-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cec5lX8+9q1I0Nv58wI108GhtXVTrtEhKeaKQjhbH/fBpOnTXuus8hdEj4iVUKNk HXdKqxHx5t2JpmGL1M/lng== 0000950133-98-000222.txt : 19980203 0000950133-98-000222.hdr.sgml : 19980203 ACCESSION NUMBER: 0000950133-98-000222 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980130 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980202 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CFX CORP CENTRAL INDEX KEY: 0000800042 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 020402421 STATE OF INCORPORATION: NH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10633 FILM NUMBER: 98519064 BUSINESS ADDRESS: STREET 1: 102 MAIN ST CITY: KEENE STATE: NH ZIP: 03431 BUSINESS PHONE: 6033522502 MAIL ADDRESS: STREET 1: 194 WEST STREET STREET 2: P O BOX 429 CITY: KEENE STATE: NH ZIP: 03431 FORMER COMPANY: FORMER CONFORMED NAME: CHESHIRE FINANCIAL CORP DATE OF NAME CHANGE: 19920703 8-K 1 CFX CORPORATION FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8 - K CURRENT REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act Date of Report (Date of earliest event reported): February 2, 1998 ---------------------------- CFX CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New Hampshire 1-10633 0-15079 - ---------------------------- ------------ ------------------- (State or other jurisdiction (Commission (I.R.S. employer of incorporation) file number) Identification no.) 102 Main Street, Keene, New Hampshire 03431 - -------------------------------------------------------------------------------- (Address of principal executive officers) (Zip Code) Registrant's telephone number, including area code (603) 352-2502 ----------------------- Not Applicable - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 Item 5. Other Events. On January 30, 1998, CFX Corporation reported its results of operations for the fourth quarter and year ended December 31, 1997. A copy of CFX Corporation's press release is filed herewith as Exhibit 99.1 and is incorporated herein by reference. As described in the press release, CFX Corporation recorded an after-tax charge of $4.4 million for the quarter ended December 31, 1997, in connection with the resolution of a dispute with American Credit Indemnity Company ("ACI"), a credit insurer, regarding the origination and servicing by CFX Funding, L.L.C., a 51% subsidiary of CFX Corporation, of certain leases held in four lease pools insured by ACI, and the discontinuance of future operations of CFX Funding with respect to its securitization business. CFX Funding engaged in the origination, securitization, sale and servicing of small-ticket equipment leases obtained through a national network of lessors. The settlement agreement with ACI (the "Settlement Agreement") provides for the payment by CFX Corporation of $2.5 million to ACI and the obligation of CFX Corporation to pay to ACI the amount of all claims made after December 18, 1997, under the credit insurance policies issued by ACI in connection with the four pools. The settlement also entitles CFX Corporation to retain all recoveries on defaulted leases, lease residuals and servicing fees after December 18, 1997. The settlement provides mutual releases by ACI of CFX Corporation and CFX Funding, and by CFX Corporation and CFX Funding of ACI, of all claims and liabilities, other than those contained in the Settlement Agreement, in connection with the four equipment lease pooling transactions pursuant to which ACI issued its credit insurance policies. Leases with an aggregate remaining principal balance of approximately $19.2 million remains in the four securitized lease pools that are the subject of the Settlement Agreement. CFX Corporation has established a reserve of $2.8 million to cover the risk of collection of such leases. The foregoing description of the Settlement Agreement is qualified by reference to the terms of the Settlement Agreement filed herewith as Exhibit 99.2 and incorporated herein by reference. Item 7. Financial Statements and Exhibits (c) Exhibits. The exhibits listed in the Exhibit Index are filed herewith. 3 EXHIBIT INDEX 99.1 CFX Corporation press release dated January 30, 1998. 99.2 Settlement Agreement dated January 30, 1998, among American Credit Indemnity Company, CFX Corporation and CFX Funding, L.L.C. 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized. CFX CORPORATION Dated: February 2, 1998 By: /s/ -------------------------- Gregg R. Tewksbury Chief Financial Officer EX-99.1 2 CFX CORPORATION PRESS RELEASE 1 CFX CORPORATION ANNOUNCES FOURTH QUARTER EARNINGS Keene, N.H., January 30, 1998 -- CFX CORPORATION (AMEX: CFX) today announced, exclusive of charges related to CFX Funding L.L.C. which are discussed below, earnings of $8,367,000, or $.35 per share, for the quarter ended December 31, 1997, compared to earnings of $7,519,000, or $.32 per share, for the corresponding period a year ago, an earnings increase of 11%. Exclusive of charges for mergers and those related to CFX Funding, the Company's earnings for the year ended December 31, 1997, amounted to $31,729,000, or $1.33 per share, compared to earnings of $27,275,000 or $1.17 per share, for the corresponding period a year ago, an earnings increase of 16%. After charges for mergers and those related to CFX Funding, earnings were $3,944,000, or $.16 per share, and $18,934,000, or $.79 per share, for the quarter and year ended December 31, 1997, respectively, compared to earnings of $7,519,000, or $.32 per share, and $23,553,000, or $1.01 per share, for the corresponding periods a year ago, respectively. A reconciliation of net income available to common stock to net income available to common stock before charges for mergers and charges related to CFX Funding for the quarters and the years ended December 31, 1997 and 1996 is summarized as follows:
- -------------------------------------------------------------------------------------------------------------------------------- EARNINGS RECONCILIATION - -------------------------------------------------------------------------------------------------------------------------------- DECEMBER 31, THREE MONTHS ENDED YEAR ENDED (Dollars in thousands, except per share data) 1997 1996 1997 1996 - -------------------------------------------------------------------------------------------------------------------------------- NET INCOME AVAILABLE TO COMMON STOCK $ 3,944 $ 7,519 $ 18,934 $ 23,553 Add Back After-Tax Charges: Merger Costs (1) - - 8,372 3,722 Charges related to CFX Funding 4,423 - 4,423 - -------- -------- -------- -------- 4,423 - 12,795 3,722 -------- -------- -------- -------- NET INCOME AVAILABLE TO COMMON STOCK BEFORE MERGER AND OTHER CHARGES $ 8,367 $ 7,519 $ 31,729 $ 27,275 ======== ======== ======== ======== BASIC EARNINGS PER COMMON SHARE: Net Income Available to Common Stock $ .16 $ .32 $ .79 $ 1.01 ======== ======== ======== ======== Net Income Available to Common Stock Exclusive of Merger and Other Charges $ .35 $ .32 $ 1.33 $ 1.17 ======== ======== ======== ========
(1) Merger-related charges associated with the acquisitions of Community Bankshares, Inc. and Portsmouth Bank Shares, Inc. completed August 29, 1997 and The Safety Fund Corporation and Milord Co/operative Bank completed on July 1, 1996. The $4.4 million after-tax charge recorded by the Company for the quarter ended December 31, 1997, covers the cost of resolving a dispute between the Company and American Credit Indemnity Company ("ACI"), a credit insurer, regarding the origination and servicing by CFX Funding, a 51% subsidiary of the Company, of certain equipment leases held in four securitized lease pools insured by ACI, as well as the discontinuance of future operations of CFX Funding with respect to its securitization business. Company spokesman and Chief Operating Officer, Mark A. Gavin, said, "The Company continues its strong operating performance, exclusive of charges for mergers and other matters. The annual loan growth of 28% and a continued strong efficiency ratio were the driving factors behind the 11% increase in earnings." - More - Page 1 of 4 2 The financial highlights for the fourth quarter of 1997 before merger costs and other matters are as follows: - The Company's overall performance ratios remained strong with return on assets, return on equity, and the efficiency ratio of 1.17%, 13.29% and 59.83%, respectively. - Other income, including trust revenues and mortgage banking fees, increased by 30% over the prior year's quarter. - Core earnings (net interest and dividend and other income) increased by $3.9 million during the fourth quarter of 1997 over the year ago quarter. The lower net interest margin is primarily the result of increased balance sheet leverage employed to utilize the excess capital acquired with the Portsmouth Bankshares, Inc. acquisition. - Total loans and leases grew by $440 million, or 28%, in 1997 to $2.0 billion as of December 31, 1997. CFX previously announced that it signed a definitive agreement to merge with Peoples Heritage Financial Group, Inc. (NASDAQ: PHBK). Peoples Heritage is a bank holding company headquartered in Portland, Maine. The merger is expected to occur in March or April of 1998 and is subject to regulatory and shareholder approvals. The charges related to CFX Funding will not affect the terms, timing or consummation of the merger. CFX Corporation is a multi-bank holding company with total assets of $2.9 billion as of December 31, 1997. The Company's three banking subsidiaries are CFX Bank, headquartered in Keene, New Hampshire, Orange Savings Bank, headquartered in Orange, Massachusetts, and The Safety Fund National Bank, headquartered in Fitchburg, Massachusetts. CFX Bank's mortgage banking division, services approximately $1.4 billion in mortgage loans for others. The Company operates 56 full service offices, 3 loan production offices, and 100 automated teller and remote service banking locations in New Hampshire and central Massachusetts, and operates a trust division with $506 million in assets.
- ------------------------------------------------------------------------------------------------------------------------------- SELECTED FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------------------------------------------------------- AT OR FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 1996 1997 - ------------------------------------------------------------------------------------------------------------------------------- (Dollars and shares in thousands, except per share data) AS REPORTED EXCLUDING ADJUSTMENT (2) - ------------------------------------------------------------------------------------------------------------------------------- OPERATING AND PERFORMANCE RATIOS: Return on average assets (1) .55% 1.26% 1.17% Return on average common equity (1) 6.26 12.47 13.29 Other income/average assets (1) 1.11 1.03 1.11 Other expense/average assets (1) 3.78 2.90 2.77 Efficiency ratio 81.47 59.37 59.83 Tier 1 leverage capital 8.32 9.70 8.48 ASSET QUALITY: Nonperforming assets/total assets .59% .60% Nonperforming loans as a percent of total loans and leases .69 .68 Allowance for loan and lease losses/nonperforming loans 156.56 188.56 Allowance for loan and lease losses/total loans and leases 1.08 1.28 Net charge offs/average loans and leases (1) .13 .24 STOCK PERFORMANCE INDICATORS: Common shares outstanding 24,071 23,581 24,071 Basic weighted average shares outstanding 24,024 23,505 24,024 Diluted weighted average shares outstanding 24,518 24,012 24,518 Closing price $30.63 $15.50 $30.63 Basic earnings per common share $.16 $.32 $.35 Diluted earnings per common share $.16 $.31 $.34 Dividends declared per common share $.22 $.21 $.22 Dividend yield per common share (1) 2.87% 5.42% 2.87% Book value per common share $10.21 $10.17 N/A Tangible book value per common shares $9.85 $9.78 N/A Price/book value per common share 300.00% 152.41% N/A Price/tangible book value per common share 310.96% 158.49% N/A Price/earnings ratio (1) 48 12 22 Market capitalization $737,295 $365,506 $737,295
(1) Annualized The Company has made, and may continue to make, various forward-looking statements with respect to earnings per share, cost savings related to acquisitions, credit quality and other financial business matters for 1998 and, in certain instances, subsequent periods. The Company cautions that these forward-looking statements are subject to numerous assumptions, risks, and uncertainties, and that statements for periods subsequent to 1998 are subject to greater uncertainty because of the increased likelihood of changes in underlying factors and assumptions. Actual results could differ materially from forward-looking statements. In addition to those factors previously disclosed by the Company and those factors identified elsewhere herein, the following factors could cause actual results to differ materially from such forward-looking statements: continued pricing pressure on loans and deposit products, actions of competitors, changes in economic conditions, the extent and timing of actions of the Federal Reserve, customers' acceptance of the Company's products and services and the extent and timing of legislative and regulatory actions and reforms. The Company's forward-looking statements speak only as of the date on which such statements are made. By making any forward-looking statements, the Company assumes no duty to update them to reflect new, changing or unanticipated events or circumstances. - More - Page 2 of 4 3
- --------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS YEAR ENDED - --------------------------------------------------------------------------------------------------------------------------- DECEMBER 31, (DOLLARS AND SHARES OUTSTANDING IN THOUSANDS) 1997 1996 - --------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and federal funds sold $ 94,672 $ 131,393 Trading and investment securities 562,735 519,578 Mortgage loans held for sale 37,737 16,967 Nonperforming loans 13,987 10,783 Other loans and leases 2,020,868 1,583,616 Allowance for loan and lease losses (21,898) (20,332) Premises and equipment 38,761 38,195 Mortgage servicing rights 9,142 7,644 Goodwill and deposit base intangibles 8,698 9,235 Foreclosed assets 2,996 3,349 Bank-owned life insurance 63,226 30,975 Other assets 42,843 37,854 ----------- ----------- TOTAL ASSETS $ 2,873,767 $ 2,369,257 =========== =========== LIABILITIES Deposits $ 1,941,996 $ 1,751,141 Borrowed funds 652,365 351,343 Other liabilities 33,689 26,936 ----------- ----------- TOTAL LIABILITIES 2,628,050 2,129,420 ----------- ----------- SHAREHOLDERS' EQUITY Common stock 16,077 15,740 Paid-in capital 149,107 142,829 Retained earnings 79,080 81,198 Net unrealized gains on securities available for sale, after tax effects 2,240 489 Cost of common stock in treasury (787) (419) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 245,717 239,837 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,873,767 $ 2,369,257 =========== =========== Common shares outstanding 24,071 23,581 =========== =========== Common shareholders' equity per share $ 10.21 $ 10.17 =========== ===========
- --------------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED INCOME STATEMENTS THREE MONTHS ENDED YEAR ENDED - --------------------------------------------------------------------------------------------------------------------------------- DECEMBER 31, (DOLLARS AND SHARES OUTSTANDING IN THOUSANDS) 1997 1996 1997 1996 - --------------------------------------------------------------------------------------------------------------------------------- Interest and dividend income $ 53,043 $ 44,183 $199,539 $168,305 Interest expense 28,020 21,189 101,252 79,583 -------- -------- -------- -------- NET INTEREST AND DIVIDEND INCOME 25,023 22,994 98,287 88,722 Provision for loan and lease losses 1,163 1,075 4,548 4,285 -------- -------- -------- -------- NET INTEREST AND DIVIDEND INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES 23,860 21,919 93,739 84,437 -------- -------- -------- -------- Other income: Service charges on deposit accounts 1,306 1,155 5,113 4,952 Mortgage Banking activities 2,336 1,390 6,996 4,716 Net gains on trading and investment securities 1,126 957 2,547 2,780 Leasing activities 220 667 1,663 2,487 Trust fees 1,117 634 3,015 2,351 Pension settlement gain - - - 877 Bank-owned life insurance 879 417 2,251 975 Other 1,015 939 3,957 3,124 -------- -------- -------- -------- 7,999 6,159 25,542 22,262 -------- -------- -------- -------- Other expense: Salaries and employee benefits 9,852 8,772 38,730 34,076 Occupancy expense and equipment expense 3,214 3,021 12,127 10,306 Professional fees 859 1,459 2,761 3,030 Advertising and marketing expense 554 574 2,322 2,366 Goodwill and deposit base intangible amortization 158 151 623 653 Operation of foreclosed real estate 221 71 648 508 Merger expenses - - 11,031 4,522 Charges related to CFX Funding 7,206 - 7,206 - SAIF special assessment - (217) - 691 Other 5,067 3,427 17,102 15,118 -------- -------- -------- -------- 27,131 17,258 92,550 71,270 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 4,728 10,820 26,731 35,429 Income taxes 784 3,301 7,797 11,876 -------- -------- -------- -------- NET INCOME $ 3,944 $ 7,519 $ 18,934 $ 23,553 ======== ======== ======== ======== Basic weighted average common shares outstanding 24,024 23,505 23,866 23,383 ======== ======== ======== ======== Basic earnings per common share $ .16 $ .32 $ .79 $ 1.01 ======== ======== ======== ======== Diluted earnings per common share $ .16 $ .31 $ .78 $ .99 ======== ======== ======== ======== - ---------------------------------------------------------------------------------------------------------------------------------
- More - Page 3 of 4 4
- ---------------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED AVERAGE BALANCE SHEETS - ---------------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED DECEMBER 31, 1997 1996 - ---------------------------------------------------------------------------------------------------------------------------------- INTEREST INTEREST AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ (DOLLARS IN THOUSANDS) BALANCE EXPENSE (1) RATE BALANCE EXPENSE (1) RATE - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS INTEREST EARNING ASSETS Loans and leases $ 1,999,851 $ 42,112 8.35% $ 1,564,588 $ 34,033 8.65% Tax-exempt loans and leases 13,343 349 10.38 9,250 257 11.05 Taxable securities 602,618 10,291 6.78 545,555 9,020 6.58 Tax-exempt securities 21,803 415 7.55 21,785 371 6.78 Other 9,955 155 6.18 60,332 736 4.85 ----------- -------- ----------- -------- Total interest earning assets 2,647,570 53,322 7.99 2,201,510 44,417 8.03 -------- -------- Noninterest earning assets 201,200 167,362 ----------- ----------- TOTAL $ 2,848,770 $ 2,368,872 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities: Savings deposits $ 672,719 3,998 2.36 $ 697,441 4,066 2.32 Time deposits 1,026,591 14,705 5.68 876,555 12,291 5.58 Advances from Federal Home Loan Bank of Boston 438,275 6,654 6.02 248,208 3,513 5.63 Other borrowed funds 201,960 2,663 5.23 113,134 1,319 4.64 ----------- -------- ----------- -------- Total interest bearing liabilities 2,339,545 28,020 4.75 1,935,338 21,189 4.36 -------- -------- Noninterest bearing liabilities: Demand deposits 235,286 180,706 Other 24,150 12,959 Shareholders' equity 249,789 239,870 ----------- ----------- TOTAL $ 2,848,770 $ 2,368,873 =========== =========== Net interest and dividend income $ 25,302 $ 23,228 ========= ======== Interest rate spread 3.24% 3.67% Net interest margin 3.79% 4.20%
(1) Income from tax-exempt securities and tax-exempt loans and leases has been restated to a tax equivalent basis using a 38.62% and 34.00% tax rate, respectively.
- ------------------------------------------------------------------------------------------------------------------------------------ CONSOLIDATED AVERAGE BALANCE SHEETS - ------------------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ INTEREST INTEREST AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ (DOLLARS IN THOUSANDS) BALANCE EXPENSE (1) RATE BALANCE EXPENSE (1) RATE - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS INTEREST EARNING ASSETS Loans and leases $1,814,156 $154,730 8.53% $ 1,458,970 $127,860 8.76% Tax-exempt loans and leases 10,984 1,136 10.34 8,925 1,019 11.42 Taxable securities 594,193 40,787 6.86 535,450 34,665 6.47 Tax-exempt securities 21,791 1,615 7.41 30,228 1,780 5.89 Other 49,608 2,281 4.60 76,468 3,930 5.14 ----------- --------- ----------- -------- Total interest earning assets 2,490,732 200,549 8.05 2,110,041 169,254 8.02 --------- -------- Noninterest earning assets 194,390 156,998 ----------- ----------- TOTAL $ 2,685,122 $ 2,267,039 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities: Savings deposits $ 668,218 15,758 2.36 $ 684,801 16,323 2.38 Time deposits 984,071 55,251 5.61 849,926 47,311 5.57 Advances from Federal Home Loan Bank of Boston 374,620 21,915 5.85 197,312 11,196 5.67 Other borrowed funds 163,554 8,328 5.09 99,863 4,753 4.76 ----------- --------- ----------- -------- Total interest bearing liabilities 2,190,463 101,252 4.62 1,831,902 79,583 4.34 ----------- ----------- Noninterest bearing liabilities: Demand deposits 214,661 176,423 Other 31,740 23,952 Shareholders' equity 248,258 234,762 ----------- ----------- TOTAL $ 2,685,122 $ 2,267,039 =========== =========== Net interest and dividend income $ 99,297 $ 89,671 ========= ======== Interest rate spread 3.43% 3.68% Net interest margin 3.99% 4.25%
(1) Income from tax-exempt securities and tax-exempt loans and leases has been restated to a tax equivalent basis using a 38.62% and 34.00% tax rate, respectively. - END - Page 4 of 4 EX-99.2 3 SETTLEMENT AGREEMENT 1 EXHIBIT 99.2 SETTLEMENT AGREEMENT This Settlement Agreement (the "Agreement") is made and entered into as of this day of January, 1998, by and among American Credit Indemnity Company, a New York Corporation ("ACI"), CFX Funding, L.L.C., a New Hampshire limited liability company ("CFX Funding"), and CFX Corporation, a New Hampshire corporation ("CFX Corp."). INTRODUCTORY STATEMENT ACI, CFX Funding, and CFX Corp. (CFX Funding and CFX Corp. are hereinafter sometimes collectively referred to as "CFX") were parties to a series of equipment lease pooling transactions (the "Transactions"), pursuant to which ACI issued credit insurance policies, such policies being described on Exhibit A attached hereto and made a part hereof. The aforesaid credit insurance policies are hereinafter collectively referred to as the "Insurance Policies". Among the documents executed in connection with the Transactions were Operating Agreements between ACI and CFX dated as of January 1, 1995, September 29, 1995, March 28, 1996 and June 28, 1996 (collectively called the "Operating Agreements"). By letter dated August 8, 1997, ACI alleged that CFX was in default in its obligations to ACI under the Operating Agreements, and threatened to take legal action to protect its 2 interests. CFX has disputed the allegations contained in such letter. In an effort to avoid litigation, the parties have agreed to resolve the dispute between them in the manner hereinafter provided. NOW THEREFORE, in consideration of the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Cash Payment. Concurrently with the execution hereof, CFX shall pay to ACI the sum of two-million five hundred thousand dollars ($2,500,000), by wire transfer to the account designated on Exhibit B attached hereto and made a part hereof. 2. Claims. (a) ACI and CFX hereby acknowledge and agree that notwithstanding the settlement being entered into between ACI and CFX pursuant to this Agreement, ACI is and shall remain responsible for paying claims under the Insurance Policies in accordance with the terms and conditions of such Insurance Policies. ACI hereby represents and warrants that it has paid all claims under the Insurance Policies presented to it prior to December 18, 1997 and acknowledges that it was reimbursed for a portion of the amounts paid on such claims from available reserves created in connection with the Transactions (hereinafter called "Reserves"); and CFX hereby acknowledges that ACI has paid all claims under the Insurance Policies presented to ACI prior to December 18, 1997, and that ACI was reimbursed for a portion of - 2 - 3 the amounts paid on such claims from Reserves. ACI and CFX hereby agree that there is to be no adjustment between them with respect to any amounts paid or reimbursed on claims made prior to December 18, 1997. (b) CFX, on behalf of itself and its successors and assigns, hereby covenants and agrees to indemnify ACI, and its successors and assigns and hold them harmless from and against any and all amounts claimed under the Insurance Policies after December 18, 1997, and in furtherance of such indemnity, CFX hereby agrees that it shall remit to ACI all of the funds required to enable ACI to pay the full amount of any and all claims made under the Insurance Policies after December 18, 1997, including claims made between December 18, 1997 and the date hereof which have not yet been paid by ACI. Accordingly, to the extent that any claims are made under the Insurance Policies after December 18, 1997, such claims shall be presented to ACI for payment in the manner set forth in the Operating Agreements and the Insurance Policies, and not more than twenty-five (25) days after the date on which such claims have been presented to ACI, CFX shall remit to ACI, by wire transfer in the manner set forth on Exhibit B hereto, the full amount of such claims. ACI shall thereafter be responsible for paying, and hereby agrees to pay such claims, in the manner required under the Insurance Policies. (c) CFX hereby agrees to remit to ACI on or before January 30, 1998, the sum of $1,903,494.48, by wire transfer in - 3 - 4 the manner set forth on Exhibit B, being the full amount of claims made under the Insurance Policies between December 18, 1997 and the date hereof, and ACI hereby agrees to pay such claims within five (5) business days after the receipt of such amount from CFX. 3. Recoveries. Notwithstanding anything to the contrary set forth in the Operating Agreements, each of the Master Pooling and Servicing Agreements relating to the Transactions, and any other agreements relating to the Transactions, the parties agree that from and after December 18, 1997, CFX shall be entitled to retain, and ACI hereby assigns to CFX, any and all Recoveries (as hereinafter defined). For purposes of this Paragraph 3, Recoveries shall mean (a) any amounts received by CFX in connection with defaulted leases, including amounts received from collection efforts, and amounts received from Reserves, (b) residuals and other amounts received in connection with terminated leases, and (c) service fees from lessors. 4. Indemnity. CFX, on behalf of itself and its successors and assigns, hereby agrees to indemnify ACI, and its successors and assigns, and defend and hold them harmless from and against any and all claims, costs, expenses or liabilities incurred by or made against ACI from and after the date hereof (including reasonable legal fees) in connection with (a) CFX's (or its agents') servicing leases pursuant to the Transactions, (b) any and all actions of CFX in connection with Recoveries, or - 4 - 5 (c) any matters relating to the Transactions arising after the date hereof, including but not limited to matters arising as a result of the sale by CFX of certain non-banking, lease related assets and the assignment by CFX of certain of its obligations as referred to in paragraph 13 (h) below (other than with regard to ACI's obligations under the Insurance Policies); provided, however, that nothing contained in this Section 4 shall apply to a breach by ACI of any of its obligations under this Agreement. 5. Joint and Several Liability. It is hereby agreed that any and all indemnities, obligations and agreements of CFX contained in this Agreement are and shall be the joint and several indemnities, obligations and agreements of CFX Funding and CFX Corp. 6. Non-Disparagement. ACI and CFX each covenant and agree to refrain from uttering, writing, or otherwise communicating negative or disparaging comments or remarks about the other to any person, firm or corporation. 7. Representations and Warranties. Each party to this Agreement represents and warrants that: (i) this Agreement constitutes the valid and binding obligation enforceable against each party in accordance with its terms; and (ii) each party has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. 8. Mutual Releases. (a) Subject to and conditioned upon the due and proper performance by CFX of all representations, warranties, - 5 - 6 covenants and agreements made or required to be performed by CFX under this Agreement, (i) ACI, on behalf of itself and its successors and assigns hereby releases, discharges and acquits CFX Funding and CFX Corp. and their respective representatives, including, without limitation, their officers, directors, shareholders, employees, agents, affiliates, predecessors, successors, subsidiaries, assigns, and attorneys of and from all claims, actions, causes of action, debts, liabilities, losses, damages, costs and expenses, of any kind or nature whatsoever, whether known or unknown, fixed or contingent, asserted or unasserted, including attorney fees, which ACI ever had, now has or hereafter may have whatsoever in law or in equity against CFX Funding or CFX Corp. arising out of or in connection with any matter, cause or thing whatsoever through the date hereof, related to, based on, or connected in any way to the Transactions. (b) Subject to and conditioned upon the due and proper performance by ACI of all representations, warranties, covenants and agreements made or required to be performed by ACI under this Agreement, (i) CFX Funding and CFX Corp., jointly and severally, on their respective behalfs and on behalf of their respective successors and assigns do hereby release, discharge and acquit ACI, and its agents, assigns, attorneys, officers, directors, shareholders, employees, affiliates, predecessors, and successors, of and from all claims, actions, causes of action, debts, liabilities, losses, damages, costs and expenses, of any - 6- 7 kind or nature whatsoever, whether known or unknown, fixed or contingent, asserted or unasserted, including attorney fees, which CFX Funding or CFX Corp. ever had, now has or hereafter may have whatsoever in law or in equity against ACI arising out of or in connection with any cause or thing whatsoever through the date hereof, related to, based on or connected in any way to the Transactions. (c) The releases contained in this Section shall not operate as a release of any claims or rights of any party hereto arising under this Agreement, shall not affect the rights and obligations of the parties under this Agreement or relieve any party from the performance of any provision hereof, and shall not affect the right of any party to enforce or make any claim or institute any action for the due and proper performance of any provision of this Agreement. 9. No Admission of Liability. The parties agree that the execution of this Agreement is not to be construed as an admission of liability by any of the parties. 10. Adequacy. The parties agree that this Agreement represents a full and complete settlement between the parties regardless of the adequacy of compensation and that the parties have no obligation to make any payment or do any act other than as set forth herein. 11. No Reliance. Each party to this Agreement represents and warrants that it has read and entered into this Agreement and has agreed to all terms and conditions set forth - 7 - 8 herein knowingly and voluntarily, after consultation with, or opportunity for consultation with, counsel and/or other professional advisers, and that none of the parties or their directors, officers, employees, or agents has made any representation or offered any inducement therefor except as expressly provided herein. 12. CFX Corp. Merger. People's Heritage Financial Group, Inc. ("PHF") has joined in as a signatory to this Agreement for the purpose of representing and warranting to ACI that (i) it has entered into a definitive agreement with CFX Corp. pursuant to which CFX Corp. has agreed to merge into PHF; and (ii) it is aware of this Agreement and the terms and conditions hereof. By executing this Agreement, PHF hereby acknowledges and agrees that upon consummation of the aforesaid merger with CFX Corp., PHF shall assume and shall be and become responsible for all of CFX Corp.'s obligations and agreements under this Agreement without the necessity of any further act or deed on the part of ACI, CFX or PHF. 13. Miscellaneous. (a) Expenses. Each party shall pay the expenses incurred on its behalf in connection with this Agreement and the underlying dispute between the parties being resolved herein. (b) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by and against the parties hereto and their successors and assigns, - 8 - 9 including, but not limited to the survivor of any merger entered into by any party hereto. (c) Survival of Covenants and Agreements. All covenants and agreements made herein shall survive the execution and delivery of this Agreement and the performance of any obligations hereunder. (d) Entire Agreement. This Agreement and the Schedules hereto constitute the entire agreement of the parties with respect to the subject matter hereof. No oral understandings, promises or inducements contrary to the terms of this Agreement exist. (e) Amendments. This Agreement may not be modified or amended except upon the execution and delivery of a written agreement executed by the parties. (f) Governing Law. This Agreement shall be governed by and construed in accordance with the substantive law of the State of Maryland without giving effect to the principles of conflict of laws thereof. Each party hereto consents to the personal jurisdiction of the federal courts in the State of Maryland in any matter arising under this Agreement. (g) Counterparts. This Agreement may be executed in several counterparts. Each such executed counterpart shall be, and shall be deemed to be, an original instrument, but all of which together shall constitute one and the same agreement. A facsimile of this Agreement with a facsimile signature shall be deemed to be an original instrument. - 9 - 10 (h) ACI hereby consents to the sale by CFX to LINC Capital, Inc. ("LINC") of certain non-banking, lease related assets, and the assignment to LINC of CFX's servicing requirements as are set forth in the Operating Agreements. Nothing herein shall affect CFX's obligations under the support agreements executed by it in connection with the Transactions, or under this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal, with the intention that it be a sealed instrument, as of the date set forth above. AMERICAN CREDIT INDEMNITY COMPANY By: [sig] (SEAL) -------------------------- CFX FUNDING, L.L.C. By: (SEAL) --------------------------- CFX CORPORATION By: (SEAL) --------------------------- PEOPLE'S HERITAGE FINANCIAL GROUP, INC. By: (SEAL) --------------------------- - 10 - 11 Exhibit A WAREHOUSE POLICIES - ------------------ I-262,068-3 I-285,403-9 I-288,622-7 I-335,224-4 I-340,653-1 POOL POLICIES - ------------- CFX 1995-A D-267,877-7 CFX 1995-B D-332,277-4 CFX 1996-A D-335,386-7 CFX 1996-B D-336,618-1 12 EXHIBIT B Wire instructions to send a wire to ACI via First National Bank of Maryland American Credit Indemnity First National Bank of Maryland Account number: #050-8150-4 Routing number: #052000113 Reference: CFX -----END PRIVACY-ENHANCED MESSAGE-----