<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. Peter W. Coogan, Esq.
Arnold & Porter Foley Hoag & Eliot LLP
555 12th Street, N.W. One Post Office Square
Washington, DC 20008 Boston, Massachusetts 02109
(202) 942-5998 (617) 832-1116
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
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<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
- --------------------------------------------------------------------------------
Common Stock
<S> <C> <C> <C> <C>
($0.66 2/3 Par Value) 6,400,000 $16.96(1) $108,544,000(1) $32,892(2)
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</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 Community Bankshares, Inc. on The Nasdaq Stock Market
on June 6, 1997 of $37.31, as adjusted to reflect the maximum Community
Exchange Ratio of 2.2.
(2) $15,592.62 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.
$17,300 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
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [ ] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ]
(Name of Registrant as Specified In Its Charter)
[ ]
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 4
CONFIDENTIAL; FOR USE OF THE COMMISSION ONLY
PRELIMINARY COPIES
COMMUNITY BANKSHARES, INC.
43 NORTH MAIN STREET
CONCORD, NEW HAMPSHIRE 03301
(603) 224-1100
JUNE 18, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Community Bankshares, Inc. ("Community") to be held on July 30, 1997 at 10:00
a.m., local time, at the Capitol Center for the Arts, 44 South Main Street,
Concord, New Hampshire (the "Special Meeting").
At the Special Meeting, stockholders will be asked to approve the Agreement
and Plan of Reorganization, dated as of March 24, 1997, by and among Community,
its wholly owned subsidiaries Concord Savings Bank ("Concord") and Centerpoint
Bank ("Centerpoint"), 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. A
copy of the Acquisition Agreement is attached to the accompanying Proxy
Statement-Prospectus as Appendix A.
If the Acquisition Agreement is approved and the acquisition of Community
by CFX (the "Acquisition") is consummated, each outstanding share of Community
Common Stock, other than shares as to which dissenters' rights have been
perfected and shares held by Community as treasury stock, will be converted into
the right to receive 2.2 shares of CFX Common Stock, subject to adjustment under
certain circumstances, as described more fully in the accompanying Proxy
Statement-Prospectus, depending upon the trading prices of CFX Common Stock on
the American Stock Exchange during the fifteen consecutive trading days prior to
the effective date of the Acquisition. The Acquisition Agreement provides that
Concord and Centerpoint will be merged with CFX Bank, with CFX Bank as the
surviving bank.
Approval of the Acquisition Agreement requires the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Community Common
Stock. Accordingly, proxies marked "Abstain" or shares that are not voted will
have the same effect as votes against the Acquisition Agreement. We urge you to
take the time to consider this important matter and vote now.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE ACQUISITION AGREEMENT
AND RELATED TRANSACTIONS AND RECOMMENDS A VOTE "FOR" THE ACQUISITION AGREEMENT.
The Board reached this decision after careful consideration of a number of
factors. The enclosed Proxy Statement-Prospectus contains more detailed
information concerning the Board's decision and the proposed transaction
(including the method for determining the exchange ratio). We urge you to
consider it carefully.
<PAGE> 5
In order to make sure that your vote is represented, 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.
Community 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 Community Board, I thank you for your continued support
and urge you to vote for the Acquisition Agreement.
Sincerely yours,
DOUGLAS CRICHFIELD
President and Chief Executive Officer
2
<PAGE> 6
COMMUNITY BANKSHARES, INC.
43 NORTH MAIN STREET
CONCORD, NEW HAMPSHIRE 03301
(603) 224-1100
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 30, 1997
To the Stockholders of Community Bankshares, Inc.
Notice is hereby given that a Special Meeting of the Stockholders of
Community Bankshares, Inc. ("Community") will be held on July 30, 1997, at 10:00
a.m., local time, at the Capitol Center for the Arts, 44 South Main Street,
Concord, New Hampshire, 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 March 24, 1997, by and among Community,
Community's wholly owned subsidiaries Concord Savings Bank and Centerpoint
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 the Acquisition Agreement, all of the outstanding
capital stock of Community, par value $1.00 per share, would be acquired by
CFX, and stockholders of Community 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
certain related documents are attached as exhibits thereto.
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 two-thirds of the shares of Common Stock of
Community 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 Community, stockholders of Community who
follow the procedures set forth in Sections 293-A:13.01 through 293-A:13.31 of
the New Hampshire Revised Statutes Annotated, the full text of which is included
as Appendix D, will have dissenters' rights of appraisal as therein provided.
This right is explained more fully in the accompanying Proxy
Statement-Prospectus in the section headed "THE PROPOSED ACQUISITION -- Rights
of Dissenting Stockholders."
<PAGE> 7
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 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
GERALD R. EMERY
Secretary
Concord, New Hampshire
June 18, 1997
2
<PAGE> 8
COMMUNITY BANKSHARES, INC.
------------------------
PROXY STATEMENT-PROSPECTUS
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 30, 1997
------------------------
INTRODUCTION
This Proxy Statement-Prospectus is being furnished to stockholders of
Community Bankshares, Inc. ("Community") in connection with the solicitation of
proxies by the Board of Directors of Community 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 Community will be asked to approve
an Agreement and Plan of Reorganization, dated as of March 24, 1997, by and
among Community, its wholly owned subsidiaries Concord Savings Bank ("Concord")
and Centerpoint Bank ("Centerpoint"), 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 of all of the issued and outstanding shares of Community
Common Stock (as defined below). The Acquisition Agreement provides for the
merger (the "Holding Company Merger") of Community with and into CFX with CFX as
the surviving corporation (the "Surviving Corporation") and the merger of
Concord and Centerpoint with and into CFX's wholly owned subsidiary, CFX Bank
(the "Bank Merger"). The Acquisition, Holding Company Merger and Bank Merger are
sometimes collectively referred to herein as the "Transactions." 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 in "THE PROPOSED ACQUISITION -- Closing;
Effective Date; Termination"), each share of common stock, par value $1.00 per
share, of Community ("Community Common Stock") issued and outstanding
immediately prior to the Effective Date (each such share to include an attached
right issued pursuant to the Community Rights Agreement (as defined in
"SUMMARY -- The Proposed Acquisition") other than dissenting shares and except
as otherwise provided in the Acquisition Agreement, will be converted 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 appropriate Exchange Ratio (as
defined in "SUMMARY -- The Proposed Acquisition") and cash in lieu of any
fractional share of CFX Common Stock.
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 -- Proposed Acquisition" and the narrative description in "THE PROPOSED
ACQUISITION -- Terms of the Acquisition."
THE SHARES OF CFX COMMON STOCK OFFERED HEREBY ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") AND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK SUBSIDIARY OF CFX.
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.
<PAGE> 9
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 Community 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.
2
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
---------
<S> <C>
INTRODUCTION..................................................................... 1
AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE....................... 4
SUMMARY.......................................................................... 7
CFX CORPORATION SELECTED HISTORICAL FINANCIAL DATA............................... 20
COMMUNITY BANKSHARES, INC. SELECTED HISTORICAL FINANCIAL DATA.................... 21
CFX CORPORATION -- COMMUNITY BANKSHARES, INC. SELECTED PRO FORMA COMBINED
FINANCIAL DATA (UNAUDITED)..................................................... 22
CFX CORPORATION -- COMMUNITY BANKSHARES, INC. -- PORTSMOUTH BANK SHARES, INC.
SELECTED PRO FORMA COMBINED FINANCIAL DATA (UNAUDITED)......................... 23
MEETING INFORMATION.............................................................. 24
Date, Place and Time........................................................... 24
Record Date; Voting Rights..................................................... 24
Voting and Revocation of Proxies............................................... 24
Solicitation of Proxies........................................................ 25
Beneficial Ownership........................................................... 25
THE PROPOSED ACQUISITION......................................................... 27
Background of the Acquisition.................................................. 27
Reasons for the Acquisition; Recommendation of the Board of Directors.......... 29
Opinion of Financial Advisor................................................... 29
Terms of the Acquisition....................................................... 34
Surrender of Certificates...................................................... 36
Resale of CFX Common Stock..................................................... 36
Representations and Warranties; Conditions to the Acquisition; Waiver.......... 37
Regulatory and Other Approvals................................................. 37
Business Pending the Acquisition............................................... 39
No Solicitation................................................................ 39
Closing; Effective Date; Termination........................................... 39
Management and Operations After the Acquisition................................ 40
Effect on Employees and Benefit Plans.......................................... 41
Certain Federal Income Tax Consequences........................................ 43
Accounting Treatment........................................................... 44
Stock Option Agreement......................................................... 44
Rights of Dissenting Stockholders.............................................. 45
Certain Differences in Rights of Stockholders.................................. 47
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)......................... 50
CERTAIN REGULATORY CONSIDERATIONS................................................ 57
LEGAL MATTERS.................................................................... 60
EXPERTS.......................................................................... 60
STOCKHOLDER PROPOSALS............................................................ 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 MCCONNELL, BUDD & DOWNES, INC........................... C-1
APPENDIX D -- SECTIONS 293-A:13.01 THROUGH 293-A:13.31 OF THE NEW HAMPSHIRE
REVISED STATUTES ANNOTATED..................................................... D-1
</TABLE>
3
<PAGE> 11
AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE
Community, CFX and Portsmouth Bank Shares, Inc. ("Portsmouth") (see
"SUMMARY -- The Companies" for a discussion of the proposed merger of Portsmouth
with CFX) 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
Commission. Proxy statements, reports and other information concerning
Community, CFX and Portsmouth can be inspected and copied at the office of the
Securities and Exchange Commission (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 Community, CFX and
Portsmouth. Community Common Stock and Portsmouth Common Stock are listed on the
Nasdaq National Market. Consequently, reports, proxy statements and other
information concerning Community and Portsmouth 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. Under applicable
securities laws, certain information contained in the Registration Statement is
not required to be included in the Proxy Statement-Prospectus. However, the
Proxy Statement-Prospectus includes all material information contained in the
Registration Statement, and the entire Registration Statement, including
exhibits, may be obtained from the Commission in the manner described above and
to which reference is hereby made. 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 DOCUMENTS BY REFERENCE
RELATING TO CFX, COMMUNITY AND PORTSMOUTH THAT ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN EXHIBITS THERETO,
ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF
COMMUNITY 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 COMMUNITY, COMMUNITY BANKSHARES, INC., 43 NORTH MAIN
STREET, CONCORD, NEW HAMPSHIRE 03301, ATTENTION: JOHN C. BAITY, CHIEF FINANCIAL
OFFICER (TELEPHONE: 603-224-1100), OR, 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). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY JULY 23, 1997.
4
<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;
(2) Amendment No. 1 to CFX's Annual Report on Form 10-K/A for the year
ended December 31, 1996;
(3) CFX's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997;
(4) CFX's Current Report on Form 8-K dated February 21, 1997; and
(5) 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 Community with the Commission
are incorporated by reference herein:
(1) Community's Annual Report on Form 10-K for the year ended December
31, 1996;
(2) Community's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997; and
(3) the description of Community's Rights Agreement contained in
Community's registration statement on Form 8-A filed on June 30, 1989.
In addition, Portsmouth'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 by Portsmouth with the Commission, are
incorporated by reference herein.
In addition, all documents subsequently filed by CFX, Community 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 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.
5
<PAGE> 13
CFX CORPORATION
Overview of Branch Network
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[MAP OF COUNTIES]
6
<PAGE> 14
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
$133.8 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.
On February 13, 1997, CFX entered into a definitive agreement with
Portsmouth Bank Shares, Inc., Portsmouth, New Hampshire ("Portsmouth"), pursuant
to which Portsmouth will be merged with and into CFX. Immediately thereafter,
Portsmouth Savings Bank ("Portsmouth Bank"), a wholly owned subsidiary of
Portsmouth, will be merged with and into CFX Bank (the mergers of Portsmouth
with and into CFX and Portsmouth Bank with and into CFX Bank constituting the
"Portsmouth Acquisition;" the Portsmouth Acquisition and the Acquisition are
sometimes collectively referred to as the "Acquisitions"). Under this definitive
agreement, CFX would issue up to 6,400,000 shares of CFX Common Stock in the
aggregate for approximately 5,872,334 outstanding shares of Portsmouth Common
Stock. As of March 31, 1997, Portsmouth reported total assets of $262.9 million
and stockholders' equity of $66.1 million. Portsmouth Bank has three full
service offices located in southeastern New Hampshire. CFX expects the
Portsmouth Acquisition to close in the third quarter of 1997. Historical
financial information regarding Portsmouth is included in documents incorporated
by reference. See "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE."
Pro forma financial information giving effect to the Acquisitions 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 "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE."
Community. Community is a New Hampshire corporation registered as a bank
holding company under the BHCA. As of March 31, 1997, Community had total
consolidated assets of $580.6 million and total stockholders' equity of $41.4
million. Community's two banking subsidiaries are Concord Savings Bank,
headquartered in Concord, New Hampshire ("Concord"), and Centerpoint Bank,
headquartered in Bedford, New Hampshire ("Centerpoint"). Concord is engaged
principally in the business of attracting deposits from the general public and
investing those deposits in commercial and consumer loans, in residential and
7
<PAGE> 15
commercial real estate loans and in various investment securities. Concord
operates seven full service banking offices in New Hampshire, four of which are
located in Concord, and one each in Weare, Tilton and Hooksett. It originates
indirect automobile and recreational vehicle loans through dealers located
throughout New Hampshire. Centerpoint is a trust company (commercial bank) with
four full service banking offices in New Hampshire located in Bedford,
Portsmouth, Manchester and Nashua. Centerpoint's business is principally
commercial banking, attracting deposits from and making loans to small-to-medium
sized businesses primarily in the geographic areas of its offices. It also takes
retail deposits from the general public and makes personal and consumer loans.
The principal executive offices of Community are located at 43 North Main
Street, Concord, New Hampshire 03301. Its telephone number is (603) 224-1100.
THE SPECIAL MEETING
The Special Meeting of Stockholders of Community will be held on July 30,
1997, at 10:00 a.m., local time, at the Capitol Center for the Arts, 44 South
Main Street, Concord, New Hampshire. Only holders of record of Community 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,
2,477,738 shares of Community 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 Community. The Acquisition Agreement provides that, immediately
thereafter, Community will be merged with and into CFX, whereupon the separate
existence of Community will cease. CFX, as the surviving entity in these
transactions, will continue unaffected and unimpaired by such transactions. The
Acquisition Agreement further provides that, upon consummation of the
Acquisition, Concord and Centerpoint will be merged with and into CFX Bank,
whereupon the separate existence of Concord and Centerpoint will cease.
At the Effective Date, each share of Community Common Stock issued and
outstanding immediately prior to the Effective Date (each such share to include
an attached right issued pursuant to the Rights Agreement adopted by Community
in 1989 (the "Community 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 number of shares of CFX Common Stock to be received for each share of
Community Common Stock (the "Exchange Ratio") will be a function of the average
of the averages of the high and low prices of CFX Common Stock on the American
Stock Exchange ("AMEX") for the fifteen consecutive trading days preceding the
Effective Date (the "Average CFX Trading Price").
The Exchange Ratio will be 2.2 if the Average CFX Trading Price is more
than $13.50 but not more than $18.18. If the Average CFX Trading Price is more
than $18.18 but not more than $20.00, the Exchange Ratio will be $40.00 divided
by the Average CFX Trading Price. If the Average CFX Trading Price is more than
$20.00, the Exchange Ratio will be 2.0. If the Average CFX Trading Price is
$13.50 or less, Community may elect to terminate the Acquisition unless CFX
agrees to an Exchange Ratio equal to $29.70 divided by the Average CFX Trading
Price (the "Cure Ratio"). However, if the Average CFX Trading Price is $13.50 or
less and Community does not elect to terminate the Acquisition, the Exchange
Ratio will be 2.2. If Community elects to terminate the Acquisition, CFX is not
required to agree to the Cure Ratio.
8
<PAGE> 16
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 EXCHANGE COMMUNITY PER
TRADING PRICE RATIO (1) SHARE VALUE
- ----------------------- --------- ----------------
<S> <C> <C>
More than $20.00....... 2.0 More than $40.00
More than $18.18, but 2.0 - 2.2 $40.00
not more than
$20.00...............
More than $13.50, but 2.2 $29.72 to $40.00
not more than
$18.18...............
$13.50 or less......... (2) (2)
</TABLE>
- ---------------
(1) In the event that, before the Effective Date of the Acquisition, an
announcement is made with respect to a business combination involving the
acquisition of CFX or a substantial portion of its assets, the Exchange
Ratio shall be not less than 2.2.
(2) If the Average CFX Trading Price is $13.50 or less, by action of its Board
of Directors, Community 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 in "THE PROPOSED ACQUISITION -- Closing;
Effective Date; Termination"). Within two business days thereafter, CFX may
elect to increase the Exchange Ratio to $29.70 divided by the Average CFX
Trading Price. 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, the Community Board will, consistent with its fiduciary duties,
consider all of the relevant facts and circumstances existing at the time,
including, without limitation, the following: whether it believes that CFX
is prepared to increase the Exchange Ratio, as described above; the market
for bank stocks in general and the relative value of the Community Common
Stock and the CFX Common Stock; and the advice of its financial advisors and
legal counsel. By approving the Acquisition Agreement, the Community
stockholders will be permitting the Community Board to determine, in the
exercise of its fiduciary duties and without any further solicitation of the
Community stockholders, whether or not to proceed with the Acquisition if
the Average CFX Trading Price is $13.50 or less. See "THE PROPOSED
ACQUISITION -- Closing; Effective Date; Termination."
If the Average CFX Trading Price were equal to $17.25 (the closing price of
CFX Common Stock on March 21, 1997, the last trading day prior to announcement
of the proposed Acquisition) and 2,465,237 shares of Community Common Stock were
outstanding (the number of shares outstanding on March 21, 1997), the aggregate
consideration to be paid in connection with the Acquisition would have a value
of approximately $93.5 million, excluding the value of options to acquire CFX
Common Stock that would be substituted for outstanding employee stock options to
purchase Community Common Stock.
9
<PAGE> 17
[COMMUNITY BANK SHARES GRAPH]
AVERAGE CFX TRADING PRICE
10
<PAGE> 18
REASONS FOR THE ACQUISITION; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of Community has unanimously adopted a resolution
approving the Acquisition Agreement and unanimously recommends approval and
adoption of the Acquisition Agreement by Community's stockholders. The Community
Board believes in its business judgment that the terms of the Acquisition
Agreement are fair and in the best interests of Community and its stockholders
and that the Exchange Ratio is fair and reasonable to the stockholders of
Community. The terms of the Acquisition Agreement, including the Exchange Ratio,
were reached on the basis of arms' length negotiations between Community and
CFX. In the course of reaching its decision to approve the Acquisition
Agreement, the Board of Directors of Community consulted with Foley, Hoag &
Eliot LLP, its legal advisor, regarding the legal terms of the Acquisition
Agreement and the Board of Directors' obligations in its consideration thereof,
and with McConnell, Budd & Downes, Inc. ("MB&D"), 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 Financial Advisor."
OPINION OF FINANCIAL ADVISOR
MB&D has rendered an oral opinion to the Community Board on March 23, 1997
and a written opinion as of the date of this Proxy Statement-Prospectus to the
effect that, as of such dates, the consideration to be received by Community's
stockholders pursuant to the Acquisition Agreement is fair, from a financial
point of view, to the holders of Community Common Stock. The full text of the
opinion of MB&D as of the date of this Proxy Statement-Prospectus is attached as
Appendix C to this Proxy Statement-Prospectus. Community 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 MB&D in connection therewith. MB&D's
opinions are directed only to the consideration to be paid in the Acquisition
and do not constitute a recommendation to any Community stockholder as to 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 Community 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 Community Common Stock regarding the manner in which their
certificates representing shares of Community 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 issued to holders
of Community Common Stock may be traded freely, subject to certain restrictions
in the case of stockholders who are deemed to be affiliates of Community 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, 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 Community, and (iii) subject to
consummation of the Portsmouth Acquisition, three persons serving as directors
of Portsmouth. In addition, three persons serving as directors of Community will
be elected to the Board of Trustees of CFX Bank.
11
<PAGE> 19
Pursuant to the terms of the Acquisition Agreement, Douglas Crichfield, the
President and Chief Executive Officer and a director of Community and Concord,
has been designated by Community to serve as a director of CFX and a trustee of
CFX Bank following the Acquisition, and will become an Executive Vice President
of CFX and the President and Chief Executive Officer of CFX Bank, effective upon
the Effective Date. 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.
Finally, Mark E. Simpson, the Secretary and Treasurer of Portsmouth, Robert W.
Simpson, the Chairman of the Board of Portsmouth, and Timothy J. Connors, a
director of Portsmouth, have been designated to serve on the CFX Board, and
Harry P. Jarvis and Mark E. Simpson, who currently serve as directors of
Portsmouth Bank, have been designated to serve as trustees of CFX Bank,
following consummation of the Portsmouth Acquisition. See "THE PROPOSED
ACQUISITION -- Management and Operations After the Acquisition."
Information regarding the current directors of CFX, the Community directors
who have been designated to serve on the CFX Board and the Portsmouth 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, Community's Annual
Report on Form 10-K and Portsmouth'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
Under the terms of the Acquisition Agreement, CFX has agreed to assume
change in control agreements with the following employees of Community and/or
Concord: Douglas Crichfield, Paul M. Ferguson, Gerald R. Emery, John C. Baity,
Margaret A. Flint, Donna L. Bean, David E. Fuller, Charles E. Gorhan and Robert
F. Howe. The Acquisition constitutes a change in control under the contracts.
CFX has also agreed to assume Mr. Crichfield's supplemental retirement
agreement. Mr. Crichfield's change in control agreement provides for the
acceleration of benefits under his supplemental retirement agreement upon a
change in control. CFX has also agreed to assume Centerpoint's employment
agreements with Philip M. Stone, Joseph B. Reilly and Lucy T. Gobin. In
connection with the execution of the Acquisition Agreement, Centerpoint has
extended Mr. Reilly's and Ms. Gobin's employment agreements one year beyond
their original expiration dates.
The Acquisition Agreement provides that Mr. Crichfield will be offered a
three-year employment agreement with CFX on terms substantially equivalent to
those contracts of other Executive Vice Presidents of CFX, but no less favorable
in the aggregate than the current employment agreement between CFX and its
President and Chief Executive Officer.
Pursuant to the terms of the 1985, 1988 and 1992 Community Stock Option
Plans, all outstanding options granted pursuant to such plans that are not fully
exercisable will become exercisable in full for a period of thirty days
following the date on which any individual, corporation or other entity becomes
the beneficial owner of 50% or more of the outstanding shares of Community
Common Stock. Thus, at the Effective Date, all of the outstanding options
granted pursuant to such plans that are not fully exercisable will become
exercisable in full for a thirty-day period. The Centerpoint Bank 1989 Stock
Option Plan does not similarly provide for the acceleration of vesting of
outstanding options following a change in control. See "THE PROPOSED
ACQUISITION -- Effect on Employees and Benefit Plans."
In addition, the Acquisition Agreement provides that from and after the
Effective Date, CFX will indemnify those persons who served as directors and
officers of any of Community, Concord or Centerpoint on or before the Effective
Date, in accordance with and subject to the provisions of Community's Articles
of Incorporation and the Acquisition Agreement. CFX has also agreed, subject to
certain terms and conditions set forth in the Acquisition Agreement, (i) to pay
reasonable fees and expenses of counsel for the indemnified parties promptly
upon receipt of statements therefor, and (ii) to provide, for a period of not
less than six years commencing on the Effective Date to those persons who served
as directors or officers of any of Community,
12
<PAGE> 20
Concord or Centerpoint on or before the Effective Date, Community'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. 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 approval of the Acquisition Agreement by the stockholders
of Community and CFX and the receipt of all regulatory approvals required or
mutually deemed necessary in connection with the Acquisition. The approval of
the Acquisition by CFX stockholders will be solicited at an Annual Meeting of
Shareholders of CFX, also scheduled to be held on July 30, 1997.
CFX does not currently have a sufficient number of authorized shares of
Common Stock to enable it to consummate the Acquisitions. Therefore, in addition
to obtaining stockholder approval of the Acquisition, CFX must obtain
stockholder approval to amend its Articles of Incorporation (the "Charter
Amendment") to increase the number of authorized shares. Approval of the Charter
Amendment requires the vote of at least two-thirds of the outstanding shares of
CFX Common Stock.
Pursuant to the terms of the Acquisition Agreement, except for stockholder
and regulatory approval, all of the conditions to consummation of the
Acquisition may be waived at any time in a writing signed by both parties, and
the Acquisition Agreement may be amended at any time, by mutual written
agreement of the parties, except that no such waiver or amendment executed after
approval of the Acquisition Agreement by the Community stockholders may alter or
change the amount or kind of consideration to be received by such stockholders
pursuant to the Acquisition Agreement or adversely affect the tax treatment to
the Community stockholders. In addition, 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 absence of a
government order enjoining or prohibiting consummation of the Acquisition and
the receipt of all required "Blue Sky" permits or other authorizations. See "THE
PROPOSED ACQUISITION -- Representations and Warranties; Conditions to the
Acquisition; Waiver."
In addition, the Acquisition Agreement may be terminated by either CFX or
Community, either before or after stockholder approval, under certain
circumstances. Community may also terminate the Acquisition Agreement if the
Average CFX Trading Price is below a certain price and CFX does not elect to
increase the Exchange Ratio to the Cure Ratio. 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 two-thirds of the shares of Community Common Stock outstanding and
entitled to vote thereon. As of June 12, 1997, directors and officers of
Community and affiliates of such persons had sole or shared voting power with
respect to 271,698 shares of Community Common Stock, representing 11.0% of the
Community Common Stock outstanding as of the same date. CFX has entered into
agreements ("Voting Acquisition Agreements") with all of the members of the
Board of Directors of Community, who together have the right to vote 10.4% of
the outstanding Community Common Stock, pursuant to which each such person has
agreed to vote all shares of Community Common Stock that he or she is entitled
to vote in favor of the Acquisition Agreement. See "MEETING
INFORMATION -- Voting and Revocation of Proxies."
REGULATORY AND OTHER APPROVALS
CFX has filed an application with the Federal Deposit Insurance Corporation
(the "FDIC") for prior approval of the Bank Merger under the Bank Merger Act,
and with the New Hampshire Bank Commissioner (the "Commissioner") for approval
of the Bank Merger pursuant to Chapter 388 or other applicable sections of the
New Hampshire Revised Statutes Annotated (the "NHRSA"). The Bank Merger Act
provides that the Bank Merger may not be consummated until applicable periods
have lapsed after FDIC approval is
13
<PAGE> 21
received. CFX has also filed an application with the Massachusetts Board of Bank
Incorporation (the "MBBI") for prior approval of the Holding Company Merger. The
Board of Governors of the Federal Reserve System (the "Federal Reserve") has
waived all prior approval requirements under Section 3 of the BHCA. See "THE
PROPOSED ACQUISITION -- Regulatory and Other Approvals."
STOCK OPTION AGREEMENT
In connection with the execution of the Acquisition Agreement, Community
and CFX entered into a Stock Option Agreement (the "Stock Option Agreement")
pursuant to which Community granted CFX an option (the "Option") to purchase up
to 493,000 authorized but unissued shares of Community Common Stock
(constituting approximately 19.99% of the shares of Community Common Stock
outstanding on the date of grant) at a price of $28.50 per 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.
NO SOLICITATION
Community has agreed that it will not (and will not authorize or permit
its, or Concord's or Centerpoint's officers, directors, agents and affiliates
to) solicit or initiate any inquiries or proposals concerning any acquisition or
purchase of all or a substantial portion of the assets or a substantial equity
interest in, Community, Concord or Centerpoint (any of the foregoing being
referred to as an "Acquisition Transaction") other than the Acquisition.
Community must notify CFX as soon as practicable if any such inquiries or
proposals are received by Community, or if Community 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. See "THE PROPOSED ACQUISITION -- No Solicitation."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of
the Acquisition to stockholders of Community. A more extensive summary is set
forth under the heading "THE PROPOSED ACQUISITION -- Certain Federal Income Tax
Consequences." Each of Community'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 Community have received an opinion from Arnold & Porter concerning
certain federal income tax consequences of the Acquisition. CFX and Community
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 Community 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 Community who exchange all of their
Community 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."
14
<PAGE> 22
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 -- Representations and Warranties; Conditions to the Acquisition;
Waiver" and "-- Accounting Treatment."
CERTAIN DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS
Upon completion of the Acquisition, stockholders of Community will
automatically become stockholders of CFX and their rights as such will be
governed by CFX's Articles of Incorporation and Bylaws rather than by
Community's Articles of Incorporation, as amended, and Bylaws. The rights of
stockholders of CFX are different in certain respects from the rights of
stockholders of Community, 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 Community 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."
MARKETS AND MARKET PRICES
CFX Common Stock is listed and traded on the AMEX under the symbol "CFX."
Community Common Stock is listed and traded on the Nasdaq National Market under
the symbol "CBNH." The following table shows the market value per share for each
of CFX and Community and the Community Equivalent Per Share (as defined below)
at the dates set forth below:
<TABLE>
<CAPTION>
CLOSING SALES PRICE
----------------------
CFX COMMUNITY COMMUNITY
COMMON COMMON EQUIVALENT
STOCK STOCK PER SHARE(1)
------ --------- ------------
<S> <C> <C> <C>
March 21, 1997(2)..................................... $17.25 $ 24.75 $37.95
June 11, 1997(3)...................................... $18.25 $ 37.63 $40.15
</TABLE>
- ---------------
(1) The equivalent market value per share of Community Common Stock represents
the closing sales price of CFX Common Stock on the dates reported multiplied
by an Exchange Ratio of 2.2. The Exchange Ratio could differ if the Average
CFX Trading Price were more than $18.18 or $13.50 or less. 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.
15
<PAGE> 23
The table below sets forth high and low sales prices for CFX Common Stock
as quoted on the AMEX and sets forth high and low sales prices for Community
Common Stock as quoted on the Nasdaq National Market, 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) COMMUNITY
--------------------------------- --------------------------------
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 $15.500 $ .2200 $38.50 $30.500 (2)
March 31, 1997............... 18.500 15.125 .2200 34.50 20.000 $ .16
1996
December 31, 1996............ 16.625 13.625 .2095 20.75 18.500 .16
September 30, 1996........... 15.250 11.625 .1905 19.75 17.750 .15
June 30, 1996................ 14.375 12.250 -- 18.25 17.063 .15
March 31, 1996............... 15.375 12.875 .1714 19.75 17.500 .15
1995
December 31, 1995............ 16.625 13.25 .3266 19.25 16.500 .15
September 30, 1995........... 16.500 13.50 .1451 17.25 15.750 .14
June 30, 1995................ 15.375 11.00 .1451 17.25 15.250 .13
March 31, 1995............... 11.750 9.50 .1391 16.25 12.875 .13
</TABLE>
- ---------------
(1) Stock prices and dividends have been restated to reflect CFX's 5% Common
Stock dividend declared on December 10, 1996.
(2) Community's Board of Directors has not yet held the meeting at which it will
consider the declaration of a dividend for the quarter ending June 30, 1997.
No assurance can be given as to what the Average CFX Trading Price will be
when and if the Acquisition is consummated. Stockholders of Community 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 CFX's Board of Directors. 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 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
upstream dividends to CFX and other relevant factors. The only funds available
to CFX for the payment of dividends are cash and cash equivalents held at the
holding company level, dividends paid to CFX by its subsidiaries, interest and
dividends from various investments and borrowings. See "CERTAIN REGULATORY
CONSIDERATIONS -- Restrictions on Payment of Dividends."
COMPARATIVE PER SHARE DATA
The following tables set forth at the dates and for the periods indicated
(i) historical consolidated per share data for CFX Common Stock and Community
Common Stock, (ii) pro forma combined per share data for CFX Common Stock (with
Community only), (iii) pro forma combined per share data for CFX Common Stock
(with Community and Portsmouth) and (iv) equivalent per share data for Community
Common Stock reflecting consummation of the Acquisition only and consummation of
both Acquisitions.
16
<PAGE> 24
The CFX pro forma data (with Community only) represents the effect of the
Acquisition on a share of CFX Common Stock, assuming a minimum Exchange Ratio of
2.0 and a maximum Exchange Ratio of 2.2. The Community equivalent pro forma data
represents the CFX pro forma data multiplied by a minimum Exchange Ratio of 2.0
and a maximum Exchange Ratio of 2.2 and thereby reflects the effect of the
Acquisition on a share of Community Common Stock.
The CFX pro forma combined data (with Community and Portsmouth) represents
the effect of both Acquisitions on a share of CFX Common Stock, assuming a
minimum Exchange Ratio of 2.0 and a maximum Exchange Ratio of 2.2 for the
Community Acquisition and a minimum exchange ratio of .9314 and a maximum
exchange ratio of 1.0294 for the Portsmouth Acquisition. The actual exchange
ratio in the Portsmouth Acquisition will depend on the market price of CFX
Common Stock during the ten trading days preceding receipt of the last
regulatory approval required for consummation of the Portsmouth Acquisition. The
Community equivalent pro forma combined data (assuming both Acquisitions)
represents the CFX pro forma combined data (with Community and Portsmouth)
multiplied by a minimum Exchange Ratio of 2.0 and a maximum Exchange Ratio of
2.2 and thereby reflects the effect of the two Acquisitions on a share of
Community Common Stock. Earnings per share data is based on net earnings before
cumulative effects of changes in accounting principles for all companies.
The information is derived from the historical financial statements of each
of CFX, Community and Portsmouth and related notes, incorporated by reference in
this Proxy Statement-Prospectus, and the pro forma combined financial
information giving effect to both Acquisitions, 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 Acquisitions 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 and balance sheet data have
been presented as if the Acquisitions had occurred at the beginning of the
earliest period presented. See "AVAILABLE INFORMATION; DOCUMENTS INCORPORATED BY
REFERENCE" AND "PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)."
17
<PAGE> 25
COMPARATIVE PER SHARE DATA
CFX CORPORATION -- COMMUNITY BANKSHARES, INC. -- PORTSMOUTH BANK SHARES, INC.
MINIMUM EXCHANGE RATIO
<TABLE>
<CAPTION>
CFX CFX COMMUNITY
PRO FORMA COMMUNITY PRO FORMA EQUIVALENT
COMBINED WITH EQUIVALENT COMBINED WITH PRO FORMA
CFX COMMUNITY COMMUNITY PRO FORMA PORTSMOUTH AND CFX/COMMUNITY/
HISTORICAL HISTORICAL ONLY(1) CFX/COMMUNITY(2) COMMUNITY(3) PORTSMOUTH(4)
---------- --------- ------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Earnings Per Common Share
Quarter Ended March 31,
1997.................. $ 0.36 $ 0.53 $0.34 $ 0.68 $ 0.32 $ 0.64
1996.................. $ 0.28 $ 0.47 $0.27 $ 0.54 $ 0.27 $ 0.54
Year Ended December 31,
1996.................. $ 0.99 $ 2.00 $0.99 $ 1.98 $ 1.01 $ 2.02
1995.................. $ 0.89 $ 1.70 $0.88 $ 1.76 $ 0.92 $ 1.84
1994.................. $ 0.58 $ 1.49 $0.63 $ 1.26 $ 0.73 $ 1.46
Dividends Declared Per
Common Share............
Quarter Ended March 31,
1997.................. $ 0.22 $ 0.16 $0.22 $ 0.44 $ 0.22 $ 0.44
1996.................. $ 0.17 $ 0.15 $0.17 $ 0.34 $ 0.17 $ 0.34
Year Ended December 31,
1996.................. $ 0.55 $ 0.61 $0.55 $ 1.10 $ 0.55 $ 1.10
1995.................. $ 0.50 $ 0.51 $0.50 $ 1.00 $ 0.50 $ 1.00
1994.................. $ 0.31 $ 0.24 $0.31 $ 0.62 $ 0.31 $ 0.62
Book Value Per Common
Share
March 31, 1997.......... $10.25 $ 16.80 $9.75 $19.50 $10.29 $20.58
December 31, 1996....... $10.24 $ 16.66 $9.72 $19.44 $10.29 $20.58
</TABLE>
- ---------------
(1) 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.
(2) The equivalent pro forma per share data for Community represents the pro
forma combined data for CFX (CFX and Community only) multiplied by an
Exchange Ratio of 2.0.
(3) The pro forma per share data gives effect to both Acquisitions but does not
reflect anticipated expenses and nonrecurring charges which may result from
the Acquisitions. 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 Acquisitions. See "PRO
FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)." CFX pro forma
dividends per share represent CFX historical dividends per share.
(4) The equivalent pro forma per share data for Community represents the pro
forma combined data for CFX (CFX, Portsmouth and Community) multiplied by an
Exchange Ratio of 2.0.
18
<PAGE> 26
COMPARATIVE PER SHARE DATA
CFX CORPORATION -- COMMUNITY BANKSHARES, INC. -- PORTSMOUTH BANK SHARES, INC.
MAXIMUM EXCHANGE RATIO
<TABLE>
<CAPTION>
CFX CFX COMMUNITY
PRO FORMA COMMUNITY PRO FORMA EQUIVALENT
COMBINED WITH EQUIVALENT COMBINED WITH PRO FORMA
CFX COMMUNITY COMMUNITY PRO FORMA PORTSMOUTH AND CFX/COMMUNITY/
HISTORICAL HISTORICAL ONLY(1) CFX/COMMUNITY(2) COMMUNITY(3) PORTSMOUTH(4)
---------- --------- ------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Earnings Per Common Share
Quarter Ended March 31,
1997................... $ 0.36 $ 0.53 $0.33 $ 0.73 $ 0.31 $ 0.68
1996................... $ 0.28 $ 0.47 $0.26 $ 0.57 $ 0.26 $ 0.56
Year Ended December 31,
1996................... $ 0.99 $ 2.00 $0.96 $ 2.11 $ 0.96 $ 2.11
1995................... $ 0.89 $ 1.70 $0.85 $ 1.87 $ 0.88 $ 1.94
1994................... $ 0.58 $ 1.49 $0.61 $ 1.34 $ 0.69 $ 1.52
Dividends Declared Per
Common Share
Quarter Ended March 31,
1997................... $ 0.22 $ 0.16 $0.22 $ 0.48 $ 0.22 $ 0.48
1996................... $ 0.17 $ 0.15 $0.17 $ 0.38 $ 0.17 $ 0.38
Year ended December 31,
1996................... $ 0.55 $ 0.61 $0.55 $ 1.21 $ 0.55 $ 1.21
1995................... $ 0.50 $ 0.51 $0.50 $ 1.10 $ 0.50 $ 1.10
1994................... $ 0.31 $ 0.24 $0.31 $ 0.68 $ 0.31 $ 0.68
Book Value Per Common Share
March 31, 1997........... $10.25 $ 16.80 $9.49 $20.88 $ 9.84 $21.65
December 31, 1996........ $10.24 $ 16.66 $9.46 $20.81 $ 9.84 $21.65
</TABLE>
- ---------------
(1) 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.
(2) The equivalent pro forma per share data for Community represents the pro
forma combined data for CFX (CFX and Community only) multiplied by an
Exchange Ratio of 2.2.
(3) The pro forma per share data gives effect to both Acquisitions but does not
reflect anticipated expenses and nonrecurring charges which may result from
the Acquisitions. 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 Acquisitions. See "PRO
FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)." CFX pro forma
dividends per share represent CFX historical dividends per share.
(4) The equivalent pro forma per share data for Community represents the pro
forma combined data for CFX (CFX, Portsmouth and Community) multiplied by an
Exchange Ratio of 2.2.
19
<PAGE> 27
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
ENDED MARCH 31, AT OR FOR THE YEARS ENDED DECEMBER 31,
------------------------ ------------------------------------------------------------------
1997 1996 1996 1995(1) 1994(1) 1993(1)(2) 1992(1)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Interest and dividend income.... $ 29,503 $ 25,740 $ 108,425 $ 96,389 $ 81,637 $ 79,076 $ 89,770
Interest expense................ 14,499 12,039 51,566 44,363 33,639 32,598 44,361
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest and dividend
income........................ 15,004 13,701 56,859 52,026 47,998 46,478 45,409
Provision for loan and lease
losses........................ 702 905 2,935 3,037 2,697 11,608 6,728
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest and dividend income
after provision for loan and
lease losses.................. 14,302 12,796 53,924 48,989 45,301 34,870 38,681
Other income.................... 4,372 3,832 16,827 14,311 11,079 11,672 7,509
Other expense................... 11,974 11,577 51,370 46,202 44,864 41,715 37,579
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes...... 6,700 5,051 19,381 17,098 11,516 4,827 8,611
Income taxes.................... 1,958 1,496 6,740 5,760 4,272 630 3,355
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income...................... 4,742 3,555 12,641 11,338 7,244 4,197 5,256
Preferred stock dividends....... -- -- -- 89 268 270 270
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income available to common
stock......................... $ 4,742 $ 3,555 $ 12,641 $ 11,249 $ 6,976 $ 3,927 $ 4,986
========== ========== ========== ========== ========== ========== ==========
Weighted average common shares
outstanding................... 13,014 12,714 12,823 12,701 12,052 11,661 11,909
========== ========== ========== ========== ========== ========== ==========
ENDING BALANCE SHEET DATA:
Total assets.................... $1,744,449 $1,415,507 $1,547,092 $1,344,880 $1,267,113 $1,218,394 $1,152,323
Investments..................... 415,002 360,844 278,191 311,814 308,241 369,297 290,752
Net loans and leases............ 1,134,997 932,011 1,102,424 911,981 828,355 731,738 749,447
Allowance for loan and lease
losses........................ 15,661 15,322 15,740 15,449 14,401 16,168 12,639
Foreclosed real estate.......... 1,806 1,364 2,223 1,186 2,599 4,110 20,182
Deposits........................ 1,223,530 1,119,270 1,157,207 1,056,824 999,217 974,694 1,006,977
Borrowed funds.................. 343,216 149,130 242,455 146,826 139,496 82,623 20,421
Total shareholders' equity...... 133,819 127,948 132,953 127,032 118,918 117,327 115,627
Common shares outstanding....... 13,050 12,778 12,981 12,683 12,185 11,661 11,960
PER SHARE DATA AND OTHER SELECTED
RATIOS:
Common earnings per share....... $ 0.36 $ 0.28 $ 0.99 $ 0.89 $ 0.58 $ 0.34 $ 0.42
Dividends declared per common
share......................... $ 0.22 $ 0.17 $ 0.55 $ 0.50 $ 0.31 $ 0.27 $ 0.25
Common dividend payout ratio.... 61.11% 60.71% 55.56% 56.18% 53.45% 79.41% 59.52%
Common shareholders' equity per
share......................... $ 10.25 $ 10.01 $ 10.24 $ 10.02 $ 9.74 $ 9.77 $ 9.38
Total shareholders' equity to
assets at period end.......... 7.67% 9.04% 8.59% 9.45% 9.38% 9.63% 10.03%
Average total shareholders'
equity to average total
assets........................ 8.40% 9.65% 8.94% 9.45% 9.35% 10.22% 10.05%
Return on average assets........ 1.19% 1.03% 0.86% 0.86% 0.56% 0.34% 0.43%
Return on average common
shareholders' equity.......... 14.14% 10.62% 9.58% 9.17% 6.12% 3.43% 4.53%
Net interest margin............. 4.15% 4.31% 4.24% 4.36% 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.
20
<PAGE> 28
COMMUNITY BANKSHARES, INC.
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 and for
the six-month period ended December 31, 1995 is derived from the audited
consolidated financial statements of Community. The financial data for the
six-month period ended December 31, 1994 and 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
and 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
AT OR FOR THE THE AT OR FOR THE
THREE MONTHS YEAR ENDED SIX MONTHS
ENDED MARCH 31, DECEMBER 31, ENDED DECEMBER 31, AT OR FOR THE YEARS ENDED JUNE 30,
------------------- ------------ --------------------- -----------------------------------------
1997 1996 1996 1995(1)(2) 1994(1) 1995(1) 1994(1) 1993(1) 1992(1)
-------- -------- ------------ ---------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
DATA:
Interest and dividend
income............... $ 10,914 $ 9,642 $ 41,578 $ 19,804 $ 15,611 $ 33,873 $ 27,204 $ 27,696 $ 29,333
Interest expense....... 5,201 4,742 19,757 10,056 6,895 15,818 11,768 12,936 17,184
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net interest and
dividend income...... 5,713 4,900 21,821 9,748 8,716 18,055 15,436 14,760 12,149
Provision for loan and
lease losses......... 240 275 1,350 498 352 777 925 2,351 3,021
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net interest and
dividend income after
provision for loan
and lease losses..... 5,473 4,625 20,471 9,250 8,364 17,278 14,511 12,409 9,128
Other income........... 1,298 1,087 3,993 1,807 1,028 2,201 2,818 3,031 2,634
Other expense.......... 4,670 3,929 16,820 8,019 6,565 13,442 12,811 12,980 11,378
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income before income
taxes................ 2,101 1,783 7,644 3,038 2,827 6,037 4,518 2,460 384
Income taxes........... 778 629 2,689 1,264 814 1,862 897 -- 85
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income............. 1,323 1,154 4,955 1,774 2,013 4,175 3,621 2,460 299
Preferred stock
dividends............ -- -- -- -- -- -- 19 24 --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income available to
common stock......... $ 1,323 $ 1,154 $ 4,955 $ 1,774 $ 2,013 $ 4,175 $ 3,602 $ 2,436 $ 299
======== ======== ======== ======== ======== ======== ======== ======== ========
Weighted average common
shares outstanding... 2,518 2,478 2,477 2,434 2,425 2,458 2,424 2,240 2,194
======== ======== ======== ======== ======== ======== ======== ======== ========
ENDING BALANCE SHEET
DATA:
Total assets........... $580,645 $516,837 $550,596 $ 498,003 $448,186 $507,024 $407,262 $375,436 $354,968
Investments............ 136,114 130,481 123,392 131,314 119,737 146,955 113,795 86,243 89,576
Net loans and leases... 396,415 338,020 384,579 323,347 294,647 318,409 257,083 241,040 223,861
Allowance for loan and
lease losses......... 4,088 3,766 3,905 3,667 3,517 3,524 3,772 4,105 4,105
Foreclosed real
estate............... 1,112 349 738 566 1,258 1,134 836 2,568 6,725
Deposits............... 410,685 390,367 395,787 385,437 363,387 373,184 346,389 332,180 308,268
Borrowed funds......... 118,366 83,769 108,888 70,936 45,644 93,021 25,986 8,079 12,097
Total shareholders'
equity............... 41,417 37,358 40,807 36,768 31,769 34,975 31,218 28,590 24,532
Common shares
outstanding.......... 2,465 2,416 2,449 2,383 2,381 2,380 2,377 2,318 2,186
PER SHARE DATA AND OTHER
SELECTED RATIOS:
Common earnings per
share................ $ 0.53 $ 0.47 $ 2.00 $ 0.73 $ 0.83 $ 1.70 $ 1.49 $ 1.09 $ 0.14
Dividends declared per
common share......... $ 0.16 $ 0.15 $ 0.61 $ 0.29 0.25 $ 0.51 $ 0.24 -- --
Common dividend payout
ratio................ 30.19% 31.92% 30.50% 39.73% 30.12% 30.00% 16.11% -- --
Common shareholders'
equity per share..... $ 16.80 $ 15.47 $ 16.66 $ 15.49 13.34 $ 14.70 $ 13.13 $ 12.33 $ 11.22
Total shareholders'
equity to assets at
period end........... 7.13% 7.23% 7.41% 7.38% 7.09% 6.90% 7.67% 7.62% 6.91%
Average total
shareholders' equity
to average assets.... 7.40% 7.60% 7.33% 7.19% 7.55% 7.33% 8.07% 7.60% 7.43%
Return on average
assets............... 0.96% 0.93% 0.94% 0.70% 0.94% 0.94% 0.94% 0.69% 0.09%
Return on average
common shareholders'
equity............... 13.00% 12.28% 12.84% 9.75% 12.51% 12.77% 11.59% 9.06% 1.20%
Net interest margin.... 4.42% 4.22% 4.43% 4.13% 4.30% 4.27% 4.25% 4.39% 3.89%
</TABLE>
- ---------------
(1) Prior period financial data has been restated to reflect the 1996
pooling-of-interests with Centerpoint Bank.
(2) Effective December 31, 1995, Community changed its fiscal year end from June
30 to December 31.
21
<PAGE> 29
CFX CORPORATION -- COMMUNITY BANKSHARES, 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 to certain pro
forma adjustments using an Exchange Ratio of 2.2 as if the Acquisition had been
accounted for as a pooling-of-interests. The pro forma balance sheets have been
prepared as if the Acquisition had been consummated on March 31, 1997, and the
pro forma income statements have been prepared as if the Acquisition 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 the 15
trading days preceding the Effective Date of the Acquisition. This information
should be read in conjunction with the historical financial statements of CFX
and Community and 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
ENDED MARCH 31, AT OR FOR THE YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------
1997 1996 1996 1995(1) 1994(1)
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Interest and dividend income................ $ 40,417 $ 35,382 $ 150,003 $ 130,262 $ 108,841
Interest expense............................ 19,700 16,781 71,323 60,181 45,407
---------- ---------- ---------- ---------- ----------
Net interest and dividend income............ 20,717 18,601 78,680 70,081 63,434
Provision for loan and lease losses......... 942 1,180 4,285 3,814 3,622
---------- ---------- ---------- ---------- ----------
Net interest and dividend income after
provision for possible loan and leases
losses.................................... 19,775 17,421 74,395 66,267 59,812
Other income................................ 5,670 4,919 20,820 16,512 13,897
Other expense............................... 16,644 15,506 68,190 59,644 57,675
---------- ---------- ---------- ---------- ----------
Income before income taxes.................. 8,801 6,834 27,025 23,135 16,034
Income tax expenses......................... 2,736 2,125 9,429 7,622 5,169
---------- ---------- ---------- ---------- ----------
Net income.................................. 6,065 4,709 17,596 15,513 10,865
Preferred stock dividend.................... -- -- -- 89 287
---------- ---------- ---------- ---------- ----------
Net income available to common stock........ $ 6,065 $ 4,709 $ 17,596 $ 15,424 $ 10,578
========== ========== ========== ========== ==========
Weighted average common shares
outstanding............................... 18,554 18,166 18,273 18,109 17,385
========== ========== ========== ========== ==========
ENDING BALANCE SHEET DATA:
Total assets................................ $2,325,094 $1,932,344 $2,097,688 $1,851,904 $1,674,375
Investments................................. 551,116 491,325 401,583 458,769 422,036
Net Loans................................... 1,531,412 1,270,031 1,487,003 1,230,390 1,085,438
Allowance for loan and lease losses......... 19,749 19,088 19,645 18,973 18,173
Foreclosed real estate...................... 2,918 1,713 2,961 2,320 3,435
Deposits.................................... 1,634,215 1,509,637 1,552,994 1,430,008 1,345,606
Borrowed funds.............................. 461,582 232,899 351,343 239,847 165,482
Total shareholders' equity.................. 175,236 165,306 173,760 162,007 150,136
Common shares outstanding................... 18,473 18,093 18,368 17,919 17,414
PER SHARE DATA AND OTHER SELECTED RATIOS:
Common earnings per share................... $ 0.33 $ 0.26 $ 0.96 $ 0.85 $ 0.61
Common shareholders' equity per share....... $ 9.49 $ 9.15% $ 9.46 $ 9.04 $ 8.62
Total shareholders' equity to assets at
period end................................ 7.54% 8.55% 8.28% 8.75% 8.97%
Average shareholders' equity to average
assets.................................... 8.14% 9.12% 8.52% 8.91% 9.05%
Return on average assets.................... 1.13% 1.00% 0.88% 0.88% 0.64%
Return on average common shareholders'
equity.................................... 13.88% 11.00% 10.32% 9.85% 7.11%
Net interest margin......................... 4.22% 4.30% 4.29% 4.33% 4.27%
</TABLE>
- ---------------
(1) Includes financial data for Community at or 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.
22
<PAGE> 30
CFX CORPORATION -- COMMUNITY BANKSHARES, INC. -- PORTSMOUTH BANK SHARES, INC.
SELECTED PRO FORMA COMBINED FINANCIAL DATA (UNAUDITED)
The following table sets forth certain unaudited pro forma financial data
for CFX after giving effect to the Acquisitions and to (i) certain pro forma
adjustments using an exchange ratio of 1.0294 for the Portsmouth Acquisition as
if it had been accounted for as a pooling-of-interests; and (ii) certain pro
forma adjustments using an Exchange Ratio of 2.2 for the Acquisition as if it
had been accounted for as a pooling-of-interests. The pro forma balance sheets
have been prepared as if the Acquisitions had been consummated on March 31,
1997, and the 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 ratios will depend on (i) for the Acquisition,
the market price of CFX Common Stock during the 15 trading days preceding the
Effective Date and (ii) for the Portsmouth Acquisition, the market price of CFX
Common Stock during the 10 trading days prior to receipt of the last required
regulatory approval. This information should be read in conjunction with the
historical financial statements of CFX, Portsmouth and Community and 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 Acquisitions 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
ENDED MARCH 31, AT OR FOR THE YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------
1997 1996 1996 1995(1) 1994(1)
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Interest and dividend income................ $ 44,997 $ 39,881 $ 168,305 $ 148,808 $ 126,797
Interest expense............................ 21,695 18,789 79,582 67,865 51,654
---------- ---------- ---------- ---------- ----------
Net interest and dividend income............ 23,302 21,092 88,723 80,943 75,143
Provision for loan and lease losses......... 942 1,180 4,285 3,814 3,622
---------- ---------- ---------- ---------- ----------
Net interest and dividend income after
provision for loan and lease losses....... 22,360 19,912 84,438 77,129 71,521
Other income................................ 5,912 5,453 22,708 17,738 14,400
Other expense............................... 17,532 16,427 71,717 63,252 61,710
---------- ---------- ---------- ---------- ----------
Income before income taxes.................. 10,740 8,938 35,429 31,615 24,211
Income taxes................................ 3,167 2,768 11,876 10,061 7,474
---------- ---------- ---------- ---------- ----------
Net income.................................. 7,573 6,170 23,553 21,554 16,737
Preferred stock dividends................... -- -- -- 89 287
---------- ---------- ---------- ---------- ----------
Net income available to common stock........ $ 7,573 $ 6,170 $ 23,553 $ 21,465 $ 16,450
========== ========== ========== ========== ==========
Weighted average common shares
outstanding............................... 24,568 24,190 24,526 24,369 23,685
========== ========== ========== ========== ==========
ENDING BALANCE SHEET DATA:
Total assets................................ $2,588,015 $2,199,772 $2,369,257 $2,119,176 $1,935,530
Investments................................. 704,070 664,793 560,869 637,661 586,075
Net loans................................... 1,628,691 1,352,233 1,587,045 1,306,841 1,164,122
Allowance for loan and lease losses......... 20,437 19,775 20,332 19,700 18,940
Foreclosed real estate...................... 3,018 1,949 3,061 2,988 4,383
Deposits.................................... 1,828,305 1,705,935 1,751,142 1,625,578 1,541,002
Borrowed Funds.............................. 461,582 232,899 351,343 239,847 165,482
Total shareholders' equity.................. 241,302 232,298 239,837 229,783 212,851
Common shares outstanding................... 24,518 24,117 24,365 23,823 23,265
PER SHARE DATA AND OTHER SELECTED RATIOS:
Common earnings per shares.................. $ 0.31 $ 0.26 $ 0.96 $ 0.88 $ 0.69
Common shareholders' equity per share....... $ 9.84 $ 9.63 $ 9.84 $ 9.65 $ 9.15
Total shareholders' equity to assets at
period end................................ 9.32% 10.56% 10.12% 10.84% 11.00%
Average shareholders' equity to average
assets.................................... 9.92% 11.00% 10.36% 10.88% 11.02%
Return on average assets.................... 1.26% 1.15% 1.04% 1.06% 0.86%
Return on average common shareholders'
equity.................................... 12.69% 10.50% 10.03% 9.77% 7.80%
Net interest margin......................... 4.21% 4.25% 4.25% 4.33% 4.30%
</TABLE>
- ---------------
(1) Includes financial data for Community at or 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.
23
<PAGE> 31
MEETING INFORMATION
DATE, PLACE AND TIME
The Special Meeting of Stockholders of Community will be held at the
Capitol Center for the Arts, 44 South Main Street, Concord, New Hampshire on
July 30, 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 Community entitled to receive notice of
and to vote at the Special Meeting. The holders of each of the 2,477,738 shares
of Community 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 1,056 stockholders of
record. Under Community's Articles of Incorporation, the presence, in person or
by proxy, of the holders of a majority of the outstanding shares of Community
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 two-thirds of the shares of Community Common Stock outstanding and
entitled to vote thereon.
VOTING AND REVOCATION OF PROXIES
Shares of Community 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 Community Common Stock represented by such
proxy will be voted FOR approval of the Acquisition Agreement and, on other
matters presented for a vote, 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 Community a written
notice of revocation, by delivering to Community 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: Gerald R. Emery, Secretary,
Community Bankshares, Inc., 43 North Main Street, Concord, New Hampshire 03301.
Under the New Hampshire Business Corporation Act of 1993, shares of
Community Common Stock represented by executed proxies received by Community
will be counted for purposes of establishing a quorum at the Special Meeting
with respect to all proposals voted on at the Special Meeting. With respect to
the required vote on any particular matter, abstentions will not be treated as
votes cast although they will be counted as shares present and represented for
quorum purposes. Such abstentions will have the same effect as votes against the
Acquisition Agreement. 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 Community 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 Community 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
according to their best judgment. The persons named as proxies by a stockholder
may propose and vote for one or more adjournments or
24
<PAGE> 32
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, all of the members of the Board of
Directors of Community have executed Voting Agreements to vote all of the shares
of Community Common Stock that they are entitled to vote at the Special Meeting
in favor of the Acquisition Agreement. The number of shares of Community Common
Stock which such directors are entitled to vote as of April 30, 1997 is 258,852
(10.5% of Community Common Stock outstanding as of April 30, 1997).
Additionally, each such person has agreed not to transfer or otherwise dispose
of his shares of Community Common Stock or to pledge or otherwise encumber any
additional shares of Community 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 Community and their respective
affiliates, holding an aggregate of 271,698 shares of outstanding Community
Common Stock (11.0%) as of June 12, 1997, vote their shares in favor of the
Acquisition Agreement, the affirmative vote of holders of approximately
1,380,128 additional shares of Community Common Stock (55.7%) will be required
in order for the Acquisition Agreement to be approved by two-thirds of the
outstanding shares of Community Common Stock. See "-- Record Date; Voting
Rights."
SOLICITATION OF PROXIES
In addition to the solicitation of proxies by mail, Community, through its
directors, officers and regular employees, may also solicit proxies personally,
by telephone or by telecopy. Community 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. Community has retained D.F. King to assist in
the solicitation of proxies. Community will pay D.F. King a fee of $3,500 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 Community Common Stock and, upon request, will
be reimbursed by Community for the expenses incurred by them. Community will
bear the expenses in connection with the solicitation of proxies, except that
CFX and Community will share all filing fees paid to the Commission associated
with this Proxy Statement-Prospectus.
BENEFICIAL OWNERSHIP
The following table sets forth the shareholdings as of June 12, 1997 of (i)
each person who was known by Community to be the beneficial owner of more than
five percent of the outstanding Community Common Stock, (ii) each executive
officer and director of Community individually; and (iii) all directors and
executive officers of Community as a group.
<TABLE>
<CAPTION>
SHARES OF
STOCK BENEFICIALLY PERCENTAGE OF
BENEFICIAL OWNER OWNED(1) STOCK OUTSTANDING
------------------------------------------ ------------------ -----------------
<S> <C> <C>
The Killen Group, Inc..................... 153,690(2) 6.2
1199 Lancaster Avenue
Berwyn, PA 19312
John C. Baity............................. 1,250 *
Arthur R. Bethke.......................... 96,028 3.9
John N. Buxton............................ 941(3) *
Douglas Crichfield........................ 67,892(4) 2.7
Gerald R. Emery........................... 10,759(5) *
William S. Fenollosa...................... 2,013(6) *
Paul M. Ferguson.......................... 10,162(7) *
Oliver R. Fifield......................... 3,743(8) *
</TABLE>
25
<PAGE> 33
<TABLE>
<CAPTION>
SHARES OF
STOCK BENEFICIALLY PERCENTAGE OF
BENEFICIAL OWNER OWNED(1) STOCK OUTSTANDING
------------------------------------------ ------------------ -----------------
<S> <C> <C>
Thomas M. Hardiman........................ 10,500 *
Walter W. Hemming......................... 38,448 1.5
Robert A. Hill............................ 896(9) *
Russell A. Holden......................... 2,514(3) *
Lucia T. Kittredge........................ 5,144(10) *
Seth A. Resnicoff......................... 11,856(3) *
Eleanor H. Stark.......................... 1,125(11) *
James R. Stewart.......................... 4,726(1) *
Philip M. Stone........................... 55,313(12) 2.2
Katherine F. Tsouros...................... 2,549(10) *
All directors and executive officers as a
group (18 persons)...................... 318,627(14) 13.0%
</TABLE>
- ---------------
* Less than one percent
(1) For purposes of this table, a person is deemed to be the beneficial owner
of any shares of Common Stock if he has or shares voting power or
investment power with respect to such shares, or has the right to acquire
beneficial ownership of such shares at any time within 60 days of the date
of this table. In addition to the shares listed in the table, the following
persons have stock options that are not currently (or within 60 days of the
date of this table) exercisable, but that will become exercisable on the
Effective Date pursuant to the 1992 Community Stock Option Plan: Messrs.
Buxton, Fenollosa, Fifield, Resnicoff and Stewart and Ms. Kittredge, Ms.
Stark and Ms. Tsouros, 202 stock options each; Mr. Hill, 101 stock options;
and Mr. Baity, 3,750 stock options. See "PROPOSED ACQUISITION -- Effect on
Employees and Benefit Plans."
(2) The Killen Group's Form 13G dated February 14, 1997 filed with the
Securities and Exchange Commission reports that the Group has sole
dispositive power with respect to 153,690 shares of the Company's Common
Stock and sole voting power with respect to 62,500 shares of the Company's
Common Stock.
(3) Includes 514 shares obtainable upon exercise of stock options.
(4) Includes 21,319 shares obtainable upon exercise of stock options and 3,061
shares held in Concord's Employee Stock Ownership Plan.
(5) Includes 8,325 shares obtainable upon exercise of stock options and 2,434
held in Concord's Employee Stock Ownership Plan.
(6) Includes 117 shares obtainable upon exercise of stock options.
(7) Includes 1,241 shares held in Concord's Employee Stock Ownership Plan.
(8) Includes 262 shares obtainable upon exercise of stock options.
(9) Includes 58 shares obtainable upon exercise of stock options.
(10) Includes 389 shares obtainable upon exercise of stock options.
(11) Includes 244 shares obtainable upon exercise of stock options.
(12) Includes 21,460 shares obtainable upon exercise of stock options.
(13) Includes 55,939 shares obtainable upon exercise of stock options and 6,736
shares allocable to executive officers under Concord's Employee Stock
Ownership Plan.
26
<PAGE> 34
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
Over the past several years, Community's Board and its senior executive
officers have regularly reviewed Community's strategic alternatives with the
assistance of Community's financial advisor. These reviews have focused on
assessing Community's opportunities for increasing long term stockholder value,
including opportunities for enhancing earnings internally and for growth through
possible strategic acquisitions or affiliations with other financial
institutions. Community's successful acquisition of Centerpoint Bank in 1996 was
one result of Community's long term strategic planning process.
Starting in 1995 and continuing into 1996, acquisition activity in the New
England banking industry began to heat up significantly. During this period,
Community's management had informal conversations from time to time with a
number of financial institutions about possible strategic combinations. These
conversations were preliminary and inconclusive, and did not impact Community's
continued belief that long term stockholder value could best be enhanced by
remaining independent and implementing its strategic plan for growth. However,
Community's Board remained open to the possibility that stockholder value might
best be served by combining with a larger financial institution, and its Finance
Committee periodically discussed its assessment of a value at which such a
combination would be worth pursuing.
In early January 1997, Peter Baxter, President and Chief Executive Officer
of CFX, contacted Douglas Crichfield, President and Chief Executive Officer of
Community, to arrange for a meeting. At that meeting, Mr. Baxter expressed CFX's
interest in Community and gave a preliminary oral indication of his assessment
of Community's value. At the end of the meeting, Mr. Crichfield responded that
Mr. Baxter's assessment of value was insufficient in light of the value that
Community expected to be able to achieve upon successful implementation of its
own strategic plan. Following that meeting, Mr. Crichfield consulted with MB&D
and with members of Community's Board, who supported Mr. Crichfield's response
to Mr. Baxter's informal expression of interest. At its next meeting (on
February 12), Community's Finance Committee confirmed that CFX's expression of
interest was not worth pursuing at that time.
Over the next month, Messrs. Baxter and Crichfield had a series of further
discussions by telephone. On February 14, 1997, Mr. Baxter called Mr. Crichfield
and reiterated CFX's interest in exploring a combination with Community, which
had been enhanced by CFX's recent announcement of its acquisition of Portsmouth
Bank Shares (Community's market area would provide an important link between
CFX's and Portsmouth's primary market areas). During that telephone
conversation, Mr. Baxter communicated his revised assessment of Community's
value to CFX, which value was significantly higher than his earlier indication
of value. Mr. Crichfield told Mr. Baxter that he would discuss the proposal with
his Board of Directors, which was scheduled to meet on February 18, 1997.
At the February 18 Board meeting, Mr. Crichfield reported to the Board of
Directors the substance of his discussions with Mr. Baxter. Mr. Crichfield also
reported that he had received a less specific expression of interest from
another New England-based financial institution. Representatives of MB&D and
legal counsel, Foley, Hoag & Eliot LLP ("FH&E"), attended the meeting and
participated with the Board in a discussion of the factors to be considered in
determining which strategic direction to pursue. At the end of the meeting, the
Board concluded that both CFX and the other interested party should be invited
to make presentations to the Board.
On March 5, 1997, the Board, together with representatives of MB&D and
FH&E, met offsite to hear successive presentations by representatives of the two
financial institutions. The purpose of these presentations was to enable the
Board to learn about the history, financial performance, banking philosophy and
strategies of
27
<PAGE> 35
these two companies, and to determine whether or not Community should move to
the next step in pursuing a possible combination with either of them. Each
institution also indicated to the Board its interest in entering into a
stock-for-stock exchange and presented its assessment of Community's value and
the exchange ratio it would expect to be prepared to offer. On the basis of a
number of different measurements, including, without limitation, the then
current market price of the two institutions' common stock and the Board's
assessment of the future prospects of the two institutions, the value of CFX's
proposed exchange ratio was higher than that proposed by the other institution.
After hearing those presentations, the Board decided to schedule another meeting
the following week to review the presentations in detail and to decide on a
course of action.
On March 11, 1997, the Board of Directors met again with MB&D and FH&E
representatives. At that meeting, the Board had a lengthy discussion in which it
assessed Community's prospects on a stand-alone basis, reviewed Community's
possible opportunities to engage in further acquisitions such as the Centerpoint
acquisition, and reviewed the opportunities that would arise from combining with
one of the two parties that had made presentations the week before. The MB&D
representatives also made a detailed presentation to the Board, analyzing the
two proposals from a financial point of view. At the end of the meeting,
following an analysis led by Community's legal counsel, the Board determined
that the expressions of interest were attractive enough that they should be
pursued further, although the values proposed were not yet sufficient. The Board
directed MB&D to go back to both institutions to let them know that the Board
would be meeting again on March 14 to discuss the matter further and to give
them an opportunity to adjust their exchange ratios prior to that meeting.
Prior to the March 14, 1997 Board meeting, each of CFX and the other
interested institution increased its proposed exchange ratio. At that meeting,
MB&D made a further detailed presentation analyzing both proposals. For a number
of reasons, the CFX proposal was more attractive than the other proposal,
including that the value of the consideration offered by CFX continued to be
higher than that offered by the other institution, based on a number of
measurements. At the end of the March 14 meeting, the Board authorized
management to proceed toward negotiation of a definitive agreement with CFX.
On March 15, 1997, CFX's counsel circulated an initial draft of the
Acquisition Agreement, the Stock Option Agreement and related documents. Over
the ensuing week, the parties and their advisors negotiated the terms of the
various agreements. On March 18, the Community Board met to discuss the progress
of the negotiations, and a representative of FH&E presented to the Board the
elements of the Acquisition Agreement and the Stock Option Agreement. During the
course of the week, the parties and their advisors also performed "due
diligence" reviews on each others' loan portfolios, financial condition and
other relevant matters.
On March 23, 1997, the Community Board met again. At that meeting, the
Board reviewed with counsel the changes to the Acquisition Agreement and the
Stock Option Agreement since their prior review, and representatives of MB&D
presented a detailed analysis of the transaction from a financial point of view
(see "-- Opinion of Financial Advisor"). At that meeting, a representative of
MB&D advised the Board orally that, in the opinion of MB&D, and based on facts
known to MB&D at that date, the consideration to be received in the Acquisition
was fair, from a financial point of view, to the Community stockholders as of
that date. He also stated that, absent significant change in the two companies'
financial condition or in the market for their stock, MB&D anticipated that it
would be prepared to issue a similar written opinion as of the date of the proxy
statement to stockholders. At that meeting, the Board of Directors unanimously
voted to approve the Acquisition Agreement and the Stock Option Agreement and to
recommend that the Community stockholders approve the Acquisition.
The parties executed the Acquisition Agreement and related documents and
publicly announced the Acquisition on March 24, 1997.
28
<PAGE> 36
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 Community 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 Community 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
Community's geographic concentration in central and south central 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
Community Board by MB&D of Community's strategic alternatives, that the
Acquisition represents an attractive strategic alternative to Community for
increasing the profitability of its operations and enhancing stockholder
value;
(4) the financial presentation of MB&D and the opinion of MB&D as to
the fairness from a financial point of view of the Acquisition
consideration to Community and its stockholders (see "-- Opinion of
Financial Advisor");
(5) its analysis of the structure and terms of the Acquisition,
including tax-free treatment for Community stockholders;
(6) its belief that the Acquisition provides an opportunity for the
stockholders of Community to receive a significant increase in dividends;
and
(7) its assessment of the social and economic effects of the
Acquisition on the constituencies which Community and its subsidiaries
serve, including depositors, borrowers, the community generally and the
employees of Concord and Centerpoint.
The foregoing discussion of the information and factors discussed by the
Board of Directors is not meant to be exhaustive but is believed to include all
material factors considered by Community's Board. The Board did not quantify or
attach any particular weight to the various factors that it considered in
reaching its determination that the Acquisition is in the best interests of
Community and its stockholders.
FOR THE REASONS DESCRIBED ABOVE, THE COMMUNITY BOARD HAS UNANIMOUSLY
APPROVED THE ACQUISITION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE ACQUISITION, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE ACQUISITION AGREEMENT.
OPINION OF FINANCIAL ADVISOR
On March 23, 1997, MB&D delivered its oral opinion to the Board of
Directors of Community that, as of that date, the number of shares of CFX Common
Stock to be received in exchange for each outstanding share of Community Common
Stock (the "Exchange Ratio") was fair, from a financial point of view, to
Community's stockholders. MB&D has subsequently delivered to the Board of
Directors of Community its written opinion, as of the date of this Proxy
Statement-Prospectus, that the Exchange Ratio is fair, from a financial point of
view, to Community's stockholders.
The method for determination of the applicable Exchange Ratio is detailed
in the Proxy Statement-Prospectus and all Community stockholders are encouraged
to read this document in detail.
MB&D has acted as financial advisor to Community on a non-exclusive
contractual basis since March of 1993 in connection with Community's development
of its strategic plan and has assisted Community in the
29
<PAGE> 37
evaluation of a number of hypothetical affiliation opportunities since that
date. During 1995 and 1996, MB&D represented Community in connection with its
acquisition of Centerpoint Bank. With respect to the pending transaction with
CFX, MB&D advised Community during the negotiation process leading up to the
execution of the Acquisition Agreement and provided Community with a number of
analyses as to the range of financially feasible exchange ratios that might be
received in a hypothetical transaction. Representatives of MB&D met with the
executive management and Board of Directors of Community on six separate
occasions during February and March of 1997 in connection with the analysis of
Community's options. The Exchange Ratio was arrived at in an arms length
negotiation between CFX and Community in a process in which MB&D advised
Community.
MB&D was retained based on its qualifications and experience in the
financial analysis of banking and thrift institutions, knowledge of the New
Hampshire and Massachusetts banking markets in particular and of the New England
banking markets in general, as well as its experience with merger and
acquisition transactions involving banking institutions. Members of the
Corporate Finance Advisory Group of MB&D have advised financial institution
clients on more than 54 successfully completed mergers or acquisitions of
financial institutions, many of which involved entities conducting business in
New England marketplaces, including New Hampshire. Since the formation of MB&D
(and excluding this pending transaction), employees of the firm have advised
institutions with respect to five successfully completed mergers and
acquisitions transactions involving financial institutions doing business in New
Hampshire.
The full text of the opinion of MB&D, which sets forth assumptions made,
matters considered and limits on the review undertaken by MB&D, is attached
hereto as Appendix C. Community's stockholders are urged to read the opinion in
its entirety. MB&D's opinion is directed only to the Exchange Ratio and does not
constitute a recommendation to any holder of Community Common Stock as to how
such holder should vote at the Special Meeting. The summary of the opinion of
MB&D set forth in this Proxy Statement-Prospectus was provided to Community by
MB&D and is qualified in its entirety by reference to the full text of the
opinion itself. MB&D's opinion is necessarily based upon conditions as of the
date thereof and upon information made available to MB&D through the date
thereof.
In arriving at its opinion, MB&D (i) reviewed the Acquisition Agreement and
this Proxy Statement-Prospectus in substantially the form to be sent to
Community's stockholders; (ii) reviewed publicly available business and
financial information with respect to Community, CFX and Portsmouth as well as
certain internal financial information and financial projections prepared by the
respective managements of Community and CFX; (iii) held discussions with members
of the senior management and Board of Directors of Community concerning the past
and current results of operations of Community, its current financial condition
and management's opinion of its future prospects; (iv) reviewed the historical
reported price and record of trading volume for both Community and CFX Common
Stock; (v) held discussions with the senior management of CFX concerning the
current and past results of operations of CFX, its current financial condition
and management's opinion of its future prospects; (vi) considered the current
state of and future prospects for the economies of New Hampshire and
Massachusetts generally and the relevant market areas for Community, CFX and
Portsmouth in particular: (vii) reviewed the specific acquisition analysis
models employed by MB&D to evaluate potential business combinations of financial
institutions; (viii) reviewed the reported financial terms of certain recent
business combinations in the banking industry; and (ix) performed such other
studies and analyses as MB&D considered appropriate under the circumstances
associated with this particular transaction.
MB&D's opinion takes into account its assessment of general economic,
market and financial conditions and its experience in other transactions, as
well as its experience in securities valuation and its knowledge of the banking
industry generally. For purposes of reaching its opinion, MB&D has assumed and
relied upon the accuracy and completeness of the information provided to it by
Community, CFX and Portsmouth and does not assume any responsibility for the
independent verification of such information. In the course of rendering its
opinion, MB&D has not completed any independent valuation or appraisal of any of
the assets or liabilities of any of Community, CFX or Portsmouth and has not
been provided with such valuations or appraisals from any other source. With
respect to the financial projections reviewed by MB&D in the course of rendering
its opinion, MB&D has assumed that such projections have been reasonably
prepared to reflect the best currently
30
<PAGE> 38
available estimates and judgment of the management of each of Community and CFX
as to the most likely future performance of their respective companies.
The following is a summary of material analyses employed by MB&D in
connection with rendering its written opinion. Given that it is a summary, it
does not purport to be a complete and comprehensive description of all the
analyses performed, or an enumeration of all the matters considered by MB&D in
arriving at its opinion. The preparation of a fairness opinion is a complicated
process, involving a determination as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances. Therefore, such an opinion is not readily susceptible
to a summary description. In arriving at its fairness opinion, MB&D did not
attribute any particular weight to any one specific analysis or factor
considered by it and made qualitative as well as quantitative judgments as to
the significance of each analysis and factor. Therefore, MB&D believes that its
analyses must be considered as a whole and feels that attributing undue weight
to any single analysis or factor considered could create a misleading or
incomplete view of the process leading to the formation of its opinion. In its
analyses, MB&D has made certain assumptions with respect to banking industry
performance, general business and economic conditions and other factors, many of
which are beyond the control of management of any of Community, CFX and
Portsmouth. Estimates which are referred to in MB&D's analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may vary significantly from those set forth.
Analysis of the Anticipated Merger and the Exchange Ratio in Relation to
CFX. The anticipated consideration to be paid in the Acquisition for each
outstanding share of Community Common Stock is an Exchange Ratio of 2.2 shares
of CFX Common Stock in exchange for each share of Community Common Stock,
subject to possible adjustment as follows: If, during the 15 trading days
preceding the Effective Date, the average of the midpoints between the daily
high and low prices reported by the Wall Street Journal for CFX Common Stock
(the "Average CFX Trading Price") is greater than $18.18 but not more than
$20.00, the Exchange Ratio will be determined by dividing $40.00 by the Average
CFX Trading Price and can accordingly range between 2.2:1 and 2.0:1. If the
Average CFX Trading Price is greater than $20.00, the Exchange Ratio will be
fixed at 2.0:1. In the event that the Average CFX Trading Price is $18.18 or
less, the Exchange Ratio will be fixed at 2.2:1 unless the Average CFX Trading
Price is $13.50 or less, at which point Community will have the right to
terminate the Acquisition.
When valued at the last reported trade for CFX Common Stock ($17.25) on the
last day on which there were trades in CFX Common Stock prior to the
announcement of the Acquisition, the anticipated Exchange Ratio of 2.2:1
represents the following:
TRANSACTION VALUE: The indicated market value is $37.95 per share,
resulting in an aggregate valuation of approximately $93.5 million for the
Acquisition based on outstanding shares of Community of approximately 2,465,237
(the number of shares outstanding on March 21, 1997).
- Multiple of Earnings: An indicated market value of $37.95 per share
represents a multiple of 18.98 TIMES Community's 1996 reported earnings
of $2.00 per share and 16.87 TIMES the consensus street estimate for
Community's 1997 earnings of $2.25 per share.
- Multiple of Book Value: An indicated market value of $37.95 per share
represents a multiple of 2.28 TIMES Community's reported $16.66 book
value per share as of December 31, 1996.
- Multiple of Market Value: An indicated market value of $37.95 per share
represents a multiple of 1.53 TIMES the last reported trade for Community
Common Stock of $24.75 on March 21, 1997.
Specific Acquisition Analysis. MB&D employs a number of proprietary
analysis models to examine hypothetical transactions involving banking and/or
thrift companies. The models use forecast earnings data, selected current period
balance sheet and income statement data, current market and trading information
and a number of assumptions as to interest rates for borrowed funds, the
opportunity costs of funds, discount rates, dividend streams, effective tax
rates and transaction structures (the alternative or combined uses of common
equity, cash, debt or other securities, to fund a transaction). The models
distinguish between purchase and pooling accounting treatments and inquire into
the likely economic feasibility of a given hypothetical transaction at a given
price level or specified exchange rate while employing a specified transaction
structure.
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<PAGE> 39
The models also permit evaluation of various levels of potential noninterest
expense savings which might be achieved and various potential implementation
time tables for such savings as well as the possibility of revenue enhancement
opportunities which may arise in a given hypothetical transaction. The models
also permit an examination of pro forma capital adequacy.
In this transaction, MB&D evaluated a range of possible exchange ratios
from 2.0:1 to 2.2:1 for each share of Community Common Stock. MB&D's analyses
contemplated both a pooling acquisition of Community by CFX on a stand-alone
basis and by CFX taking into account a prior (or simultaneous) pooling
acquisition of Portsmouth. In either case, MB&D believes that the proposed
transaction is financially feasible from an earnings per share dilution
perspective, generating prospective dilution which can be eliminated by a
reduction of less than 20% of the annualized run rate for non-interest expense
for Community. MB&D believes that this is an achievable objective for CFX and
that the transaction can become accretive to earnings per share for the pro
forma CFX and thus to the stockholders of Community who will prospectively
become CFX stockholders when the Acquisition is consummated. MB&D is satisfied
that the pro forma capitalization of CFX will be adequate after the completion
of the transaction.
Discounted Cash Flow Analysis. MB&D reviewed a discounted cash flow
analysis to permit the conceptual examination of the present discounted values
of potential future results employing selected assumptions and discount rates.
In the discounted cash flow analysis, MB&D reviewed a cash flow model with
the management and Board of Community that employed a projection of hypothetical
earnings for the five twelve-month periods subsequent to March 1997. A
hypothetical dividend pay-out ratio assumption which depicted average annual
pay-outs as a percentage of earnings fixed at 26% over the same five-year period
was also used. MB&D assumed that the control sale price/earnings ratio at the
end of a five year period would approximate 15.70 times earnings. Given the
model time horizon of five years and a discount rate of 12.0%, these assumptions
resulted in a range of present discounted values (12% discount rate) of cash
flows of from as little as $24.77, assuming an .80% constant return on assets
and an 8% annual growth rate of earnings per share to as much as $47.91,
assuming a 1.30% constant return on assets and a 12% annual compound growth rate
in earnings per share. These values can be compared to the indicated per share
value of the Acquisition of $37.95 based on the anticipated Exchange Ratio and
the last trade for CFX Common Stock on Friday, March 21, 1997. To reach a
theoretical indifference point between the $37.95 in present discounted value of
the anticipated Exchange Ratio, Community would need to demonstrate an annual
return on assets of at least 1.09% every year for five years and grow its
earnings per share at 10.58% or more every year, while maintaining a steady 26%
cash dividend payout ratio.
It is important to note that the discount factors employed embody both the
concept of a riskless time value of money and risk factors that reflect the
uncertainty of the forecast cash flows and terminal price/earnings multiples.
Use of higher discount rates would result in lower discounted present values.
Conversely, use of lower discount rates would result in higher discounted
present values. MB&D advised the Community Board of Directors that, although
discounted cash flow analysis is a frequently used valuation methodology, it
relies on numerous assumptions, including discount rates, terminal values,
earnings and asset growth, as well as dividend payout ratios. Any or all of
these assumptions may vary from actual future performance and results.
MB&D also considered the fact that Community stockholders receiving CFX
Common Stock would substantially increase their prospect for annual dividends
based upon current and projected dividend streams of both Community and CFX.
Based upon an annualization of the quarterly dividend payout by CFX at the
announcement date, Community stockholders receiving CFX Common Stock would
receive an equivalent dividend per share of Community Common Stock of $1.936 per
year using the anticipated Exchange Ratio of 2.2 CFX shares for each share of
Community Common Stock. By comparison, at the announcement date, Community was
paying a dividend per share to holders of Common Stock equivalent to $0.64 per
year. The implied increase is equivalent to more than 200%.
Analysis of Other Comparable Transactions. MB&D is reluctant to place
excessive emphasis on "comparable analysis" as a valuation methodology due to
what it considers to be inherent limitations of the
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<PAGE> 40
application of the results to specific cases. It has observed that such analysis
as employed by some industry observers and financial advisors fails to
adequately take into consideration such factors as material differences in the
underlying capitalization of the comparable institutions which are being
acquired; differences in the historic earnings (or loss) patterns recorded by
the compared institutions which can depict a very different trend than might be
implied by examining only recent financial results; failure to exclude
non-recurring profit or loss items from the last twelve months' earnings streams
of target companies which can distort apparent earnings multiples; material
differences in the form or forms of consideration used to complete the
transaction; differences between the planned method of accounting for the
completed transaction; and such less accessible factors as the relative
population, business and economic demographics of the acquired entities' markets
as compared or contrasted to such factors for the markets in which comparables
are doing business. Comparable analysis also rarely seems to take into
consideration the degree of facilities overlap between the acquirer's market and
that of the target or the absence of such overlap and the resulting cost savings
differentials between otherwise apparently comparable transactions. MB&D
consequently believes that comparable analysis has inherent limitations and
should not be relied upon to any material extent by members of management, the
Board of Directors or the stockholders in considering the presumed merits of a
pending transaction.
Nevertheless, MB&D reviewed a universe of 16 publicly announced
transactions in the financial institutions industry in which either a bank or a
thrift (or their respective holding companies) engaged in the acquisition of
another thrift. These transactions were announced between March 14, 1995 and
February 26, 1997. All of the examined transactions involved entities doing
business in New England.
The 16 transactions reviewed by MB&D are as follows: Main Street Community
Bancorp's acquisition of Lexington Savings Bank; Walden Bancorp's acquisition of
Bank of Braintree; Webster Financial Corp.'s acquisition of Shelton Bancorp;
Albank Financial Corp.'s acquisition of Marble Financial Corp.; Center Financial
Corp.'s acquisition of Great Country Bank; CFX's acquisition of Milford
Co-operative Bank; Peoples Heritage Financial Group's acquisition of Family
Bancorp; First Union Corp.'s acquisition of Center Financial Corp.; Grove Bank's
acquisition of Greater Boston Bank; UST Corporation's acquisition of Walden
Bancorp; Webster Financial Corp.'s acquisition of DS Bancor, Inc.; Citizens
Financial Group's acquisition of Grove Bank; Vermont Financial Services Corp.'s
acquisition of Eastern Bancorp, Inc.; Eagle Financial Corp.'s acquisition of
MidConn Bank; CFX's acquisition of Portsmouth Bankshares, Inc.; and MASSBANK
Corp.'s acquisition of Glendale Co-operative Bank.
Within this group of 16 transactions, the median multiple of tangible book
value paid by the acquirer was 1.60 times, the mean multiple of tangible book
value paid was 1.56 times, the maximum multiple paid was 1.96 times and the
minimum multiple was .96 times. The comparable multiple for the Acquisition is
2.28 times, representing a higher multiple of tangible book value than any of
the other 16 transactions announced since March 1995. This multiple was derived
based upon the indicated value of the merger consideration of $37.95 per share,
determined by multiplying the Exchange Ratio of 2.2 by the price at which the
CFX Common Stock last traded on the trading day immediately preceding the
announcement of the Acquisition ($17.25).
With respect to trailing 12 months earnings multiples for this same data
sample of 16 transactions, the median price/earnings multiple paid was 15.25
times, the mean price/earnings multiple paid was 15.68 times, the minimum
price/earnings multiple paid was 11.68 times and the maximum price/earnings
multiple paid was 24.56 times. The comparable multiple for the proposed
transaction of 18.98 times falls comfortably above both the mean and the median
paid for the whole group of transactions.
Pursuant to a letter agreement with Community dated March 23, 1997, MB&D
will receive a fee equivalent to 1% of the fair market value of consideration to
be received by Community's stockholders, conditioned on the consummation of the
Acquisition. MB&D was paid $150,000 after the execution of the Acquisition
Agreement and was paid a further $250,000 upon issuance of its opinion, which is
set forth at Appendix C to this Proxy Statement-Prospectus. Payment of the
balance of the fee will be conditioned on the closing of the Acquisition and
will be based on 1% of a measurement of the fair market value of the CFX shares
of Common Stock issued to Community stockholders, including the value to option
holders, from
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<PAGE> 41
which will be deducted the $400,000 already paid to MB&D. Such fee, however,
will be limited to a maximum fee of $1,000,000. The fee represents compensation
for services rendered in connection with the analysis of the hypothetical
transaction, support of the negotiations and for the rendering of MB&D's
opinion. In addition, Community has agreed to reimburse MB&D for its reasonable
out-of-pocket expenses incurred in connection with the transaction. Community
also has agreed to indemnify MB&D and its directors, officers and employees
against certain losses, claims, damages and liabilities relating to or arising
out of MB&D's engagement, including liabilities under the federal securities
laws.
TERMS OF THE ACQUISITION
In accordance with the terms of the Acquisition Agreement and applicable
New Hampshire law, CFX's proposed acquisition of Community will involve a share
exchange, a holding company merger and a bank merger. In the initial step, CFX
will acquire all of the outstanding shares of Community Common Stock, including
each attached Right issued pursuant to the Community Rights Agreement, through
an exchange (the "Share Exchange") of shares of CFX Common Stock for the issued
and outstanding shares of Community Common Stock pursuant to the Plan of
Exchange. Immediately following the Share Exchange, Community will be merged
with CFX pursuant to a merger agreement or plan of merger in a form to be
specified by CFX, and immediately thereafter Concord and Centerpoint will be
merged with CFX Bank pursuant to an Agreement and Plan of Merger substantially
in the form agreed upon by the parties concurrently with the execution of the
Acquisition Agreement.
At the Effective Date, each share of Community 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
converted (together with its attached Right) into 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.
The Exchange Ratio will be a function of the Average CFX Trading Price. The
Average CFX Trading Price is based on the average of the averages of the high
and low prices of CFX Common Stock on the AMEX as reported in The Wall Street
Journal for the fifteen consecutive trading days ending on the business day
before the Effective Date. Thus, 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.
The Exchange Ratio will be:
(1) 2.2, if the Average CFX Trading Price is more than $13.50, but not
more than $18.18;
(2) $40.00 divided by the Average CFX Trading Price, if the Average
CFX Trading Price is more than $18.18 but not more than $20.00; or
(3) 2.0, if the Average CFX Trading Price is more than $20.00.
If the Average CFX Trading Price is $13.50 or less, Community may elect to
terminate the Acquisition Agreement unless CFX agrees to an Exchange Ratio equal
to $29.70 divided by the Average CFX Trading Price (the "Cure Ratio") in
accordance with the terms of the Acquisition Agreement. If Community does not
elect to terminate the Acquisition, the Exchange Ratio will be 2.2; if Community
elects to terminate the Acquisition, CFX is not required to agree to the Cure
Ratio. In addition, the Plan of Exchange provides that if, prior to the
Effective Date, an announcement is made with respect to a business combination
involving the acquisition of CFX or a substantial portion of its assets, the
Exchange Ratio shall be not less than 2.2.
In determining whether to elect to terminate the Acquisition Agreement, the
Community Board will, consistent with its fiduciary duties, consider all of the
relevant facts and circumstances existing at the time, including, without
limitation, the following: whether it believes that CFX is prepared to increase
the Exchange Ratio, as described above; the market for bank stocks in general
and the relative value of the Community Common Stock and CFX Common Stock; and
the advice of its financial advisors and legal counsel. By approving the
Acquisition Agreement, the Community stockholders will be permitting the
Community Board to determine, in the exercise of its fiduciary duties and
without any further solicitation of the Community
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<PAGE> 42
stockholders, whether or not to proceed with the Acquisition if the Average CFX
Trading Price is $13.50 or less. See "THE PROPOSED ACQUISITION -- Effective Date
of the Acquisition; Termination."
The following table shows the Exchange Ratio at various Average CFX Trading
Prices, together with the Community Per Share Value in each case. As used
herein, the Community Per 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
Community Common Stock based on the Average CFX Trading Price.
<TABLE>
<CAPTION>
EXCHANGE
AVERAGE CFX RATIO COMMUNITY
TRADING (CFX PER SHARE
PRICE SHARES) VALUE
- ----------- ----------- ----------
<S> <C> <C> <C>
$21.50 .... 2.0........ $43.00
$20.50 .... 2.0........ 41.00
$19.50 .... 2.0512 .... 40.00
$18.50 .... 2.1621 .... 40.00 If Community elects to terminate
$17.50 .... 2.2........ 38.50 the Acquisition but CFX elects to
$16.50 .... 2.2........ 36.30 pay the Cure Ratio and thereby
$15.50 .... 2.2........ 34.10 keep the Acquisition Agreement in
$14.50 .... 2.2........ 31.90 effect:
</TABLE>
<TABLE>
<CAPTION>
ADJUSTED
EXCHANGE COMMUNITY
RATIO PER
(CFX SHARES) SHARE VALUE
------------ ------------
<S> <C> <C>
$13.50................................. 2.2......... $29.70
$12.50................................. 2.376....... 29.70
</TABLE>
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.
At the Effective Date, outstanding stock options to purchase Community
Common Stock ("Community Options") pursuant to the 1985 Stock Option Plan, the
1988 Stock Option Plan, the 1989 Centerpoint Bank Stock Option Plan, the 1992
Stock Option Plan and the 1991 Employee Stock Purchase Plan (collectively, the
"Community Stock Option Plans") will be assumed by CFX and, except as provided
in the Plan of Exchange, each stock option outstanding under the Community Stock
Option Plans 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 Community Common Stock subject to such
options. As of March 24, 1997, there were 95,379 shares of Community Common
Stock subject to purchase pursuant to the exercise of the Community Options
(excluding those under the 1991 Employee Stock Purchase Plan).
In the event that, between March 24, 1997 and the Effective Date, the
outstanding shares of CFX Common Stock or Community Common Stock shall have been
increased, decreased or changed into or exchanged for a different number or
reorganization, recapitalization, reclassification, stock split or other like
changes in the capitalization of CFX or Community, or if a stock dividend is
declared on CFX Common Stock or Community 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, and the dollar amounts and the Exchange Ratio.
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<PAGE> 43
SURRENDER OF CERTIFICATES
Within five business days after the Effective Date, an exchange agent
appointed by CFX will mail to each record holder of Community 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 Community Common Stock
certificates for the certificates representing CFX Common Stock and the cash in
lieu of fractional shares, if any, into which the Community Common Stock will
have been converted as result of the Acquisition. Upon surrender of their
Community 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 Community Common
Stock outstanding immediately prior to the Effective Date shall have no rights
with respect to such Community 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
Community 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 Community 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 Community 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, Community or CFX, and for purposes hereof could be deemed to include all
executive officers, directors and ten percent stockholders of Community 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
Community 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 Community.
In addition, since the Acquisition is to be accounted for as a
pooling-of-interests, shares of CFX Common Stock and Community 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
Community 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 Agreement, CFX has agreed to use its best
efforts to publish no later than 25 days after the end of the first calendar
quarter (or, under certain circumstances, the first calendar month) 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.
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<PAGE> 44
CFX and Community shall use their reasonable best efforts to cause those
persons who may be deemed to be affiliates of Community or CFX to deliver to the
other party 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 Community Common Stock
for the 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 Community and in compliance with the Securities Act and
the rules and regulations promulgated thereunder. It is anticipated that each
director and executive officer of Community and CFX will execute such an
agreement. Certificates of Community 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
Community 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 (as
defined in "-- Closing; Effective Date; Termination").
The obligations of CFX and Community to consummate the Acquisition are
conditioned upon, among other things: (i) approval of the Acquisition Agreement
and related documents (the "Transaction Documents") by the stockholders of CFX
and Community; (ii) the absence of court or regulatory orders prohibiting the
Acquisition; (iii) the receipt of all necessary regulatory approvals and the
expiration of all applicable waiting periods, without any condition or
requirement that causes the Board of Directors of CFX or Community to abandon
the Acquisition because such condition or requirement, in the reasonable good
faith opinion of CFX or Community, materially and adversely affects the
anticipated economic and business benefits of the Acquisition to CFX; (iv) the
effectiveness under the Securities Act of the Registration Statement and the
absence of any proceeding by the Commission to suspend such effectiveness; (v)
approval for listing on the AMEX, subject to official notice of issuance, of the
shares of CFX Common Stock to be issued in the Share Exchange; (vi) the receipt
of the tax opinion described under "-- Certain Federal Income Tax Consequences";
(vii) that no event shall have occurred which would preclude the Acquisition
from being accounted for as a pooling of interests; (viii) receipt of all
necessary permits, authorizations, consents and waivers; and (ix) receipt of
other customary closing documents and opinions.
The Acquisition Agreement provides that, except with respect to any
required stockholder or regulatory approval, CFX and Community may at any time
(whether before or after approval of the Transaction Documents by the
stockholders of CFX and Community), in a writing signed by an executive officer
of each of CFX and Community, extend the time for the performance of the
obligations of CFX or Community 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
Community, or satisfaction of any of the conditions precedent to CFX's or
Community's obligations contained in the Transaction Documents or (iii) the
performance by CFX or Community of any of CFX's or Community's obligations;
provided that after approval of the Acquisition by the stockholders of
Community, no such modification shall alter or change the amount or kind of
consideration to be received by the stockholders of Community as provided in the
Plan of Exchange or adversely affect the tax treatment to Community stockholders
as a 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
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
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<PAGE> 45
Bank Merger, CFX, Community, CFX Bank and/or Concord or Centerpoint must obtain
the prior consent and approval, as applicable, of the FDIC, the Commissioner and
the MBBI, and approval from the Federal Reserve or a waiver from the Federal
Reserve of the obligation to seek such approval.
FDIC. CFX has filed an application with the FDIC for approval of the Bank
Merger under the Bank Merger Act provisions of the Federal Deposit Insurance Act
(the "BMA"). The BMA requires that the FDIC take into consideration the
financial and managerial resources and future prospects of the existing and
proposed institutions and the convenience and needs of the communities to be
served. The BMA prohibits the FDIC from approving the Acquisition if it would
violate certain antitrust standards, unless it finds that the anticompetitive
effect of the Acquisition is clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs of the
communities to be served. In addition, the FDIC must take into account the
parties' record of performance in meeting the credit needs of the entire
community, including low and moderate-income neighborhoods. FDIC regulations
require publication of notice of the application for approval of the Acquisition
and provide an opportunity for the public to comment on the application in
writing and to request a hearing. The Acquisition may not be consummated until
the 30th day after such approval (or such shorter period as the FDIC may
prescribe with the concurrence of the Attorney General, but not less than 15
days), during which time the United States Department of Justice ("DOJ") may
challenge the Acquisition on antitrust grounds.
Federal Reserve. The Federal Reserve has waived all prior approval
requirements under Section 3 of the BHCA.
New Hampshire Bank Commissioner. CFX has filed an application with the
Commissioner for approval of the Bank Merger under relevant provisions of the
New Hampshire Revised Statutes Annotated (the "NHRSA") and regulations
promulgated thereunder. The Commissioner may conduct such investigation as he
deems necessary to find whether the Bank Merger will promote the public
convenience and advantage and the interest of the merging institutions and their
shareholders and depositors, and whether the Bank Merger can be effected without
reducing the amount standing to the credit of any depositor upon consummation
thereof and without the imposition of restrictions on the withdrawal of funds by
depositors.
Massachusetts Commissioner of Banks. Because CFX controls subsidiary banks
in Massachusetts, Chapter 167A of the Massachusetts General Laws requires prior
approval of the Holding Company Merger by 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.
Although the shares issuable upon exercise of the Option represent 19.9% of
the Community Common Stock outstanding on the date the Option was granted, CFX
may not acquire more than 5% of the Community 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 as Appendix B.
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 Acquisition will not proceed in the absence of all required approvals.
There can be no assurance that the FDIC, the Commissioner or the MBBI will grant
their approvals to the Acquisition, and if granted, there can be no assurance as
to the date of such grants, that such grants will not be conditioned upon
matters that would cause the Board of Directors of CFX to abandon the
Acquisition, or that no action will be brought by the DOJ challenging the
Acquisition. See "--Representations and Warranties; Conditions to the
Acquisition; Waiver" and "--Closing; Effective Date; Termination."
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<PAGE> 46
CFX and Community 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 or Community to abandon the Acquisition.
BUSINESS PENDING THE ACQUISITION
Under the terms of the Acquisition Agreement, each of CFX, Community and
their respective subsidiaries generally is prohibited from taking any action
that materially affects the ability of CFX or Community 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 as a tax-free reorganization
within the meaning of Section 368(a) of the Code, or results in the
representations and warranties of CFX and Community in the Acquisition Agreement
not being true and correct on the date of the Acquisition Agreement or on the
Closing Date.
Community, Concord and Centerpoint 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, Community, Concord and Centerpoint 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 or described in
the Acquisition Agreement.
NO SOLICITATION
Community has agreed that it will not (and will not authorize or permit
its, or Concord's or Centerpoint's, officers, directors, agents and affiliates
to) solicit or initiate any inquiries or proposals concerning any acquisition or
purchase of all or a substantial portion of the assets or a substantial equity
interest in, Community, Concord or Centerpoint (any of the foregoing being
referred to as an "Acquisition Transaction") other than the Acquisition.
Community must notify CFX as soon as practicable if any such inquiries or
proposals are received by Community, or if Community 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 Transactions will be consummated at a closing to be held as soon as
practicable 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, so long as such manner of consummation does not materially impede or
delay receipt of approvals referred to in the Acquisition Agreement or the
consummation of the Transactions, alter the consideration to be delivered to
Community's stockholders or adversely affect the tax treatment to Community's
stockholders. The Transactions will 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 (the "Effective Date").
CFX and Community each anticipates that the Transactions 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 Transactions is not
satisfied. There can be no assurance as to if or when such approvals will be
obtained or that the Transactions 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
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Community: (i) at any time on or prior to the Effective Date, by the mutual
written agreement of CFX and Community; (ii) at any time on or prior to the
Closing Date, by either Community 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 Community or CFX in
the event that the Closing Date does not occur on or before March 31, 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 Community fail to approve the Acquisition or the stockholders of CFX fail
to approve the Charter Amendment; (v) at any time, by any party if the
Acquisition is disapproved by a relevant regulatory authority; or (vi) by
Community, if the Average CFX Trading Price is $13.50 or less 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
The Acquisition Agreement provides that, following the 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 Community, to be designated by Community after consultation with and the
consent of CFX (which consent shall not be unreasonably withheld), and (iii)
subject to consummation of the Portsmouth Acquisition, three persons serving as
directors of Portsmouth.
The Acquisition Agreement also provides that following the consummation of
the Holding Company Merger, Concord and Centerpoint will be merged with and into
CFX Bank pursuant to the provisions of, and with the effect provided in, Title
35 of the NHRSA, and that three persons serving as directors of Community, to be
designated by Community 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 prior to or at the Effective Date.
Pursuant to the terms of the Acquisition Agreement, Douglas Crichfield, the
President and Chief Executive Officer and a director of Community and Concord,
has been designated by Community to serve as a director of CFX and a trustee of
CFX Bank following the Acquisition, and will become an Executive Vice President
of CFX and the President and Chief Executive Officer of CFX Bank, effective upon
the Effective Date. 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, effective upon
the Effective Date. Messrs. Buxton, Resnicoff and Hill and Ms. Kittredge
currently serve as directors of Community. Finally, Mark E. Simpson, the
Secretary and Treasurer of Portsmouth, Robert W. Simpson, the Chairman of the
Board of Portsmouth, and Timothy J. Connors, a director of Portsmouth, have been
designated to serve on the CFX Board, and Harry P. Jarvis and Mark E. Simpson,
who currently serve as directors of Portsmouth Bank, have been designated to
serve as trustees of CFX Bank, following consummation of the Portsmouth
Acquisition.
Information regarding the current directors of CFX, the Community directors
who have been designated to serve on the CFX Board and the Portsmouth 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, Community's Annual
Report on Form 10-K and Portsmouth'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, Concord, Centerpoint and Portsmouth Bank will
enable customers to have access to a broader array of products and services at a
larger number of banking offices. Additionally, through the use of imaging,
automated work flow, telebanking, debit and smart cards, electronic bulletin
board and automated loan underwriting and credit scoring, it is anticipated that
customers will receive faster and more efficient services at competitive prices.
It is expected that the consolidation of support functions, including
accounting, administration, data processing, investments, marketing and mortgage
loan servicing, will produce economies of scale that will result in improved
efficiency and service to customers. CFX estimates cost savings during the first
full year of operations after consummation of the Acquisitions through
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reductions of non-interest expense of approximately $5.0 million in the case of
the Acquisition (representing approximately 30% of Community's non-interest
expense) and $826,000 relating to the Portsmouth 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 Acquisition
and $2.9 million in the case of the Portsmouth Acquisition. The one-time
after-tax charges of the transactions pertain to the following areas: data
processing, $1.4 million; personnel, $1.4 million; and other, $4.9 million. 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 and
registration statement 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 will be realized.
These savings, combined with various leverage activities previously described,
will 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 Community, Concord and
Centerpoint will 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 Community,
Concord or Centerpoint other than officers whose employment contracts are being
assumed. See "-- Employment Agreements."
Employment Agreements. Under the terms of the Acquisition Agreement, CFX
has agreed to assume change in control agreements with the following employees
of Community and/or Concord: Douglas Crichfield, Paul M. Ferguson, Gerald R.
Emery, John C. Baity, Margaret A. Flint, Donna L. Bean, David E. Fuller, Charles
E. Gorhan and Robert F. Howe. CFX has also agreed to assume Mr. Crichfield's
supplemental retirement agreement. Mr. Crichfield's change in control agreement
provides for the acceleration of benefits under his supplemental retirement
agreement upon a change in control. CFX has also agreed to assume Centerpoint's
employment agreements with Philip M. Stone, Joseph B. Reilly and Lucy T. Gobin.
In
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connection with the execution of the Acquisition Agreement, Centerpoint has
extended Mr. Reilly's and Ms. Gobin's employment agreements one year beyond
their original expiration dates.
Pursuant to the change in control agreements, each officer is entitled to
receive severance benefits if such officer's employment is involuntarily
terminated or voluntarily terminated for "good reason" (as defined in the
contracts) within two years following a "change in control" (as defined in the
contracts; the Acquisition constitutes a change in control under the contracts).
Under such circumstances, Mr. Crichfield's change in control agreement
provides for (i) a lump sum payment to Mr. Crichfield equal to three times his
highest salary rate in effect at any time within the 12-month period preceding
termination, subject to the limitations of 280G of the Code, (ii) the
acceleration of vesting of Mr. Crichfield's options and other retirement
benefits, (iii) reimbursement to Mr. Crichfield of certain fees and expenses,
and (iv) reimbursement to Mr. Crichfield of the cost of maintaining life and
health insurance coverage for a period of two years following termination of
employment.
Messrs. Ferguson's, Emery's and Baity's change in control agreements are
similar to Mr. Crichfield's, except that their agreements provide for a lump sum
payment equal to two times their highest salary rate in effect within the
12-month period preceding termination.
All of the other change in control agreements provide for severance
benefits equal to one time the officer's highest salary rate in effect within
the 12-month period preceding termination plus certain other benefits.
The Acquisition Agreement provides that Mr. Crichfield will be offered a
three-year employment agreement with CFX on terms substantially equivalent to
those contracts of other Executive Vice Presidents of CFX, but no less favorable
in the aggregate than the current employment agreement between CFX and its
President and Chief Executive Officer.
Indemnification and Insurance. The Acquisition Agreement provides that
from and after the Effective Date, CFX will indemnify those person who served as
directors and officers of Community, Concord and Centerpoint on or before the
Effective Date, in accordance with and subject to the provisions of Community's
Articles of Incorporation, without regard to any limitation contained in New
Hampshire law or in the By-laws of Community, Concord or Centerpoint. The
Acquisition Agreement further provides that, subject to certain terms and
conditions set forth in the Acquisition Agreement, CFX will pay all reasonable
fees and expenses of counsel for the indemnified parties promptly as statements
therefor are received.
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 any of Community, Concord or Centerpoint on or before
the Effective Date, Community'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
coverage more than 150% of the current per annum amount expended by Community to
maintain or procure such insurance coverage. It is currently anticipated that
such coverage may be obtained at a total cost of approximately $20,200 per year.
Community Stock Option Plans. Certain key employees have been granted
stock options pursuant to the Community Stock Option Plans. See "MEETING
INFORMATION -- Beneficial Ownership." As of March 24, 1997, there were 95,379
shares of Community Common Stock subject to purchase pursuant to the exercise of
Community Options (excluding those under the 1991 Employee Stock Purchase Plan).
In addition to the acceleration of options contained in the change in
control agreements with certain officers (see "-- Employment Agreements"), the
1985, 1988 and 1992 Community Stock Option Plans provide that all outstanding
options granted pursuant to such plans that are not fully exercisable will
become exercisable in full for a period of thirty days following the date on
which any individual, corporation or other entity becomes the beneficial owner
of 50% or more of the outstanding shares of Community Common Stock. Thus, at the
Effective Date, all of the outstanding options granted pursuant to such plans
that are not fully exercisable will become exercisable in full for a thirty-day
period.
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The Plan of Exchange provides that, on the Effective Date, the Community
Options will be assumed by CFX, subject to the same terms and conditions set
forth in the Community Stock Option Plans immediately prior to the Effective
Date, except that each Community Option will be exercisable for that number of
whole shares of CFX Common Stock equal to the product of the number of shares of
Community Common Stock covered by the Community Option multiplied by the
Exchange Ratio provided that any fractional share of CFX Common Stock resulting
therefrom will be rounded down to the nearest share and the exercise price per
share of CFX Common Stock will be equal to the exercise price per share of
Community Common Stock of such Community Option, divided by the Exchange Ratio
provided that the exercise price shall be rounded up to the nearest cent.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of
the Acquisition to stockholders of Community. 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 Community
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, counsel to CFX, has rendered an opinion to CFX and
Community 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 Community 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 Community 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; (ii) no gain or loss will be recognized
by a stockholder of Community who exchanges all of the stockholder's Community
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
Community Common Stock solely for CFX Common Stock in the Acquisition will be
the same as the aggregate adjusted tax basis of the Community 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 Community Common Stock will
include the period during which the stockholder held the Community Common Stock
surrendered in the exchange, provided that the Community Common Stock was held
as a capital asset at the Effective Date.
For federal income tax purposes, a stockholder of Community 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 Community 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 Community Common Stock are held as capital assets and
have been held for more than one year at the Effective Date.
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A holder of Community 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 Community 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
Community 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 Community Common Stock or CFX Common Stock, the
payment made to such holder could be treated as dividend income. In general,
under the constructive 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 Community 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
Under 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 Community that it does not intend to waive this
condition. CFX and Community 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 Community will be combined and
carried forward at their previously recorded amounts. Revenue and expenses of
CFX and Community will be combined at historically recorded amounts.
A requirement of pooling treatment is that affiliates of Community cannot
reduce their holdings of Community 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 Community. The Acquisition
cannot be accounted for as a pooling-of-interests if the holders of more than
10% of the outstanding shares of Community Common Stock exercise their
dissenters' rights. See "-- Background of the Acquisition," "-- Rights of
Dissenting Stockholders" and "MEETING INFORMATION -- Beneficial Ownership."
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 following summary information 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, Community has granted an Option to CFX to
purchase up to 493,000 authorized but unissued shares of Community Common Stock
(constituting 19.99% of the shares of Community Common Stock outstanding on the
date of such grant, at a price of $28.50 per share, or at such lesser price as
provided in the Stock Option Agreement. In the event of any change in Community
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 Community 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
Community Common Stock subject to the Option shall be adjusted so that, after
such issuance, it equals 19.99% of the number of shares of Community Common
Stock then issued
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and outstanding without giving effect to any shares subject to or issued
pursuant to the Option. The closing price for Community Common Stock on Nasdaq
for March 24, 1997, the date of the Stock Option Agreement, was $33.25.
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 Community. 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 Community.
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 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 Community, Concord or Centerpoint 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 Community Common Stock or
(ii) the execution by one or more third parties and Community or any Community
subsidiary of an agreement to (A) merge or consolidate, or enter into any
similar transaction, with Community or any Community subsidiary, (B) purchase,
lease or otherwise acquire all or substantially all the assets of Community or
any Community 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 Community or any Community
subsidiary (but not later than the termination of the Option) Community is
required to repurchase the Option from CFX together with any shares of Community
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 Community Common Stock outstanding on the date of
grant of the Option, CFX may not acquire more than 5% of the Community 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
Sections 13.01 et seq. of Chapter 293-A of the NHRSA (which Chapter 293-A
is referred to as the "New Hampshire Corporate Law") provides that, if the
Acquisition is consummated, any holder of shares of Community Common Stock who
objects to the Acquisition is entitled to dissent from the Acquisition
("Dissenting Stock") and to have the fair value (as defined below) of such
shares as determined by Community, or if necessary, judicially, 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 Community 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 Community by
a dissenting stockholder is in addition to and separate from any proxy or vote
against the Acquisition. Neither voting against nor failure to
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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
Community 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 Community 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 Community 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 the record holder notifies Community 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
Douglas Crichfield, President, Community Bankshares, Inc., 43 North Main Street,
Concord, New Hampshire 03301.
If the Acquisition is approved, Community 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 ten days after the approval of the Acquisition by the stockholders of
Community. 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 (March 24, 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 Community 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
March 24, 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 Community has made the
required payment (as described below) within 60 days after the date for
demanding payment and depositing certificates for Dissenting Stock, Community
shall return any certificates for Dissenting Stock so deposited. If the
Acquisition is consummated after the Dissenting Stock is returned, Community
must send a new notice (as described in the foregoing paragraph).
As soon as the Acquisition has been consummated, or upon receipt of demand
for payment (whichever is later), Community shall pay to each dissenting
stockholder who has made proper demand and deposited his or her certificates as
required the amount that Community estimates to be the fair value of the
dissenting stockholder's Dissenting Stock, with accrued interest, if any,
accompanied by (i) Community'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) Community's latest available interim financial statements, if any,
(iv) a statement of Community'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 Community's offer, as well
as a copy of Sections 13.01 et seq. Community may withhold payment from any
dissenting stockholder who acquired beneficial ownership of Community Common
Stock subsequent to March 24, 1997, the date on which announcement of the
Acquisition was first made. If Community withholds payment with respect to
shares of Community Common Stock acquired after March 24, 1997, upon
consummation of the Acquisition, Community shall estimate the fair value of the
shares, plus accrued interest, if any, and pay the estimated amount to each
holder who agrees to accept the
46
<PAGE> 54
payment in full satisfaction of the holder's demand. With each such offer of
payment, Community shall send its estimate of the fair value of the shares, an
explanation of how the interest was calculated, and a statement of the
dissenting stockholder's right to demand payment if the dissenting stockholder
is dissatisfied with the 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 Community in connection
with the Acquisition).
If Community fails to remit the fair value to a dissenting stockholder
within 60 days from the date set for demanding payment or fails to return any
deposited certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days of the date set for demanding payment, or a
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), the dissenting stockholder may send Community his or her own estimate
of fair value (and interest, if any) and demand payment of the deficiency, or
reject Community's offer and demand payment of the fair value (and interest, if
any). If the dissenting stockholder does not notify Community of his or her
payment demand within 30 days after Community has made payment or offered
payment, as the case may be, the 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, Community shall file a petition with the Superior Court of Merrimack
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 Community is exceeded
by the Court's determination of fair value, if any. If Community 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 Community, 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) Community if the
Court finds it failed to comply substantially with the requirements of Sections
13.01 et seq. or (ii) either Community or a dissenting stockholder if the Court
finds that the party acted arbitrarily, vexatiously or not in good faith with
respect to the assertion of 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
Community.
CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS
CFX and Community are both New Hampshire corporations. The rights of
holders of CFX Common Stock and Community 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 Community Common Stock are governed by the Community
Articles of Incorporation, as amended (the "Community Articles") and by the
Community By-Laws, as amended (the "Community By-Laws"). Upon consummation of
the Acquisition, the stockholders of Community (except those who exercise
dissenters' rights) will become stockholders of CFX and as such their rights
will continue to be governed by New Hampshire Corporate Law.
The rights of stockholders of CFX and Community with respect to cumulative
voting, filling vacancies on the board of directors, classification of
directors, action by consent of stockholders, amendment of by-laws,
47
<PAGE> 55
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
Community 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 Community Articles and the Community By-Laws.
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.
Community. Under the Community By-Laws, a Director may be removed from
office, with or without cause, by the holders of shares then entitled to vote at
an election of the Directors, except that the vote of 80% of the outstanding
capital stock having power to vote in the election of Directors is required to
remove a Director without cause.
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 board of directors, 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 board deems relevant. Among
the factors the 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.
Community. The Community Articles provide that, in addition to any vote
required by law or the Articles, the approval or authorization of any "business
combination" (as defined below) with a "related person" (as defined below)
requires the affirmative vote of the holders of outstanding shares of stock of
Community representing not less than 80% of the votes entitled to be cast
generally in the election of directors (at least two-thirds of which votes must
be cast by holders who are not related persons, all such shares voting together
as a single class for this purpose); provided, however, that this requirement is
not applicable if the "disinterested directors" (as defined below) have approved
the business combination. "Business combination" generally includes, without
limitation, any (i) merger or consolidation of the corporation with a related
person; (ii) any sale, lease, exchange or transfer of assets having a material
value by the corporation to a related person or by a related person to the
corporation; (iii) the issuance of securities to a related person; (iv) any
transaction increasing the proportionate share of voting power of any entity
held by a related person; (v) the adoption of any plan of liquidation or
dissolution of the corporation proposed by a related person; or (vi) any loan
guarantee or other financial assistance or tax credits provided by the
corporation to a related person. "Related person" generally includes, without
limitation, any individual, corporation, partnership or other person or entity
which beneficially owns shares of capital stock of the corporation which in the
aggregate represent not less than 10% of the votes entitled to be cast generally
in the election of directors. "Disinterested director" generally means a
director who was not elected with the vote of, is not representing, and is not
an affiliate or associate of, a related person.
48
<PAGE> 56
In addition to any vote required pursuant to the above-referenced
provisions, the Community Articles further provide that the affirmative vote of
the holders of outstanding shares of stock of the corporation which represent
not less than 80% of the votes entitled to be cast generally in the election of
directors is required for the approval of any merger, consolidation, exchange of
shares or sale of substantially all of the assets of the corporation with or to
a related person if the cash or fair market value of the property, securities or
other consideration to be received per share in such reorganization by holders
of common stock of the corporation other than related persons shall be less than
fair price (defined to mean the highest per share price paid by the related
person in acquiring any of its holdings of shares of the Community 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."
Community. The Community Articles provide that action of the stockholders
to amend, alter, change or repeal, or adopt any provision inconsistent with
those provisions described above in "-- Business Combinations" requires the
affirmative vote of the holders of outstanding shares of capital stock of the
corporation representing not less than 80% of the votes entitled to be cast
generally in the election of directors (at least two-thirds of which votes must
be cast by holders who are not related persons (as defined in "-- Business
Combinations")).
ANTI-TAKEOVER PROVISIONS -- RIGHTS PLANS
CFX. CFX has not adopted a shareholders' rights plan.
Community. Community has adopted the Community Rights Plan, which is
described in documents incorporated herein by reference. See "AVAILABLE
INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE."
49
<PAGE> 57
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma combined condensed financial statements
have been prepared to reflect the Acquisitions on a pooling-of-interest basis.
The pro forma balance sheets have been prepared as if the Acquisitions had
occurred on March 31, 1997, and the pro forma income statements have been
prepared as if the Acquisitions had occurred as of the beginning of the earliest
period presented. Under pooling-of-interest accounting treatment for the
Acquisitions, the recorded assets and liabilities of CFX, Portsmouth and
Community are carried forward to the combined company at their recorded amounts.
The following pro forma financial statements reflect the exchange of Portsmouth
Common Stock for CFX Common Stock in connection with the Portsmouth Acquisition
at an exchange ratio of 1.0294 and reflect the exchange of Community Common
Stock for CFX Common Stock at an Exchange Ratio of 2.2. The actual exchange
ratios will depend on (i) in the case of the Acquisition, the CFX trading price
during the 15 days preceding the Effective Date, and (ii) in the case of the
Portsmouth Acquisition, during the 10 days preceding the receipt of the last
required regulatory approval. This unaudited pro forma combined financial
information should be read in conjunction with the consolidated historical
financial statements of CFX, Community and Portsmouth, including notes thereto,
incorporated by reference herein. See "AVAILABLE INFORMATION; DOCUMENTS
INCORPORATED BY REFERENCE."
The unaudited pro forma combined condensed financial statements give effect
to the Acquisitions, but do not reflect anticipated expenses and nonrecurring
charges which may result from the Acquisitions or estimated expense savings and
revenue enhancements anticipated to result from the 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 Acquisitions been consummated at the dates
indicated. The unaudited pro forma combined condensed balance sheets reflect
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
times of the Acquisitions and may differ from those reflected in the pro forma
financial statements.
50
<PAGE> 58
CFX CORPORATION -- COMMUNITY BANKSHARES, INC. -- PORTSMOUTH BANK SHARES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
CFX
PRO FORMA
CFX PRO FORMA CFX PRO FORMA COMBINED W/
CFX COMMUNITY PRO FORMA COMBINED W/ PORTSMOUTH PRO FORMA COMBINED W/ COMMUNITY AND
(HISTORICAL) (HISTORICAL) ADJUSTMENTS COMMUNITY (HISTORICAL) ADJUSTMENTS PORTSMOUTH PORTSMOUTH
------------ --------- ----------- ------------- ---------- ----------- ------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from
banks............ $ 62,080 $ 22,709 $ 84,789 $ 6,107 $ -- $ 68,187 $ 90,896
Interest bearing
deposits with
other banks...... 4,628 4,227 8,855 44,752 49,380 53,607
Securities
available for
sale............. 379,423 88,081 467,504 86,698 466,121 554,202
Securities held to
maturity......... 30,951 43,806 74,757 21,504 52,455 96,261
Mortgage loans held
for sale......... 21,101 4,352 25,453 0 21,101 25,453
Loans and leases... 1,150,658 400,503 1,551,161 97,967 1,248,625 1,649,128
Less allowance
for loan and
lease losses... 15,661 4,088 19,749 688 16,349 20,437
---------- -------- ---------- -------- ---------- ----------
Net Loans and
Leases....... 1,134,997 396,415 0 1,531,412 97,279 0 1,232,276 1,628,691
Premises and
equipment........ 28,227 9,923 38,150 890 29,117 39,040
Mortgage servicing
rights........... 6,555 1,654 8,209 0 6,555 8,209
Goodwill and
deposit base
intangibles...... 9,080 0 9,080 0 9,080 9,080
Foreclosed real
estate........... 1,806 1,112 2,918 100 1,906 3,018
Bank-owned life
insurance........ 31,376 0 31,376 0 31,376 31,376
Other assets....... 34,225 8,366 42,591 5,591 39,816 48,182
---------- -------- ------- ---------- -------- ------- ---------- ----------
$1,744,449 $580,645 $ 0 $ 2,325,094 $262,921 $ 0 $ 2,007,370 $ 2,588,015
========== ======== ======= ========== ======== ======= ========== ==========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Deposits:
Interest
bearing........ $1,074,879 $356,492 $ 1,431,371 $190,515 $ 1,265,394 $ 1,621,886
Noninterest
bearing........ 148,651 54,193 202,844 3,575 152,226 206,419
---------- -------- ---------- -------- ---------- ----------
Total
Deposits.... 1,223,530 410,685 0 1,634,215 194,090 1,417,620 1,828,305
Advances from
FHLBB............ 238,681 83,684 322,365 0 238,681 322,365
Other borrowed
funds............ 104,535 34,682 139,217 0 104,535 139,217
Other
liabilities...... 43,884 10,177 54,061 2,765 46,649 56,826
---------- -------- ---------- -------- ---------- ----------
Total
Liabilities. 1,610,630 539,228 0 2,149,858 196,855 1,807,485 2,346,713
SHAREHOLDERS' EQUITY
Preferred stock.... 0 0 0 0 0 0
Common
stock(1)(2)(3)... 8,718 2,465 1,152 12,335 666 3,365 12,749 16,366
Paid-in capital.... 98,234 22,391 (1,152) 119,473 35,416 (9,729) 123,921 145,160
Retained
earnings......... 30,094 16,875 46,969 35,955 66,049 82,924
Net unrealized
gains (losses) on
securities
available for
sale, after tax
effects.......... (2,757) (314) (3,071) 393 (2,364) (2,678)
Cost of common
stock in
treasury......... (470) 0 (470) (6,364) 6,364 (470) (470)
---------- -------- ------- ---------- -------- ------- ---------- ----------
Total
Shareholders'
Equity...... 133,819 41,417 0 175,236 66,066 0 199,885 241,302
---------- -------- ------- ---------- -------- ------- ---------- ----------
$1,744,449 $580,645 $ 0 $ 2,325,094 $262,921 $ 0 $ 2,007,370 $ 2,588,015
========== ======== ======= ========== ======== ======= ========== ==========
Number of common
shares
outstanding(1)..... 13,050 2,465 18,473 5,872 19,095 24,518
---------- -------- ---------- -------- ---------- ----------
Common shareholders'
equity per
share(4)........... $ 10.25 $ 16.80 $ 9.49 $ 11.25 $ 10.47 $ 9.84
---------- -------- ---------- -------- ---------- ----------
</TABLE>
51
<PAGE> 59
CFX CORPORATION -- COMMUNITY BANKSHARES, INC. -- PORTSMOUTH BANK SHARES, INC.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1997(7)
(UNAUDITED)
<TABLE>
<CAPTION>
CFX
CFX CFX PRO FORMA
PRO FORMA PRO FORMA COMBINED W/
CFX COMMUNITY COMBINED W/ PORTSMOUTH COMBINED W/ COMMUNITY AND
(HISTORICAL) (HISTORICAL) COMMUNITY (HISTORICAL) PORTSMOUTH PORTSMOUTH
------------ --------- ------------- ------------ ------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Interest income
Interest on loans and
leases.................. $24,399 $ 8,940 $33,339 $1,965 $26,364 $35,304
Interest and dividends on
securities.............. 5,013 1,946 6,959 1,794 6,807 8,753
Other interest income...... 91 28 119 821 912 940
------- ------- ------- ------ ------- -------
Total Interest and
Dividend Income.. 29,503 10,914 40,417 4,580 34,083 44,997
Interest expense
Interest on deposits....... 10,577 3,664 14,241 1,995 12,572 16,236
Interest on borrowings..... 3,922 1,537 5,459 0 3,922 5,459
------- ------- ------- ------ ------- -------
Total interest
expense.......... 14,499 5,201 19,700 1,995 16,494 21,695
------- ------- ------- ------ ------- -------
Net Interest and Dividend
Income.................. 15,004 5,713 20,717 2,585 17,589 23,302
Provision for loan and lease
losses..................... 702 240 942 0 702 942
------- ------- ------- ------ ------- -------
Net Interest and Dividend
Income after Provision
for Loan and Lease
Losses.................. 14,302 5,473 19,775 2,585 16,887 22,360
Other income................. 4,372 1,298 5,670 242 4,614 5,912
Other expense................ 11,974 4,670 16,644 888 12,862 17,532
------- ------- ------- ------ ------- -------
Income Before Income
Taxes................... 6,700 2,101 8,801 1,939 8,639 10,740
Income taxes................. 1,958 778 2,736 431 2,389 3,167
------- ------- ------- ------ ------- -------
Net Income................. $ 4,742 $ 1,323 $ 6,065 $1,508 $ 6,250 $ 7,573
------- ------- ------- ------ ------- -------
Weighted average common
shares outstanding(5)...... 13,014 2,518 18,554 5,843 19,029 24,568
======= ======= ======= ====== ======= =======
Earnings per common share.... $ 0.36 $ .53 $ 0.33 $ 0.26 $ 0.33 $ 0.31
======= ======= ======= ====== ======= =======
</TABLE>
52
<PAGE> 60
CFX CORPORATION -- COMMUNITY BANKSHARES, INC. -- PORTSMOUTH BANK SHARES, INC.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996(7)
(UNAUDITED)
<TABLE>
<CAPTION>
CFX
CFX CFX PRO FORMA
PRO FORMA PRO FORMA COMBINED W/
CFX COMMUNITY COMBINED W/ PORTSMOUTH COMBINED W/ COMMUNITY AND
(HISTORICAL) (HISTORICAL) COMMUNITY (HISTORICAL) PORTSMOUTH PORTSMOUTH
------------ --------- ------------- ---------- ------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Interest income
Interest on loans and leases.... $ 88,416 $32,976 $121,392 $ 7,141 $ 95,557 $128,533
Interest and dividends on
securities................... 19,386 8,287 27,673 8,169 27,555 35,842
Other interest income........... 623 315 938 2,992 3,615 3,930
-------- ------- -------- ------- -------- --------
Total Interest and
Dividend Income....... 108,425 41,578 150,003 18,302 126,727 168,305
-------- ------- -------- ------- -------- --------
Interest expense
Interest on deposits............ 40,740 14,839 55,579 8,055 48,795 63,634
Interest on borrowings.......... 10,826 4,918 15,744 204 11,030 15,948
-------- ------- -------- ------- -------- --------
Total interest
expense............... 51,566 19,757 71,323 8,259 59,825 79,582
-------- ------- -------- ------- -------- --------
Net Interest and Dividend
Income....................... 56,859 21,821 78,680 10,043 66,902 88,723
Provision for loan and lease
losses.......................... 2,935 1,350 4,285 -- 2,935 4,285
-------- ------- -------- ------- -------- --------
Net Interest and Dividend Income
after Provision for Loan and
Lease Losses................. 53,924 20,471 74,395 10,043 63,967 84,438
Other income...................... 16,827 3,993 20,820 1,888 18,715 22,708
Other expense..................... 51,370 16,820 68,190 3,527 54,897 71,717
-------- ------- -------- ------- -------- --------
Income Before Income Taxes...... 19,381 7,644 27,025 8,404 27,785 35,429
Income taxes...................... 6,740 2,689 9,429 2,447 9,187 11,876
-------- ------- -------- ------- -------- --------
Net Income...................... $ 12,641 $ 4,955 $ 17,596 $ 5,957 $ 18,598 $ 23,553
======== ======= ======== ======= ======== ========
Weighted average common shares
outstanding(5).................. 12,823 2,477 18,273 6,074 19,076 24,526
======== ======= ======== ======= ======== ========
Earnings per common share......... $ 0.99 $ 2.00 $ 0.96 $ 0.98 $ 0.97 $ 0.96
======== ======= ======== ======= ======== ========
</TABLE>
53
<PAGE> 61
CFX CORPORATION -- COMMUNITY BANKSHARES, INC. -- PORTSMOUTH BANK SHARES, INC.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995(7)
(UNAUDITED)
<TABLE>
<CAPTION>
CFX
CFX CFX PRO FORMA
PRO FORMA PRO FORMA COMBINED W/
CFX COMMUNITY COMBINED W/ PORTSMOUTH COMBINED W/ COMMUNITY AND
(HISTORICAL) (HISTORICAL)(6) COMMUNITY (HISTORICAL) PORTSMOUTH PORTSMOUTH
------------ ------------- ------------- ---------- ------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Interest income
Interest on loans and leases....... $76,747 $26,086 $102,833 $ 6,769 $ 83,516 $109,602
Interest and dividends on
securities...................... 18,422 7,564 25,986 10,007 28,429 35,993
Other interest income.............. 1,220 223 1,443 1,770 2,990 3,213
------- ------- -------- ------- -------- --------
Total Interest and Dividend
Income................... 96,389 33,873 130,262 18,546 114,935 148,808
------- ------- -------- ------- -------- --------
Interest expense
Interest on deposits............... 37,279 12,904 50,183 7,491 44,770 57,674
Interest on borrowings............. 7,084 2,914 9,998 193 7,277 10,191
------- ------- -------- ------- -------- --------
Total interest expense..... 44,363 15,818 60,181 7,684 52,047 67,865
------- ------- -------- ------- -------- --------
Net Interest and Dividend Income... 52,026 18,055 70,081 10,862 62,888 80,943
Provision for loan and lease
losses............................. 3,037 777 3,814 -- 3,037 3,814
------- ------- -------- ------- -------- --------
Net Interest and Dividend Income
after Provision for Loan and
Lease Losses.................... 48,989 17,278 66,267 10,862 59,851 77,129
Other income......................... 14,311 2,201 16,512 1,226 15,537 17,738
Other expense........................ 46,202 13,442 59,644 3,608 49,810 63,252
------- ------- -------- ------- -------- --------
Income Before Income Taxes......... 17,098 6,037 23,135 8,480 25,578 31,615
Income taxes......................... 5,760 1,862 7,622 2,439 8,199 10,061
------- ------- -------- ------- -------- --------
Net Income......................... 11,338 4,175 15,513 6,041 17,379 21,554
Preferred stock dividends............ 89 -- 89 -- 89 89
------- ------- -------- ------- -------- --------
Net Income Available to Common
Stock........................... $11,249 $ 4,175 $ 15,424 $ 6,041 $ 17,290 $ 21,465
======= ======= ======== ======= ======== ========
Weighted average common shares
outstanding(5)..................... 12,701 2,458 18,109 6,082 18,962 24,369
------- ------- -------- ------- -------- --------
Earnings per common share............ $ 0.89 $ 1.70 $ 0.85 $ 0.99 $ 0.91 $ 0.88
======= ======= ======== ======= ======== ========
</TABLE>
54
<PAGE> 62
CFX CORPORATION -- COMMUNITY BANKSHARES, INC. -- PORTSMOUTH BANK SHARES, INC.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
DECEMBER 31, 1994 (7)
(UNAUDITED)
<TABLE>
<CAPTION>
CFX
CFX CFX PRO FORMA
PRO FORMA PRO FORMA COMBINED W/
CFX COMMUNITY COMBINED W/ PORTSMOUTH COMBINED W/ COMMUNITY AND
(HISTORICAL) (HISTORICAL)(6) COMMUNITY (HISTORICAL) PORTSMOUTH PORTSMOUTH
------------ ------------- ------------- ---------- ------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Interest income
Interest on loans and leases....... $62,546 $21,489 $ 84,035 $ 6,716 $69,262 $ 90,751
Interest and dividends on
securities...................... 18,025 5,419 23,444 10,336 28,361 33,780
Other interest income.............. 1,066 296 1,362 904 1,970 2,266
------- ------- -------- ------- ------- --------
Total Interest and Dividend
Income................... 81,637 27,204 108,841 17,956 99,593 126,797
------- ------- -------- ------- ------- --------
Interest expense
Interest on deposits............... 28,122 11,262 39,384 6,051 34,173 45,435
Interest on borrowings............. 5,517 506 6,023 196 5,713 6,219
------- ------- -------- ------- ------- --------
Total interest expense..... 33,639 11,768 45,407 6,247 39,886 51,654
------- ------- -------- ------- ------- --------
Net Interest and Dividend Income... 47,998 15,436 63,434 11,709 59,707 75,143
Provision for loan and lease
losses............................. 2,697 925 3,622 -- 2,697 3,622
------- ------- -------- ------- ------- --------
Net Interest and Dividend Income
after Provision for Loan and
Lease Losses.................... 45,301 14,511 59,812 11,709 57,010 71,521
Other income......................... 11,079 2,818 13,897 503 11,582 14,400
Other expense........................ 44,864 12,811 57,675 4,035 48,899 61,710
------- ------- -------- ------- ------- --------
Income Before Income Taxes......... 11,516 4,518 16,034 8,177 19,693 24,211
Income taxes......................... 4,272 897 5,169 2,305 6,577 7,474
------- ------- -------- ------- ------- --------
Net Income......................... 7,244 3,621 10,865 5,872 13,116 16,737
Preferred stock dividends............ 268 19 287 -- 268 287
------- ------- -------- ------- ------- --------
Net Income Available to Common
Stock........................... $ 6,976 $ 3,602 $ 10,578 $ 5,872 $12,848 $ 16,450
======= ======= ======== ======= ======= ========
Weighted average common shares
outstanding(5)..................... 12,052 2,424 17,385 6,121 18,353 23,685
======= ======= ======== ======= ======= ========
Earnings per common share............ $ 0.58 $ 1.49 $ 0.61 $ 0.96 $ 0.70 $ 0.69
======= ======= ======== ======= ======= ========
</TABLE>
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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 shareholders in exchange for the outstanding shares
of Portsmouth and Community common stock.
(3) The Acquisition Agreements 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 maximum exchange ratios
of 1.0294 and 2.2 for the Portsmouth and Community Acquisitions,
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 the Community Acquisition.
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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 Community'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 (the "Banks") 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 the Banks and its 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 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 the Banks 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 by the
Banks could be deemed to constitute such an unsafe or unsound practice depending
on the financial condition of the bank. The ability of the Banks to pay
dividends in the future is currently, 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 and surplus. An exception to these qualitative
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.
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<PAGE> 65
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, Concord and Centerpoint received overall CRA ratings of "Outstanding" and
Orange Savings and Safety Fund 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 CFX and its subsidiary
banks. Under Federal Reserve policy, CFX is expected to act as a source of
financial strength to each of its subsidiary banks and to commit resources to
support each such bank. This support may be required at times when, absent this
policy, CFX might not otherwise provide 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 Concord and Centerpoint 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, Concord and Centerpoint, and 0.27% of
insured deposits for the worst rated institutions. In addition, legislation
passed in 1996 requires all insured depository institutions to pay a pro rata
portion 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 (into which Concord and Centerpoint will be merged in connection with the
Acquisition), as well as officers, directors and institution-affiliated parties
of these institutions, to administrative sanctions and potentially substantial
civil money penalties.
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<PAGE> 66
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 March 31, 1997, each of the Banks, as well
as Concord and Centerpoint, 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 Community 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 documents 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 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 Community 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.
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 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. Community does not believe
that consideration of the additional factors considered in this paragraph will
affect the regulators' assessment of the capital adequacy of Community, Concord
or Centerpoint.
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 March 31, 1997, CFX's and Community'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.
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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. 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 MATTERS
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
Foley, Hoag & Eliot LLP, Boston, Massachusetts, counsel to Community.
EXPERTS
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 by reference herein and in the Registration Statement have
been audited by KPMG Peat Marwick LLP, independent certified public accountants,
as set forth in their report thereon included therein and incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing. Representatives of KPMG Peat Marwick LLP 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 audited 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 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 Portsmouth and its subsidiaries as
of December 31, 1996 and 1995, and for each of the years in the three-year
period ended December 30, 1996 have been incorporated by reference herein and in
the Registration Statement in reliance on the report of Shatswell & MacLeod,
independent certified public accountants, incorporated by reference herein and
upon the authority of said firm as experts in accounting and auditing. The
report of Shatswell & MacLeod refers to the adoption in 1994 of Statement of
Financial Accounting Standards No. 115.
STOCKHOLDER PROPOSALS
If the Acquisition is not consummated for any reason, Community will
schedule a 1997 annual meeting for the purpose of electing directors. To be
eligible for inclusion in Community's proxy statement and form of proxy relating
to such meeting, any proposal that a stockholder of Community intends to present
at such annual meeting must be received by Community at its principal executive
offices a reasonable time prior to the date of such meeting, which will be
publicly announced promptly after such meeting date has been set.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Reorganization
Agreement"), dated as of March 24, 1997, is by and among COMMUNITY BANKSHARES,
INC. ("Community"), a New Hampshire corporation, CONCORD SAVINGS BANK ("Concord
Bank"), a New Hampshire state-chartered savings bank, CENTERPOINT BANK, a New
Hampshire state-chartered commercial bank (Concord Bank and Centerpoint Bank
being referred to together herein as the "Community Banks"), CFX CORPORATION
("CFX"), a New Hampshire corporation, and CFX BANK, a New Hampshire state-
chartered savings 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 Community, including each attached right issued
pursuant to the Community 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 Community 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, Community
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 Community and consistent with
the terms of this Reorganization Agreement;
WHEREAS, the parties desire that, following the consummation of the Holding
Company Merger, the Community Banks, wholly owned subsidiaries of Community,
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,
Community and CFX have entered into a Stock Option Agreement (the "Stock Option
Agreement") dated as of even date herewith pursuant to which Community will
grant CFX the right to purchase certain shares of Community 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");
WHEREAS, it is intended that all of the parties hereto except Centerpoint
Bank shall execute this Reorganization Agreement on the date first above
written, with Centerpoint Bank to execute this Reorganization Agreement, as
promptly thereafter as practicable, as provided in Section 4.7(d) hereof;
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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 the CFX Subsidiaries.
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 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, together with the consolidated balance
sheet of CFX and the related consolidated statements of income, cash flows and
changes in shareholders' equity (including related notes, if any) as of and for
the period ended December 31, 1996, as delivered to Community prior to the date
hereof 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. "Community Entities" shall mean Community and the Community
Subsidiaries.
1.9. "Community Financial Statements" shall mean (i) the consolidated
balance sheets of Community 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 Community in SEC Documents, together with the
consolidated balance sheet of Community and the related consolidated statements
of income, cash flows and changes in shareholders' equity (including related
notes, if any) as of and for the period ended December 31, 1996, as delivered to
CFX prior to the date hereof and (ii) the consolidated balance sheets of
Community and related consolidated statements of income, cash flows and changes
in shareholders' equity (including related notes, if any) as filed by Community
in SEC Documents with respect to periods ended subsequent to September 30, 1996.
1.10. "Effective Date" shall mean the date specified pursuant to Section
4.8 hereof as the effective date of the Share Exchange.
1.11. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.12. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.13. "FDIA" shall mean the Federal Deposit Insurance Act.
1.14. "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.15. "Federal Reserve" shall mean the Board of Governors of the Federal
Reserve System or any appropriate Federal Reserve Bank.
1.16. "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
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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.
1.17. "Investment Company Act" means the Investment Company Act of 1940,
as amended.
1.18. "Material Adverse Effect" shall mean, with respect to Community or
CFX, as the case may be, a material adverse effect on (A) 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 Community 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); or (B) the ability of any Party to perform its
obligations under, and to consummate the transactions contemplated by, the
Transaction Documents.
1.19. "Parties" shall mean CFX, CFX Bank, Community and the Community
Banks.
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 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 Community 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.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF COMMUNITY
AND THE COMMUNITY BANKS
Community and the Community Banks hereby represent and warrant to CFX and
CFX Bank that, except as Previously Disclosed:
2.1. CAPITAL STRUCTURE OF COMMUNITY
(a) The authorized capital stock of Community consists solely of 3,000,000
shares of common stock, par value $1.00 per share ("Community Common Stock"),
and 1,000,000 shares of preferred stock, par value $1.00 per share ("Community
Preferred Stock"). There are 2,465,237 shares of Community Common Stock issued
and outstanding, no shares of Community Common Stock held in its treasury, no
shares of Community Preferred Stock issued and outstanding, and no shares of
Community Preferred Stock held in its treasury. No shares of Community Common
Stock or Community Preferred Stock are reserved for issuance, except that (i)
36,924 shares of Community Common Stock are reserved for issuance under
Community's employee stock purchase plans (the "Community Stock Purchase
Plans"), (ii) 143,781 shares of Community Common Stock are reserved for issuance
upon the exercise of stock options heretofore granted pursuant to Community's
stock option plans (the "Community Stock Option Plans") and (iii) 24,653 shares
of Community Preferred Stock are reserved for issuance upon the exercise of
rights pursuant to the Rights Agreement dated as of October 31, 1989 between
Community and the First National Bank of Boston (the "Community Rights
Agreement").
(b) Except for shares of Community Common Stock subject to purchase under
the Community Stock Purchase Plans or subject to options under the Community
Stock Option Plans as Previously Disclosed and to the Stock Option Agreement and
shares of Community Preferred Stock subject to the Community Rights Agreement,
Community is not bound by any outstanding Rights. Except for the Community
Rights Agreement and the Stock Option Agreement, there are no agreements,
understandings or commitments to which Community is a party with respect to the
voting of any shares of Community Common Stock or which restrict the transfer of
such shares.
(c) All outstanding shares of Community's capital stock have been duly
issued and are validly outstanding, fully paid and nonassessable. None of the
shares of Community's capital stock has been issued in violation of the
preemptive rights of any person. All options granted under the Community Stock
Option Plans have become fully exercisable in accordance therewith or in
accordance with certain change in control agreements that have been Previously
Disclosed.
2.2. ORGANIZATION, STANDING AND AUTHORITY OF COMMUNITY
Community 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 Community. Community is
registered as a bank holding company under the BHC Act.
2.3. OWNERSHIP AND CAPITAL STRUCTURE OF THE COMMUNITY SUBSIDIARIES
(a) Community 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, except as Previously Disclosed (collectively, the
"Community Subsidiaries" and individually a "Community Subsidiary").
(b) The authorized and issued capital stock of each of the Community
Subsidiaries has been Previously Disclosed.
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(c) The outstanding shares of capital stock of each Community Subsidiary
are validly issued and outstanding, fully paid and nonassessable and all such
shares are directly or indirectly owned by Community free and clear of all
liens, claims and encumbrances, subject, in the case of Concord Bank, to the
Distribution and Liquidation Account (the "Liquidation Account") established by
Concord in connection with its conversion from mutual to stock form and
maintained pursuant to Article 7 of Concord Bank's Amended and Restated Charter.
No Community Subsidiary is bound by any Rights with respect to its capital
securities and there are no agreements, understandings or commitments relating
to the right of Community to vote or dispose of said shares. None of the shares
of capital stock of any Community Subsidiary 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. Concord Bank has established and maintained
the Liquidation Account in accordance with all applicable laws and regulations.
2.4. ORGANIZATION, STANDING AND AUTHORITY OF THE COMMUNITY SUBSIDIARIES
Each of the Community Subsidiaries is a corporation, savings bank or
commercial bank duly organized, 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 Community. Neither of the Community Banks engages 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. Each of the Community Banks 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 each of the Community Banks
are insured by the Bank Insurance Fund of the FDIC in accordance with the FDIA,
and each of the Community Banks has paid all assessments that have come due and
has filed all reports required by the FDIA.
2.5. AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Community has all requisite corporate power and authority to enter into
and perform all its obligations under the Transaction Documents to which
Community is a party. The adoption, execution and delivery of the Transaction
Documents to which Community 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 Community, including without
limitation the approval of a majority of the "Disinterested Directors" as
contemplated by Article Ninth, Section A of Community's Articles of
Incorporation, except that (1) pursuant to applicable New Hampshire law and
Community's Articles of Incorporation and By-laws, the Plan of Exchange must be
approved by the affirmative vote of the holders of not less than two-thirds of
all the shares of Community 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 Community has directed that the
Transaction Documents and the Transactions be, to the extent necessary,
submitted to Community's stockholders for approval at an annual or special
meeting to be held as soon as practicable.
(b) Each of the Community Banks has all requisite corporate power and
authority to enter into and perform all its obligations under the Transaction
Documents to which it 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 the Community
Banks.
(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 Community 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.
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(d) Except as Previously Disclosed, and 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 Community, neither the
adoption, execution and delivery of the Transaction Documents nor the
consummation of the Transactions nor compliance by the Community 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 any of the Community 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 any Community 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 any Community
Entity.
(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
Community 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
Community has, since January 1, 1992, 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. As of their respective
dates, no such SEC Documents filed with the SEC contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except that information
filed as of a later date shall be deemed to modify information as of an earlier
date. Each of the Community Entities has, since January 1992, 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.
2.7. FINANCIAL STATEMENTS; BOOKS AND RECORDS; MINUTE BOOKS
The Community Financial Statements fairly present, or when filed will
fairly present, in all material respects, the consolidated financial position of
the Community Entities as of the dates indicated and the results of operations,
changes in shareholders' equity and cash flows of the Community 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 and except for the omission of
notes for unaudited financial statements and year-end adjustments to interim
results). The books and records of each of the Community 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
Community 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
Community has not, on a consolidated basis, suffered any Material Adverse
Effect in its financial condition, results of operations or business since
December 31, 1996.
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2.9. ABSENCE OF UNDISCLOSED LIABILITIES
None of the Community Entities has any liability (contingent or otherwise)
that is material to Community, on a consolidated basis or that, when combined
with all similar liabilities, would be material to the Community Entities,
except as Previously Disclosed, as disclosed in the Community Financial
Statements described in clause (i) of Section 1.9 hereof and except for
liabilities incurred in the ordinary course of business subsequent to December
31, 1996.
2.10. PROPERTIES
The Community Entities have good 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
Community Financial Statements as of September 30, 1996 or acquired after such
date, except (i) as may be reflected in the Community 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 Community 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 any of the Community Entities, as lessee,
leases real and personal property which, individually or in the aggregate, are
material to the business of the Community Entities are valid and enforceable by
one or both of the Community Entities in accordance with their respective terms.
2.11. LOANS; ALLOWANCE FOR POSSIBLE LOAN LOSSES
(a) Each loan reflected as an asset in the Community 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 Community Entities have Previously Disclosed all loans in the
original principal amount in excess of $200,000 of each Community Entity that,
as of the date of this Reorganization Agreement, are classified by Community 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
Community Financial Statements, as of September 30, 1996, neither of the
Community Banks was, as of the date hereof, a party to any loan, including any
loan guaranty, in the amount of $50,000 or more, with any director, executive
officer or 5% shareholder of Community 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 the Community Banks
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 Community Entities has timely filed federal income tax
returns for each year through December 31, 1995 and has timely filed all
other material 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
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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 Community 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 material 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 Community 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 Community Entities are complete and accurate in all
material respects. None of the Community Entities is delinquent in the
payment of any material tax, assessment or governmental charge, and no
Community 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 any Community Entity which has not been settled and paid. There are
currently no agreements in effect with respect to any Community Entity to
extend the period of limitations for the assessment or collection of any
tax.
2.13. EMPLOYEE BENEFITS; ERISA
(a) The Community 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 any Community
Entity or by any trade or business, whether or not incorporated, that together
with any Community 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 any Community Entity, whether formal or informal and
whether legally binding or not (the "Plans"). None of the Community 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 any Community
Entity.
(b) With respect to each of the Plans, the Community Entities have made
available 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 any Community
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
Community 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 Section 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 Community 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 Community 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.
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(e) Full payment has been made, or will be made in accordance with Section
404(a)(6) of the Code, of all amounts that any Community 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
Community. 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 Community 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 Community Entities, threatened or anticipated (other than routine claims for
benefits) against any Plan, the assets of any Plan or against any Community
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.
(k) Except as Previously Disclosed, neither consummation of the
Transactions nor termination of the employment or service of any employee or
director of any of the Community Entities prior to or following consummation of
the Transactions will (i) entitle any current or former employee or director of
any Community Entity to severance pay, 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 Community 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 Community Financial Statements, none of the Community 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 requiring the payment of
more than $100,000 in any year 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
any Community Entity or the guarantee by any Community Entity of any such
obligation, other than instruments relating to transactions entered into in the
customary course of the Community Banks' business, (iii) any written or oral
agreement, arrangement or commitment not terminable at will without liability or
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requiring the payment of more than $25,000 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) No Community 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 for matters which, individually or in the aggregate, would not have
a Material Adverse Effect on Community, neither Community nor any of the
Community Subsidiaries is a party to any, and there are no pending or, to the
best of Community's knowledge, threatened, legal, administrative, arbitral or
other proceedings, claims, actions or governmental investigations of any nature
by or against Community or any of the Community Subsidiaries; and neither
Community nor any of the Community Subsidiaries is a party to or subject to any
order, judgment or decree. To the knowledge of the Community 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 Community Entities, threatened against any
present or former director or officer of any Community 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 Community and, to the knowledge of the Community Entities,
there is no reasonable basis for any such action, suit or proceeding.
2.16. COMPLIANCE WITH LAWS; REGULATORY EXAMINATIONS; REGULATORY APPROVALS
(a) Each Community Entity holds, and at all times since January 1, 1994 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, and no
Community Entity has any knowledge of any violation of, 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 Community Entities, except as Previously Disclosed and
except for failures to hold, failures to comply, defaults or violations which,
either individually or in the aggregate, do not or would not have a Material
Adverse Effect on Community.
(b) Except for normal examinations conducted by a regulatory agency in the
regular course of business of the Community Entities, no regulatory agency has
initiated any proceeding or, to the best knowledge of the Community Entities,
investigation into the business or operations of any Community Entity since
December 31, 1996. None of the Community Entities has received any objection
from any regulatory agency to any response by any Community Entity to any
violation, criticism or exception with respect to any report or statement
relating to any examinations of the Community Entities.
(c) No Community Entity has, since January 1, 1994 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. No
Community Entity is subject to any regulatory or supervisory cease and desist
order, agreement, directive, memorandum of understanding or commitment, and none
of them has received any communication requesting that it enter into any of the
foregoing.
(d) No Community Entity is aware of any reason why the conditions set forth
in Section 5.1(b) hereof would not be satisfied without significant delay.
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2.17. LABOR MATTERS
With respect to their respective employees, the Community Entities are not
parties to any labor agreement with any labor organization, group or association
and have not engaged in any unfair labor practice as defined under applicable
federal law. Since January 1, 1996, no Community Entity has experienced any
attempt by organized labor or its representatives to make any Community 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 any
Community Entity. There is no unfair labor practice charge or other complaint by
any employee or former employee of any Community Entity against it pending
before any governmental agency arising out of the activities of the Community
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 Community;
there is no labor strike or labor disturbance pending or, to the knowledge of
the Community Entities, threatened against any Community Entity; and no
Community Entity has experienced a work stoppage or other labor difficulty since
January 1, 1996.
2.18. BROKERS AND FINDERS
Neither the Community 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 Community has engaged and will pay a fee or commission
to McConnell, Budd & Downes, Inc., as Previously Disclosed.
2.19. INSURANCE
Community has made available to CFX true and correct copies of all material
policies of insurance of any Community Entity in effect as of the date hereof.
No Community Entity has any liability for unpaid premiums or premium adjustments
not properly reflected on Community's Financial Statements, except for any such
liability that would not have a Material Adverse Effect on Community. Except as
Previously Disclosed, no Community 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 except as a result of the
Transactions.
2.20. ENVIRONMENTAL LIABILITY
(a) Except for any violation, liability or noncompliance which does not
have a Material Adverse Effect on Community: (i) no Community 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 any Community Entity (including, without limitation, soils and surface
and ground waters) are contaminated with any hazardous substance; (iii) no
Community Entity is liable for any off-site contamination; and (iv) each
Community 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 purposes of the foregoing, all references to
"properties" include, without limitation, any owned real property or leased real
property.
(b) No Community Entity has received any written notice of any legal,
administrative, arbitral or other proceeding, claim or action and, to the
knowledge of the Community 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 Community 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 Community; 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
no Community 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.
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2.21. ADMINISTRATION OF TRUST ACCOUNTS
Except as Previously Disclosed, neither of the Community Banks currently
administers or previously has 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 other than IRA accounts.
2.22. INTELLECTUAL PROPERTY
The Community 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 Community. 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 Community.
2.23. CERTAIN INFORMATION
As of the effectiveness of the Registration Statement or any post-effective
amendment thereto and as of the date of the Community shareholders' meeting to
vote upon the Transactions, as of the mailing of any Proxy Statement or any
amendment thereto and as of the date of the Community 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 Community relating to Community 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 Community Entities know of no reason which would reasonably cause any
of them to believe that the Transactions will not qualify as a pooling of
interests for financial accounting purposes.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CFX AND CFX BANK
CFX and CFX Bank hereby represent and warrant to Community and the
Community Banks that, except as Previously Disclosed:
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 will have been duly
authorized upon adoption of an amendment to CFX's Articles of Incorporation
authorizing additional shares of CFX Common Stock (a "Charter Amendment"), 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.
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(b) As of December 31, 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, and except for
shares to be issued pursuant to that certain Agreement and Plan of
Reorganization, dated as of February 13, 1997, by and among CFX, CFX Bank,
Portsmouth Bank Shares, Inc. and Portsmouth Savings Bank, 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. CFX has made available to Community true and correct
copies of its charter and bylaws.
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 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) Subject to adoption of a Charter Amendment, 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 a Charter Amendment must be approved by the affirmative vote of
the holders of at least two thirds of all of the shares of CFX entitled to vote
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for the election of directors in accordance with the Articles of Incorporation
of CFX and 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 a
Charter Amendment, 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 and subject to adoption of a Charter
Amendment, 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. As of their respective dates, no such SEC Documents
filed with the SEC contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances in which they were
made, not misleading, except that information filed as of a later date shall be
deemed to modify information as of an earlier date. CFX and each of the CFX
Subsidiaries 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.
3.7. FINANCIAL STATEMENTS
The CFX Financial Statements fairly present or when filed will 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
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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 December 31,
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 December
31, 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, 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 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. None of the CFX Entities has received any
objection from any regulatory agency to any 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.
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(c) No 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. No CFX Entity is subject to any regulatory or supervisory cease
and desist order, agreement, directive, memorandum of understanding or
commitment, and none of them has received any communication requesting that it
enter into any of the foregoing.
(d) No 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.
3.15. EMPLOYEE BENEFITS
CFX has Previously Disclosed a list of all benefit plans and programs made
available by CFX to officers and employees of the CFX Entities. True and correct
copies of all such plans and of all documents related to such programs have been
made available to Community.
ARTICLE 4
COVENANTS
4.1. SHAREHOLDERS' MEETING
CFX and Community shall submit the Transaction Documents and, in the case
of CFX, adoption of a Charter Amendment and 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 Community and CFX as
determined by each after consultation with counsel, the boards of directors of
CFX and Community shall recommend at the respective shareholders' meetings that
the shareholders vote in favor of such approvals. Nothing contained in this
Section 4.1 shall prohibit either CFX or Community 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
Community's investment advisor dated the date of the Proxy Statement as to the
fairness of the consideration to be paid to Community'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 Community shall
cooperate in the preparation of the Proxy Statements to be mailed to the
shareholders of Community 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 Community,
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, after the Effective Date shall file a
post-effective amendment to the Registration Statement or shall file a
registration statement, as appropriate, either with respect to the sale of the
shares of CFX Common Stock provided for in Article III of the Plan of Exchange
to the holders of stock options issued by Community or for the resale of such
shares by such optionees, as CFX and such optionees may agree. 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. Community 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 no Community 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
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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 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) Community shall give prompt notice to CFX, and CFX shall give prompt
notice to Community, 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 Community 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) Community 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
Community 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 February,
1997 by and between Community and CFX (the "Confidentiality Agreement").
4.6. PRESS RELEASES
Community 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 THE COMMUNITY ENTITIES
(a) Prior to the Closing Date, and except as otherwise provided for by the
Transaction Documents or consented to or approved by CFX, the Community Entities
shall, and shall cause each of their respective subsidiaries to, use their
respective reasonable best efforts to preserve their respective properties,
business and relationships with customers, employees and other persons.
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(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, no Community Entity shall, and no Community Entity shall permit any
of its subsidiaries to:
(1) carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted;
(2) with respect to Community only, declare, set aside, make or pay
any dividend or other distribution in respect of its capital stock other
than its regular cash dividends on Community Common Stock in amounts not in
excess of $.16 per share and in a manner consistent with past practice and
in accordance with applicable law, regulation and contractual and
regulatory commitments, provided that Community's cash dividends may be
increased to the Increased Dividend (as defined below) per share of
Community Common Stock beginning with the dividend payable in the first
quarter of 1998, and provided further that the parties agree (x) to consult
with respect to the amount of the last Community quarterly dividend payable
prior to the Effective Date with the objective of assuring that the
shareholders of Community do not receive a shortfall or dividend or
distribution from both Community and CFX for such quarter based on the
record and payment dates of their last dividend prior to the Holding
Company Merger and the record and payment dates of the first dividend of
CFX following the Holding Company Merger and (y) that Community may pay a
dividend to holders of record of Community Common Stock immediately prior
to Effective Date consistent with the objective described in clause (x)
above. 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 2.2;
(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;
(4) incur any additional 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) 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 consistent with past
practice, waive or release any material right or cancel or compromise any
material debt or claim;
(9) except in connection with the hedging of interest rate risk
related to Community's 1-4 family residential mortgage loan pipeline, enter
into any material swap, hedge or other similar off-balance sheet
transaction;
(10) except as Previously Disclosed, except for foreclosing on
collateral and except for sales of 1-4 family residential mortgage loans,
automobile loans and Small Business Administration loans in the ordinary
course of business consistent with past practice, 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;
(11) 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;
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(12) enter into, modify or extend any employment or severance
contracts with any of its present or former directors, officers or
employees;
(13) 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;
(14) 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;
(15) 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 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;
(16) 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, any Community Entity or any business
combination with any Community 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 any
Community Entity, or if any Community 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
(17) agree to do any of the foregoing.
(c) Each of the Community 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 Community in connection with the Share Exchange, (ii) adversely affect the
tax treatment to the shareholders of Community 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) CFX, CFX Bank, Community and Concord Bank all acknowledge that this
Reorganization Agreement is binding upon them as of the date hereof. Community
hereby covenants that it shall cause the board of directors of Centerpoint Bank
to approve this Reorganization Agreement and the Plan of Merger and shall cause
Centerpoint Bank to execute this Reorganization Agreement and the Plan of Merger
as soon as practicable, but in no event later than 10 days after the date
hereof. Pending such approval and execution, the representations and warranties
contained in Article 2 hereof shall be construed on the basis that such approval
and execution have yet to occur.
(e) Community undertakes and agrees that, if so requested by CFX, it shall
take all necessary action to facilitate the liquidation of Community
Subsidiaries or the merger of Community Subsidiaries with subsidiaries of CFX
effective on or after the Effective Date; provided however, that in no event
shall the Closing be delayed in order to facilitate any such liquidation or
merger and provided further, however, that Community shall not be required to
take any action that could adversely affect the qualification of the Share
Exchange as a reorganization within the meaning of Section 368(a) of the Code.
(f) Immediately prior to the Closing, the CFX Entities and the Community
Entities will supplement or amend their prior disclosures 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 or the Community Entities, as appropriate, if this Reorganization
Agreement were dated as of the Closing Date, or which is necessary to
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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 any of the Community 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, as soon as
practicable 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 (the "Earliest Possible Date") but not later
than 10:00 a.m. on (x) the first business day following the last business day of
the month containing the Earliest Possible Date or, (y) if the Earliest Possible
Date occurs after the 20th day of a month, then the first business day following
the last business day of the following month, 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 Community in connection with the Share
Exchange, (ii) adversely affect the tax treatment to the shareholders of
Community 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. In the event that the
Closing occurs on a date determined under clause (y) of the preceding sentence
and if such determination results in the passage of an additional calendar
quarter prior to the publication of the financial information contemplated by
Section 4.9(b) hereof, then CFX shall use its reasonable best efforts to publish
no later than 25 days after the end of the first calendar month in which there
are at least 30 days of combined operations following the consummation of the
Transactions (which calendar month may be the calendar month 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. 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 efforts to
identify those persons who may be deemed to be "affiliates" of CFX and Community
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. Each of Community and CFX shall use its reasonable best
efforts to cause each person so identified to deliver, 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
Community Common Stock shall not be transferable until such time as financial
results covering at least 30 days of combined operations of CFX and Community
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.
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4.10. COMMUNITY EMPLOYEES; DIRECTORS AND MANAGEMENT
(a) All employees of the Community Entities as of the Effective Date (the
"Continuing Employees") 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 Continuing Employee a right to continued
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 Continuing Employees who remain employed by the CFX Entities after the
Effective Date with employee benefits which, in the aggregate, are at least
substantially equivalent to 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 (the
"CFX Benefits"); provided that (1) for purposes of determining eligibility for
and vesting of the CFX Benefits only (and not for pension benefit accrual
purposes), service with Community prior to the Effective Date shall be treated
as service with an "employer" to the same extent as if such Continuing Employees
had been employees of the CFX Entities; (2) for a one-year period after the
Effective Date, CFX shall not be required to provide the CFX Benefits to the
Continuing Employees who continue to be employed by the CFX Entities to the
extent that the Continuing Employees continue to be covered under one or more of
the Plans; (3) 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 of general
applicability to all CFX employees as they deem appropriate; and (4) CFX will
provide Continuing Employees with severance benefits in accordance with
Community's Previously Disclosed Severance Policy for a period of 12 months
following the Effective Date.
(b) Effective upon the Effective Date, Mr. Douglas Crichfield, the
President and Chief Executive Officer of Community and Concord, shall become an
Executive Vice President of CFX and the President and Chief Executive Officer of
CFX Bank and shall be offered a 3-year employment agreement with CFX on terms
substantially equivalent to those contracts of other Executive Vice Presidents,
but which agreement shall be no less favorable in the aggregate than the current
employment agreement between CFX and its the President and Chief Executive
Officer.
(c) Prior to or at the Effective Date, three directors of Community to be
designated by Community (one of whom shall be Mr. Crichfield), 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.
(d) Prior to or at the Effective Date, three directors of Community to be
designated by Community (one of whom shall be Mr. Crichfield), 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.
(e) From and after the Effective Date, the appropriate CFX Entity shall
assume and honor in accordance with their terms all employment agreements
(including change in control agreements and supplemental retirement plans)
Previously Disclosed by Community. CFX agrees that the consummation of the
Transactions constitutes a "change in control" as defined in such agreements.
This paragraph is intended for the irrevocable benefit of, and shall be
enforceable by, the parties to the agreements.
(f) From and after the Effective Date, CFX shall indemnify persons who
served as directors and officers of Community and the Community Banks on or
before the Effective Date ("Indemnified Parties") in accordance with and subject
to the provisions of Community's Articles of Incorporation Previously Disclosed
to CFX (without regard to any limitation contained in New Hampshire law, in the
By-laws of Community or the By-laws or Articles of the Community Banks). CFX
intends the indemnification provided in the preceding sentence to be a binding
obligation upon it for the irrevocable benefit of, and enforceable by, those
directors and officers so indemnified. Any Indemnified Party wishing to claim
indemnification under this Section 4.10(f), upon learning of any claim, action,
suit, proceeding or investigation for which indemnification is to be sought,
shall promptly notify CFX thereof; provided, that the failure to so notify shall
not affect the
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obligations of CFX under this Section 4.10(f), (unless such failure materially
increases CFX's liability here under). In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Date), (1) CFX shall have the right to assume the defense thereof, if it so
elects, and CFX shall pay all reasonable fees and expenses of counsel for the
indemnified Parties promptly as statements therefor are received; provided
however, that CFX shall be obligated pursuant to this Section 4.10(f) to pay for
only one firm of counsel for all Indemnified Parties in any jurisdiction for any
single action, suit or proceeding or any group of actions, suits or proceedings
arising out of or related to a common body of facts, (2) the Indemnified Parties
will cooperate in the defense of any such matter, and (3) CFX shall not be
liable for any settlement effected without its prior written consent. From and
after the Effective Date, CFX will cause the persons who served as directors or
officers of Community and the Community Banks on or before the Effective Date to
be covered by Community'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 Community 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. As a condition to receiving indemnification under this Section 4.10(f),
the party claiming indemnification shall assign, by separate writing, to CFX all
right, title and interest to and in proceeds of any insurance maintained or
provided by Community or CFX or any of their respective affiliates for the
benefits of the claiming party, to the extent of indemnification actually
received from CFX hereunder and shall send such notices as CFX may reasonably
request under any applicable directors' and officers' liability or blanket bond
insurance coverage to preserve claims of which the claiming party is aware. No
person shall be entitled to indemnification under this Section 4.10(f) if such
person is seeking indemnification based on a claim (other than a claim arising
as a supplier to, customer of or borrower from CFX or the CFX Subsidiaries or
Community or the Community Subsidiaries) brought by such person or by an entity
of which such person is a general partner, executive officer, director, trustee,
beneficiary or controlling person unless such person has waived any right to
participate in any damage or other award to such claiming party or other entity
in any such action, suit or proceeding.
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 or Community, 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,
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property or assets of the combined enterprise or of Community or otherwise
materially impair the value of Community 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 Community 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
(iii) the Parties shall have received an opinion of Arnold & Porter
to the effect that the issuance of CFX Common Stock in exchange for
Community 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 Community 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 Community;
(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) Community and CFX shall have received an opinion of Arnold &
Porter, reasonably satisfactory to tax counsel for Community, 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
Community who exchanges all of the shareholder's Community Common Stock
(including each attached right issued pursuant to the Community Rights
Agreement) 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 Community Common Stock solely for
CFX Common Stock in the Share Exchange will be the same as the tax basis
of the Community Common Stock surrendered in exchange therefor (reduced
by any amount allocable to a fractional share interest for which cash is
received); and
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(4) the holding period of the shares of CFX Common Stock to be
received by a shareholder of Community will include the period during
which such shareholder held the shares of Community Common Stock
surrendered in exchange therefor, provided the Community 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 COMMUNITY AND THE COMMUNITY
BANKS
The obligations of Community and the Community Banks to effect the
Transactions shall be subject to satisfaction of the following additional
conditions at or prior to the Closing Date unless waived by Community 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 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 Community; 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 CFX;
(b) CFX and CFX Bank shall have in all material respects performed all
obligations and complied with all of their covenants required by the
Transaction Documents prior to the Effective Date (including, without
limitation, the covenant set forth in Section 4.10(b) hereof);
(c) CFX and CFX Bank each shall have delivered to Community 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) Community shall have received an opinion of Devine, Millimet &
Branch, counsel to CFX, dated the Closing Date, as to such matters as
Community 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 and CFX 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 CFX pursuant to Section 6.4 hereof:
(a) The representations and warranties of Community and the Community
Banks 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
Community;
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(b) Community and the Community Banks shall have, in all material
respects, performed all obligations and complied with all of their
covenants required by the Transaction Documents;
(c) Community and the Community Banks 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 Community 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 Community);
(f) CFX shall have received from KPMG Peat Marwick LLP 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 Community, in form and substance which is
customary in transactions such as the Transactions; and
(g) CFX shall have received an opinion of Foley, Hoag & Eliot LLP,
counsel to Community, dated the Closing Date, as to such matters as CFX may
reasonably request with respect to the Transactions.
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 Community:
(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
Community or either of the Community Banks has, or by Community 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 (without giving effect to any exceptions in such representations or
warranties relating to materiality or a Material Adverse Effect), 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); provided, however, that no
breach or breaches of any representation or warranty referenced in this
paragraph 6.1(b) shall be grounds for termination pursuant to this
paragraph 6.1(b) unless such breach or breaches, singly or in the
aggregate, shall have a Material Adverse Effect on the breaching party;
(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 Community do not approve the Transactions or the shareholders of CFX do
not approve the Charter Amendment at the annual or special meetings duly
called for that purpose;
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(e) By any Party in writing, if the Closing Date has not occurred by
the close of business on March 31, 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 June 30, 1998 by any Party by written notice to the other
Parties (given not later than February 28, 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 Community, 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) Community 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
(a) 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) this Section 6.2, 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 (ii) a
termination pursuant to Section 6.1(b)(i) shall not relieve the breaching Party
from liability (in an action at law or otherwise) for an uncured willful breach
of such covenant or agreement giving rise to such termination.
(b) If this Reorganization Agreement is terminated, expenses of the Parties
hereto shall be determined as follows:
(1) Any termination of this Reorganization Agreement pursuant to
Sections 6.1(a), 6.1(c), 6.1(d), 6.1(e) or 6.1(f) hereof (other than as a
result of a willful breach or gross negligence by a Party hereto) shall be
without cost or expense on the part of any Party to the others; and
(2) In the event of a termination of this Reorganization Agreement
pursuant to Section 6.1(b) hereof as a result of a breach of a
representation, warranty or covenant which is caused by the willful conduct
or gross negligence of a Party, such Party shall (while remaining liable
for any liabilities or damages arising out of such willful breach or gross
negligence) be obligated to reimburse the other Parties for all
out-of-pocket costs and expenses, including, without limitation, reasonable
legal, accounting and investment banking fees and expenses, incurred by
such other Parties in connection with the entering into of this
Reorganization Agreement and the carrying out of any and all acts
contemplated hereunder (collectively referred to as "Expenses").
(c) The payment of Expenses is not an exclusive remedy, but is in addition
to any other rights or remedies available to the parties hereto at law or in
equity and notwithstanding anything to the contrary contained herein, no Party
shall be relieved or released from any liabilities or damages arising out of its
gross negligence or willful breach of any provision of this Reorganization
Agreement.
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
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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 Community, 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 Community, 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 Community) extend the time
for the performance of any of the obligations or other acts of the Community
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
Community, no such modification shall (i) alter or change the amount or kind of
consideration to be received by holders of Community Common Stock as provided in
the Plan of Exchange, or (ii) adversely affect the tax treatment to Community
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
Except as provided in Section 6.2(b) hereof, 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, provided, however, that CFX and Community each shall bear and pay 50
percent of all filing fees associated with the Proxy Statements insofar as they
pertain to the Transactions and with the Registration Statement, if required.
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 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.
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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 Community or the Community Banks:
Community Bankshares, Inc.
43 North Main Street
Concord, NH 03301
Attention: Mr. Douglas Crichfield
Facsimile No.: 603-228-5190
With a copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attention: Peter W. Coogan, Esquire
Facsimile No.: 617-832-7000
If to CFX or CFX Bank:
CFX Corporation
102 Main Street
Keene, NH 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. This Agreement may be executed by facsimile transmission.
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.
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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.
COMMUNITY BANKSHARES, INC.
By:
------------------------------------
Douglas Crichfield
President and Chief Executive
Officer
CONCORD SAVINGS BANK
By:
------------------------------------
Douglas Crichfield
President and Chief Executive
Officer
CENTERPOINT BANK
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
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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ANNEX A
PLAN OF SHARE EXCHANGE
PURSUANT TO THIS PLAN OF SHARE EXCHANGE (this "Plan of Exchange"), dated as
of March 24, 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
COMMUNITY BANKSHARES, INC. ("Community"), a New Hampshire corporation.
ARTICLE 1
SHARE EXCHANGE
1.1. On the Effective Date (as hereinafter defined), each share of common
stock of Community, par value $1.00 per share ("Community 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 Community 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).
1.2. As used herein, the term "CFX Price" shall mean the average of the
averages of the high and low prices of CFX Common Stock on the American Stock
Exchange (as reported by The Wall Street Journal) for each of the 15 consecutive
trading days ending on the business day before the Effective Date.
1.3. (a) For purposes of this Plan of Exchange, the Exchange Ratio shall
be 2.2 shares of CFX Common Stock for each share of Community Common Stock;
provided, however, that (i) the Exchange Ratio shall be 2.0 shares of CFX Common
Stock for each share of Community Stock if the CFX Price is greater than $20.00;
(ii) the Exchange Ratio shall be $40.00 ? the CFX Price, if the CFX Price is
greater than $18.18 but not greater than $20.00; and (iii) the Exchange Ratio
shall be $29.70 ? the CFX Price (the "Cure Ratio"), if the CFX Price is $13.50
(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.
(b) Notwithstanding the provisions of the preceding subparagraph (a), in
the event that before the Effective Date an announcement is made with respect to
a business combination involving the acquisition of CFX or a substantial portion
of its assets, the Exchange Ratio shall not be less than 2.2 shares of CFX
Common Stock for each share of Community Common Stock
1.4. On the Effective Date, all shares of Community Common Stock held in
the treasury of Community or owned beneficially by any subsidiary of Community
other than in a fiduciary capacity or in connection with a debt previously
contracted and all shares of Community 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.
1.5. (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
Community 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 Community 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. Community 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 Community 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 Community 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 Community in
respect of the issuance of certificates for CFX Common Stock and no expenses
shall be imposed on any shareholder of Community in connection with the
conversion of shares of Community Common Stock into shares of CFX Common Stock
and the delivery of such shares to the former holder of Community 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 Community 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 Community 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 Community 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.
1.6. Upon the Effective Date, the stock transfer books of Community shall
be closed and no transfer of Community 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 Community 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.
1.7. In the event that, between the date hereof and prior to the Effective
Date, the outstanding shares of CFX Common Stock or Community 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 Community, or if a stock dividend is declared on CFX Common Stock or
Community 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 Community 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 Community, or as a result of a stock
dividend on CFX Common Stock or Community Common Stock, had the record date
therefor been immediately following the Effective Date.
1.8. Notwithstanding any other provision hereof, each holder of shares, or
of options to purchase shares, of Community 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.
1.9. 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 2
DISSENTERS' RIGHTS
Notwithstanding anything in this Plan of Exchange to the contrary and
unless otherwise provided by applicable New Hampshire law, shares of Community
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 Community before the taking of the vote of
Community's stockholders on the Plan of Exchange a written notice of their
intent to demand payment for their shares of Community 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 Community 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 Community 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 3
STOCK OPTIONS
On the Effective Date, each then outstanding stock option to purchase
Community Common Stock ("Community Option") pursuant to the 1985 Stock Option
Plan, the 1988 Stock Option Plan, the 1989 Centerpoint Bank Stock Option Plan,
the 1992 Stock Option Plan or the 1991 Employee Stock Purchase Plan
(collectively, the "Community Stock Option Plans") (it being understood that the
aggregate number of shares of Community Common Stock subject to purchase
pursuant to the exercise of such Community Options (excluding those under the
1991 Employee Stock Purchase Plan) is not and shall not be more than 95,379),
whether vested or unvested, will be assumed by CFX. Each Community Option so
assumed by CFX under this Agreement shall continue to have, and be subject to,
the same terms and conditions set forth in the Community Stock Option Plans
immediately prior to the Effective Date, except that (i) such Community Option
shall be exercisable (when vested) for that number of whole shares of CFX Common
Stock equal to the product of the number of shares of Community Common Stock
covered by the Community Option multiplied by the Exchange Ratio, provided that
any fractional share of CFX Common Stock resulting from
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such multiplication shall be rounded down to the nearest share; and (ii) the
exercise price per share of CFX Common Stock shall be equal to the exercise
price per share of Community Common Stock of such Community Option, divided by
the Exchange Ratio, provided that such exercise price shall be rounded up to the
nearest cent. It is the intention of the parties that the Community Options
assumed by CFX qualify following the Effective Date as incentive stock options
as defined in Section 422 of the Internal Revenue Code of 1986, as amended to
the extent that the Community Options qualified as incentive stock options
immediately prior to the Effective Date.
ARTICLE 4
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 5
CONDITIONS PRECEDENT
The obligations of CFX and Community 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 6
TERMINATION
Anything contained in this Plan of Exchange to the contrary
notwithstanding, and notwithstanding the adoption hereof by the shareholders of
Community, this Plan of Exchange may be terminated and the share exchange
abandoned as provided in the Reorganization Agreement.
ARTICLE 7
MISCELLANEOUS
7.1. This Plan of Exchange may be amended or supplemented at any time
prior to its Effective Date by mutual agreement of CFX and Community. 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.
7.2. 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.
7.3. 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.
7.4. This Plan of Exchange shall be governed by and construed in
accordance with the laws of New Hampshire applicable to the internal affairs of
Community and CFX.
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APPENDIX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Option Agreement"), dated as of March
24, 1997, is by and between COMMUNITY BANKSHARES, INC. ("Community"), a New
Hampshire corporation, and CFX CORPORATION ("CFX"), a New Hampshire corporation.
WITNESSETH
WHEREAS, the respective Boards of Directors of Community and CFX have
approved a Plan of Share Exchange (the "Plan of Exchange"), and the respective
Boards of Directors of Community, Concord Savings Bank ("Concord Bank"), a New
Hampshire state-chartered savings bank subsidiary of Community, Centerpoint Bank
("Centerpoint Bank"), a New Hampshire state-chartered commercial bank subsidiary
of Community, 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 Community through a share
exchange, Community would be merged with and into CFX, and Concord Bank and
Centerpoint Bank would be merged with and into CFX Bank (collectively, the
"Transactions");
WHEREAS, as a condition to CFX's entry into the Transaction Documents and
the Transactions, and to induce such entry, Community has agreed to grant CFX
the option set forth herein to purchase authorized but unissued shares of
Community 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
Community, any Community 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 Community (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 Community, any Community subsidiary, CFX,
or any CFX affiliate) shall have commenced (as such term is defined in Rule
14d-2 under the Exchange Act), or shall have filed a registration statement
under the Securities Act with respect to, a bona fide tender or exchange
offer to purchase shares of Community Common Stock such that upon
consummation of such offer such person would own or control 15 percent or
more of the outstanding shares of Community Common Stock;
(2) any person (other than Community, any Community 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
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(i) merge or consolidate, or enter into any similar transaction, with
Community or any Community subsidiary, (ii) purchase, lease or otherwise
acquire all or substantially all the assets of Community or any Community
subsidiary, or (iii) purchase or otherwise acquire (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 15 percent or more of the voting power of Community
or any Community subsidiary;
(3) any person (other than Community, any Community subsidiary,
subsidiaries of Community 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 15
percent or more of the outstanding shares of Community 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 Community, any Community subsidiary, CFX or
any CFX affiliate) shall have made a bona fide proposal to Community by
public announcement or written communication that is or becomes the subject
of public disclosure to (i) acquire Community or any Community 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) Community 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 Community, any Community subsidiary, CFX,
or any CFX affiliate) shall have acquired beneficial ownership of 25
percent or more of the outstanding shares of Community 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 Community or any Community subsidiary to (i) merge or
consolidate, or enter into any similar transaction, with Community or any
Community subsidiary, (ii) purchase, lease or otherwise acquire all or
substantially all the assets of Community or any Community 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 Community or any
Community 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),
(11), (16) and, to the extent applicable to the foregoing subsections, (17) of
Section 4.7(b) of the Reorganization Agreement.
2. GRANT OF OPTION.
Subject to the terms and conditions set forth herein, Community hereby
grants to CFX an option (the "Option") to purchase up to 493,000 shares of
Community Common Stock at a price of $28.50 per share payable in cash as
provided in Section 4 hereof; provided, however, that in the event Community
issues or agrees to issue any shares of Community Common Stock in breach of its
obligations under the Transaction Documents at a price less than $28.50 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
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Documents in accordance with the terms of the Reorganization Agreement before
the occurrence of a Purchase Event (other than a termination resulting from a
willful breach by Community, Concord Bank or Centerpoint Bank of any Specified
Covenant contained in the Reorganization Agreement) 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
Community, Concord Bank or Centerpoint Bank of any Specified Covenant contained
in the Reorganization Agreement; 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
Community 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
Community the aggregate purchase price for the shares of Community Common Stock
purchased pursuant to the exercise of the Option in immediately available funds
by a wire transfer to a bank account designated by Community.
(b) At such closing, simultaneously with the delivery of cash as provided
in subsection (a), Community shall deliver to CFX a certificate or certificates
representing the number of shares of Community Common Stock purchased by CFX,
and CFX shall deliver to Community 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 Community 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 Community Bankshares, 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 Community Bankshares, Inc. A copy of such agreement
will be provided to the holder hereof without charge upon receipt by
Community Bankshares, 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 Community a copy of a letter from the staff of the SEC, or an
opinion of counsel, in form and substance satisfactory to Community, 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.
Community hereby represents, warrants and covenants to CFX as follows:
(a) Community shall at all times maintain sufficient authorized but
unissued shares of Community Common Stock so that the Option may be
exercised without authorization of additional shares of Community Common
Stock.
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(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.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
In the event of any change in Community 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 Community 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 Community 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 Community 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 Community to breach any provision of the Transaction Documents.
7. REGISTRATION RIGHTS.
Community shall, if requested by CFX, as expeditiously as possible file a
registration statement on a form of general use and available for use by
Community under the Securities Act if necessary in order to permit or assist the
sale or other disposition of the shares of Community 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 Community for inclusion in any registration statement to
be filed hereunder. Community 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 Community 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 Community 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
Community. The first registration statement prepared under this Section 7 shall
be at Community's expense except for underwriting commissions and the fees and
disbursements of CFX's counsel attributable to the offering of Community 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
Community 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
Community of Community Common Stock. If requested by CFX in connection with any
registration, Community 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 Community 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"),
Community 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
Community 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 Community Common
Stock acquired pursuant to the Option;
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(2) the difference between (A) the "market/tender offer" price for
shares of Community 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 Community Common Stock within
that portion of the Repurchase Period preceding the date CFX gives notice
of the required repurchase under 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 Community
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 Community 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.
(b) In the event CFX exercises its rights under this Section 8, Community
shall, within thirty business days thereafter, pay the required amount to CFX in
immediately available funds and CFX shall surrender to Community the Option and
the certificates evidencing the shares of Community 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, Community 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
Community to repurchase the full number of shares of Community Common Stock
provided in Section 2 hereof (as adjusted pursuant to Section 6 hereof), it is
the express intention of Community to allow the holder to acquire or to require
Community 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. 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
COMMUNITY BANKSHARES, INC.
By:
------------------------------------
Douglas Crichfield
President and Chief Executive
Officer
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APPENDIX C
June 18, 1997
The Board of Directors
Community Bankshares, Inc.
43 North Main Street
Concord, NH 03301
The Board of Directors:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Community Bankshares, Inc. ("Community") of the
range of possible exchange ratios governing the prospective exchange of shares
of Community Common Stock for shares of CFX Common Stock in connection with the
proposed acquisition of Community by CFX Corporation ("CFX") in a transaction to
be accounted for as a pooling of interests pursuant to an Agreement and Plan of
Reorganization, dated as of March 24, 1997, by and among Community, its wholly
owned subsidiaries, Concord Savings Bank ("Concord") and Centerpoint Bank
("Centerpoint"), 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"). Pursuant to the Acquisition Agreement, Community will
merge with and into CFX (the "Merger").
As is more specifically set forth in the Plan of Exchange, upon
consummation of the Merger, each outstanding share of the common stock of
Community, par value $1.00 per share ("Community Common Stock"), except for any
dissenting shares and except for shares held by CFX and its subsidiaries or by
Community and its subsidiaries (in both cases, other than shares held in a
fiduciary capacity or as a result of debts previously contracted), will be
entitled to be exchanged for 2.20 shares of common stock, par value $.66 2/3 per
share of CFX Corporation, ("CFX Common Stock"); provided however, that (i) the
exchange ratio shall be 2.00 shares of CFX Common Stock for each share of
Community Common Stock if the CFX Price (as defined below) is greater than
$20.00 and (ii) the exchange ratio shall be $40.00 / the CFX Price, if the CFX
Price is greater than $18.18 but not greater than $20.00; and (iii) the exchange
ratio shall be $29.70 / the CFX Price (the "Cure Ratio"), if the CFX Price is
less than or equal to $13.50 and the Board of Directors of Community has not
terminated the transaction. The term "CFX Price" is defined as the average of
the averages of the high and low prices of CFX Common Stock on the American
Stock Exchange (as reported by The Wall Street Journal) for each of the 15
consecutive trading days ending on the business day before the Effective Date
(as defined in the Plan of Exchange).
The Plan of Exchange provides that, on the Effective Date, outstanding
options to purchase Community Common Stock pursuant to the Community Stock
Option Plans (as defined in the Proxy Statement-Prospectus to which this opinion
is appended (the "Proxy Statement-Prospectus") ("Community Option") will be
assumed by CFX, subject to the same terms and conditions set forth in the
Community Stock Option Plans immediately prior to the Effective Date, except
that each Community Option will be exercisable for that number of whole shares
of CFX Common Stock equal to the product of the number of shares of Community
Common Stock covered by the Community Option multiplied by the Exchange Ratio,
and the exercise price per share of CFX Common Stock will be equal to the
exercise price per share of Community Common Stock of such Community Option,
divided by the Exchange Ratio.
The reader is urged to carefully read all the terms of the Acquisition
Agreement, which is set forth in its entirety in Appendix A of the Proxy
Statement-Prospectus.
McConnell, Budd & Downes, Inc., as part of its investment banking business,
is engaged in the valuation of bank holding companies and banks and thrift
holding companies and thrifts and their securities in connection with mergers
and acquisitions, underwriting, private placements, competitive bidding
processes, market making as an NASD market maker, secondary distributions of
listed securities and valuations for corporate, estate and other purposes. Our
experience and familiarity with Community includes having worked
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as a financial advisor to Community since March of 1993 on a non-exclusive
contractual basis and specifically includes our participation in the process and
negotiations leading up to the proposed Merger. Our experience and familiarity
with CFX includes our representation of The Safety Fund Corporation of
Massachusetts in a transaction in which Safety Fund was acquired by CFX during
1996. In the course of our role as financial advisor to Community in connection
with the Merger we have received fees for our services and will receive
additional fees contingent on the occurrence of certain defined events. We will
receive a fee in connection with the rendering of this opinion. In the ordinary
course of our business, we may, from time to time, trade the equity securities
of either or both Community and CFX in our capacity as an NASD market maker and
as a broker dealer, for our own account, for the accounts of our customers and
for the accounts of individual employees of McConnell, Budd & Downes, Inc.
Accordingly we may, from time to time, hold a long or short position in the
equity securities of either Community or CFX.
In arriving at our opinion, we have reviewed the Acquisition Agreement and
the Proxy Statement-Prospectus in substantially the form to be mailed to
Community stockholders. We have also reviewed publicly available business,
financial and stockholder information relating to Community and its
subsidiaries, certain publicly available financial information relating to CFX
and its subsidiaries and certain financial information relating to Community
provided by Community's management, as well as certain financial information
relating to CFX provided by CFX's management. In addition, we have reviewed
certain other information, including internal reports and documents of Community
and certain management prepared financial information provided to us by CFX. We
have also met with and had discussions with members of the senior management of
each of Community and CFX to discuss their past and current business operations,
current financial condition and future prospects. In connection with the
foregoing, we have reviewed the annual reports to stockholders of Community for
the fiscal years ended June 30, 1993, 1994 and 1995 and the Annual Report on
Form 10-K for the calendar year ended December 31, 1996. We have similarly
reviewed the annual reports of CFX for the calendar years ended December 31,
1993, 1994, 1995 and 1996. We have reviewed and studied the historical stock
prices and trading volumes of the common stock of both Community and CFX as well
as the terms and conditions of 16 recent acquisition transactions involving
publicly traded financial institutions conducting business in New England and on
a conditional basis compared those transactions to the proposed acquisition of
Community by CFX. We also considered the current state of and future prospects
for the economy of New Hampshire and the economy of Massachusetts generally and
the relevant market areas for CFX and Community in particular. We have also
conducted such other studies, analyses and investigations as we deemed
appropriate under the circumstances surrounding this proposed transaction. For
additional information concerning the analyses which we conducted, we direct the
reader's attention to the section of the Proxy Statement-Prospectus titled "THE
PROPOSED ACQUISITION -- OPINION OF FINANCIAL ADVISOR," which provides more
detail concerning our review and analysis.
In the course of our review and analysis we considered, among other things,
such topics as relative capitalization, capital adequacy, profitability,
availability of non-interest income, relative asset quality, adequacy of the
reserve for loan losses and the composition of the loan portfolio of each of CFX
and Community. We also considered estimates of cost savings and (to a lesser
extent) revenue enhancements which might result from a consolidation of CFX and
Community, which were provided to us by the management of CFX and Community. In
the conduct of our review and analysis we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial
information provided to us by CFX and Community or otherwise publicly
obtainable. In reaching our opinion, we have not assumed any responsibility for
the independent verification of such information nor have we completed any
independent valuation or appraisal of any of the assets or the liabilities of
either CFX or Community nor have we obtained from any other source, any
appraisals of the assets or liabilities of either CFX or Community. We have also
relied on the management of Community as to the reasonableness of various
financial and operating forecasts, cost savings estimates and of the assumptions
on which they are based, which were provided to us for use in our analyses.
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In the course of rendering this opinion, which is being rendered prior to
the receipt of certain required regulatory approvals necessary before
consummation of the transaction, we have assumed that no conditions will be
imposed by any regulatory agency in connection with its approval of the
transaction that will have a material adverse effect on the results of
operations, the financial condition or the prospects of CFX following
consummation of the transaction.
Based upon and subject to the foregoing, it is our opinion, that as of the
date of this letter, the range of possible exchange ratios is fair to the
stockholders of Community from a financial point of view.
Very truly yours,
McConnell, Budd & Downes, Inc.
By:
------------------------------------
David A. Budd
Managing Director
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APPENDIX D
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.
(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.
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(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.
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.
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(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 the 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 corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
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(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) 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
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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> 116
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> 117
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> 118
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> 119
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
/s/ Peter J. Baxter June 13, 1997
- ---------------------------
Peter J. Baxter President, Chief Executive
Officer and Director,
CFX Corporation (Principal
Executive Officer)
* Mark A. Gavin June 13, 1997
- ---------------------------
Mark A. Gavin Executive Vice President and
Chief Operating Officer, CFX
Corporation (Principal Operating
Officer)
* Gregg R. Tewksbury June 13, 1997
- ---------------------------
Gregg R. Tewksbury Chief Financial Officer, CFX
Corporation (Principal Financial
and Accounting Officer)
* Christopher W. Bramley June 13, 1997
- ---------------------------
Christopher W. Bramley President and Chief Executive
Officer, Safety Fund National
Bank; Director, CFX Corporation
* Richard F. Astrella June 13, 1997
- ---------------------------
Richard F. Astrella Director
II-4
<PAGE> 120
<TABLE>
<S> <C>
* William E. Aubuchon, III June 13, 1997
- ---------------------------
William E. Aubuchon, III Director
* Richard B. Baybutt June 13, 1997
- ---------------------------
Richard B. Baybutt Director
* Christopher V. Bean June 13, 1997
- ---------------------------
Christopher V. Bean Director
* P. Kevin Condron June 13, 1997
- ---------------------------
P. Kevin Condron Director
* Calvin L. Frink June 13, 1997
- ---------------------------
Calvin L. Frink Director
* Eugene E. Gaffey June 13, 1997
- ---------------------------
Eugene E. Gaffey Director
* David R. Grenon June 13, 1997
- ---------------------------
David R. Grenon Director
* Elizabeth Sears Hager June 13, 1997
- ---------------------------
Elizabeth Sears Hager Director
* Douglas S. Hatfield, Jr. June 13, 1997
- ---------------------------
Douglas S. Hatfield, Jr. Director
* Philip A. Mason June 13, 1997
- ---------------------------
Philip A. Mason Director
* Walter R. Peterson June 13, 1997
- ---------------------------
Walter R. Peterson Director
* L. William Slanetz June 13, 1997
- ---------------------------
L. William Slanetz Director
*By /s/ Peter J. Baxter June 13, 1997
---------------------------
(Attorney-in-Fact)
</TABLE>
II-5
<PAGE> 121
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 McConnell, Budd & Downes, Inc., 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 Community Bankshares,
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 transactions
contemplated therein, including the issuance of the CFX Common Stock.
<PAGE> 2
Based upon the foregoing and such other investigation as we have deemed
necessary, it is our opinion that when (i) the Community Agreement and the
Portsmouth Agreement shall have been approved by the shareholders of the
Company, (ii) the Registration Statement shall have become effective and (iii)
the CFX Common Stock shall have been issued and delivered to the shareholders of
Community and Portsmouth and the consideration therefor shall have been received
by the Company, all in accordance with the provisions of the Community Agreement
and the Portsmouth Agreement, the CFX Common Stock will be validly issued, fully
paid and non-assessable.
We understand that this opinion is to be used in connection with the
Registration Statement and hereby consent to the filing of this opinion with and
as a part of the Registration Statement and to the use of our name therein and
in the related Proxy Statements under the caption "Legal Opinions".
Very truly yours,
DEVINE, MILLIMET & BRANCH
Professional Association
By:/s/ Paul C. Remus
----------------------
Paul C. Remus, Officer
<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 Community Bankshares, Inc. ("Community")
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
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the inclusion of the Opinion of McConnell, Budd &
Downes, Inc. in Appendix C to the Joint Proxy Statement-Prospectus filed as part
of the Form S-4 Registration Statement of CFX Corporation and to the references
to our firm as Financial Advisor to Community Bankshares, Inc. in the text of
said Proxy Statement-Prospectus. 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.
McConnell, Budd & Downes, Inc.
By: /s/ David A. Budd
-----------------
June 13, 1997 David A. Budd
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
- ----------------------------
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
COMMUNITY BANKSHARES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Special Meeting of Stockholders to be held on
Wednesday, July 30, 1997
The undersigned hereby appoints Douglas Crichfield, Seth A. Resnicoff and
Katherine F. Tsouros, and each of them individually, as proxies of the
undersigned, with full power of substitution to each and to each substitute
appointed pursuant to such power, to vote all shares of stock of Community
Bankshares, Inc. that the undersigned would be entitled to vote, if personally
present, at the Special Meeting of Stockholders of the Company to be held on
Wednesday, July 30, 1997 and at any and all adjournments thereof. The
undersigned hereby acknowledges receipt of a copy of the accompanying Notice and
Proxy Statement for the Special Meeting of Stockholders and hereby revokes any
proxy or proxies, if any, heretofore given. This proxy may be revoked at any
time before it is exercised.
If the undersigned hold(s) any of the shares of the Company in a fiduciary,
custodial or joint capacity or capacities, this proxy is signed by the
undersigned in every such capacity as well as individually.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS SPECIFIED HEREIN. IF NO
SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR"
PROPOSAL 1 AND IN THE DISCRETION OF THE PERSONS NAMED AS PROXIES AS TO SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
PLEASE VOTE, DATE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE
To approve and adopt the Agreement and Plan of Reorganization, dated as of
March 24, 1997, by and among the Company, the Company's wholly owned
subsidiaries, Concord Savings Bank and Centerpoint Bank, CFX Corporation and
CFX's wholly owned subsidiary CFX Bank and the related Plan of Share Exchange,
and each of the transactions contemplated thereby.
FOR AGAINST ABSTAIN
<PAGE> 2
Please be sure to sign and date this Proxy. Please sign exactly as your name
appears on this card.
Joint owners should sign. When signing as an attorney, administrator,
trustee, guardian or custodian for a minor, please give full title as such. If a
corporation, please sign full corporate name and indicate the signer's office.
If a partner, sign in partnership name.
Signature of Stockholder: Date:
---------------------------- --------------
Signature of Co-holder (if any): Date:
--------------------- --------------
