SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
Portsmouth Bank Shares, Inc.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
737031104
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(CUSIP Number)
Mark A. Gavin
Executive Vice President and
Chief Operating Officer
CFX Corporation
102 Main Street
Keene, New Hampshire 03431
(603) 352-2502
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 13, 1997
-----------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement /X/.
This Document Consists of 18 Pages.
An Exhibit Index Appears on Sequentially Numbered Page 18.
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CUSIP No. 737031104 Schedule 13D Page 2 of 18
1. Name of Reporting Person: CFX Corporation I.R.S. Identification No.
02-0402421
2. Check the Appropriate Box if a Member of a Group (a) / /
(b) / /
3. SEC Use Only
4. Source of Funds: WC, OO
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant To Items
2(d) or 2(e) / /
6. Citizenship or Place of Organization: New Hampshire
Number of 7. Sole Voting Power: 01
Shares
Beneficially 8. Shared Voting Power: 01
Owned by
Each 9. Sole Dispositive Power: 01
Reporting
Person 10. Shared Dispositive Power: 01
With
11. Aggregate Amount Beneficially Owned by Each Reporting Person: 01
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares /X/
13. Percent of Class Represented by Amount in Row 11: 0%1
14. Type of Reporting Person: HC, CO
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1 The Reporting Person and the Issuer have entered into a
Stock Option Agreement covering 1,142,000 shares of Portsmouth Common Stock (as
defined herein) or approximately 17% of the total shares that would be
outstanding following exercise (including the shares issued upon exercise).
Unless and until the option granted thereunder is exercised by the Reporting
Person, the Reporting Person disclaims beneficial ownership of the shares
covered by the Stock Option Agreement.
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CUSIP No. 737031104 Schedule 13D Page 3 of 18
Item 1. Security and Issuer.
The title of the class of equity securities to which this Schedule 13D
relates is the common stock, par value $0.10 per share, of Portsmouth Bank
Shares, Inc. ("Portsmouth"). The address of the principal executive offices of
Portsmouth is 333 State Street, Portsmouth, N.H. 03802.
Item 2. Identity and Background.
This statement is filed on behalf of CFX Corporation ("CFX"). CFX is a
New Hampshire corporation with its principal executive offices at 102 Main
Street, Keene, New Hampshire 03431. CFX is a bank holding company registered
under the Bank Holding Company Act of 1956, as amended, and is principally
engaged in the business of managing and controlling banks and activities closely
related to banking.
Filed as Schedule I to this Schedule 13D is a list of the executive
officers and directors of CFX containing the following information with respect
to each such person: (a) name, (b) business address and (c) present principal
occupation or employment, and the name and, if different than such person's
business address, the address of any corporation or other organization in which
such employment is conducted. Each person listed in Schedule I is a United
States citizen.
During the past five years, neither CFX nor, to the best of CFX's
knowledge, any person named in Schedule I: (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors), or (ii) has
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result was or is subject to a judgment, decree
or final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws, or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to a Stock Option Agreement dated as of February 13, 1997
("Option Agreement"), Portsmouth has granted to CFX an option ("Option") to
purchase up to 1,142,000 shares of common stock, par value $0.10 per share, of
Portsmouth ("Portsmouth Common Stock") at a price of $15.75 per share, subject
to adjustment as provided in the Option Agreement. In the event Portsmouth
issues or agrees to issue any shares of Portsmouth Common Stock in breach of its
obligations under the Agreement and Plan of
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CUSIP No. 737031104 Schedule 13D Page 4 of 18
Reorganization, the Plan of Share Exchange, the Agreement and Plan of Merger,
the Merger Agreement or the Stock Option Agreement (collectively, the
"Transaction Documents") at a price less than $15.75 per share, (as adjusted
pursuant to Section 6 of the Option Agreement), the exercise price shall be
equal to such lesser price. The aggregate amount of funds required to exercise
the Option in full at an exercise price of $15.75 per share would be
$17,986,500. If and when the Option is exercised, CFX's source of funds will be
either working capital or funds borrowed from one or more banks in the ordinary
course of business; the identity of such bank or banks has not yet been
determined.
Item 4. Purpose of Transaction.
On February 13, 1997, CFX and Portsmouth entered into a Plan of Share
Exchange (the "Plan of Exchange") and an Agreement and Plan of Reorganization
("Reorganization Agreement"), that provide for CFX acquiring all the outstanding
shares of capital stock of Portsmouth, including each attached right issued
pursuant to the Portsmouth Rights Agreement (as defined in the Reorganization
Agreement), through an exchange (the "Share Exchange") of shares of CFX Common
Stock for the issued and outstanding shares of Portsmouth Common Stock.
Following the Share Exchange, Portsmouth shall be merged (the "Holding
Company Merger") with and into CFX, pursuant to a merger agreement or plan of
merger (the "Merger Agreement") in a form to be specified by CFX and reasonably
satisfactory to Portsmouth and consistent with the terms of the Reorganization
Agreement.
Following the consummation of the Holding Company Merger, Portsmouth
Bank, a wholly-owned subsidiary of Portsmouth, shall be merged (the "Bank
Merger") with and into CFX Bank, a wholly-owned subsidiary of CFX, pursuant to
an Agreement and Plan of Merger (the "Plan of Merger" and, together with the
Reorganization Agreement, the Plan of Exchange and the Merger Agreement, the
"Transaction Documents").
CFX and Portsmouth have entered into the Option Agreement in order to
facilitate the consummation of the Share Exchange, the Holding Company Merger,
the Bank Merger and the other transactions contemplated by the Reorganization
Agreement (collectively, the "Transactions"). Consummation of the Transactions
is subject to, among other things, receipt of all necessary shareholder and
government approvals.
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CUSIP No. 737031104 Schedule 13D Page 5 of 18
CFX has no present intention to acquire any shares of Portsmouth Common
Stock except pursuant to the Transaction Documents.
Except as otherwise set forth in Items 4, 5 and 6 hereof and the
Exhibits to this Schedule 13D (which are hereby incorporated by reference herein
and made a part hereof to the same extent as though set forth herein in full),
CFX does not now have any plans or proposals which relate to or would result in
(i) the acquisition by any person of additional securities of Portsmouth, or the
disposition of securities of Portsmouth; (ii) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving
Portsmouth or any of its subsidiaries; (iii) any change in the present Board of
Directors or management of Portsmouth, including any change in the number or
term of Portsmouth directors or the filling of any existing vacancies on the
Board of Directors of Portsmouth; (iv) any material change in the present
capitalization or dividend policy of Portsmouth; (v) any other material change
in the business or corporate structure of Portsmouth; (vi) changes in
Portsmouth's charter, bylaws or instruments corresponding thereto or other
actions which may impede the acquisition of control of Portsmouth by any person;
(vii) causing a class of securities of Portsmouth to be delisted from a national
securities exchange or to cease to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association; or (viii) a
class of equity securities of Portsmouth becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities Exchange Act of
1934.
Item 5. Interest in Securities of the Issuer.
The 1,142,000 shares of Portsmouth Common Stock subject to the Option
represent approximately 17% of the 6,855,421 shares of Portsmouth Common Stock
that would be issued and outstanding upon exercise of the Option in full
(including the shares issued upon exercise of the Option). Unless and until the
Option is exercised, CFX disclaims beneficial ownership of the Portsmouth Common
Stock subject to the Option.
Except as otherwise described herein, neither CFX, nor, to the best of
CFX's knowledge, any of the persons listed on Schedule I hereto, beneficially
owns any shares of Portsmouth Common Stock. Other than as described in this
Schedule 13D, no transactions in Portsmouth Common Stock were effected during
the past 60 days by CFX, or, to the best of CFX's knowledge, by any of the
persons listed on Schedule I hereto.
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CUSIP No. 737031104 Schedule 13D Page 6 of 18
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the
Issuer.
Option Agreement
Set forth below is a description of selected provisions of
the Option Agreement. Such description is qualified in its entirety by
reference to the copy of the Option Agreement filed as an Exhibit
hereto, which is incorporated herein by reference and made a part
hereof to the same extent as though set forth herein in full.
Under the Option Agreement, Portsmouth granted CFX the right
to purchase up to 1,142,000 shares of Portsmouth Common Stock at a
purchase price of $15.75 per share. The Option Agreement was executed
to facilitate the Transactions. CFX may exercise the Option upon the
occurrence of any of the following events (each a "Purchase Event")
after the execution of the Option Agreement:
(a) any person (other than Portsmouth, any Portsmouth
subsidiary, CFX, or any CFX affiliate) shall have commenced a bona fide
tender or exchange offer to purchase shares of Portsmouth Common Stock
such that upon consummation of such offer such person would own or
control 10% or more of the outstanding shares of Portsmouth Common
Stock;
(b) any person (other than Portsmouth or any Portsmouth
subsidiary, CFX or any CFX affiliate), other than in connection with a
transaction to which CFX has given its prior written consent, shall
have filed an application or notice with any federal or state
regulatory agency for clearance or approval, to (i) merge or
consolidate, or enter into any similar transaction, with Portsmouth or
any Portsmouth subsidiary, (ii) purchase, lease or otherwise acquire
all or substantially all the assets of Portsmouth or any Portsmouth
acquire (including by way of merger, consolidation, share exchange or
any similar transaction) securities representing 10% or more of the
voting power of Portsmouth or any Portsmouth subsidiary;
(c) any person (other than Portsmouth, any Portsmouth
subsidiary, subsidiaries of Portsmouth in a fiduciary capacity, CFX,
affiliates of CFX, or subsidiaries of CFX in a fiduciary capacity)
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of
Portsmouth Common Stock (the term "beneficial ownership" for purposes
of the Option Agreement having the meaning assigned
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CUSIP No. 737031104 Schedule 13D Page 7 of 18
thereto in Section 13(d) of the Securities Exchange Act of
1934 and the regulations promulgated thereunder);
(d) any person (other than Portsmouth, any Portsmouth
subsidiary, CFX or any CFX affiliate) shall have made a bona fide
proposal to Portsmouth by public announcement or written communication
that is or becomes the subject of public disclosure to (i) acquire
Portsmouth or any Portsmouth subsidiary by merger, consolidation,
purchase of all or substantially all its assets or any other similar
transaction, or (ii) make an offer described in clause (a) above; or
(e) Portsmouth shall have willfully breached any Specified
Covenant, as defined in the Option Agreement, 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 in the Option
Agreement.
The Option may be exercised in whole or in 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:
(a) the Effective Date, as defined in the Option
Agreement;
(b) the termination of the Transaction Documents in
accordance with the terms of the Reorganization Agreement prior to the
occurrence of a Purchase Event (other than a termination resulting from
a willful breach by Portsmouth or Portsmouth Bank of any Specified
Covenant contained in the Transaction Documents); or
(c) six months after termination of the Transaction Documents
if such termination follows the occurrence of a Purchase Event or is
due to a willful breach by Portsmouth or Portsmouth Bank of any
Specified Covenant contained in the Transaction Documents; and
provided further that any such exercise shall be subject to compliance
with applicable provisions of law.
In the event of any change in Portsmouth Common Stock by reason of
stock dividends, split-ups, recapitalizations, combinations, exchanges of shares
or the like, the type and number of shares subject to the Option, and the
purchase price per share, as the case may be, shall be adjusted appropriately.
Also, in the event that any additional shares of Portsmouth Common Stock are
issued or
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CUSIP No. 737031104 Schedule 13D Page 8 of 18
otherwise become outstanding after the date of the Option Agreement (other than
pursuant to the Option Agreement), the number of shares of Portsmouth Common
Stock subject to the Option shall be adjusted so that, after such issuance, it
equals 19.9% of the number of shares of Portsmouth Common Stock then issued and
outstanding without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in the Option Agreement shall be deemed to
authorize Portsmouth to breach any provision of the Transaction Documents.
The Option Agreement also provides that subject to the giving of any
notices and the receipt of any required approvals, at the request of CFX at any
time commencing upon the occurrence of a Repurchase Event and ending nine months
thereafter (the "Repurchase Period"), Portsmouth shall repurchase the Option
(but not later than the termination of the Option pursuant to Section 3(a) of
the Option Agreement) from CFX together with any shares of Portsmouth Common
Stock purchased by CFX pursuant thereto with respect to which CFX then has
beneficial ownership, at a price (per share, the "Per Share Repurchase Price")
equal to the sum of:
(1) the exercise price paid by CFX for any shares of
Portsmouth Common Stock acquired pursuant to the Option;
(2) the difference between (A) the "market/ tender offer"
price for shares of Portsmouth Common Stock (defined as the higher of (x) the
highest price per share at which a tender or exchange offer has been made or (y)
the highest reported sale price for shares of Portsmouth Common Stock within
that portion of the Repurchase Period preceding the date CFX gives notice of the
required repurchase under Section 8 of the Option Agreement) and (B) the
exercise price as determined pursuant to Section 2 of the Option Agreement
(subject to adjustment as provided in Section 6 of the Option Agreement)
multiplied by the number of shares of Portsmouth Common Stock with respect to
which the Option has not been exercised, but only if the market/tender offer
price is greater than such exercise price;
(3) the difference between the market/tender offer price (as
defined in Section 8(a)(2) of the Option Agreement) and the exercise price paid
by CFX for any shares of Portsmouth Common Stock purchased pursuant to the
exercise of the Option, multiplied by the number of shares so purchased, but
only if the market/tender offer price is greater than such exercise price; and
(4) CFX's out-of-pocket expenses incurred in connection with
the transactions contemplated by the Transaction Documents, including without
limitation legal, accounting and investment banking fees, in an amount not to
exceed $500,000.
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CUSIP No. 737031104 Schedule 13D Page 9 of 18
Transaction Documents
Set forth below is a description of selected provisions of the
Transaction Documents. Such description is qualified in its entirety by
reference to the copies of the Transaction Documents filed as an Exhibits
hereto, which is incorporated herein by reference and made a part hereof to the
same extent as though set forth herein in full.
The Transaction Documents provide for a Share Exchange in which CFX
will acquire all the outstanding shares of capital stock of Portsmouth,
including each attached right issued pursuant to the Portsmouth Rights
Agreement, through an exchange of shares of CFX Common Stock for the issued and
outstanding shares of Portsmouth Common Stock pursuant to a Plan of Exchange.
Following the Share Exchange, Portsmouth shall be merged with and into
CFX in the Holding Company Merger, pursuant to the Merger Agreement.
Following the consummation of the Holding Company Merger, Portsmouth
Bank, a wholly-owned subsidiary of Portsmouth, shall be merged with and into CFX
Bank, a wholly-owned subsidiary of CFX in the Bank Merger, pursuant to the Plan
of Merger.
Prior to the Closing Date, as defined in the Option Agreement, and
except as otherwise provided for by the Transaction Documents or consented to or
approved by CFX, the Portsmouth Entities shall use their respective reasonable
best efforts to preserve their respective properties, business and relationships
with customers, employees and other persons. Except with prior written consent
of CFX or except as previously disclosed or except as expressly contemplated or
permitted by the Transaction Documents, neither Portsmouth Entity (as defined in
the Reorganization Agreement) shall:
(1) carry on its business other than in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
(2) declare, set aside, make or pay any dividend or other distribution
in respect of its capital stock other than its regular cash and stock dividends
on Portsmouth Common Stock in amounts not to exceed the
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CUSIP No. 737031104 Schedule 13D Page 10 of 18
dividends paid to Portsmouth stockholders in the comparable period in the last
12 months and in a manner consistent with past practice and in accordance with
applicable law, regulation and contractual and regulatory commitments, provided
that Portsmouth's cash dividends may be increased to the Increased Dividend (as
defined below) per share of Portsmouth Common Stock beginning with the dividend
payable in the first quarter of 1998, and provided further that the parties to
the Reorganization Agreement agree to consult with respect to the last quarterly
Portsmouth dividend payable prior to the Effective Date (as defined in the
Reorganization Agreement) with the objective of assuring that the Portsmouth
stockholders do not receive a shortfall, or dividend or distribution from both
Portsmouth and CFX, for the period covered by such dividend based on the record
and payment dates of their last dividend prior to the Effective Date. The
"Increased Dividend" shall be determined by multiplying the quarterly dividend
then being paid by CFX with respect to each share of CFX Common Stock by 0.95;
(3) issue any shares of its capital stock or permit any treasury shares
to become outstanding other than pursuant to the Stock Option Agreement or
Rights outstanding at the date hereof or a stock dividend not to exceed 2%
payable in the first quarter of each of 1997 and 1998;
(4) incur any additional debt obligation or other obligation for
borrowed money other than in the ordinary course of business consistent with
past practice;
(5) issue, grant or authorize any Rights or effect any
recapitalization, reclassification, stock dividend, stock split or like change
in capitalization, or redeem, repurchase or otherwise acquire any shares of its
capital stock;
(6) amend its articles or certificate of incorporation or association,
charter or by-laws;
(7) except for foreclosing on collateral, merge with any other
corporation, savings association or bank or permit any other corporation,
savings association or bank to merge into it or consolidate with any other
corporation, savings association or bank; acquire control over any other firm,
bank, corporation, savings association or organization or create any subsidiary;
(8) except in the ordinary course of business, waive or release any
material right or cancel or compromise any material debt or claim;
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CUSIP No. 737031104 Schedule 13D Page 11 of 18
(9) fail to comply in any material respect with any laws, regulations,
ordinances or governmental actions applicable to it and to the conduct of its
business;
(10) enter into any material swap, hedge or other similar off-balance
sheet transaction;
(11) except for foreclosing on collateral, liquidate or sell or dispose
of any material assets or acquire any material assets; except as Previously
Disclosed, make any capital expenditure in excess of $100,000 in any instance or
$250,000 in the aggregate; or, except as Previously Disclosed, establish new
branches or other similar facilities or enter into or modify any leases or other
contracts relating thereto that involve annual payments that exceed $25,000 in
any instance or $100,000 in the aggregate;
(12) except as Previously Disclosed, increase the rate of compensation
of, pay or agree to pay any bonus to, or provide any other employee benefit or
incentive to, any of its directors, officers or employees except in a manner
consistent with past practice and except as Previously Disclosed;
(13) enter into, modify or extend any employment or severance contracts
with any of its present or former directors, officers or employees;
(14) enter into or substantially modify (except as may be required by
applicable law) any pension, retirement, stock option, stock purchase, stock
appreciation right, savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or welfare contract,
plan or arrangement, or any trust agreement related thereto, in respect of any
of its directors, officers or other employees;
(15) change its lending, investment, asset/liability management or
other material banking policies in any material respect except as may be
required by changes in applicable law or regulations;
(16) change its methods of accounting in effect at December 31, 1995,
except as required by changes in generally accepted accounting principles or
regulatory requirements concurred in by its independent certified public
accountants, or change any of its methods of reporting income and deductions for
federal 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;
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CUSIP No. 737031104 Schedule 13D Page 12 of 18
(17) solicit or initiate inquiries or proposals with respect to any
acquisition or purchase of all or a substantial portion of the assets of, or a
substantial equity interest in, either Portsmouth Entity or any business
combination with either Portsmouth Entity other than as contemplated by the
Reorganization Agreement; or authorize or permit any officer, director, agent or
affiliate of it to do any of the above; or fail to notify CFX as soon as
practicable if any such inquiries or proposals are received by either Portsmouth
Entity, or if either Portsmouth Entity or any officer, director, agent or
affiliate thereof is requested to or does furnish any confidential information
relating to, or participates in any negotiations or discussions concerning, any
transaction of a type describe in this paragraph; or
(18) agree to do any of the foregoing.
Both CFX and Portsmouth have agreed to use all reasonable efforts to
obtain as soon as practicable all consents and approvals of any persons
necessary or desirable for the consummation of the Transactions, including the
approval of the respective shareholders of CFX and Portsmouth and all consents
and approvals required of applicable federal and state regulatory authorities.
Additional Agreements
In connection with the Transactions, certain members of the Board of
Directors of Portsmouth, each in his capacity as a shareholder of such company,
has agreed with CFX to vote or cause to be voted for approval of the
Reorganization Agreement and the Plan of Exchange all of his or her shares which
he is entitled to vote with respect thereto. In addition, each of such persons
has agreed not to transfer or otherwise dispose of his shares of Portsmouth
Common Stock or to pledge or otherwise encumber any additional shares prior to
shareholder approval of the Reorganization Agreement and the Plan of Exchange or
termination of the Transaction Documents pursuant to the terms of the
Reorganization Agreement. Each such person has also agreed not to take any
action that would substantially impair the prospects of completing the
Transactions pursuant to the Reorganization Agreement and the Plan of Exchange.
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CUSIP No. 737031104 Schedule 13D Page 13 of 18
Item 7. Material to be Filed as Exhibits.
1. Stock Option Agreement dated as of February 13, 1997.
2. Agreement and Plan of Merger dated as of February 13, 1997.
3. Agreement and Plan of Reorganization dated as of February 13, 1997.
4. Plan of Share Exchange dated as of February 13, 1997.
5. Form of Agreement between certain directors of Portsmouth, on the one hand,
and CFX, on the other.
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CUSIP No. 737031104 Schedule 13D Page 14 of 18
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is
true, complete and correct.
Date: February 21, 1997 CFX CORPORATION
By: /s/ Mark A. Gavin
--------------------------------
Mark A. Gavin,
Executive Vice President and
Chief Operating Officer
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CUSIP No. 737031104 Schedule 13D Page 15 of 18
SCHEDULE I
----------
Following is a list of the executive officers and directors of CFX
Corporation as of February 17, 1997:
Executive Officers:
- -------------------
Name Office
- ---- ------
Richard Astrella President and CEO of Orange
Savings Bank
Peter Baxter President and CEO of CFX
Corporation
Christopher Bramley President and CEO of the
Safety Fund National Bank
Mark A. Gavin Executive Vice President and COO
of CFX Corporation
Steven Shirley Senior Vice President and Senior
Trust Officer
Gregg R. Tewksbury Chief Financial Officer of CFX
Corporation
The business address for each executive officer is CFX
Corporation, 102 Main Street, Keene, New Hampshire 03431.
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CUSIP No. 737031104 Schedule 13D Page 16 of 18
Directors:
- ----------
Name and Occupation Business or Residence Address
- ------------------- -----------------------------
Eugene E. Gaffey
Chairman of the Board
CFX Corporation and CFX Bank
Retired Justice,
Hinsdale Municipal Court
Richard F. Astrella
President, Orange Savings Bank
William E. Aubuchon, III
Chairman of the Board and CEO
W.E. Aubuchon Company, Inc.
Peter J. Baxter
President and Chief Executive
Officer CFX Corporation and
CFX Bank
Richard B. Baybutt
Chairman of the Board
Baybutt Construction
Christopher V. Bean
Attorney
Bean Law Offices
Christopher W. Bramley
President and CEO
Safety Fund National Bank
P. Kevin Condron
President
Central Supply Company, Inc.
Calvin L. Frink
Retired
David R. Grenon
Chairman of Advisory
Board & Asst. Clerk
The Protector Group
Insurance Agency, Inc.
Elizabeth Sears Hager
Former New Hampshire State
Representative
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CUSIP No. 737031104 Schedule 13D Page 17 of 18
Douglas S. Hatfield, Jr.
President and Treasurer
Hatfield, Moran & Barry, P.A.
Philip A. Mason
Attorney
Mason & Martin
Walter R. Peterson
President Emeritus of
Franklin Pierce College
L. William Slanetz
Owner, Cheshire Realty
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CUSIP No. 737031104 Schedule 13D Page 18 of 18
EXHIBIT INDEX
-------------
Location in
Sequentially
Numbered Copy
-------------
Exhibit 99.1 Option Agreement dated as of 20
February 13, 1997
Exhibit 99.2 Agreement and Plan of Merger 30
dated as of February 13, 1997
Exhibit 99.3 Agreement and Plan of Reorganization 34
dated as of February 13, 1997
Exhibit 99.4 Plan of Share Exchange dated as 73
of February 13, 1997
Exhibit 99.5 Form of Agreement between certain 79
directors of Portsmouth, on the
one hand, and CFX, on the other.
Exhibit 99.6 Press Release
Exhibit 99.1
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Option Agreement"), dated as of
February , 1997, is by and between PORTSMOUTH BANK SHARES, INC.
("Portsmouth"), a New Hampshire corporation, and CFX CORPORATION ("CFX"), a New
Hampshire corporation.
WITNESSETH
WHEREAS, the respective Boards of Directors of Portsmouth and CFX have
approved a Plan of Share Exchange (the "Plan of Exchange"), and the respective
Boards of Directors of Portsmouth, Portsmouth Savings Bank, a New Hampshire
state-chartered savings bank subsidiary of Portsmouth, CFX and CFX Bank, a New
Hampshire state-chartered savings bank subsidiary of CFX, have approved an
Agreement and Plan of Reorganization (the "Reorganization Agreement") and an
Agreement and Plan of Merger (the "Plan of Merger" and, together with the Plan
of Exchange, the Reorganization Agreement and certain other agreements
contemplated by the Reorganization Agreement, the "Transaction Documents"),
providing for certain transactions pursuant to which CFX would acquire all the
outstanding capital stock of Portsmouth through a share exchange, Portsmouth
would be merged with and into CFX, and Portsmouth Savings Bank, a wholly-owned
New Hampshire state-chartered savings bank subsidiary of Portsmouth, would be
merged with and into CFX Bank, a wholly-owned New Hampshire state-chartered
savings bank subsidiary of CFX (collectively, the "Transactions");
WHEREAS, as a condition to CFX's entry into the Transaction Documents and
the Transactions, and to induce such entry, Portsmouth has agreed to grant CFX
the option set forth herein to purchase authorized but unissued shares of
Portsmouth Common Stock;
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Certain Definitions.
(a) Capitalized terms used but not defined herein shall have the
same meanings as in the Transaction Documents.
(b) The term "Effective Date" shall have the meaning specified in
the Reorganization Agreement.
(c) The term "person" shall have the meanings specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act, and shall also include persons (other
than Portsmouth, any Portsmouth subsidiary, CFX, or any CFX affiliate), who have
entered into an agreement, arrangement or understanding (whether or not in
writing), or who are acting in concert or with conscious parallel behavior, for
the purpose of acquiring,
<PAGE>
holding, voting or disposing of any voting securities of Portsmouth (except
pursuant solely to a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
provisions of the Exchange Act and the regulations promulgated thereunder).
(d) The term "Purchase Event" shall mean any of the following events
or transactions occurring after the date hereof:
(1) any person (other than Portsmouth, any Portsmouth
subsidiary, CFX, or any CFX affiliate) shall have commenced a bona fide tender
or exchange offer to purchase shares of Portsmouth Common Stock such that upon
consummation of such offer such person would own or control 10 percent or more
of the outstanding shares of Portsmouth Common Stock;
(2) any person (other than Portsmouth, any Portsmouth
subsidiary, CFX, or any CFX affiliate), other than in connection with a
transaction to which CFX has given its prior written consent, shall have filed
an application or notice with any federal or state regulatory agency for
clearance or approval, to (i) merge or consolidate, or enter into any similar
transaction, with Portsmouth or any Portsmouth subsidiary, (ii) purchase, lease
or otherwise acquire all or substantially all the assets of Portsmouth or any
Portsmouth subsidiary, or (iii) purchase or otherwise acquire (including by way
of merger, consolidation, share exchange or any similar transaction) securities
representing 10 percent or more of the voting power of Portsmouth or any
Portsmouth subsidiary;
(3) any person (other than Portsmouth, any Portsmouth
subsidiary, subsidiaries of Portsmouth in a fiduciary capacity, CFX, affiliates
of CFX, or subsidiaries of CFX in a fiduciary capacity) shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 10 percent
or more of the outstanding shares of Portsmouth Common Stock (the term
"beneficial ownership" for purposes of this Option Agreement having the meaning
assigned thereto in Section 13(d) of the Exchange Act and the regulations
promulgated thereunder);
(4) any person (other than Portsmouth, any Portsmouth
subsidiary, CFX or any CFX affiliate) shall have made a bona fide proposal to
Portsmouth by public announcement or written communication that is or becomes
the subject of public disclosure to (i) acquire Portsmouth or any Portsmouth
subsidiary by merger, consolidation, purchase of all or substantially all its
assets or any other similar transaction, or (ii) make an offer described in
clause (1) above; or
(5) Portsmouth shall have willfully breached any Specified
Covenant (as defined below), which breach would entitle CFX to terminate the
Transaction Documents (without regard to the cure periods
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<PAGE>
provided for therein) and such breach shall not have been cured prior to the
Notice Date (as defined below).
(e) The term "Repurchase Event" shall mean any of the following:
(1) any person (other than Portsmouth, any Portsmouth
subsidiary, CFX, or any CFX affiliate) shall have acquired beneficial ownership
of 25 percent or more of the outstanding shares of Portsmouth Common Stock; or
(2) any person (other than CFX or any CFX affiliate) shall have
entered into an agreement, arrangement or understanding (whether or not in
writing) with Portsmouth or any Portsmouth subsidiary to (i) merge or
consolidate, or enter into any similar transaction, with Portsmouth or any
Portsmouth subsidiary, (ii) purchase, lease or otherwise acquire all or
substantially all the assets of Portsmouth or any Portsmouth subsidiary, or
(iii) purchase or otherwise acquire (including by way of merger, consolidation,
share exchange or any similar transaction) securities representing 25 percent or
more of the voting power of Portsmouth or any Portsmouth subsidiary.
(f) The term "Specified Covenant" shall mean any covenant contained
in Sections 4.1, 4.2, 4.3, 4.4 or 4.8 or subsections (2), (3), (4), (5), (6),
(7), (12), (17) and, to the extent applicable to the foregoing subsections, (18)
of Section 4.7(b) of the Reorganization Agreement.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Portsmouth hereby grants to CFX an option (the "Option") to purchase up to
1,142,000 shares of Portsmouth Common Stock at a price of $15.75 per share
payable in cash as provided in Section 4 hereof; provided, however, that in the
event Portsmouth issues or agrees to issue any shares of Portsmouth Common Stock
in breach of its obligations under the Transaction Documents at a price less
than $15.75 per share (as adjusted pursuant to Section 6 hereof), the exercise
price shall be equal to such lesser price.
3. Exercise of Option.
(a) If not then in material breach of the Transaction Documents, CFX
may exercise the Option, in whole or part, at any time or from time to time if a
Purchase Event shall have occurred and be continuing; provided that, to the
extent the Option shall not have been exercised, it shall terminate and be of no
further force and effect upon the earliest to occur of (i) the Effective Date,
(ii) termination of the Transaction Documents in accordance with the terms of
the Reorganization Agreement before the occurrence of a Purchase Event (other
than a termination resulting from a willful breach by Portsmouth or Portsmouth
Bank of any Specified Covenant contained in the Transaction Documents),
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<PAGE>
or (iii) six months after the termination of the Transaction Documents if such
termination follows the occurrence of a Purchase Event or is due to a willful
material breach by Portsmouth or Portsmouth Bank of any Specified Covenant
contained in the Transaction Documents; and provided further that any such
exercise shall be subject to compliance with applicable provisions of law.
(b) If more than one of the transactions giving rise to a Purchase
Event is undertaken or effected, then all such transactions shall give rise only
to one Purchase Event, which Purchase Event shall be deemed continuing for all
purposes hereunder until all such transactions are abandoned.
(c) In the event CFX wishes to exercise the Option, it shall send to
Portsmouth a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of shares it will purchase
pursuant to such exercise, and (ii) a place and date not earlier than three
business days nor later than 30 business days from the Notice Date for the
closing of such purchase (the "Closing Date"); provided that, if prior
notification to or approval of any federal or state regulatory agency is
required in connection with such purchase, CFX shall promptly file the required
notice or application for approval and shall expeditiously process the same and
the period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification period has expired or
been terminated or such approval has been obtained and any requisite waiting
period shall have passed.
4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3 hereof, CFX shall pay to
Portsmouth the aggregate purchase price for the shares of Portsmouth Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by a wire transfer to a bank account designated by Portsmouth.
(b) At such closing, simultaneously with the delivery of cash as
provided in subsection (a), Portsmouth shall deliver to CFX a certificate or
certificates representing the number of shares of Portsmouth Common Stock
purchased by CFX, and CFX shall deliver to Portsmouth a letter agreeing that CFX
will not offer to sell, pledge or otherwise dispose of such shares in violation
of applicable law or the provisions of this Option Agreement.
(c) Certificates for Portsmouth Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend which shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
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<PAGE>
registered holder hereof and Portsmouth Bank Shares, Inc. and
to resale restrictions arising under the Securities Act of
1933, as amended, a copy of which agreement is on file at the
principal office of Portsmouth Bank Shares, Inc. A copy of such
agreement will be provided to the holder hereof without charge
upon receipt by Portsmouth Bank Shares, Inc. of a written
request."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if CFX shall have delivered to
Portsmouth a copy of a letter from the staff of the SEC, or an opinion of
counsel, in form and substance satisfactory to Portsmouth, to the effect that
such legend is not required for purposes of the Securities Act and any
applicable state securities laws and this Option Agreement.
5. Representations. Portsmouth hereby represents, warrants and covenants
to CFX as follows:
(a) Portsmouth shall at all times maintain sufficient authorized but
unissued shares of Portsmouth Common Stock so that the Option may be exercised
without authorization of additional shares of Portsmouth Common Stock.
(b) The shares to be issued upon due exercise, in whole or in part,
of the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable.
6. Adjustment Upon Changes in Capitalization. In the event of any change
in Portsmouth Common Stock by reason of stock dividends, split-ups,
recapitalizations, combinations, exchanges of shares or the like, the type and
number of shares subject to the Option, and the purchase price per share, as the
case may be, shall be adjusted appropriately. In the event that any additional
shares of Portsmouth Common Stock are issued or otherwise become outstanding
after the date of this Option Agreement (other than pursuant to this Option
Agreement), the number of shares of Portsmouth Common Stock subject to the
Option shall be adjusted so that, after such issuance, it equals 19.99 percent
of the number of shares of Portsmouth Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section 6 shall be deemed to authorize Portsmouth to
breach any provision of the Transaction Documents.
7. Registration Rights. Portsmouth shall, if requested by CFX, as
expeditiously as possible file a registration statement on a form of general use
and available for use by Portsmouth under the Securities Act if necessary in
order to permit or assist the sale or other disposition of the shares of
Portsmouth Common Stock that have been acquired upon exercise of the Option in
accordance with the intended method of sale or other disposition requested by
CFX. CFX shall provide all information reasonably requested by Portsmouth for
inclusion in any registration
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<PAGE>
statement to be filed hereunder. Portsmouth will use its best efforts to cause
such registration statement first to become effective and then to remain
effective for such period not in excess of 270 days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sales or other dispositions. The obligations of Portsmouth hereunder
to file a registration statement and to maintain its effectiveness may be
suspended for one or more periods of time not exceeding 60 days in the aggregate
if the Board of Directors of Portsmouth shall have determined that the filing of
such registration statement or the maintenance of its effectiveness would
require disclosure of non-public information that would materially and adversely
affect Portsmouth. The first registration statement prepared under this Section
7 shall be at Portsmouth's expense except for underwriting commissions and the
fees and disbursements of CFX's counsel attributable to the offering of
Portsmouth Common Stock by CFX. The preparation of a second registration
statement may be requested and effected hereunder at CFX's sole expense. In no
event shall Portsmouth be required to effect more than two registrations
hereunder. The filing of any registration statement hereunder may be delayed for
such period of time as may reasonably be required to facilitate any public
distribution by Portsmouth of Portsmouth Common Stock. If requested by CFX in
connection with any registration, Portsmouth will become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements for parties similarly situated. In any such transaction Portsmouth
and CFX will also agree to indemnify each other on customary terms with respect
to any information provided by such party.
8. Repurchase.
(a) Subject to the giving of any notices and the receipt of any
required approvals, at the request of CFX at any time commencing upon the
occurrence of a Repurchase Event and ending nine months thereafter (the
"Repurchase Period"), Portsmouth shall repurchase the Option (but not later than
the termination of the Option pursuant to Section 3(a) hereof) from CFX together
with any shares of Portsmouth Common Stock purchased by CFX pursuant thereto
with respect to which CFX then has beneficial ownership, at a price (per share,
the "Per Share Repurchase Price") equal to the sum of:
(1) the exercise price paid by CFX for any shares of
Portsmouth Common Stock acquired pursuant to the Option;
(2) the difference between (A) the "market/tender offer" price
for shares of Portsmouth Common Stock (defined as the higher of (x) the highest
price per share at which a tender or exchange offer has been made or (y) the
highest reported sale price for shares of Portsmouth Common Stock within that
portion of the Repurchase Period preceding the date CFX gives notice of the
required repurchase under this
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<PAGE>
Section 8) and (B) the exercise price as determined pursuant to Section 2 hereof
(subject to adjustment as provided in Section 6) multiplied by the number of
shares of Portsmouth Common Stock with respect to which the Option has not been
exercised, but only if the market/tender offer price is greater than such
exercise price;
(3) the difference between the market/tender offer price (as
defined in Section 8(a)(2) hereof) and the exercise price paid by CFX for any
shares of Portsmouth Common Stock purchased pursuant to the exercise of the
Option, multiplied by the number of shares so purchased, but only if the
market/tender offer price is greater than such exercise price; and
(4) CFX's out-of-pocket expenses incurred in connection with the
transactions contemplated by the Transaction Documents, including without
limitation legal, accounting and investment banking fees, in an amount not to
exceed $500,000.
(b) In the event CFX exercises its rights under this Section 8,
Portsmouth shall, within thirty business days thereafter, pay the required
amount to CFX in immediately available funds and CFX shall surrender to
Portsmouth the Option and the certificates evidencing the shares of Portsmouth
Common Stock purchased thereunder and CFX shall warrant that it owns such shares
and that the same are then free and clear of all liens, charges, claims,
restrictions and encumbrances; provided that, if prior notification to any
federal or state regulatory agency is required in connection with such purchase,
Portsmouth shall promptly file the required notice or application for approval
and shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which any
required notification period has expired or been terminated or such approval has
been obtained and any requisite waiting period shall have passed.
9. Severability. If any term, provision, covenant or restriction
contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Option Agreement shall remain in full force and
effect, and shall in no way be affected, impaired or invalidated. If for any
reason such court or regulatory agency determines that the Option will not
permit the holder to acquire or Portsmouth to repurchase the full number of
shares of Portsmouth Common Stock provided in Section 2 hereof (as adjusted
pursuant to Section 6 hereof), it is the express intention of Portsmouth to
allow the holder to acquire or to require Portsmouth to repurchase such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
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<PAGE>
10. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Entire Agreement. Except as otherwise expressly provided herein,
this Option Agreement and the Transaction Documents contain the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereto,
written or oral. [Notwithstanding anything to the contrary contained in this
Agreement, this Agreement and the Transaction Documents shall be deemed to amend
the Confidentiality Agreement so as to permit CFX to enter into this Agreement
and exercise all its rights hereunder, including its right to acquire Portsmouth
Common Stock upon exercise of the Option.] The terms and conditions of this
Option Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns. Nothing in this Option
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this Option
Agreement, except as expressly provided herein.
(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.
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<PAGE>
(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.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
CFX CORPORATION
By: _____________________________________
Peter J. Baxter,
President and Chief Executive Officer
PORTSMOUTH BANK SHARES, INC.
By: _____________________________________
Harry R. Hart
President and Chief Executive Officer
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Exhibit 99.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Plan of Merger"), dated as of
February 13, 1997, is by and between PORTSMOUTH SAVINGS BANK ("Portsmouth
Bank"), a New Hampshire state chartered savings bank, and CFX BANK ("CFX Bank"),
a New Hampshire state chartered savings bank, and is joined in by PORTSMOUTH
BANK SHARES, INC. ("Portsmouth"), a New Hampshire corporation, and CFX
CORPORATION ("CFX"), a New Hampshire Corporation.
WITNESSETH
WHEREAS, the respective Boards of Directors of Portsmouth Bank and CFX
Bank deem the merger of Portsmouth Bank with and into CFX Bank, under and
pursuant to the terms and conditions herein set forth or referred to, desirable
and in the best interests of the respective banks and their respective
shareholders, and the respective Boards of Directors of Portsmouth Bank and CFX
Bank have adopted resolutions approving this Plan of Merger and a related
Agreement and Plan of Reorganization dated as of even date herewith (the
"Reorganization Agreement").
WHEREAS, Portsmouth, the sole shareholder of Portsmouth Bank, and CFX, the
sole shareholder of CFX Bank, have consented to and joined in this Plan of
Merger and have entered into the Reorganization Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto do hereby agree as follows:
ARTICLE I
BANK MERGER
Subject to the terms and conditions of this Plan of Merger, on the
Effective Date (as hereinafter defined), Portsmouth Bank shall be merged with
and into CFX Bank, pursuant to the provisions of, and with the effect provided
in, Title 35 of the New Hampshire Revised Statutes Annotated (the "Bank
Merger"). On the Effective Date, the separate existence of Portsmouth Bank shall
cease and CFX Bank, as the surviving entity, shall continue unaffected and
unimpaired by the Bank Merger (CFX Bank, as existing on and after the Effective
Date, being hereinafter sometimes referred to as the "Surviving Bank").
ARTICLE II
ARTICLES OF AGREEMENT AND BY-LAWS
The Amended and Restated Articles of Agreement and the By-laws of CFX Bank
in effect immediately prior to the Effective Date shall be the Articles of
Agreement and the By-laws of the Surviving Bank, amended as set forth below, in
each case until amended in accordance with applicable law. The Articles of
Agreement of the Surviving Bank shall be amended effective
<PAGE>
upon the Effective Date to add the following paragraph to the end of existing
Article VI:
"The Bank shall assume the Distribution and Liquidation Account
(the "Liquidation Account") initially established and maintained
by Portsmouth Savings Bank for the benefit of Portsmouth Savings
Bank's eligible savings account holders as of December 31, 1987
("eligible savers"). Notwithstanding any provision of these
Articles or of the By-laws of the Bank to the contrary, in the
event of a complete liquidation of the Bank, it shall comply with
such regulations with respect to the amount and the priorities on
liquidation of each of the Bank's eligible savers' inchoate
interest in the Liquidation Account, to the extent it is still in
existence; provided, that an eligible saver's inchoate interest in
the Liquidation Account shall not entitle such eligible saver to
any voting rights at meetings of the Bank's shareholders."
ARTICLE III
DIRECTORS AND OFFICERS
The directors of CFX Bank immediately prior to the Effective Date,
together with two directors of Portsmouth to be designated by Portsmouth in
accordance with Section 4.10(c) of the Reorganization Agreement, will be the
directors of the Surviving Bank on the Effective Date. The officers of CFX Bank
immediately prior to the Effective Date shall be the officers of the Surviving
Bank on the Effective Date.
ARTICLE IV
CAPITAL
The shares of capital stock of CFX Bank issued and outstanding immediately
prior to the Effective Date shall be the shares of the Surviving Bank issued and
outstanding on the Effective Date.
ARTICLE V
CANCELLATION OF PORTSMOUTH BANK STOCK
Each share of Portsmouth Bank capital stock issued and outstanding
immediately prior to the Effective Date shall, by virtue of the Bank Merger, be
cancelled on the Effective Date, and no cash, stock or other property shall be
delivered in exchange therefor.
ARTICLE VI
EFFECTIVE DATE OF THE BANK MERGER
Certificates or articles of merger evidencing the transactions
contemplated herein shall be delivered to the New Hampshire Secretary of State
in accordance with applicable New Hampshire law. The Bank Merger shall be
effective at the time and on the date specified in such
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<PAGE>
certificates or articles of merger (such date and time being herein referred to
as the "Effective Date").
ARTICLE VII
CONDITIONS PRECEDENT
The obligations of Portsmouth Bank and CFX Bank to effect the Bank Merger
as herein provided shall be subject to satisfaction, unless duly waived, of the
conditions set forth in the Reorganization Agreement.
ARTICLE VIII
TERMINATION
Anything contained in this Plan of Merger to the contrary notwithstanding,
this Plan of Merger may be terminated and the Bank Merger abandoned as provided
in the Reorganization Agreement.
ARTICLE IX
MISCELLANEOUS
1. This Plan of Merger may be amended or supplemented at any time prior to
the Effective Date by mutual agreement of the parties hereto. Any such amendment
or supplement must be in writing and approved by the parties' respective Boards
of Directors and/or by officers authorized thereby.
2. Any notice or other communication required or permitted under this Plan
of Merger shall be given, and shall be effective, in accordance with the
provisions of the Reorganization Agreement.
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 Merger.
4. This Plan of Merger shall be governed by and construed in accordance
with the laws of New Hampshire applicable to the internal affairs of Portsmouth
Bank and CFX Bank.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement and Plan of Merger to be executed in
counterparts by their duly authorized officers and their corporate seals to be
hereunto affixed and attested by their officers thereunto duly authorized, all
as of the day and year first above written.
PORTSMOUTH SAVINGS BANK
By: _____________________________________
Harry R. Hart
Chairman and Chief Executive Officer
CFX BANK
By: _____________________________________
Peter J. Baxter,
President and Chief Executive Officer
JOINED IN BY:
PORTSMOUTH BANK SHARES, INC.
By: _____________________________________
Harry R. Hart
President and Chief Executive Officer
CFX CORPORATION
By: _____________________________________
Peter J. Baxter,
President and Chief Executive Officer
- 4 -
Exhibit 99.3
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Reorganization
Agreement"), dated as of February 13, 1997, is by and among PORTSMOUTH BANK
SHARES, INC. ("Portsmouth"), a New Hampshire corporation, PORTSMOUTH SAVINGS
BANK ("Portsmouth Bank"), a New Hampshire state-chartered savings bank, CFX
CORPORATION ("CFX"), a New Hampshire corporation, and CFX BANK, a New Hampshire
state-chartered savings bank ("CFX Bank").
WITNESSETH
WHEREAS, the parties hereto desire to combine their respective businesses
on the terms and subject to the conditions of this Reorganization Agreement;
WHEREAS, the parties hereto desire that CFX acquire all the outstanding
shares of capital stock of Portsmouth, including each attached right issued
pursuant to the Portsmouth Rights Agreement (as defined below), through an
exchange (the "Share Exchange") of shares of CFX Common Stock (as defined below)
for the issued and outstanding shares of Portsmouth Common Stock (as defined
below) pursuant to a Plan of Share Exchange (the "Plan of Exchange") in the form
attached hereto as Annex A;
WHEREAS, the parties desire that, following the Share Exchange, Portsmouth
shall be merged (the "Holding Company Merger") with and into CFX, pursuant to a
merger agreement or plan of merger (the "Merger Agreement") in a form to be
specified by CFX and reasonably satisfactory to Portsmouth and consistent with
the terms of this Reorganization Agreement;
WHEREAS, the parties desire that, following the consummation of the Holding
Company Merger, Portsmouth Bank, a wholly-owned subsidiary of Portsmouth, shall
be merged (the "Bank Merger") with and into CFX Bank, a wholly-owned subsidiary
of CFX, pursuant to an Agreement and Plan of Merger (the "Plan of Merger") in
the form attached hereto as Annex B;
WHEREAS, in connection with the execution of this Reorganization Agreement,
Portsmouth and CFX have entered into a Stock Option Agreement (the "Stock Option
Agreement") dated as of even date herewith pursuant to which Portsmouth will
grant CFX the right to purchase certain shares of Portsmouth Common Stock; and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with Share
Exchange, the Holding Company Merger, the Bank Merger and the other transactions
(collectively, the "Transactions") contemplated by this Reorganization
Agreement, the Plan of Exchange, the Merger Agreement, the Plan of Merger and
the Stock Option Agreement (collectively, the "Transaction Documents");
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
ARTICLE 1.
CERTAIN DEFINITIONS
1.1. "AMEX" shall mean the American Stock Exchange, Inc.
1.2. "BHC Act" shall mean the Bank Holding Company Act of 1956, as amended.
1.3. "CFX Entities" shall mean CFX and CFX Bank.
1.4. "CFX Financial Statements" shall mean (i) the consolidated balance
sheets of CFX as of September 30, 1996 and as of December 31, 1995 and 1994 and
the related consolidated statements of income, cash flows and changes in
shareholders' equity (including related notes, if any) for the nine months ended
September 30, 1996 and each of the three years ended December 31, 1995, 1994 and
1993 as filed by CFX in SEC Documents and (ii) the consolidated balance sheets
of CFX and related consolidated statements of income, cash flows and changes in
shareholders' equity (including related notes, if any) as filed by CFX in SEC
Documents with respect to periods ended subsequent to September 30, 1996.
1.5. "Closing Date" shall mean the date specified pursuant to Section 4.8
hereof as the date on which the Parties shall close the Transactions.
1.6. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.7. "Commissioner" shall mean the New Hampshire State Bank Commissioner.
1.8. "Effective Date" shall mean the date specified pursuant to Section 4.8
hereof as the effective date of the Share Exchange.
1.9. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.10. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.11. "FDIA" shall mean the Federal Deposit Insurance Act.
1.12. "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.13. "Federal Reserve" shall mean the Board of Governors of the Federal
Reserve System or any appropriate Federal Reserve Bank.
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<PAGE>
1.14. "Intellectual Property" means domestic and foreign letters patent,
patents, patent applications, patent licenses, software licensed or owned,
know-how, know-how licenses, trade names, common law and other trademarks,
service marks, licenses of trademarks, trade names and/or service marks,
trademark registrations and applications, service mark registrations and
applications and copyright registrations and applications.
1.15. "Investment Company Act" means the Investment Company Act of 1940, as
amended.
1.16. "Material Adverse Effect" shall mean, with respect to Portsmouth or
CFX, as the case may be, a material adverse effect on the business, results of
operations or financial condition of such party and its subsidiaries taken as a
whole; provided, however, that the following shall not constitute or contribute
to a Material Adverse Effect: (i) changes in the financial condition, business,
or results of operations of a person resulting directly or indirectly from (1)
changes in interest rates (provided that Portsmouth is in compliance with its
asset/liability management policy as Previously Disclosed to CFX, as the same
may be revised thereafter with CFX's concurrence), or (2) changes in state and
federal regulations or legislation affecting New Hampshire banks; or (ii)
matters related to changes in federal, state or local tax laws or changes in
federal, state or local tax status, characteristics, or attributes or the
ability to use such attributes.
1.17. "Parties" shall mean CFX, CFX Bank, Portsmouth and Portsmouth Bank.
1.18. "Portsmouth Entities" shall mean Portsmouth and Portsmouth Bank.
1.19. "Portsmouth Financial Statements" shall mean (i) the consolidated
balance sheets of Portsmouth as of September 30, 1996 and as of December 31,
1995 and 1994 and the related consolidated statements of income, cash flows and
changes in shareholders' equity (including related notes, if any) for the nine
months ended September 30, 1996 and each of the three years ended December 31,
1995, 1994 and 1993 as filed by Portsmouth in SEC Documents and (ii) the
consolidated balance sheets of Portsmouth and related consolidated statements of
income, cash flows and changes in shareholders' equity (including related notes,
if any) as filed by Portsmouth in SEC Documents with respect to periods ended
subsequent to September 30, 1996.
1.20. "Previously Disclosed" shall mean disclosed prior to the execution
hereof in (i) an SEC Document filed with the SEC subsequent to December 31, 1995
and prior to the date hereof, or (ii) a letter dated of even date herewith from
the Party making such disclosure and delivered to the other Parties prior to the
execution hereof.
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1.21. "Proxy Statement" shall mean the proxy statement/prospectus (or
similar documents) together with any supplements thereto sent to the
shareholders of CFX or Portsmouth to solicit their votes in connection with this
Reorganization Agreement and the Plan of Exchange.
1.22. "Registration Statement" shall mean the registration statement with
respect to the CFX Common Stock to be issued in connection with the Share
Exchange as declared effective by the SEC under the Securities Act, if required.
1.23. "Rights" shall mean subscriptions, warrants, options, rights, calls,
agreements, understandings or commitments of any character calling for the
transfer, purchase, issuance or disposition of, or representing the right to
purchase, acquire, subscribe to or otherwise receive any shares of capital
stock, or any securities convertible into or representing the right to purchase,
acquire, subscribe to or otherwise receive any shares of capital stock, or any
stock appreciation rights, performance units and other similar stock-based
rights whether they obligate the issuer thereof to issue stock or other
securities or to pay cash.
1.24. "SEC" shall mean the Securities and Exchange Commission.
1.25. "SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a Party pursuant to the Securities Laws.
1.26. "Securities Act" shall mean the Securities Act of 1933, as amended.
1.27. "Securities Laws" shall mean the Securities Act; the Exchange Act;
the Investment Company Act; the Investment Advisers Act of 1940, as amended; the
Trust Indenture Act of 1939, as amended; and the rules and regulations of the
SEC promulgated thereunder.
Other terms used herein are defined in the preamble and the recitals to
this Reorganization Agreement and in Articles II, III and IV hereof.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF PORTSMOUTH AND PORTSMOUTH BANK
Portsmouth and Portsmouth Bank hereby represent and warrant to CFX and CFX
Bank as follows:
2.1. Capital Structure of Portsmouth
(a) The authorized capital stock of Portsmouth consists solely of
25,000,000 shares of common stock, par value $0.10 per share ("Portsmouth Common
Stock"), and 15,000,000 shares of preferred stock, par value $0.10 per share
("Portsmouth Preferred Stock"). There are 5,713,421 shares of Portsmouth Common
Stock issued and outstanding, 784,850 shares of Portsmouth Common Stock held in
its treasury, no shares of Portsmouth
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Preferred Stock issued and outstanding, and no shares of Portsmouth Preferred
Stock held in its treasury. There are 370,734 shares of Portsmouth Common Stock
reserved for issuance under Portsmouth's Revised 1987 Stock Option and
Appreciation Rights Plan (the "Portsmouth Stock Option Plan"). In connection
with a rights agreement adopted by Portsmouth on November 17, 1988 (the
"Portsmouth Rights Agreement"), each share of Portsmouth Common Stock
outstanding on November 28, 1988, and each share of Portsmouth Common Stock
subsequently issued, has associated with it such rights to acquire such
additional shares of Portsmouth Common Stock as are specified in the Portsmouth
Rights Agreement.
(b) Except for shares of Portsmouth Common Stock subject to options under
the Portsmouth Stock Option Plan as Previously Disclosed, subject to the Stock
Option Agreement and subject to the Portsmouth Rights Agreement, Portsmouth is
not bound by any outstanding Rights. Except for the Portsmouth Rights Agreement
and the Stock Option Agreement, there are no agreements, understandings or
commitments to which Portsmouth is a party with respect to the voting of any
shares of Portsmouth Common Stock or which restrict the transfer of such shares.
(c) All outstanding shares of Portsmouth's capital stock have been duly
issued and are validly outstanding, fully paid and nonassessable. None of the
shares of Portsmouth's capital stock has been issued in violation of the
preemptive rights of any person. All options granted under the Portsmouth Stock
Option Plan have become fully exercisable in accordance therewith.
2.2. Organization, Standing and Authority of Portsmouth
Portsmouth is a duly organized corporation, validly existing and in good
standing under the laws of New Hampshire, with full corporate power and
authority to carry on its business as now conducted and is duly licensed or
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on Portsmouth. Portsmouth
is registered as a bank holding company under the BHC Act.
2.3. Ownership and Capital Structure of Portsmouth Bank
(a) Portsmouth does not own, directly or indirectly, 5 percent or more of
the outstanding capital stock or other voting securities of any corporation,
bank or other organization other than Portsmouth Bank.
(b) The authorized capital stock of Portsmouth Bank consists solely of
1,000,000 shares of common stock, par value $0.10 per share ("Portsmouth Bank
Common Stock"). There are 100 shares of Portsmouth Bank Common Stock issued and
outstanding, and no shares of Portsmouth Bank Common Stock held in its treasury.
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(c) The outstanding shares of Portsmouth Bank Common Stock are validly
issued and outstanding, fully paid and nonassessable and all such shares are
directly owned by Portsmouth free and clear of all liens, claims and
encumbrances, subject to the Distribution and Liquidation Account (the
"Liquidation Account") established by Portsmouth Bank in connection with its
conversion from mutual to stock form and maintained pursuant to Article 7 of
Portsmouth Bank's Amended and Restated Charter. Portsmouth Bank is not bound by
any Rights with respect to the Portsmouth Bank Common Stock, and there are no
agreements, understandings or commitments relating to the right of Portsmouth to
vote or to dispose the Portsmouth Bank Common Stock. None of the shares of
Portsmouth Bank Common Stock has been issued in violation of the preemptive
rights of any person whose cause of action is not time barred by any applicable
statute of limitations. Portsmouth Bank has established and maintained the
Liquidation Account in accordance with all applicable laws and regulations.
2.4. Organization, Standing and Authority of Portsmouth Bank
Portsmouth Bank is a duly organized state savings bank, validly existing
and in good standing under the laws of New Hampshire with full power and
authority to carry on its business as now conducted and is duly licensed or
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on the Portsmouth
Entities. Portsmouth Bank does not own, directly or indirectly, five percent or
more of the outstanding capital stock or other voting securities of any
corporation, bank or other organization. Portsmouth Bank does not engage in any
activities other than those expressly authorized to it by applicable New
Hampshire and federal banking laws, including without limitation the regulations
of the FDIC under Section 24 of the FDIA. Portsmouth Bank is a member in good
standing of the Federal Home Loan Bank of Boston and owns the requisite amount
of stock therein. The deposits of Portsmouth Bank are insured by the Bank
Insurance Fund of the FDIC in accordance with the FDIA, and Portsmouth has paid
all assessments that have come due and has filed all reports required by the
FDIA.
2.5. Authorized and Effective Agreement
(a) Portsmouth has all requisite corporate power and authority to enter
into and perform all its obligations under the Transaction Documents to which
Portsmouth is a party. The adoption, execution and delivery of the Transaction
Documents to which Portsmouth is a party and the consummation of the
Transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of Portsmouth,
including without limitation the approval of a majority of the "Continuing
Directors" as contemplated by Article 7, Section 2.B of Portsmouth's Articles of
Incorporation, except that (1) pursuant to applicable New Hampshire law and
Portsmouth's Articles of Incorporation and By-laws, the Plan of Exchange must be
approved by the
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affirmative vote of the holders of a majority of all the shares of Portsmouth
Common Stock entitled to vote thereon, and (2) pursuant to applicable
New Hampshire law, certain required or appropriate actions may or must be taken
with respect to the rights of any dissenting shareholders. The Board of
Directors of Portsmouth has directed that the Transaction Documents and the
Transactions be, to the extent necessary, submitted to Portsmouth's stockholders
for approval at an annual or special meeting to be held as soon as practicable.
(b) Portsmouth Bank has all requisite corporate power and authority to
enter into and perform all its obligations under the Transaction Documents to
which Portsmouth Bank is a party. The execution and delivery of this
Reorganization Agreement and the Plan of Merger and the consummation of the
Transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of Portsmouth Bank.
(c) Assuming the accuracy of the representations contained in Section
3.5(c) hereof, the Transaction Documents constitute legal, valid and binding
obligations of the Portsmouth Entities, enforceable against them in accordance
with their respective terms subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
(d) Except as Previously Disclosed, neither the adoption, execution and
delivery of the Transaction Documents nor the consummation of the Transactions
nor compliance by the Portsmouth Entities with any of the provisions hereof or
thereof shall (i) conflict with or result in a breach of any provision of the
articles or certificates of incorporation or association, charters or by-laws of
either of the Portsmouth Entities, (ii) assuming that the regulatory approvals
referred to in Section 5.1(b) hereof are duly obtained, constitute or result in
a breach of any term, condition or provision of, or constitute a default under,
or give rise to any right of termination, cancellation or acceleration with
respect to, or result in the creation of any lien, charge or encumbrance upon
any property or asset of either Portsmouth Entity pursuant to, any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation, or
(iii) assuming that the regulatory approvals referred to in Section 5.1(b)
hereof are duly obtained, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to either Portsmouth Entity, except for such
violations, rights, conflicts, breaches, creations or defaults which, either
individually or in the aggregate, will not have a Material Adverse Effect on
Portsmouth.
(e) Except for the approvals specified in Sections 4.2 and 4.4 hereof,
except as Previously Disclosed and except as expressly referred to in this
Reorganization Agreement, no consent, approval or authorization of, or
declaration, notice, filing or registration with, any governmental or regulatory
authority, or any other person, is required to be made or obtained by the
Portsmouth Entities on or prior to the Closing Date in
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connection with the execution, delivery and performance of the Transaction
Documents or the consummation of the Transactions other than the filing of
certificates or articles of merger or share exchange or similar documents with
the appropriate New Hampshire state authorities.
2.6. SEC Documents; Regulatory Filings
Portsmouth has filed all SEC Documents required by the Securities Laws and
such SEC Documents complied, as of their respective dates, in all material
respects with the Securities Laws. Each of the Portsmouth Entities has filed all
reports required by statute or regulation to be filed with any federal or state
bank regulatory agency, and such reports were prepared in accordance with the
applicable statutes, regulations and instructions in existence as of the date of
filing of such reports in all material respects.
2.7. Financial Statements; Books and Records; Minute Books
The Portsmouth Financial Statements fairly present, or when filed will
fairly present, in all material respects, the consolidated financial position of
the Portsmouth Entities as of the dates indicated and the results of operations,
changes in shareholders' equity and cash flows of the Portsmouth Entities for
the periods then ended in conformity with generally accepted accounting
principles applicable to banking organizations or financial institutions applied
on a consistent basis (except as disclosed therein, except for the omission of
notes for unaudited financial statements and year-end adjustments to interim
results, and except as required or permitted by SFAS 109 and 115). The books and
records of each of the Portsmouth Entities fairly reflect in all material
respects the transactions to which it is a party or to or by which its
properties are subject or bound. Such books and records have been properly kept
and maintained and are in compliance in all material respects with all
applicable legal and accounting requirements. The minute books of the Portsmouth
Entities contain records which are accurate in all material respects of all
corporate actions of their respective shareholders and Boards of Directors
(including committees of their respective Boards of Directors).
2.8. Material Adverse Change
Portsmouth has not suffered any Material Adverse Effect in its financial
condition, results of operations or business since December 31, 1995.
2.9. Absence of Undisclosed Liabilities
Neither of the Portsmouth Entities has any liability (contingent or
otherwise) that is material to the Portsmouth Entities taken as a whole or that,
when combined with all similar liabilities, would be material to the Portsmouth
Entities taken as a whole, except as Previously Disclosed, except as disclosed
in the Portsmouth Financial Statements filed with the
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SEC prior to the date hereof and except for liabilities incurred in the ordinary
course of business subsequent to September 30, 1996.
2.10. Properties
The Portsmouth Entities have good and marketable title free and clear of
all liens, encumbrances, charges, defaults or equitable interests to all of
their respective properties and assets, real and personal that are reflected on
the Portsmouth Financial Statements as of September 30, 1996 or acquired after
such date, except (i) as may be reflected in the Portsmouth Financial
Statements, (ii) for liens for taxes not yet delinquent, (iii) for liens on real
estate acquired by foreclosure or substantively repossessed, (iv) for pledges to
secure deposits and other liens incurred in the ordinary course of banking
business, (v) for such imperfections of title, easements, encumbrances, liens,
charges, defaults and equitable interests, if any, that do not have a Material
Adverse Effect on the value of personal or real property reflected in the
Portsmouth Financial Statements or acquired since the date of such statements
and which do not materially interfere with or impair the present and continued
use of such property, and (vi) for dispositions and encumbrances in the ordinary
course of business. All leases pursuant to which either of the Portsmouth
Entities, as lessee, leases real and personal property which, individually or in
the aggregate, are material to the business of the Portsmouth Entities are valid
and enforceable by one or both of the Portsmouth Entities in accordance with
their respective terms.
2.11. Loans; Allowance for Loan Losses
(a) Each loan reflected as an asset in the Portsmouth Financial Statements
(i) is evidenced by notes, agreements or other evidences of indebtedness which
are true, genuine and what they purport to be, (ii) to the extent secured, has
been secured by valid liens and security interests which have been perfected,
and (iii) is not subject to any known defenses, set-off or counterclaims except
as may be provided under bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditors' rights and to
general principles of equity.
(b) The Portsmouth Entities have Previously Disclosed all loans in the
original principal amount in excess of $200,000 of either Portsmouth Entity
that, as of the date of this Reorganization Agreement, are classified by
Portsmouth or any state or federal bank regulatory or supervisory authority as
"Special Mention," "Substandard," "Doubtful," "Loss" or "Classified," together
with the aggregate principal amount of and accrued and unpaid interest on such
loans, by category, it being understood that no representation is being made
that any state or federal bank regulatory or supervisory authority would agree
with such loan classifications.
(c) Except as Previously Disclosed or as identified in the notes to the
Portsmouth Financial Statements, as of September 30, 1996, Portsmouth
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Bank was not, as of the date hereof, a party to any loan, including any loan
guaranty, with any director, executive officer or 5% shareholder of Portsmouth
or any person, corporation or enterprise controlling, controlled by or under
common control with any of the foregoing. All loans and extensions of credit
that have been made by Portsmouth Bank and that are subject to Section 22(h) of
the Federal Reserve Act, comply therewith.
2.12. Tax Matters
Except as Previously Disclosed:
(a) Each of the Portsmouth Entities has timely filed federal income tax
returns for each year through December 31, 1995 and has timely filed all other
federal, state, local and foreign tax returns (including, without limitation,
estimated tax returns, returns required under Sections 1441-1446 and 6031-6060
of the Code and the regulations thereunder and any comparable state, foreign and
local laws, any other information returns, withholding tax returns, FICA and
FUTA returns and back-up withholding returns required under Section 3406 of the
Code and any comparable state, foreign and local laws) required to be filed with
respect to the Portsmouth Entities. All taxes due in respect of the periods
covered by such tax returns and for any subsequent periods have been paid or
adequate reserves have been established for the payment of such taxes. As of the
Closing Date, all taxes due in respect of any subsequent periods ending on or
prior to the Closing Date (or that portion of any period that is prior to the
Closing Date) will have been paid or adequate reserves will have been
established for the payment thereof. No (i) audit examination, (ii) deficiency
or (iii) refund litigation with respect to any tax is pending. The Portsmouth
Entities will not have any material liability for any taxes in excess of amounts
paid or reserves or accruals established.
(b) All federal, state and local (and, if applicable, foreign) tax returns
filed by the Portsmouth Entities are complete and accurate in all material
respects. Neither of the Portsmouth Entities is delinquent in the payment of any
tax, assessment or governmental charge, and neither Portsmouth Entity has
requested any extension of time within which to file any tax returns in respect
of any fiscal year or portion thereof which have not since been filed. No
deficiency for any tax, assessment or governmental charge has been proposed,
asserted or assessed (tentatively or otherwise) against either Portsmouth Entity
which has not been settled and paid. There are currently no agreements in effect
with respect to either Portsmouth Entity to extend the period of limitations for
the assessment or collection of any tax.
2.13. Employee Benefits; ERISA
(a) The Portsmouth Entities have Previously Disclosed a true and complete
list of each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, medical, life or other insurance,
profit-sharing, or pension plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or
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arrangement, sponsored, maintained or contributed to or required to be
contributed to by either Portsmouth Entity or by any trade or business, whether
or not incorporated, that together with either Portsmouth Entity would be deemed
a "single employer" under Section 414 of the Code (an "ERISA Affiliate") for the
benefit of any employee or director (including advisory directors) or former
employee or former director (including advisory directors) of either Portsmouth
Entity, whether formal or informal and whether legally binding or not (the
"Plans"). Neither of the Portsmouth Entities has any formal plan or commitment,
whether legally binding or not, to create any additional plan or modify or
change any existing Plan that would affect any employee or director or former
employee or former director of either Portsmouth Entity.
(b) With respect to each of the Plans, the Portsmouth Entities have
Previously Disclosed to CFX true and complete copies of each of the following
documents: (a) the Plan and related documents (including all amendments
thereto); (b) the two most recent annual reports and financial statements, if
any; (c) the most recent Summary Plan Description, together with each Summary of
Material Modifications, required under ERISA with respect to such Plan, and all
material employee communications relating to such Plan; and (d) the most recent
determination letter received from the IRS with respect to each Plan that is
intended to be qualified under the Code and all material communications to or
from the IRS or any other governmental or regulatory authority relating to each
Plan.
(c) No liability under Title IV of ERISA has been incurred by either
Portsmouth Entity or any ERISA Affiliate since the effective date of ERISA that
has not been satisfied in full, and no condition exists that presents a material
risk to Portsmouth or any ERISA Affiliate of incurring a liability under such
Title. No reportable event under Section 4043 of ERISA (other than the
reportable event described in Pension Benefit Guaranty Corporation Regulation
2615.23 occurring by reason of the Transactions) has occurred or will occur with
respect to any Plan on or before the Closing Date or the Effective Date.
(d) No Portsmouth Entity, no ERISA Affiliate, no Plan, no trust created
thereunder, and no trustee or administrator thereof has engaged in a transaction
in connection with which any Portsmouth Entity, any Plan, any trust, or any
trustee or administrator thereof, could be subject to either a civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA, or a tax imposed pursuant
to Section 4975 or 4976 of the Code.
(e) Full payment has been made, or will be made in accordance with Section
404(a)(6) of the Code, of all amounts that either Portsmouth Entity or any ERISA
Affiliate is required to pay under Section 412 of the Code or under the terms of
the Plans, and all such amounts properly accrued through the Closing Date or the
Effective Date will be paid on or prior to the Closing Date or the Effective
Date (as applicable) or will be properly recorded on the books and records of
Portsmouth. None of the Plans or any trust established thereunder has incurred
any "accumulated funding
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deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived.
(f) Except as Previously Disclosed, with respect to each Plan that is
subject to Title IV of ERISA, the present value of accrued benefits under such
Plan, based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such Plan's actuary with respect to such
Plan, did not, as of the valuation date used in such report, exceed the current
value of the assets of such Plan allocable to such accrued benefits as of such
valuation date and no material adverse change in the funded status of any such
Plan has occurred since such valuation date.
(g) No Plan is a "multiemployer pension plan," as such term is defined in
Section 3(37) of ERISA, a "multiple employer welfare arrangement," as such term
is defined in Section 3(40) of ERISA, or a single employer plan that has two or
more contributing sponsors, at least two of whom are not under common control,
within the meaning of Section 4063(a) of ERISA.
(h) Each Plan that is intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified. Each Plan that is intended to
satisfy the requirements of Section 125 or 501(c)(9) of the Code satisfies such
requirements. Each Plan has been operated and administered in all material
respects in accordance with its terms and applicable laws, including without
limitation ERISA and the Code.
(i) Except as Previously Disclosed, each Plan may be amended or terminated
without liability to Portsmouth or any ERISA Affiliate. No amounts payable under
the Plans will fail to be deductible for federal income tax purposes under
Section 280G of the Code.
(j) There are no actions, suits or claims pending, or, to the knowledge of
the Portsmouth Entities, threatened or anticipated (other than routine claims
for benefits) against any Plan, the assets of any Plan or against either
Portsmouth Entity or any ERISA Affiliate with respect to any Plan. There is no
judgment, decree, injunction, rule or order of any court, governmental body,
commission, agency or arbitrator outstanding against or in favor of any Plan or
any fiduciary thereof (other than rules of general applicability). There are no
pending or threatened audits, examinations or investigations by any governmental
body, commission or agency involving any Plan.
(k) Except as Previously Disclosed, neither consummation of the
Transactions nor termination of the employment of any employees of either of the
Portsmouth Entities prior to or following consummation of the Transactions will
(i) entitle any current or former employee or director of either Portsmouth
Entity to severance pay, unemployment compensation or any similar payment, (ii)
accelerate the time of payment or vesting, or increase the amount, of any
compensation due to any such current or former employee or director, (iii) renew
or extend the term of any agreement
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regarding compensation for a current or former employee or director, or (iv)
result in the Portsmouth Entities making or being required to make any "excess
parachute payment" as that term is defined in Section 280G of the Code.
2.14. Certain Contracts
(a) Except as Previously Disclosed or as specifically identified in the
notes to the Portsmouth Financial Statements, neither of the Portsmouth Entities
is a party to, or bound by, (i) any material contract, arrangement or commitment
whether or not made in the ordinary course of business or any agreement
restricting the nature or geographic scope of its business activities in any
material respect, (ii) any agreement, indenture or other instrument relating to
the borrowing of money by either Portsmouth Entity or the guarantee by either
Portsmouth Entity of any such obligation, other than instruments relating to
transactions entered into in the customary course of Portsmouth Bank's business,
(iii) any written or oral agreement, arrangement or commitment relating to the
employment of a consultant or the employment, election, retention in office or
severance of any present or former director or officer, or (iv) any contract,
agreement or understanding with a labor union.
(b) Neither Portsmouth Entity is in default in any material respect under
any material agreement, commitment, arrangement, lease, insurance policy or
other instrument whether entered into in the ordinary course of business or
otherwise, and there has not occurred any event that, with the lapse of time or
giving of notice or both, would constitute such a material default.
2.15. Legal Proceedings
Except as Previously Disclosed, there are no actions, suits or proceedings
instituted, pending or, to the knowledge of the Portsmouth Entities, threatened
against either Portsmouth Entity or any asset, interest or right of either
Portsmouth Entity that, if determined adversely to the Portsmouth Entities,
would, individually or in the aggregate, have a Material Adverse Effect on the
Portsmouth Entities. To the knowledge of the Portsmouth Entities, there are no
actual or threatened actions, suits or proceedings which present a claim to
restrain or prohibit the Transactions or to impose any material liability in
connection therewith. There are no actions, suits or proceedings instituted,
pending or, to the knowledge of the Portsmouth Entities, threatened against any
present or former director or officer of either Portsmouth Entity, that would be
likely to give rise to a claim for indemnification and that, in the event of an
unfavorable outcome, would, individually or in the aggregate, have a Material
Adverse Effect on the Portsmouth Entities and, to the knowledge of the
Portsmouth Entities, there is no reasonable basis for any such action, suit or
proceeding.
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2.16. Compliance with Laws; Regulatory Examinations; Regulatory Approvals
(a) Each Portsmouth Entity holds, and at all times has held, all licenses,
franchises, permits, approvals, consents, qualifications and authorizations
material for the lawful conduct of its business under and pursuant to, and has
complied with, and is not in default under, any applicable law, statute, order,
rule, regulation, policy, ordinance, reporting or filing requirement and/or
guideline of any federal, state or local governmental authority relating to the
Portsmouth Entities, except as Previously Disclosed and except for violations
which, either individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Portsmouth Entities, and neither Portsmouth
Entity has knowledge of any material violation of any of the above.
(b) Except for normal examinations conducted by a regulatory agency in the
regular course of business of the Portsmouth Entities, no regulatory agency has
initiated any proceeding or, to the best knowledge of the Portsmouth Entities,
investigation into the business or operations of either Portsmouth Entity since
September 30, 1996. Neither of the Portsmouth Entities has received any
objection from any regulatory agency to any response by either Portsmouth Entity
to any violation, criticism or exception with respect to any report or statement
relating to any examinations of the Portsmouth Entities.
(c) Neither Portsmouth Entity has received notification from any agency or
department of federal, state or local government (i) asserting a material
violation of any such statute or regulation, (ii) threatening to revoke any
license, franchise, permit or government authorization, or (iii) restricting or
in any way limiting its operations. Neither Portsmouth Entity is subject to any
regulatory or supervisory cease and desist order, agreement, directive,
memorandum of understanding or commitment, and neither of them has received any
communication requesting that it enter into any of the foregoing.
(d) Neither Portsmouth Entity is aware of any reason why the conditions set
forth in Section 5.1(b) hereof would not be satisfied without significant delay.
2.17. Labor Matters
With respect to their respective employees, the Portsmouth Entities are not
parties to any labor agreement with any labor organization, group or association
and has not engaged in any unfair labor practice as defined under applicable
federal law. Since January 1, 1996, neither Portsmouth Entity has experienced
any attempt by organized labor or its representatives to make either Portsmouth
Entity conform to demands of organized labor relating to its employees or to
enter into a binding agreement with organized labor that would cover the
employees of either Portsmouth Entity. There is no unfair labor practice charge
or other complaint by any employee or former employee of either Portsmouth
Entity against it pending before any governmental agency arising out of the
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activities of the Portsmouth Entities which charge or complaint (i) has a
reasonable probability of an unfavorable outcome and (ii) in the event of an
unfavorable outcome would, individually or in the aggregate, have a Material
Adverse Effect on the Portsmouth Entities taken as a whole; there is no labor
strike or labor disturbance pending or, to the knowledge of the Portsmouth
Entities, threatened against either Portsmouth Entity; and neither Portsmouth
Entity has experienced a work stoppage or other labor difficulty since January
1, 1996.
2.18. Brokers and Finders
Neither the Portsmouth Entities nor any of their respective officers,
directors or employees, has employed any broker, finder or financial advisor or
incurred any liability for any fees or commissions in connection with the
Transactions, except that Portsmouth has engaged and will pay a fee or
commission to Tucker Anthony Incorporated as Previously Disclosed.
2.19. Insurance
The Portsmouth Entities have Previously Disclosed a list of all material
policies of insurance of either Portsmouth Entity in effect as of the date
hereof and true and correct copies of all such policies have previously been
made available to CFX. Neither Portsmouth Entity has any liability for unpaid
premiums or premium adjustments not properly reflected on Portsmouth's Financial
Statements, except for any such liability that would not have a Material Adverse
Effect on the Portsmouth Entities taken as a whole. Except as Previously
Disclosed, neither Portsmouth Entity has received any notice of termination of
any such insurance coverage or material increase in the premiums therefor or has
any reason to believe that any such insurance coverage will be terminated or the
premiums therefor materially increased.
2.20. Environmental Liability
(a) Except for any violation, liability or noncompliance which does not
have a Material Adverse Effect on the Portsmouth Entities: (i) neither
Portsmouth Entity has violated during the last five years or is in violation of
or is liable under any federal, state or local environmental law; (ii) none of
the properties owned or leased by either Portsmouth Entity (including, without
limitation, soils and surface and ground waters) are contaminated with any
hazardous substance; (iii) neither Portsmouth Entity is liable for any off-site
contamination; and (iv) each Portsmouth Entity is, and during the last five
years has been, in compliance with, all of its respective permits, licenses and
other authorizations issued under any environmental laws. For purposes of the
foregoing, all references to "properties" include, without limitation, any owned
real property or leased real property.
(b) Neither Portsmouth Entity has received any written notice of any legal,
administrative, arbitral or other proceeding, claim or action and, to the
knowledge of the Portsmouth Entities, there is no governmental
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investigation of any nature ongoing, in each case that could reasonably be
expected to result in the imposition, on the Portsmouth Entities of any
liability arising under any local, state or federal environmental statute,
regulation or ordinance including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
which liability would have a Material Adverse Effect on the Portsmouth Entities;
there are no facts or circumstances which could reasonably be expected to form
the basis for any such proceeding, claim, action or governmental investigation
that would impose any such liability; and neither Portsmouth Entity is subject
to any agreement, order, judgment, decree or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any such
liability.
2.21. Administration of Trust Accounts
Except as Previously Disclosed, Portsmouth Bank does not currently and has
not previously administered any accounts for which it acts as a fiduciary or
agent, including without limitation accounts for which it serves as a trustee,
agent, custodian, personal representative, guardian, conservator or investment
advisor.
2.22. Intellectual Property
The Portsmouth Entities own the entire right, title and interest in and to,
or have valid licenses with respect to, all the Intellectual Property necessary
in all material respects to conduct their business and operations as presently
conducted, except where the failure to do so would not, individually or in the
aggregate, have a Material Adverse Effect on the Portsmouth Entities. None of
such Intellectual Property is subject to any outstanding order, decree,
judgment, stipulation, settlement, lien, charge, encumbrance or attachment,
which order, decree, judgment, stipulation, settlement, lien, charge,
encumbrance or attachment would have a Material Adverse Effect on the Portsmouth
Entities.
2.23. Certain Information
At all times subsequent to the effectiveness of the Registration Statement
or any post-effective amendment thereto and up to and including the time of the
Portsmouth shareholders' meeting to vote upon the Transactions, and at all times
subsequent to the mailing of any Proxy Statement or any amendment thereto and up
to and including the time of the Portsmouth shareholders' meeting to vote upon
the Transactions, such Registration Statement or Proxy Statement and all
amendments or supplements thereto, with respect to all information set forth
therein furnished by Portsmouth relating to Portsmouth shall (i) comply in all
material respects with the applicable provisions of the Securities Laws, and
(ii) not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading.
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2.24. Pooling of Interests
The Portsmouth Entities know of no reason which would reasonably cause
either of them to believe that the Transactions will not qualify as a pooling of
interests for financial accounting purposes.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF CFX AND CFX BANK
CFX and CFX Bank hereby represent and warrant to Portsmouth and Portsmouth
Bank as follows:
3.1. Capital Structure of CFX
(a) The authorized capital stock of CFX consists solely of 22,500,000
shares of common stock, par value $0.66 2/3 per share ("CFX Common Stock"), and
3,000,000 shares of preferred stock, par value $1.00 per share ("CFX Preferred
Stock"). As of December 31, 1996, there were 13,008,787 shares of CFX Common
Stock issued and outstanding, 28,000 shares of CFX Common Stock held in its
treasury, no shares of CFX Preferred Stock issued and outstanding, and no shares
of CFX Preferred Stock held in its treasury. All outstanding shares of CFX's
capital stock have been duly issued and are validly outstanding, fully paid and
nonassessable. None of the shares of CFX's capital stock has been issued in
violation of the preemptive rights of any person. The shares of CFX Common Stock
to be issued in connection with the Share Exchange have been duly authorized
and, when issued in accordance with the terms of the Transaction Documents, will
be validly issued, fully paid, nonassessable and free and clear of any
preemptive rights.
(b) As of September 30, 1996, CFX's Tier 1 risk-based capital ratio, total
risk-based capital ratio, and leverage ratio, each calculated in accordance with
the capital guidelines of the Federal Reserve applicable to bank holding
companies on a fully phased-in basis, were each in excess of the specified
minimum levels for qualification as "well capitalized."
(c) As of the date hereof, except for shares of CFX Common Stock subject to
options under CFX's employee stock option and incentive plans, CFX is not bound
by any outstanding Rights. There are no agreements or understandings to which
CFX is a party with respect to the voting of any shares of CFX Common Stock or
which restrict the transfer of such shares.
3.2. Organization, Standing and Authority of CFX
CFX is a duly organized corporation, validly existing and in good standing
under the laws of New Hampshire, with full corporate power and authority to
carry on its business as now conducted and is duly licensed or qualified to do
business in the states of the United States and foreign jurisdictions where its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so
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licensed or qualified would not have a Material Adverse Effect on CFX. CFX is
registered as a bank holding company under the BHC Act.
3.3. Ownership and Capital Structure of CFX's Subsidiaries
Except as Previously Disclosed, CFX does not own, directly or indirectly,
25 percent or more of the outstanding capital stock or other voting securities
of any corporation, bank or other organization (each a "CFX Subsidiary" and
collectively the "CFX Subsidiaries"). The outstanding shares of capital stock or
other equity interests of the CFX Subsidiaries are validly issued and
outstanding, fully paid and nonassessable and, except with respect to CFX
Funding L.L.C. in which CFX owns 51% of the equity interests, all such shares or
interests are directly or indirectly owned by CFX free and clear of all liens,
claims and encumbrances. No CFX Subsidiary has or is bound by any Rights which
are authorized, issued or outstanding with respect to the capital stock or other
equity interests of any CFX Subsidiary, and there are no agreements,
understandings or commitments relating to the right of CFX to vote or to dispose
of said shares or interests. None of the shares of capital stock or other equity
interests of any CFX Subsidiary has been issued in violation of the preemptive
rights of any person.
3.4. Organization, Standing and Authority of CFX Subsidiaries
Each CFX Subsidiary is a duly organized corporation or banking association,
validly existing and in good standing under applicable laws. Each CFX Subsidiary
(i) has full power and authority to carry on its business as now conducted, and
(ii) is duly licensed or qualified to do business in the states of the United
States and foreign jurisdictions where its ownership or leasing of property or
the conduct of its business requires such licensing or qualification and where
failure to be licensed or qualified would have a Material Adverse Effect on CFX.
Each CFX Subsidiary has all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now being conducted, except where the failure to
be so authorized would not have a Material Adverse Effect on CFX.
3.5. Authorized and Effective Agreement
(a) CFX has all requisite corporate power and authority to enter into and
perform all of its obligations under the Transaction Documents to which CFX is a
party. The adoption, execution and delivery of the Transaction Documents to
which CFX is a party and the consummation of the Transactions contemplated
thereby have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of CFX, except that the issuance of CFX Common
Stock pursuant to the Transaction Documents must be approved by the affirmative
vote of the holders of a majority of the votes cast by the holders of CFX Common
Stock eligible to vote thereon in accordance with AMEX policy. The Board of
Directors of CFX has directed that the Transaction Documents and the
Transactions be
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submitted to CFX's stockholders for approval at an annual or special meeting to
be held as soon as practicable.
(b) CFX Bank has all requisite corporate power and authority to enter into
and perform all of its obligations under the Transaction Documents to which CFX
Bank is a party. The execution and delivery of this Reorganization Agreement and
the Plan of Merger and the consummation of the Transactions contemplated thereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of CFX Bank.
(c) Assuming the accuracy of the representations contained in Sections
2.5(c) hereof, the Transaction Documents constitute legal, valid and binding
obligations of CFX and CFX Bank, in each case enforceable against them in
accordance with their respective terms subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
(d) Except as Previously Disclosed, neither the adoption, execution and
delivery of the Transaction Documents nor the consummation of the Transactions
nor compliance by the CFX Entities with any of the provisions hereof or thereof
shall (i) conflict with or result in a breach of any provision of the articles
or certificates of incorporation or association, charters or by-laws of the CFX
Entities, (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of the
CFX Entities pursuant to, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the CFX Entities,
except for such violations, rights, conflicts, breaches, creations or defaults
which, either individually or in the aggregate, will not have a Material Adverse
Effect on CFX.
(e) Except for the approvals specified in Sections 4.2 and 4.4 hereof,
except as Previously Disclosed and except as expressly referred to in this
Reorganization Agreement, no consent, approval or authorization of, or
declaration, notice, filing or registration with, any governmental or regulatory
authority, or any other person, is required to be made or obtained by the CFX
Entities on or prior to the Closing Date in connection with the execution,
delivery and performance of the Transaction Documents or the consummation of the
Transactions other than the filing of certificates or articles of merger or
share exchange or similar documents with the appropriate New Hampshire state
authorities.
3.6. SEC Documents; Regulatory Filings
CFX has filed all SEC Documents required by the Securities Laws and such
SEC Documents complied, as of their respective dates, in all material respects
with the Securities Laws. CFX and each of the CFX Subsidiaries
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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 the consolidated financial
position of CFX and the consolidated CFX Subsidiaries as of the dates indicated
and the consolidated results of operations, changes in shareholders' equity and
cash flows of CFX and the consolidated CFX Subsidiaries for the periods then
ended in conformity with generally accepted accounting principles applicable to
banking organizations or financial institutions applied on a consistent basis
except as disclosed therein. The books and records of CFX fairly reflect in all
material respects the transactions to which it is a party or by which its
properties are subject or bound. Such books and records have been properly kept
and maintained and are in compliance in all material respects with all
applicable legal and accounting requirements. The minute books of the CFX
Entities contain records which are accurate in all material respects of all
corporate actions of their respective shareholders and Boards of Directors
(including committees of their respective Boards of Directors).
3.8. Material Adverse Change
CFX has not, on a consolidated basis, suffered any material adverse change
in its financial condition, results of operations or business since September
30, 1996.
3.9. Absence of Undisclosed Liabilities
Neither CFX nor any CFX Subsidiary has any liability (contingent or
otherwise) that is material to CFX on a consolidated basis, or that, when
combined with all similar liabilities, would be material to CFX on a
consolidated basis, except as Previously Disclosed, as disclosed in the CFX
Financial Statements filed with the SEC prior to the date hereof and except for
liabilities incurred in the ordinary course of business subsequent to September
30, 1996.
3.10. Brokers and Finders
Neither the CFX Entities nor any of their respective officers, directors or
employees, has employed any broker, finder or financial advisor or incurred any
liability for any fees or commissions in connection with the Transactions,
except that CFX has engaged and will pay a fee or commission to Alex. Brown &
Sons Incorporated.
3.11. Legal Proceedings
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Except for matters which, individually or in the aggregate, would not have
a Material Adverse Effect on CFX and the CFX Subsidiaries, taken as a whole,
neither CFX nor any of the CFX Subsidiaries is a party to any, and there are no
pending or, to the best of CFX's knowledge, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental investigations of
any nature by or against CFX or any of the CFX Subsidiaries; and neither CFX nor
any of the CFX Subsidiaries is a party to or subject to any order, judgment or
decree. To the knowledge of the CFX Entities, there are no actual or threatened
actions, suits or proceedings which present a claim to restrain or prohibit the
Transactions or to impose any material liability in connection therewith.
3.12. Compliance with Laws; Regulatory Examinations; Regulatory Approvals
(a) CFX and each of the CFX Subsidiaries holds, and has at all times held,
all licenses, franchises, permits, approvals, consents, qualifications and
authorizations material for the lawful conduct of its business under and
pursuant to, and has complied with, and is not in default under, any applicable
law, statute, order, rule, regulation, policy, ordinance, reporting or filing
requirement and/or guideline of any federal, state or local governmental
authority relating to CFX or any of the CFX Subsidiaries, except for violations
which, either individually or in the aggregate, do not or would not have a
Material Adverse Effect on CFX and the CFX Subsidiaries taken as a whole, and
neither CFX or any of the CFX Subsidiaries has knowledge of any violation of any
of the above.
(b) Except for normal examinations conducted by a regulatory agency in the
regular course of the business of CFX and the CFX Subsidiaries, no regulatory
agency has initiated any proceeding or, to the best knowledge of CFX,
investigation into the business or operations of CFX or any of the CFX
Subsidiaries since September 30, 1996. CFX has not received any objection from
any regulatory agency to CFX's response to any violation, criticism or exception
with respect to any report or statement relating to any examinations of CFX or
any of the CFX Subsidiaries.
(c) Neither CFX Entity has received notification from any agency or
department of federal, state or local government (i) asserting a material
violation of any such statute or regulation, (ii) threatening to revoke any
license, franchise, permit or government authorization, or (iii) restricting or
in any way limiting its operations. Neither CFX Entity is subject to any
regulatory or supervisory cease and desist order, agreement, directive,
memorandum of understanding or commitment, and neither of them has received any
communication requesting that it enter into any of the foregoing.
(d) Neither CFX Entity is aware of any reason why the conditions set forth
in Section 5.1(b) hereof would not be satisfied without significant delay.
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3.13. Certain Information
At all times subsequent to the effectiveness of the Registration Statement
or any post-effective amendment thereto and up to and including the time of the
CFX shareholders' meeting to vote upon the Transactions, and at all times
subsequent to the mailing of any Proxy Statement or any amendment thereto and up
to and including the time of the CFX shareholders' meeting to vote upon the
Transactions, such Registration Statement or Proxy Statement and all amendments
or supplements thereto, with respect to all information set forth therein
furnished by CFX relating to the CFX Entities shall (i) comply in all material
respects with the applicable provisions of the Securities Laws, and (ii) not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading.
3.14. Pooling of Interests
The CFX Entities know of no reason which would reasonably cause either of
them to believe that the Transactions will not qualify as a pooling of interests
for financial accounting purposes.
ARTICLE 4.
COVENANTS
4.1. Shareholders' Meeting
CFX and Portsmouth shall submit the Transaction Documents and, in the case
of CFX, the issuance of CFX Common Stock thereunder, to their respective
shareholders for approval at annual or special meetings to be held as soon as
practicable after the date hereof. Subject to the fiduciary duties of the
respective boards of directors of Portsmouth and CFX as determined by each after
consultation with such board's counsel, the boards of directors of CFX and
Portsmouth shall recommend at the respective shareholders' meetings that the
shareholders vote in favor of such approval. Nothing contained in this Section
4.1 shall prohibit either CFX or Portsmouth from taking and disclosing to its
stockholders a position with respect to a tender offer by a third party pursuant
to Rules 14d-9 and 14e-2 promulgated under the Exchange Act or making such other
disclosure to its stockholders which, in the judgment of its Board, based upon
the advice of outside counsel, may be required under applicable law, or making
disclosure to its stockholders of the absence of an opinion from Portsmouth's
investment advisor dated the date of the Proxy Statement as to the fairness of
the consideration to be paid to Portsmouth's stockholders in connection with the
Share Exchange.
4.2. Proxy Statement; Registration Statement
As promptly as practicable after the date hereof, CFX and Portsmouth shall
cooperate in the preparation of the Proxy Statements to be mailed to the
shareholders of Portsmouth and CFX in connection with the Transactions
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and, if required, to be filed by CFX as part of the Registration Statement.
In the event that the issuance of CFX Common Stock in connection with the Share
Exchange is exempt from registration under Section 3(a)(10) of the Securities
Act and the SEC's regulations and interpretations thereunder and shares received
will not be considered "restricted securities" for purposes of Rule 144 under
the Securities Act, no Registration Statement will be filed. CFX will advise
Portsmouth, promptly after it receives notice thereof, of the time when the
Registration Statement or any post-effective amendment thereto has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order, of the suspension of qualification of the CFX Common Stock issuable
in connection with the Share Exchange for offering or sale in any jurisdiction,
or the initiation or threat of any proceeding for any such purpose, or of any
request by the SEC for the amendment or supplement of the Registration Statement
or for additional information. CFX shall take all actions necessary to register
or qualify the shares of CFX Common Stock to be issued in the Share Exchange
pursuant to all applicable state "blue sky" or securities laws and shall
maintain such registrations or qualifications in effect for all purposes hereof.
CFX shall apply for approval to list the shares of CFX Common Stock to be issued
in the Share Exchange on the AMEX, subject to official notice of issuance, prior
to the Effective Date.
4.3. Applications
As promptly as practicable after the date hereof, the Parties shall take
all action necessary or desirable to obtain any required regulatory approval for
the Transactions. Without limiting the generality of the foregoing sentence, CFX
or CFX Bank shall (i) file a request with the Federal Reserve for a waiver of
the application and prior approval requirements of Section 3 of the BHC Act with
respect to the Share Exchange and the Holding Company Merger, (ii) file an
application with the FDIC for prior approval of the Bank Merger under the Bank
Merger Act and the regulations promulgated thereunder, and (iii) file a notice
with the Commissioner with respect to the Bank Merger pursuant to Chapter 388 or
other applicable section of the New Hampshire Revised Statutes Annotated and the
regulations promulgated thereunder. Each of the Parties shall, and they shall
cause their respective subsidiaries to, submit any applications, notices,
requests or other filings to any other state or federal government agency,
department or body the approval of which is required for consummation of the
Transactions. Portsmouth and CFX each represents and warrants to the other that
all information concerning it and its directors, officers, shareholders and
subsidiaries included (or submitted for inclusion) in any such application,
notice, request or other filing and furnished by it shall be true, correct and
complete in all material respects.
4.4. Best Efforts; Certain Notices and Information
(a) The Parties shall each use their reasonable best efforts in good faith
to (a) furnish such information as may be required in connection with the
preparation of the documents referred to in Sections 4.2 and 4.3
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above, and (b) take or cause to be taken all action necessary or desirable
on its part so as to permit consummation of the Transactions at the earliest
possible date, including, without limitation, (i) obtaining the consent or
approval of each individual, partnership, corporation, association or other
business or professional entity whose consent or approval is required for
consummation of the Transactions, provided that neither Portsmouth Entity shall
agree to make any payments or modifications to agreements in connection
therewith without the prior written consent of CFX, and (ii) requesting the
delivery of appropriate opinions, consents and letters from its counsel and
independent auditors. No Party shall take or fail to take, or cause or permit
its subsidiaries to take or fail to take, or to the best of its ability permit
to be taken or omitted to be taken by any third persons, any action that would
substantially impair the prospects of completing the Transactions pursuant to
the Transaction Documents, or that would adversely affect the qualification of
the Transactions for pooling of interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Code; provided that
nothing herein contained shall preclude CFX from exercising its rights under the
Stock Option Agreement. In the event that any Party has taken any action,
whether before, on or after the date hereof, that would adversely affect such
qualification, each Party shall take such action as any other Party may
reasonably request to cure such effect to the extent curable without a Material
Adverse Effect on any of the Parties.
(b) Portsmouth shall give prompt notice to CFX, and CFX shall give prompt
notice to Portsmouth, of (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty contained in this Reorganization Agreement to be untrue or inaccurate
in any material respect at the date hereof or on the Closing Date (if so
required under Section 5.2(a) or Section 5.3(a) hereof), and (ii) any material
failure of Portsmouth or CFX, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, and each Party shall use all reasonable efforts to remedy such
failure.
(c) Portsmouth shall provide and shall request its auditors to provide CFX
with such historical financial information regarding it (and related audit
reports and consents) as CFX may reasonably request for securities disclosure
purposes.
4.5. Investigation and Confidentiality
Portsmouth and CFX each will keep the other advised of all material
developments relevant to its business or to consummation of the Transactions,
material transactions outside of its ordinary course of business, and material
changes in the normal course of its business or in the operation of its
properties. The Parties each may make or cause to be made such investigation of
the financial and legal condition of the other Parties as such Party reasonably
deems necessary or advisable in connection with the Transactions; provided,
however, that such investigation shall be reasonably related to such
Transactions and shall not interfere
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unnecessarily with normal operations. Each Party agrees to furnish the other
Parties and the other Parties' advisors with such financial data and other
information with respect to its business and properties as such other Parties
shall from time to time reasonably request. No investigation pursuant to this
Section 4.5 shall affect or be deemed to modify any representation or warranty
made by, or the conditions to the obligations to consummate the Transactions of,
any Party. Each Party shall hold all information furnished by the other Parties
or any of such Party's subsidiaries or representatives pursuant hereto in
confidence to the extent required by, and in accordance with, the provisions of
the confidentiality agreement dated January 17, 1997 by and between Portsmouth
and CFX (the "Confidentiality Agreement").
4.6. Press Releases
Portsmouth and CFX shall agree with each other as to the form and substance
of any press release related to the Transactions, and shall consult each other
as to the form and substance of other public disclosures related thereto;
provided, however, that nothing contained herein shall prohibit any Party,
following notification to the other Parties, from making any disclosure which
its counsel deems necessary.
4.7. Covenants of Portsmouth and Portsmouth Bank
(a) Prior to the Closing Date, and except as otherwise provided for by the
Transaction Documents or consented to or approved by CFX, the Portsmouth
Entities shall use their respective reasonable best efforts to preserve their
respective properties, business and relationships with customers, employees and
other persons.
(b) Except with the prior written consent of CFX or except as Previously
Disclosed or except as expressly contemplated or permitted by the Transaction
Documents, neither Portsmouth Entity shall:
(1) carry on its business other than in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
(2) declare, set aside, make or pay any dividend or other distribution in
respect of its capital stock other than its regular cash and stock dividends on
Portsmouth Common Stock in amounts not to exceed the dividends paid to
Portsmouth stockholders in the comparable period in the last 12 months and in a
manner consistent with past practice and in accordance with applicable law,
regulation and contractual and regulatory commitments, provided that
Portsmouth's cash dividends may be increased to the Increased Dividend (as
defined below) per share of Portsmouth Common Stock beginning with the dividend
payable in the first quarter of 1998, and provided further that the Parties
agree to consult with respect to the last quarterly Portsmouth dividend payable
prior to the Effective Date with the objective of assuring that the Portsmouth
stockholders do not receive a shortfall, or dividend or distribution from both
Portsmouth and CFX, for
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the period covered by such dividend based on the record and payment dates of
their last dividend prior to the Effective Date. The "Increased Dividend"
shall be determined by multiplying the quarterly dividend then being paid by CFX
with respect to each share of CFX Common Stock by 0.95;
(3) issue any shares of its capital stock or permit any treasury shares to
become outstanding other than pursuant to the Stock Option Agreement or Rights
outstanding at the date hereof or a stock dividend not to exceed 2% payable in
the first quarter of each of 1997 and 1998;
(4) incur any additional debt obligation or other obligation for borrowed
money other than in the ordinary course of business consistent with past
practice;
(5) issue, grant or authorize any Rights or effect any recapitalization,
reclassification, stock dividend, stock split or like change in capitalization,
or redeem, repurchase or otherwise acquire any shares of its capital stock;
(6) amend its articles or certificate of incorporation or association,
charter or by-laws;
(7) except for foreclosing on collateral, merge with any other corporation,
savings association or bank or permit any other corporation, savings association
or bank to merge into it or consolidate with any other corporation, savings
association or bank; acquire control over any other firm, bank, corporation,
savings association or organization or create any subsidiary;
(8) except in the ordinary course of business, waive or release any
material right or cancel or compromise any material debt or claim;
(9) fail to comply in any material respect with any laws, regulations,
ordinances or governmental actions applicable to it and to the conduct of its
business;
(10) enter into any material swap, hedge or other similar off- balance
sheet transaction;
(11) except for foreclosing on collateral, liquidate or sell or dispose of
any material assets or acquire any material assets; except as Previously
Disclosed, make any capital expenditure in excess of $100,000 in any instance or
$250,000 in the aggregate; or, except as Previously Disclosed, establish new
branches or other similar facilities or enter into or modify any leases or other
contracts relating thereto that involve annual payments that exceed $25,000 in
any instance or $100,000 in the aggregate;
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(12) except as Previously Disclosed, increase the rate of compensation of,
pay or agree to pay any bonus to, or provide any other employee benefit or
incentive to, any of its directors, officers or employees except in a manner
consistent with past practice and except as Previously Disclosed;
(13) enter into, modify or extend any employment or severance contracts
with any of its present or former directors, officers or employees;
(14) enter into or substantially modify (except as may be required by
applicable law) any pension, retirement, stock option, stock purchase, stock
appreciation right, savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or welfare contract,
plan or arrangement, or any trust agreement related thereto, in respect of any
of its directors, officers or other employees;
(15) change its lending, investment, asset/liability management or other
material banking policies in any material respect except as may be required by
changes in applicable law or regulations;
(16) change its methods of accounting in effect at December 31, 1995,
except as required by changes in generally accepted accounting principles or
regulatory requirements concurred in by its independent certified public
accountants, or change any of its methods of reporting income and deductions for
federal income tax purposes from those employed in the preparation of its
federal income tax returns for the year ended December 31, 1995, except as
required by law;
(17) solicit or initiate inquiries or proposals with respect to any
acquisition or purchase of all or a substantial portion of the assets of, or a
substantial equity interest in, either Portsmouth Entity or any business
combination with either Portsmouth Entity other than as contemplated by this
Reorganization Agreement; or authorize or permit any officer, director, agent or
affiliate of it to do any of the above; or fail to notify CFX as soon as
practicable if any such inquiries or proposals are received by either Portsmouth
Entity, or if either Portsmouth Entity or any officer, director, agent or
affiliate thereof is requested to or does furnish any confidential information
relating to, or participates in any negotiations or discussions concerning, any
transaction of a type describe in this paragraph; or
(18) agree to do any of the foregoing.
(c) Each of the Portsmouth Entities agrees to approve, execute and deliver
any amendment to the Transaction Documents and any additional plans and
agreements requested by CFX to modify the structure of, or to substitute parties
to, the Transactions; provided, however, that no such change shall (i) alter or
change the amount or kind of consideration to be delivered to the shareholders
of Portsmouth in connection with the Share
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Exchange, (ii) adversely affect the tax treatment to the shareholders of
Portsmouth as a result of receiving such consideration in the Share Exchange, or
(iii) materially impede or delay receipt of any approval referred to in Section
4.1 or 4.3 hereof or the consummation of the Transactions.
(d) Immediately prior to the Closing, the Portsmouth Entities will
supplement or amend their prior disclosures to the CFX Entities pursuant to this
Reorganization Agreement, including without limitation all Previously Disclosed
documents and information, with respect to any matter hereafter arising which,
at the Closing Date, would be required to be Previously Disclosed to the CFX
Entities if this Reorganization Agreement were dated as of the Closing Date, or
which is necessary to correct any Previously Disclosed document or information
which was inaccurate at the time it was made. No such supplement or amendment
shall have any effect for the purpose of determining satisfaction of the
conditions set forth in Article 5 hereof or the compliance by either of the
Portsmouth Entities with the covenants set forth in this Section 4.7.
4.8. Closing; Effective Date
The Transactions shall be consummated at a closing (the "Closing") to be
held at the offices of CFX, 102 Main Street, Keene, New Hampshire, at 10:00 a.m.
on the first business day that is at least 20 calendar days after the date on
which the last of all required approvals for the Transactions has been obtained
and the last of all required waiting periods under such approvals has expired,
or at such other place, date and time as the Parties may mutually agree upon
(the "Closing Date"), with the Transactions to be consummated in such order and
after such intermediate steps as CFX may specify; provided, however, that the
order and any intermediate steps shall not (i) alter or change the amount or
kind of consideration to be delivered to the shareholders of Portsmouth in
connection with the Share Exchange, (ii) adversely affect the tax treatment to
the shareholders of Portsmouth as a result of receiving such consideration in
the Share Exchange, or (iii) materially impede or delay receipt of any approval
referred to in Section 4.1 or 4.3 hereof or the consummation of the
Transactions. The Transactions shall be effective at the times and on the dates
specified in the certificates or articles of merger or share exchange to be
filed with the appropriate New Hampshire state authorities as contemplated by
the Transaction Documents. For purposes of this Reorganization Agreement, the
term "Effective Date" shall mean the effective time and date of the Share
Exchange specified in the articles of share exchange to be filed with the
appropriate New Hampshire state authorities as contemplated by the Plan of
Exchange.
4.9. Affiliates
(a) The Parties shall cooperate and use their reasonable best efforts to
identify those persons who may be deemed to be "affiliates" of Portsmouth within
the meaning of Rule 145 promulgated by the SEC under the Securities Act and for
purposes of qualifying the Share Exchange for
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"pooling of interests" accounting treatment. Portsmouth shall use its
reasonable best efforts to cause each person so identified to deliver to CFX, no
later than 30 days prior to the Effective Date, a written agreement providing
that such person will not dispose of any CFX Common Stock received in the Share
Exchange except in compliance with the Securities Act, the rules and regulations
promulgated thereunder and the SEC's rules relating to pooling of interests
accounting treatment. Shares of CFX Common Stock issued to such affiliates in
exchange for Portsmouth Common Stock shall not be transferable until such time
as financial results covering at least 30 days of combined operations of CFX and
Portsmouth have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies, regardless of whether each such
affiliate has provided the written agreement referred to in this section.
(b) CFX shall use its reasonable best efforts to publish no later than 25
days after the end of the first calendar quarter in which there are at least 30
days of combined operations following consummation of the Transactions (which
calendar quarter may be the calendar quarter in which the Effective Date
occurs), combined sales and net income figures as contemplated by and in
accordance with the terms of SEC Accounting Series Release No. 135.
4.10. Portsmouth Employees; Directors and Management
(a) All employees of the Portsmouth Entities as of the Effective Date shall
become employees of one or more of the CFX Entities, as determined by CFX, as of
the Effective Date. Nothing in the Transaction Documents shall give any employee
of the Portsmouth Entities a right to continuing employment with the CFX
Entities after the Effective Date. As soon as practicable after the Effective
Date, CFX shall provide or cause to be provided to all employees of the
Portsmouth Entities who remain employed by the CFX Entities after the Effective
Date with employee benefits (including without limitation the severance benefits
provided for in CFX's termination guidelines in the form previously provided by
CFX to Portsmouth) which, in the aggregate, are no less favorable than those
generally afforded to other employees of the CFX Entities holding similar
positions, subject to the terms and conditions under which those employee
benefits are made available to such employees; provided that (1) for purposes of
determining eligibility for and vesting of such employee benefits only (and not
for pension benefit accrual purposes), service with Portsmouth prior to the
Effective Date shall be treated as service with an "employer" to the same extent
as if such persons had been employees of the CFX Entities, and (2) this Section
4.10(a) shall not be construed to limit the ability of the CFX Entities to
terminate the employment of any employee or to review employee benefits programs
from time to time and to make such changes as they deem appropriate. In
addition, the benefits listed in Section 4.10(a) of Portsmouth's Previously
Disclosed letter, dated as of the date hereof, as being continuing benefits
shall be continued notwithstanding that such benefits may not be provided to
other CFX employees.
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(b) Prior to or at the Effective Date, three directors of Portsmouth to be
designated by Portsmouth, after consultation with and the consent of CFX (which
consent shall not be unreasonably withheld), shall be elected to the Board of
Directors of CFX effective upon the Effective Date, shall be divided evenly
among the classes, and shall be nominated for re-election, if at all, pursuant
to CFX's then existing policies and procedures (provided that one of the three
directors to be designated by Portsmouth shall serve as a director of CFX for
one year only and shall not be nominated for re-election).
(c) Prior to or at the Effective Date, two directors of Portsmouth to be
designated by Portsmouth, after consultation with and the consent of CFX and CFX
Bank (which consent shall not be unreasonably withheld), shall be elected to the
Board of Trustees of CFX Bank effective upon the Effective Date and shall be
nominated for re-election, if at all, pursuant to CFX Bank's then existing
policies and procedures.
(d) From and after the Effective Date, the appropriate CFX Entity shall
assume and honor in accordance with their terms all employment agreements
Previously Disclosed by Portsmouth. CFX agrees that the consummation of the
Transactions constitutes a "change in control" as defined in such employment
agreements. The provisions of this Section 4.10(d) are expressly intended to be
for the irrevocable benefit of, and shall be enforceable by, each officer
covered by such employment agreements and his or her heirs and representatives.
(e) Prior to the Effective Date, the Portsmouth Entities shall cause the
waiver or release, at an aggregate expense not to exceed $240,000, by any
present director of either Portsmouth Entity who has any right or interest,
including the right to receive compensation or other payment, under any director
retirement plan of either Portsmouth Entity or with respect to service on any
advisory board of either Portsmouth Entity.
(f) From and after the Effective Date, CFX shall indemnify persons who
served as directors and officers of Portsmouth on or before the Effective Date
in accordance with and subject to the provisions of Portsmouth's Articles of
Incorporation and By-laws Previously Disclosed to CFX. From and after the
Effective Date, CFX will cause the persons who served as directors or officers
of Portsmouth on or before the Effective Date to be covered by Portsmouth's
existing directors' and officers' liability insurance policy (or policies of at
least the same coverage and amounts and containing terms and conditions which
are not less advantageous than such policy); provided that no such person shall
be entitled to insurance coverage more favorable than that provided to the
person in such capacity at the date hereof with respect to acts or omissions
resulting from the person's service as such on or prior to the Effective Date,
and provided further that CFX shall not be required to expend with respect to
any year of coverage more than 150 percent of the current per annum amount
expended by Portsmouth to maintain or procure insurance coverage pursuant
hereto. Such insurance coverage shall commence on the Effective Date and
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will be provided for a period of no less than six years after the Effective
Date.
ARTICLE 5.
CONDITIONS PRECEDENT
5.1. Conditions Precedent to the Obligations of All the Parties
The respective obligations of the Parties to effect the Transactions shall
be subject to satisfaction or waiver of the following conditions at or prior to
the Closing Date:
(a) All corporate action necessary to authorize the execution, delivery and
performance of the Transaction Documents and the consummation of the
Transactions shall have been duly and validly taken;
(b) The Parties shall have received all regulatory approvals required or
mutually deemed necessary in connection with the Transactions, all notice
periods and waiting periods required after the granting of any such approvals
shall have passed and all conditions contained in any such approval required to
have been satisfied prior to consummation of the Transactions shall have been
satisfied, provided that no such approval shall have imposed any condition or
requirement not reasonably foreseen as of the date of this Agreement that would,
in the reasonable good faith opinion of the Board of Directors of CFX,
materially and adversely affects the anticipated economic and business benefits
to CFX of the Transactions as to render consummation of the Transactions
inadvisable, provided that no condition or requirement that relates primarily to
regulatory matters existing at the date hereof with respect to CFX's business or
activities shall be deemed to affect the business, operations, financial
condition, property or assets of the combined enterprise or of Portsmouth or
otherwise materially impair the value of Portsmouth to CFX;
(c) One of the following shall have occurred:
(i) a Registration Statement (including any post-effective amendment
thereto) shall have been filed with the SEC and shall be effective under the
Securities Act, and no proceeding shall be pending or to the knowledge of CFX
threatened by the SEC to suspend the effectiveness of such Registration
Statement;
(ii) the Parties shall have received a "no-action" letter from the staff of
the SEC stating that, by reason of the exemption afforded by Section 3(a)(10) of
the Securities Act, it will not recommend any enforcement action to the SEC with
respect to the issuance of CFX Common Stock in exchange for Portsmouth Common
Stock in connection with the Share Exchange without registration thereof under
the Securities Act and that such shares do not constitute "restricted
securities"; or
(iii) the Parties shall have received an opinion of counsel to CFX
reasonably satisfactory to the Parties to the effect that the issuance
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<PAGE>
of CFX Common Stock in exchange for Portsmouth Common Stock in connection with
the Share Exchange is exempt from the registration provisions of the Securities
Act by reason of the exemption afforded by Section 3(a)(10) thereof and that
such shares do not constitute "restricted securities";
(d) CFX shall have received all state securities or "Blue Sky" permits or
other authorizations, or confirmations as to the availability of an exemption
from registration requirements as may be necessary;
(e) To the extent that any lease, license, loan, financing agreement or
other contract or agreement to which Portsmouth is a party requires the consent
of or waiver from the other party thereto as a result of the Transactions, such
consent or waiver shall have been obtained, unless the failure to obtain such
consents or waivers, individually or in the aggregate, would not have a Material
Adverse Effect on the Portsmouth Entities;
(f) None of the Parties shall be subject to any order, decree or injunction
of a court or agency of competent jurisdiction which enjoins or prohibits the
consummation of the Transactions;
(g) The shares of CFX Common Stock that may be issued in the Share Exchange
shall have been approved for listing on the AMEX, subject to official notice of
issuance; and
(h) Portsmouth and CFX shall have received an opinion of Arnold & Porter,
reasonably satisfactory to tax counsel for Portsmouth, substantially to the
effect that, on the basis of facts, representations and assumptions set forth in
such opinion which are consistent with the state of facts existing on the
Effective Date:
(1) the Share Exchange shall either constitute a reorganization for federal
income tax purposes within the meaning of Section 368(a) of the Code or be
treated as part of a reorganization within the meaning of Section 368(a) of the
Code;
(2) no gain or loss will be recognized by a shareholder of Portsmouth who
exchanges all of the shareholder's Portsmouth Common Stock solely for CFX Common
Stock in the Share Exchange (except with respect to cash received in lieu of a
fractional share interest in CFX Common Stock);
(3) the tax basis of the CFX Common Stock received by a shareholder who
exchanges all of the shareholder's Portsmouth Common Stock solely for CFX Common
Stock in the Share Exchange will be the same as the tax basis of the Portsmouth
Common Stock surrendered in exchange therefor (reduced by any amount allocable
to a fractional share interest for which cash is received); and
(4) the holding period of the shares of CFX Common Stock to be received by
a shareholder of Portsmouth will include the period during which such
shareholder held the shares of Portsmouth Common Stock
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<PAGE>
surrendered in exchange therefor, provided the Portsmouth Common Stock
surrendered is held as a capital asset on the Effective Date.
Each Party shall provide, in writing, a statement of facts, representations
and assumptions on which Arnold & Porter may rely in rendering its opinion,
which facts, representations and assumptions shall reflect the state of facts
existing on the Effective Date.
5.2. Conditions Precedent to the Obligations of Portsmouth and Portsmouth Bank
The obligations of Portsmouth and Portsmouth Bank to effect the
Transactions shall be subject to satisfaction of the following additional
conditions at or prior to the Closing Date unless waived by Portsmouth pursuant
to Section 6.4 hereof:
(a) The representations and warranties of CFX and CFX Bank set forth in
Article 3 hereof shall be true and correct in all material respects as of the
date of this Reorganization Agreement and as of the Closing Date as though made
on and as of the Closing Date (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated or permitted by this Reorganization Agreement
or consented to in writing by Portsmouth;
(b) CFX and CFX Bank shall have in all material respects performed all
obligations and complied with all covenants required by the Transaction
Documents prior to the Effective Date;
(c) CFX and CFX Bank each shall have delivered to Portsmouth a certificate,
dated the Closing Date and signed by its President or Chief Financial Officer to
the effect that the conditions set forth in paragraphs (a) and (b) of this
section have been satisfied; and
(d) Portsmouth shall have received an opinion of Devine, Millimet & Branch,
counsel to CFX, dated the Closing Date, as to such matters as Portsmouth may
reasonably request with respect to the Transactions.
5.3. Conditions Precedent to the Obligations of CFX and CFX Bank
The respective obligations of CFX to effect the Transactions shall be
subject to satisfaction of the following additional conditions at or prior to
the Closing Date unless waived by CFX pursuant to Section 6.4 hereof:
(a) The representations and warranties of Portsmouth and Portsmouth Bank
set forth in Article 2 hereof shall be true and correct in all material respects
as of the date of this Reorganization Agreement and as of the Closing Date as
though made on and as of the Closing Date (or on the date when made in the case
of any representation and warranty which specifically relates to an earlier
date), except as otherwise contemplated or permitted by this Reorganization
Agreement or consented to in writing by CFX; provided, however, that (i) in
determining whether or not the
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<PAGE>
condition contained in this paragraph (a) shall be satisfied, no effect shall be
given to any exceptions in such representations and warranties relating to
materiality or Material Adverse Effect, and (ii) the condition contained in
this paragraph (a) shall be deemed to be satisfied unless the failure of such
representations and warranties to be so true and correct constitute,
individually or in the aggregate, a Material Adverse Effect on Milford;
(b) Portsmouth and Portsmouth Bank shall have, in all material respects,
performed all obligations and complied with all covenants required by the
Transaction Documents;
(c) Portsmouth and Portsmouth Bank each shall have delivered to CFX a
certificate, dated the Closing Date and signed by its President and Chief
Executive Officer to the effect that the conditions set forth in paragraphs (a)
and (b) of this section have been satisfied;
(d) No event shall have occurred that shall preclude the Transactions from
being accounted for as a pooling of interests;
(e) The Rights issued pursuant to the Portsmouth Rights Agreement shall not
have become nonredeemable, exercisable, distributed or triggered pursuant to the
terms of such agreement (unless, in the case of a distribution or trigger, the
effects can be cured by Portsmouth);
(f) CFX shall have received from Shatswell, MacLeod & Co. a "comfort
letter" dated not more than five days prior to (i) the effective date of the
Registration Statement, if any, and, otherwise, the mailing date of the Proxy
Statement, and (ii) the Closing Date, with respect to certain financial
information regarding Portsmouth, in form and substance which is customary in
transactions such as the Transactions; and
(g) CFX shall have received an opinion of Hale and Dorr LLP, counsel to
Portsmouth, dated the Closing Date, as to such matters as CFX may reasonably
request with respect to the Transactions. In rendering such opinion, Hale and
Dorr LLP may rely as to certain matters of New Hampshire law on an opinion of a
law firm Previously Disclosed to CFX.
ARTICLE 6.
TERMINATION, WAIVER AND AMENDMENT
6.1. Termination
This Reorganization Agreement and the other Transaction Documents (other
than the Stock Option Agreement, which shall be governed by the terms thereof)
may be terminated, either before or after approval by the shareholders of CFX
and Portsmouth:
(a) At any time on or prior to the Effective Date, by the mutual consent in
writing of the Parties;
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<PAGE>
(b) At any time on or prior to the Closing Date, by CFX in writing, if
Portsmouth or Portsmouth Bank has, or by Portsmouth in writing, if CFX or CFX
Bank has, in any material respect, breached, and the Party seeking to terminate
the Transaction Documents has not, in any material respect, breached (i) any
covenant or agreement contained in the Transaction Documents, or (ii) any
representation or warranty contained herein, and in either case if such breach
has not been cured by the earlier of 30 days after the date on which written
notice of such breach is given to the Party committing such breach or the
Closing Date (unless the breach, by its nature, is curable within 30 days after
the date of written notice thereof and such 30-day cure period extends beyond
the Closing Date, in which case the Closing Date shall be delayed to permit the
cure of the breach by the breaching Party within such 30-day cure period);
(c) At any time, by any Party in writing, if the applications for prior
approval or consents referred to in Section 4.3 hereof have been denied, and the
time period for appeals and requests for reconsideration has run, or if any
governmental entity of competent jurisdiction shall have issued a final
non-appealable order enjoining or otherwise prohibiting the Transactions or any
of them;
(d) At any time, by any Party in writing, if the shareholders of CFX or
Portsmouth do not approve the Transactions at the annual or special meetings
duly called for that purpose;
(e) By any Party in writing, if the Closing Date has not occurred by the
close of business on February 13, 1998 (the "Termination Date"), unless the
failure of the Closing to occur by such date shall be due to the failure of the
Party seeking to terminate this Reorganization Agreement and the other
Transaction Documents to perform or observe the covenants and agreements set
forth herein, provided that the Termination Date may be extended until May 13,
1998 by any Party by written notice to the other Parties (given not later than
January 13, 1998) if the Closing shall not have occurred because of failure to
obtain approval from one or more regulatory authorities whose approval is
required in connection with this Reorganization Agreement and the Transactions
under circumstances in which neither party has the right to terminate this
Reorganization Agreement pursuant to Section 6.1(c) hereof; or
(f) By Portsmouth, if (i) the CFX Price (as that term is defined in the
Plan of Exchange) is less than the Floor Price (as that term is defined in the
Plan of Exchange), (ii) Portsmouth provides written notice to CFX prior to the
third business day immediately preceding the Closing Date of its intent to
terminate this Reorganization Agreement and the other Transaction Documents
(other than the Stock Option Agreement) pursuant to this Section 6.1(f), and
(iii) CFX does not elect prior to the close of business on the business day
immediately preceding the Closing Date to increase the Exchange Ratio (as that
term is defined in the Plan of Exchange) to the Cure Ratio (as that term is
defined in the Plan of Exchange).
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<PAGE>
6.2. Effect of Termination
In the event this Reorganization Agreement and the other Transaction
Documents are terminated pursuant to Section 6.1 hereof, the Transaction
Documents (other than the Stock Option Agreement) shall become void and have no
effect, except that (i) the provisions relating to confidentiality, expenses and
governing law set forth in Sections 4.5, 7.1 and 7.7 hereof, respectively, shall
survive any such termination and (ii) a termination pursuant to Section
6.1(b)(i) shall not relieve the breaching Party from liability for an uncured
willful breach of such covenant or agreement giving rise to such termination.
6.3. Non-Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Reorganization
Agreement and the other Transaction Documents or in any instrument delivered
pursuant hereto or thereto shall expire on, and be terminated and extinguished
at, the Effective Date other than covenants that by their terms are to survive
or be performed after the Effective Date, provided that no such representations,
warranties or covenants shall be deemed to be terminated or extinguished so as
to deprive any Party (or any director, officer or controlling person thereof) of
any defense in law or equity which otherwise would be available against the
claims of any person, including, without limitation, any shareholder or former
shareholder of either CFX or Portsmouth, the aforesaid representations,
warranties and covenants being material inducements to the consummation by the
Parties of the Transactions.
6.4. Waiver
Except with respect to any required shareholder or regulatory approval, CFX
and Portsmouth, respectively, by written instrument signed by an executive
officer of such Party, may at any time (whether before or after approval of the
Transaction Documents by the shareholders of CFX and Portsmouth) extend the time
for the performance of any of the obligations or other acts of the Portsmouth
Entities, on the one hand, or the CFX Entities, on the other hand, and may waive
(i) any inaccuracies of the Parties in the representations or warranties
contained in the Transaction Documents or any document delivered pursuant hereto
or thereto, (ii) compliance with any of the covenants, undertakings or
agreements of the Parties, or satisfaction of any of the conditions precedent to
its obligations, contained in the Transaction Documents, or (iii) the
performance by such parties of any of its obligations set out herein or therein;
provided, however, that, after any such approval by the shareholders of
Portsmouth, no such modification shall (i) alter or change the amount or kind of
consideration to be received by holders of Portsmouth Common Stock as provided
in the Plan of Exchange, or (ii) adversely affect the tax treatment to
Portsmouth shareholders as a result of the receipt of such consideration.
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<PAGE>
6.5. Amendment or Supplement
The Transaction Documents may be amended or supplemented at any time by
mutual agreement of the parties thereto. Any such amendment or supplement must
be in writing and approved by their respective boards of directors and/or
officers authorized thereby and shall be subject to the proviso in Section 6.4
hereof.
ARTICLE 7.
MISCELLANEOUS
7.1. Expenses
Each Party shall bear and pay all costs and expenses incurred by it in
connection with the Transactions, including fees and expenses of its own
financial consultants, accountants and counsel, except that CFX and Portsmouth
each shall bear and pay 50 percent of all printing and mailing costs and filing
fees associated with the Registration Statement, if required, and the Proxy
Statements.
7.2. Entire Agreement
The Transaction Documents contain the entire agreement between the parties
with respect to the Transactions and supersede all prior arrangements or
understandings with respect thereto, written or oral, other than documents
referred to herein or therein and the Confidentiality Agreement. The terms and
conditions of the Transaction Documents shall inure to the benefit of and be
binding upon the Parties and thereto and their respective successors. Except as
specifically set forth in the Transaction Documents, nothing in the Transaction
Documents, expressed or implied, is intended to confer upon any person, other
than the Parties, and their respective successors, any rights, remedies,
obligations or liabilities.
7.3. No Assignment
No Party may assign any of its rights or obligations under this
Reorganization Agreement to any other person.
7.4. Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
facsimile transmission or overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
If to Portsmouth or Portsmouth Bank:
Portsmouth Bank Shares, Inc.
333 State Street
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<PAGE>
Portsmouth, N.H. 03802
Attention: Mark E. Simpson
Facsimile No.: 603-431-2322
With a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Edward Young, Esquire
Facsimile No.: 617-526-5000
If to CFX or CFX Bank:
CFX Corporation
102 Main Street
Keene, N.H. 03431
Attention: Mark A. Gavin
Facsimile No.: 603-358-5028
With a copy to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004
Attention: Steven Kaplan, Esquire
Facsimile No.: 202-942-5999
7.5. Captions
The captions contained in this Reorganization Agreement are for reference
purposes only and are not part of this Reorganization Agreement.
7.6. Counterparts
This Reorganization Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
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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<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement and Plan of Reorganization to be executed in
counterparts by their duly authorized officers and their corporate seal to be
hereunto affixed and attested by their officers thereunto duly authorized, all
as of the day and year first above written.
PORTSMOUTH BANK SHARES, INC.
By: _______________________________________
Harry R. Hart
President and Chief Executive Officer
PORTSMOUTH SAVINGS BANK
By: _______________________________________
Harry R. Hart
Chairman and Chief Executive Officer
CFX CORPORATION
By: _____________________________________
Peter J. Baxter,
President and Chief Executive Officer
CFX BANK
By: _____________________________________
Peter J. Baxter,
President and Chief Executive Officer
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Exhibit 99.4
PLAN OF SHARE EXCHANGE
PURSUANT TO THIS PLAN OF SHARE EXCHANGE (this "Plan of Exchange"), dated as
of February 13, 1997, CFX CORPORATION ("CFX"), a New Hampshire corporation,
shall, subject to the terms and conditions specified herein and in a related
Agreement and Plan of Reorganization dated as of even date herewith (the
"Reorganization Agreement"), acquire through a share exchange all the
outstanding shares of PORTSMOUTH BANK SHARES, INC. ("Portsmouth"), a New
Hampshire corporation.
ARTICLE I.
SHARE EXCHANGE
1. On the Effective Date (as hereinafter defined), each share of common
stock of Portsmouth, par value $0.10 per share ("Portsmouth Common Stock"),
outstanding immediately prior to the Effective Date (except as provided in
Paragraphs 4, 7 and 8 of this Article), including each attached right issued
pursuant to the Portsmouth Rights Agreement (as defined in Section 2.1(a) of the
Reorganization Agreement), shall be converted without any action on the part of
the holder thereof into an amount of common stock, par value $0.66 2/3 per
share, of CFX ("CFX Common Stock") equal to one share multiplied by the Exchange
Ratio as determined below (rounded to the nearest four decimal places).
2. As used herein, the term "CFX Price" shall mean the average closing
price of CFX Common Stock on the American Stock Exchange (as reported by The
Wall Street Journal) for the ten consecutive trading days ending on the business
day before the date on which the last regulatory approval required to consummate
the transactions contemplated by this Plan of Exchange and the Reorganization
Agreement is obtained.
3. For purposes of this Plan of Exchange, the Exchange Ratio shall be:
(a) 0.9500, if the CFX Price is greater than $17.375;
(b) $16.50 / the CFX Price, if the CFX Price is greater than $15.70
and is no greater than $17.375; or
(c) 1.0500, if the CFX Price is no greater than $15.70; provided,
however, that the Exchange Ratio shall be $14.91 / the CFX Price (the "Cure
Ratio"), if the CFX Price is $14.20 (the "Floor Price") or less and CFX has
elected to increase the Exchange Ratio in accordance with Section 6.1(f) of the
Reorganization Agreement.
4. On the Effective Date, all shares of Portsmouth Common Stock held in the
treasury of Portsmouth or owned beneficially by any subsidiary of Portsmouth
other than in a fiduciary capacity or in connection with a debt
<PAGE>
previously contracted and all shares of Portsmouth Common Stock owned by CFX or
owned beneficially by any subsidiary of CFX other than in a fiduciary
capacity or in connection with a debt previously contracted shall be canceled
and no cash, stock or other property shall be delivered in exchange therefor.
5. (a) Prior to the Effective Date, CFX shall appoint a bank, trust company
or other stock transfer agent selected by CFX as the exchange agent (the
"Exchange Agent") to effect the exchange of certificates evidencing shares of
Portsmouth Common Stock (any such certificate being hereinafter referred to as a
"Certificate") for shares of CFX Common Stock to be received in the share
exchange. On the Effective Date, CFX shall have granted the Exchange Agent the
requisite power and authority to effect for and on behalf of CFX the issuance of
the number of shares of CFX Common Stock issuable in the share exchange.
(b) Within five business days after the Effective Date, the Exchange
Agent shall mail to each holder of record of Portsmouth Common Stock as of the
Effective Date a notice of consummation of the share exchange and a form of
transmittal letter pursuant to which each such shareholder shall transmit the
Certificate or Certificates, or, in lieu thereof, such evidence of lost, stolen
or mutilated Certificate or Certificates and such surety bond as the Exchange
Agent may reasonably require in accordance with customary exchange practices.
Portsmouth shareholders who satisfy such requirements for lost, stolen or
mutilated certificates shall for purposes of the exchange procedures set forth
herein be deemed to have submitted Certificates for Portsmouth Common Stock. As
soon as practicable after surrender of such Certificate to the Exchange Agent
with a properly completed transmittal letter, the Exchange Agent will promptly
mail by first class mail to such shareholder a certificate or certificates
representing the number of full shares of CFX Common Stock into which the shares
of Portsmouth Common Stock evidenced by the Certificate surrendered shall have
been converted pursuant to this Plan of Exchange.
(c) The Exchange Agent shall accept such Certificates upon compliance
with such reasonable terms and conditions as the Exchange Agent may impose to
effect an orderly exchange thereof in accordance with customary exchange
practices. Until so surrendered, each Certificate shall be deemed for all
purposes to evidence ownership of the number of shares of CFX Common Stock into
which the shares represented by such Certificates have been changed or converted
as aforesaid. No dividends or other distributions declared after the Effective
Date with respect to CFX Common Stock shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender such
Certificate in accordance with this Article I. After the surrender of a
Certificate in accordance with this Article I, the record holder thereof shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
CFX Common Stock represented by such Certificate.
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<PAGE>
(d) No transfer taxes shall be payable by any shareholders of
Portsmouth in respect of the issuance of certificates for CFX Common Stock and
no expenses shall be imposed on any shareholder of Portsmouth in connection with
the conversion of shares of Portsmouth Common Stock into shares of CFX Common
Stock and the delivery of such shares to the former holder of Portsmouth Common
Stock entitled thereto, except that, if any certificate for shares of CFX Common
Stock is to be issued in a name other than that in which a certificate or
certificates for shares of Portsmouth Common Stock surrendered shall have been
registered, it shall be a condition to such issuance that the person requesting
such issuance shall pay to CFX any transfer taxes payable by reason thereof or
of any prior transfer of such surrendered certificate or certificates or
establish to the reasonable satisfaction of the Exchange Agent that such taxes
have been paid or are not payable.
(e) Certificates surrendered for exchange by any person who is an
"affiliate" of Portsmouth for purposes of Rule 145(c) under the Securities Act
of 1933, as amended, shall not be exchanged for certificates representing shares
of CFX Common Stock until CFX has received the written agreement of such person
contemplated by Section 4.9 of the Reorganization Agreement. If any certificate
for shares of Portsmouth Common Stock is to be issued in a name other than that
in which a certificate surrendered for exchange is issued, the certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and the person requesting such exchange shall affix any requisite stock transfer
tax stamps to the certificate surrendered or provide funds for their purchase or
establish to the reasonable satisfaction of CFX or its agent that such taxes are
not payable.
6. Upon the Effective Date, the stock transfer books of Portsmouth shall be
closed and no transfer of Portsmouth Common Stock shall thereafter be made or
recognized. Any other provision of this Plan of Exchange notwithstanding,
neither CFX or its agent nor any party to the share exchange shall be liable to
a holder of Portsmouth Common Stock for any amount paid or property delivered in
good faith to a public official pursuant to any applicable abandoned property,
escheat or similar law.
7. In the event that, between the date hereof and prior to the Effective
Date, the outstanding shares of CFX Common Stock or Portsmouth Common Stock
shall have been increased, decreased or changed into or exchanged for a
different number or kind of shares or securities by reorganization,
recapitalization, reclassification, stock split or other like changes in the
capitalization of CFX or Portsmouth, or if a stock dividend is declared on CFX
Common Stock or Portsmouth Common Stock with a record date within such period,
then an appropriate and proportionate adjustment shall be made in the number and
kind of shares of CFX Common Stock to be thereafter delivered pursuant to this
Plan of Exchange, and the dollar amounts and the Exchange Ratio set forth in
Section 3 of this Article I, so that each shareholder of Portsmouth shall be
entitled to
- 3 -
<PAGE>
receive such number of shares of CFX Common Stock or other securities as such
shareholder would have received pursuant to such reorganization,
recapitalization, reclassification, stock split, exchange or shares or
readjustment or other like changes in the capitalization of CFX or Portsmouth,
or as a result of a stock dividend on CFX Common Stock or Portsmouth Common
Stock, had the record date therefor been immediately following the Effective
Date.
8. Notwithstanding any other provision hereof, each holder of shares, or of
options to purchase shares, of Portsmouth Common Stock who would otherwise have
been entitled to receive a fraction of a share of CFX Common Stock (after taking
into account all Certificates delivered by such holder or all shares such holder
is entitled to receive in accordance with Article III hereof) shall receive (by
check from the Exchange Agent, mailed to the shareholder with the certificate(s)
for CFX Common Stock which such holder is to receive pursuant to the share
exchange), in lieu thereof, cash in an amount equal to such fractional part of a
share of CFX Common Stock multiplied by the "market value" of such Common Stock.
The "market value" of one share of CFX Common Stock shall be the closing price
of CFX Common Stock on the American Stock Exchange (as reported by The Wall
Street Journal) on the last business day preceding the Effective Date. No such
holder shall be entitled to dividends, voting rights or any other shareholder
right in respect of any fractional share.
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 II.
DISSENTERS' RIGHTS
Notwithstanding anything in this Plan of Exchange to the contrary and
unless otherwise provided by applicable New Hampshire law, shares of Portsmouth
Common Stock that are issued and outstanding immediately prior to the Effective
Date and that are owned by stockholders who, pursuant to applicable New
Hampshire law, (1) deliver to Portsmouth before the taking of the vote of
Portsmouth's stockholders on the Plan of Exchange a written notice of their
intent to demand payment for their shares of Portsmouth Common Stock if the
share exchange is effectuated, and (2) do not vote their shares in favor of this
Plan of Exchange (the "Dissenting Shares"), shall not be converted into the
right to receive, or be exchangeable for, shares of CFX Common Stock, but,
instead, the holders of such Dissenting Shares shall be entitled to payment of
the fair value of such Dissenting Shares, plus accrued interest, in accordance
with applicable New Hampshire law. If any holders of Portsmouth Common Stock
shall have failed to perfect or shall have effectively withdrawn, waived or lost
the right to dissent from the share exchange and to receive the fair value of
such shares as provided under applicable New Hampshire law, the shares of
Portsmouth Common Stock held by such holder shall be deemed to have been
- 4 -
<PAGE>
converted into and be exchangeable for shares of CFX Common Stock on the
Effective Date.
ARTICLE III.
STOCK OPTIONS
On the Effective Date, Portsmouth's obligations with respect to stock
options granted under its Revised 1987 Stock Option and Stock Appreciation
Rights Plan (the "Option Plan") shall be assumed by CFX and each stock option
outstanding under the Option Plan shall become the right to receive (except as
provided in Paragraph 8 of Article I hereof), upon payment of the exercise
price, the number of shares of CFX Common Stock equal to the number of shares of
Portsmouth Common Stock subject to such option multiplied by the Exchange Ratio
as determined pursuant to Section 3 of Article I hereof; provided that (1) in
respect of any stock option which is an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), the conversion hereinabove provided for shall comply with the
requirements of Section 424(a) of the Code, including the requirement that such
converted options shall not give to the holder thereof any benefits additional
to those which such holder had prior to such conversion under the option as
originally granted, and (2) under no circumstances shall CFX have any
responsibility or liability with respect to any stock appreciation rights
referred to in connection with grants of stock options under the Option Plan.
ARTICLE IV.
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 V.
CONDITIONS PRECEDENT
The obligations of CFX and Portsmouth to effect the share exchange as
herein provided shall be subject to satisfaction, unless duly waived, of the
conditions set forth in the Reorganization Agreement.
ARTICLE VI.
TERMINATION
Anything contained in this Plan of Exchange to the contrary
notwithstanding, and notwithstanding the adoption hereof by the shareholders of
Portsmouth, this Plan of Exchange may be terminated and the share exchange
abandoned as provided in the Reorganization Agreement.
- 5 -
<PAGE>
ARTICLE VII.
MISCELLANEOUS
1. This Plan of Exchange may be amended or supplemented at any time prior
to its Effective Date by mutual agreement of CFX and Portsmouth. Any such
amendment or supplement must be in writing and approved by their respective
Boards of Directors and/or by officers authorized thereby and shall be subject
to the proviso in Section 6.4 of the Reorganization Agreement.
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.
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.
4. This Plan of Exchange shall be governed by and construed in accordance
with the laws of New Hampshire applicable to the internal affairs of Portsmouth
and CFX.
- 6 -
Exhibit 99.5
February 13, 1997
CFX Corporation
102 Main Street
P.O. Box 429
Keene, N.H. 03431
Ladies and Gentlemen:
The undersigned is a director of Portsmouth Bank Shares, Inc.
("Portsmouth") and is the beneficial holder of shares of common stock, par value
$0.10 per share, of Portsmouth ("Portsmouth Common Stock").
Portsmouth, Portsmouth Savings Bank, CFX Corporation ("CFX") and CFX Bank
are considering the adoption and/or execution of an Agreement and Plan of
Reorganization (the "Reorganization Agreement"), a Plan of Share Exchange (the
"Plan of Exchange") and an Agreement and Plan of Merger (the "Plan of Merger"
and, together with the Reorganization Agreement and the Plan of Exchange, the
"Transaction Documents"), providing for certain transactions pursuant to which
CFX would, among other things, acquire all the issued and outstanding Portsmouth
Common Stock through a share exchange, Portsmouth would be merged with and into
CFX, and Portsmouth Savings Bank, a wholly-owned New Hampshire state-chartered
savings bank subsidiary of Portsmouth, would be merged with and into CFX Bank, a
wholly-owned New Hampshire state-chartered savings bank subsidiary of CFX
(collectively, the "Transactions"). The execution of the Transaction Documents
is subject in the case of CFX to the execution and delivery of this letter
agreement (this "Agreement"). In consideration of the substantial expenses that
CFX will incur in connection with the Transactions and in order to induce CFX to
execute the Transaction Documents and to proceed to incur such expenses, the
undersigned agrees and undertakes, in his capacity as a shareholder of
Portsmouth and not in his capacity as a director of Portsmouth, as follows:
1. The undersigned will vote or cause to be voted for approval of the
Reorganization Agreement and the Plan of Exchange all the shares of Portsmouth
Common Stock the undersigned is entitled to vote with respect thereto.
2. The undersigned will not effect any transfer or other disposition
(except by operation of law) of any of the undersigned's shares of Portsmouth
Common Stock until
<PAGE>
CFX Corporation
February 13, 1997
Page 2
Portsmouth's shareholders have voted to approve the Reorganization Agreement
and the Plan of Exchange or until the Transaction Documents have been terminated
pursuant to the terms of the Reorganization Agreement. In the case of any
transfer by operation of law or otherwise, this Agreement shall be binding upon
and inure to the benefit of the transferee. Any transfer or other disposition in
violation of the terms of this paragraph 2 shall be null and void.
3. In the capacity described in the second paragraph of this letter, the
undersigned shall take or cause to be taken all action necessary or desirable on
the undersigned's part so as to permit consummation of the Transactions at the
earliest possible date and shall not take, or cause or to the best of the
undersigned's ability permit to be taken, any action which would substantially
impair the prospects of completing the Transactions pursuant to the Transaction
Documents.
4. The undersigned acknowledges and agrees that any remedy at law for
breach of the foregoing provisions shall be inadequate and that, in addition to
any other relief which may be available, CFX shall be entitled to temporary and
permanent injunctive relief without the necessity of proving actual damages.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
Very truly yours,
------------------------------------
Accepted and agreed to as of the date first above written:
CFX CORPORATION
By:
-----------------------------------
Peter J. Baxter,
President and Chief Executive Officer
Exhibit 99.6
CFX CORPORATION
TO ACQUIRE
PORTSMOUTH BANK SHARES, INC.
Keene, N.H., February 13, 1997 - CFX Corporation (AMEX: CFX), headquartered
in Keene, New Hampshire and Portsmouth Bank Shares, Inc., (NASDAQ: POBS),
headquartered in Portsmouth, New Hampshire, announced today that they have
signed a definitive agreement under which CFX will acquire Portsmouth and
Portsmouth Savings Bank, Portsmouth's bank subsidiary.
Subsequent to the effective date of the merger, Portsmouth Savings Bank
will be merged into and operate as the Portsmouth Savings Division of CFX's New
Hampshire banking subsidiary, CFX Bank.
Pursuant to the definitive agreement, each outstanding share of Portsmouth
Common Stock will be converted into .95 share of CFX Common Stock. If the
average price of CFX Common Stock for the ten trading days preceding the last
regulatory approval required for the transaction is below $15.70, the exchange
ratio becomes 1.05 shares, and the exchange ratio floats between .95 and 1.05
shares if the average price of CFX Common Stock is between $17.375 and $15.70.
Portsmouth may terminate the agreement if the average price of CFX Common Stock
is below $14.20 per share unless CFX agrees to increase the exchange ratio.
Three Portsmouth Directors will join the CFX Board and two will become
Directors of CFX Bank. The transaction is tax free to the shareholders of
Portsmouth and is subject to regulatory approval and the approval of both CFX's
and Portsmouth's shareholders. It is anticipated that the transaction will be
accounted for by the pooling-ofinterests method of accounting.
Based on the closing price of CFX Common Stock on February 12, 1997 of
$18.50, the indicated value of the transaction would be $17.58 per Portsmouth
share, for a total aggregate consideration of approximately $106 million. The
agreement also provides CFX with an option to acquire up to 19.9% of the
outstanding shares of Portsmouth Common Stock under certain circumstances.
In announcing the transaction, Peter J. Baxter, President and Chief
Executive Officer of CFX Corporation stated, "Portsmouth Savings Bank is a
strong community bank located in the seacoast region of Rockingham County, one
of the most attractive banking markets in the state. Increased penetration into
higher growth markets has been a strategic objective of CFX and Portsmouth is a
natural extension of our current banking system. We look forward to serving the
customers and communities of Portsmouth Savings by providing the same level of
personal service to customers that Portsmouth has so effectively delivered over
the years."
Mr. Baxter added, "CFX plans to add significantly to Portsmouth's asset
base upon completion of the acquisition. The core deposit base, strong capital
position, and highly liquid asset structure at Portsmouth will allow CFX to
continue to generate earning assets at the pace we have seen in recent years.
Additionally, we look forward to capitalizing on the attractive economic
conditions in New Hampshire's seacoast region by integrating our investment and
trust services, mortgage banking, and commercial banking services with the
strong community presence Portsmouth Savings Bank has developed since its
inception in 1823.
We anticipate that after efficiencies resulting from consolidation, and
after certain balance sheet restructuring, the transaction will be accretive to
both earnings per share and book value per share, making the acquisition
beneficial to shareholders of both CFX Corporation and Portsmouth Bank Shares,
Inc. Upon consummation of the merger, CFX will take a special charge of
approximately $2.9 million to earnings for one-time costs of the transaction."
<PAGE>
Robert W. Simpson, Chairman of the Board of Directors of Portsmouth Bank
Shares, Inc. said, "We are pleased to affiliate with a strong, well-managed and
locally controlled financial institution. The CFX organization allows our
customers access to a greatly expanded menu of financial services and resources.
Our strong heritage as a community bank blends very well with CFX's strong
banking heritage."
CFX Corporation is a multi-bank holding company with total assets of $1.6
billion as of December 31, 1996. The Company's three banking subsidiaries are
CFX Bank, headquartered in Keene, New Hampshire, Orange Savings Bank,
headquartered in Orange, Massachusetts, and The Safety Fund National Bank,
headquartered in Fitchburg, Massachusetts. CFX Mortgage, Inc., CFX Bank's
mortgage banking subsidiary, services approximately $765 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, now services over $100 million in leases for others. The
Company operates 42 full service offices, 2 loan production offices, and 68
automated teller and remote service banking locations in New Hampshire and
central Massachusetts, and operates a trust division with $370 million in assets
under management.
