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");
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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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 ▇▇▇▇ 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 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
- 15 -
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
- 17 -
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
- 18 -
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
- 19 -
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. ▇▇▇▇▇ &
Sons Incorporated.
3.11. Legal Proceedings
- 20 -
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
- 22 -
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
- 24 -
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
- 25 -
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;
- 26 -
(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
- 27 -
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, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, 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
- 28 -
"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.
- 29 -
(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
- 30 -
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
- 31 -
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 ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
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
- 32 -
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 ▇▇▇▇▇▇ & ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, 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
- 33 -
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 ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & 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 ▇▇▇▇ and ▇▇▇▇ 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, ▇▇▇▇ and
▇▇▇▇ 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;
- 34 -
(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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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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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.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
- ▇▇ -
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esquire
Facsimile No.: 617-526-5000
If to CFX or CFX Bank:
CFX Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esquire
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
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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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: _______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇
President and Chief Executive Officer
PORTSMOUTH SAVINGS BANK
By: _______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇
Chairman and Chief Executive Officer
CFX CORPORATION
By: _____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
President and Chief Executive Officer
CFX BANK
By: _____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
President and Chief Executive Officer
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