-----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, L8V+NR13CKKbjFxes5riaaR0kQi2CH8UiTHuN3lvGDUmUaTNT71oxkEhwT/rvCN+ Jq6rsnUgJ5WiPy6Z8yQVcg== 0000950133-97-003262.txt : 19970918 0000950133-97-003262.hdr.sgml : 19970918 ACCESSION NUMBER: 0000950133-97-003262 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19970829 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19970915 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: 97680558 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 OF 1934 Date of Report (Date of earliest event reported): August 29, 1997 CFX CORPORATION --------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New Hampshire 1-10633 02-0402421 ---------------------------- ------------ ---------------------- (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 offices) (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 2. Acquisition or Disposition of Assets. Consummation of Acquisitions On August 29, 1997, CFX Corporation ("CFX") consummated the following previously announced transactions: (1) the acquisition of Portsmouth Bank Shares, Inc., a New Hampshire corporation ("Portsmouth"), and its subsidiary, Portsmouth Savings Bank, a New Hampshire state- chartered savings bank ("Portsmouth Bank"), through (a) an exchange of shares of CFX common stock, par value $0.66 2/3 per share ("CFX Common Stock"), for issued and outstanding shares of Portsmouth common stock, par value $0.10 per share, including any shareholders' rights attached thereto ("Portsmouth Common Stock"), (b) the merger of Portsmouth with and into CFX, and (c) the merger of Portsmouth Bank with and into CFX Bank, a New Hampshire state-chartered savings bank subsidiary of CFX (collectively, the "Portsmouth Acquisition"); and (2) the acquisition of Community Bankshares, Inc., a New Hampshire corporation ("Community"), and its bank subsidiaries, Concord Savings Bank, a New Hampshire state- chartered savings bank, and Centerpoint Bank, a New Hampshire state-chartered commercial bank (collectively, the "Community Banks") through (a) an exchange of shares of CFX Common Stock for issued and outstanding shares of Community common stock, par value $1.00 per share, including any shareholders' rights attached thereto ("Community Common Stock"), (b) the merger of Community with and into CFX, and (c) the merger of the Community Banks with and into CFX Bank (collectively, the "Community Acquisition" and, together with the Portsmouth Acquisition, the "Acquisitions"). The consummation of the Acquisitions is discussed in a press release filed herewith as Exhibit 99.1. Portsmouth Acquisition In the Portsmouth Acquisition, each of the 5,907,242 outstanding shares of Portsmouth Common Stock was exchanged for 0.9314 shares of CFX Common Stock and cash in lieu of fractional shares. At June 30, 1997, Portsmouth had total assets of approximately $259 million and total deposits of approximately $190 million. The transaction was accounted for as a pooling of interests. Upon the closing, in accordance with the Agreement and Plan of Reorganization dated as of February 13, 1997 - 2 - 3 by and among CFX, CFX Bank, Portsmouth and Portsmouth Bank (the "Portsmouth Reorganization Agreement"), Robert W. Simpson, Mark E. Simpson and Timothy J. Connors, formerly directors of Portsmouth, were appointed to CFX's board of directors (the "CFX Board"), and Mark E. Simpson and Harry P. Jarvis, formerly directors of Portsmouth Bank, were appointed to CFX Bank's board of trustees (the "CFX Bank Board"). The Portsmouth Reorganization Agreement was previously filed as Exhibit 2 to CFX's Schedule 13D filed on February 21, 1997 with respect to Portsmouth Common Stock, and was previously incorporated by reference to such Schedule 13D in CFX's Current Report on Form 8-K filed on February 21, 1997. Community Acquisition In the Community Acquisition, each of the 2,510,314 outstanding shares of Community Common Stock was exchanged for 2.113 shares of CFX Common Stock and cash in lieu of fractional shares. At June 30, 1997, Community had total assets of approximately $616 million and total deposits of approximately $429 million. The transaction was accounted for as a pooling of interests. Upon the closing, in accordance with the Agreement and Plan of Reorganization dated as of March 24, 1997 by and among CFX, CFX Bank, Community and the Community Banks (the "Community Reorganization Agreement"), Douglas Crichfield, John N. Buxton and Seth A. Resnicoff, formerly directors of Community, were appointed to the CFX Board, Douglas Crichfield, Robert A. Hill and Lucia T. Kittredge, formerly directors of Community, were appointed to the CFX Bank Board, and Douglas Crichfield was appointed an Executive Vice President of CFX and the President and Chief Executive Officer of CFX Bank. The Community Reorganization Agreement was previously filed as Exhibit 2.2 to CFX's Annual Report on Form 10-K for the year ended December 31, 1996. Item 5. Other Events. As previously reported in CFX's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, in connection with the Acquisitions, the shareholders of CFX, at the annual meeting held on July 30, 1997, approved an amendment to CFX's Articles of Incorporation (the "CFX Articles") to increase the number of authorized shares of CFX Common Stock from 22,500,000 to 50,000,000 (the "Charter Amendment"). To - 3 - 4 implement the Charter Amendment, CFX filed Articles of Amendment to the CFX Articles with the New Hampshire Secretary of State on August 20, 1997. The Articles of Amendment are filed herewith as Appendix 3.1. The CFX Articles, reflecting the Charter Amendment, are filed herewith as Exhibit 3.2. In connection with the Community Acquisition, CFX entered into a three-year employment contract with Douglas Crichfield which is filed herewith as Exhibit 10.1. CFX also entered into new three-year employment contracts with Peter J. Baxter, President and Chief Executive Officer of CFX, Mark A. Gavin, Executive Vice President and Chief Operating Officer of CFX, and Christopher W. Bramley, Executive Vice President of CFX, which are filed herewith as Exhibits 10.2 through 10.4, respectively. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements. (1) Audited consolidated financial statements of Portsmouth (File No. 0-16510) as of December 31, 1996 and 1995 and for each of the years ended December 31, 1996, 1995 and 1994, and the independent auditor's report thereon, included in Portsmouth's Annual Report on Form 10-K for the year ended December 31, 1996, are incorporated herein by reference to such Portsmouth Annual Report on Form 10-K. (2) Unaudited consolidated interim financial statements of Portsmouth as of June 30, 1997 and for the six months ended June 30, 1997 and 1996 are incorporated herein by reference to Portsmouth's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997. (3) Audited consolidated financial statements of Community (File No. 0-14620) as of December 31, 1996 and 1995 and June 30, 1995, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the year ended December 31, 1996, the six months ended December 31, 1995 and for each of the years in the two-year period ended June 30, 1995, and the independent auditor's report thereon, included in Community's Annual Report on Form 10-K for the year ended December 31, 1996, are incorporated herein by reference to such Community Annual Report on Form 10-K. - 4 - 5 (4) Unaudited consolidated interim financial statements of Community as of June 30, 1997 and for the six months ended June 30, 1997 and 1996 are incorporated herein by reference to Community's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997. (b) Pro Forma Financial Information. (1) Unaudited pro forma combined financial information as of December 31, 1996 and for each of the years ended December 31, 1996, 1995 and 1994, giving effect to the Acquisitions, included on pages 44-50 of the definitive proxy statement for the CFX annual meeting of shareholders held on July 30, 1997 filed under cover of CFX's definitive Schedule 14A filed on June 16, 1997 is incorporated herein by reference to such CFX Schedule 14A. (2) Unaudited pro forma combined financial information as of June 30, 1997 and for the six months ended June 30, 1997 and 1996, giving effect to the Acquisitions, is filed herewith as Exhibit 99.2. (c) Exhibits. The exhibits listed in the Exhibit Index are filed herewith. - 5 - 6 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, CFX has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CFX CORPORATION Date: September 15, 1997 By: /s/ Gregg R. Tewksbury ------------------------- Gregg R. Tewksbury Chief Financial Officer - 6 - 7 EXHIBIT INDEX
Location in Sequentially Numbered Copy ------------- 3.1 Articles of Amendment to CFX's 8 Articles of Incorporation. 3.2 Articles of Incorporation of CFX, 11 as amended. 10.1 Employment Agreement dated as of 22 August 29, 1997 by and between CFX and Douglas Crichfield. 10.2 Employment Agreement dated as of 37 August 12, 1997 by and between CFX and Peter J. Baxter. 10.3 Employment Agreement dated as of 53 August 11, 1997 by and between CFX and Mark A. Gavin. 10.4 Employment Agreement dated as of 69 August 14, 1997 by and between CFX and Christopher W. Bramley. 23.1 Consent of Shatswell, MacLeod & Co. 85 23.2 Consent of KPMG Peat Marwick LLP. 86 23.3 Consent of Wolf & Company, P.C. 87 99.1 Press Release dated August 29, 1997. 88 99.2 Unaudited pro forma combined financial 89 information as of June 30, 1997 and for the six months ended June 30, 1997 and 1996, giving effect to the Acquisitions.
- 7 - EX-3.1 2 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION 1 EXHIBIT 3.1 STATE OF NEW HAMPSHIRE Filing fee: $ 35.00 Form No. 14 Use black print or type. RSA 293-A:10.06 Leave 1" margins both sides. ARTICLES OF AMENDMENT to the ARTICLES OF INCORPORATION PURSUANT TO THE PROVISIONS OF THE NEW HAMPSHIRE BUSINESS CORPORATION ACT, THE UNDERSIGNED CORPORATION ADOPTS THE FOLLOWING ARTICLES OF AMENDMENT TO ITS ARTICLES OF INCORPORATION: FIRST: The name of the corporation is CFX Corporation. SECOND: The text of each amendment adopted is: RESOLVED: That, in order to increase the number of authorized shares of the Company's Common Stock $.66 2/3 par value, from 22,500,000 shares to 50,000,000 shares, the Board of Directors hereby proposes and recommends for the approval of the shareholders of the Company the amendment of Article Four of the Company's Articles of Incorporation to read as follows: "FOURTH: The aggregate number of shares which the corporation shall have the authority to issue is: Fifty-three million (53,000,000), consisting of 1. Three Million (3,000,000) shares of preferred stock, one dollar ($1.00) par value per share; and 2. Fifty Million (50,000,000) shares of common stock, sixty-six and two thirds cents ($.66 2/3) par value per share. (See Also Appendix I)" THIRD: The amendment does not provide for an exchange, reclassification, or cancellation of issued shares. FOURTH: The amendments were adopted on July 30, 1997. - 8 - 2 FIFTH: (Check one) A. _____ The amendments were adopted by the incorporators or board of directors without shareholder action and shareholder action was not required. B. X The amendments were approved by the shareholders. _____
Designation Number of Votes (class or series) Number of indisputably of voting Number of votes entitled represented at group shares outstanding to be cast the meeting - ---------------- ------------------- ---------------- --------------- Common Stock 13,005,793 13,005,793 11,023,641 $.66 2/3 par value Designation (class or series) Total number of of voting Total number of votes cast:* OR undisputed group FOR AGAINST votes cast FOR - ----------------- --- ------- --------------- Common Stock 10,225,941 705,875 --- $.66 2/3 par value
*Abstained: 91,825 SIXTH: The number cast for the amendments by each voting group was sufficient for approval by each voting group. Dated: August 20, 1997 CFX CORPORATION ------------------------- By /s/ Peter J. Baxter ------------------------ Signature of its President Peter J. Baxter -------------------------- Print or type name Notes: 1. All sections under "B." must be completed. If any voting group is entitled to vote separately, give respective information for each voting group. (see RSA 293-A:1.40 for definition of voting group.) 2. Exact corporate name of corporation adopting articles of amendment. - 9 - 3 3. Signature and title of person signing for the corporation. Must be signed by the chairman of the board of directors, president or another officer; or see RSA 293-A:1.20(f) for alternative signatures. Mail fee and ORIGINAL and ONE EXACT OR CONFORMED COPY to: Secretary of State, State House, Room 204, 107 North Main Street, Concord, NH 03301-4989 - 10 - EX-3.2 3 ARTICLES OF INCORPORATION AS AMENDED 1 EXHIBIT 3.2 ARTICLES OF INCORPORATION OF CFX CORPORATION THE UNDERSIGNED, ACTING AS INCORPORATOR(S) OF A CORPORATION UNDER THE NEW HAMPSHIRE BUSINESS CORPORATION ACT, ADOPT(S) THE FOLLOWING ARTICLES OF INCORPORATION FOR SUCH CORPORATION: FIRST: The name of the corporation is CFX Corporation. SECOND: The period of its duration if such period is other than perpetual: _________. THIRD: The corporation is empowered to transact any and all lawful business for which corporations may be incorporated under RSA 293-A and the principal purpose or purposes for which the corporation is organized are: 1. Generally conducting the business and carrying on the activities of a bank holding company, as defined in the Bank Holding Company Act of 1956, as amended. 2. Acquiring an interest in or control of banks, savings banks, financial institutions and other corporations or associations of every kind and description through ownership of stock; acquiring such stock by purchase, exchange for its own securities or otherwise; exercising all of the rights, powers and privileges of such stock. FOURTH: The aggregate number of shares which the corporation shall have the authority to issue is: Fifty-three million (53,000,000), consisting of 1. Three Million (3,000,000), shares of preferred stock, one dollar ($1.00) par value per share (hereinafter the "Preferred Stock"); and 2. Fifty Million (50,000,000), shares of common stock, sixty-six and two thirds cents (66 2/3 ) par value per share (hereinafter the "Common Stock"). [The following portion of Article FOURTH appears in Appendix I to the Articles of Incorporation.] Shares of Preferred Stock may be issued from time to time in one or more series as may be determined by the Board of Directors. Each series is to be distinctly designated to distinguish the shares in the series from the shares of all other series and - 11 - 2 classes. The relative rights and preferences of the Preferred Stock and the variations of rights and preferences between different series of Preferred Stock may be fixed and determined by the Board of Directors by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock. All shares of Preferred shall be identical except as to the following relative rights and preferences, as to which there may be variations between different series: (a) The rate of dividend; (b) Whether shares may be redeemed and, if so, the redemption price and the terms and conditions of redemption; (c) The amount payable upon shares in event of voluntary and involuntary liquidation; (d) Sinking fund provisions, if any, for the redemption or purchase of shares; (e) The terms and conditions, if any, on which shares may be converted; or (f) Voting rights, if any. The authorized shares of Common Stock may be issued by the Corporation from time to time by vote of the Board without approval of the holders of the Common Stock. Upon payment of lawful consideration, such shares shall be deemed to be fully paid and nonassessable. Except as the Board shall have otherwise specified or except as otherwise provided by law, voting power shall be vested exclusively in the Common Stock. The holders of the Common Stock shall be entitled to one vote for each share of Common Stock owned. Dividends, as declared by the Board out of lawfully available funds, shall be payable on the Common Stock subject to any rights or preferences of the Preferred Stock. Upon any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Common Stock are entitled to receive pro rata the remaining assets of the Corporation after the holders of Preferred Stock have been paid in full any sums to which they may be entitled. There shall be no cumulative voting for Directors or otherwise. FIFTH: The capital stock will be sold or offered for sale within the meaning of RSA 421-B. (New Hampshire Securities Act) SIXTH: Provisions, if any, for the limitation or denial of preemptive rights: - 12 - 3 None of the shares of the Corporation shall carry any preemptive or preferential rights of subscription with respect to any shares of any class or series of stock of the Corporation or any warrants to purchase such shares or securities convertible into such shares, whether now or hereafter authorized. SEVENTH: Provisions for the regulation of the internal affairs of the corporation are: [The following portion of Article SEVENTH appears in Appendix II to the Articles of Incorporation.] Section 1. (a) Number, Qualifications and Term of Office. Subject to the provisions hereof relating to the initial Board, the number of directors of the Corporation shall be no less than 9 and no more than 21. The exact number of Directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board pursuant to a resolution adopted by a majority of the entire Board. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director. At the 1987 annual meeting of Shareholders, the Directors shall be divided into three classes as nearly equal in number as possible with the term of office of the first class to expire at the 1988 annual meeting of Shareholders, the term of office of the second class to expire at the 1989 annual meeting of Shareholders and the term of office of the third class to expire at the 1990 annual meeting of the Shareholders. At each annual meeting of Shareholders following such initial classification and election, Directors elected to succeed those Directors whose terms expire shall be elected for a three year term of office to expire at the third succeeding annual meeting of Shareholders after their election. Directors need not be Shareholders or residents of the Sate of New Hampshire. (b) Vacancies. Any vacancy in the Board caused by death, resignation, retirement, disqualification, removal, or other cause, shall be filled by a majority vote of the remaining Directors, though less than a quorum. A Director so chosen shall hold office for the unexpired term of their predecessors in office. Any Directorship to be filled by reason of an increase in the authorized number of directors may be filled by the Board for a term of office continuing only until the next election of Directors by the Shareholders. (c) Removal of Directors. At any meeting of Shareholders called expressly for the purpose, any Director may be removed from office by the affirmative vote of holders of seventy-five percent (75%) of the shares entitled to vote or if removal is for cause, then by a majority of the shares then entitled to vote. For "cause" shall mean a final adjudication by a court of competent - 13 - 4 jurisdiction that the Director (i) is liable for negligence for misconduct in the performance of his duty, (ii) guilty of a felony conviction, or (iii) has failed to act or has acted in a manner which is in derogation of the Director's duties. (d) Nomination of Directors. In addition to the right of the Board to make nominations for the election of Directors, nominations for the election of Directors may be made by any Shareholder entitled to vote for the election of Directors if that Shareholder complies with all of the following provisions: a. Advance notice of such proposed nomination shall be received by the Secretary of the Corporation, not less than thirty (30) days nor more than sixty (60) days prior to any meeting of the Shareholders called for the election of Directors; provided, however, that if fewer than fourteen (14) days' notice of the meeting is given to Shareholders, such written notice of a proposed nomination shall be received not later than the close of the tenth day following the day on which the notice of the meeting was mailed to Shareholders. b. Each notice shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee; and (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee. In addition, the Shareholder making such nomination shall promptly provide any other information reasonably requested by the Corporation. c. The nomination made by a Shareholder may only be made in a meeting of the Shareholders of the Corporation called for the election of Directors at which such Shareholder is present in person or by proxy, and can only be made by a Shareholder who has complied with the notice provisions of (a) and (b) above. d. The Chairman of the meeting may in his discretion determined and declare to the meeting that a nomination was not made in accordance with the foregoing procedures, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. - 14 - 5 Section 2. Voting For Business Combinations (a) Neither the Corporation nor any subsidiary of which the Corporation owns at least a majority of the equity securities ordinarily entitled to vote for the election of Directors, ("Subsidiary") shall be a party to any of the transactions speci- fied herein (a "Business Combination") or enter into any agreement providing for any Business Combination unless the conditions specified in (b), (c) and (d) below shall have been satisfied: (i) any merger or consolidation (whether in a single transaction or a series of related transactions) other than a merger or consolidation of the Corporation and any of its subsidiaries or a merger or consolidation of any subsidiaries of the Corporation; or (ii) any sale, lease, exchange, transfer or distribution of all or substantially all or a substantial portion of the property or assets of the Corporation or any of its subsidiaries, including its goodwill; or (iii) the issuance of any securities, or of any rights warrants or options to acquire any securities of the Corporation or any of its subsidiaries, to any Shareholders other than by stock dividend declared and paid to all Shareholders of the Corporation or pursuant to an employee stock ownership plan or an employee stock option plan established by the Corporation; or (iv) any reclassification of the stock of the Corpo- ration or any of its subsidiaries or any recapitalization or other transaction (other than a redemption of stock) which has the effect, directly or indirectly, of increasing the proportionate share of stock of the Corporation or any of its subsidiaries held by any person; or (v) the dissolution of the Corporation or any subsidiary thereof or any partial or complete liquidation of the Corporation or any subsidiary thereof. (b) The vote of the holders of at least eighty percent (80%) of the outstanding shares entitled to vote for the election of Directors shall be required to approve or authorize any Business Combination to which the Corporation or any Subsidiary is a party unless the aggregate of the cash and fair market value of the consideration to be paid to all the holders of the Common Stock of - 15 - 6 the Corporation in connection with the Business Combination (when adjusted for stock splits, stock dividends, reclassification of shares or otherwise) shall be equal to the highest price per share paid by the other party or parties to the Business Combination (the "Acquiring Party") in acquiring any of the Corporation's Common Stock; provided, however, that the consideration to be paid to the holders of the Common Stock of the Corporation shall be in the same form as that paid by the Acquiring Party in acquiring the shares of the Common Stock held by it except to the extent that any Stockholder of the Corporation shall otherwise agree. (c) Subject to the provisions in (b) above, the vote of the holders of at least seventy-five percent (75%) of the outstanding shares entitled to vote for the election of Directors shall be required to approve or authorize any Business Combination to which the Corporation or any Subsidiary is a party unless the Business Combination shall have been approved by at least two-thirds (2/3) of the Directors of the Corporation who are not affiliated with, or Shareholders of, the Acquiring Party. In connection with the exercise of its judgment in determin- ing what is in the best interests of the Corporation and of the Shareholders, when evaluating a Business Combination or a proposal by another person or persons to make a Business Combination or a tender or exchange offer, the Board may, in addition to considering the adequacy of the amount to be paid in connection with any such transaction, consider all of the following factors and any other factors which it deems relevant: (i) the social and economic effects of the transaction on the Corporation and its subsidiaries, employees, depositors, loan and other customers, creditors and other elements of the communities in which the Corporation and its subsidiaries operate or are located; (ii) the business and financial condition and earnings prospects of the acquiring person or persons, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the acquisition, and other likely financial obligations of the acquiring person or persons, and the possible effect of such conditions upon the Corporation and its subsidiaries and the other elements of the communities in which the Corporation and its subsidiaries operate or are located; and (iii) the competence, experience and integrity of the acquiring person or persons and its or their management. (d) In the event that all of the conditions set forth in (b) and (c) above are met, the Corporation or any Subsidiary may enter into any Business Combination under the terms and conditions specified in the New Hampshire Business Corporation Act. (e) The affirmative vote of the holders of at least eighty percent (80%) of all of the shares of the Corporation entitled to - 16 - 7 vote for the election of Directors shall be required to amend or repeal, or to adopt any provision in contravention of or incon- sistent with this Section 2, notwithstanding the fact that a lesser percentage may be specified by law. Section 3. Special Meetings and Consent Meetings Special meetings of the Shareholders may be called by the Chairman, President, the Board, or by the Secretary upon written request of the holders of not less than ten percent (10%) of all the shares entitled to vote. Section 4. Acquisition of Stock (a) Restrictions on Offers and Acquisitions. For a period of five (5) years from the effective date of the conversion, no person shall directly or indirectly offer to acquire or acquire the beneficial ownership of (i) more than ten percent (10%) of the issued and outstanding shares of any class of an equity security of the Corporation; (ii) more than ten percent (10%) of any class of securities convertible into, or exercisable for, any class of an equity security of the Corporation; (iii) any securities convertible into, or exercisable for, any equity securities of the Corporation if assuming conversion or exercise by such person of all securities of which such person is the beneficial owner which are convertible into, or exercisable for, such equity securities (but of no securities convertible into, or exercisable for, such equity securities of which such person is not the beneficial owner), such person would be the beneficial owner of more than ten percent (10%) of any class of an equity security of the Corporation. For the same five year period, each share beneficially owned in violation of the foregoing percentage limitation, as determined by the Board, shall not be voted by any person or counted as voting shares in connection with any matter submitted to the shareholders for a vote. For the purposes of this Section 4: (i) The term "person" shall mean and include any in- dividual, group acting in concert, corporation, partnership, or other organization or entity, together with its affiliates and associates; and (ii) The term "offer" includes every offer to buy or acquire, solicitation of an offer to sell, tender offer for, or request or invitation for tenders of, a security (including, without limitation, shares - 17 - 8 of any class of capital stock of the Corporation) or interest in a security for value. (iii) The term "conversion" shall mean the completed process whereby Cheshire County Savings Bank will be converted from a New Hampshire-chartered mutual savings bank to a New Hampshire-chartered stock savings bank and Cheshire Financial Corporation shall become the holding company for Cheshire County Savings Bank. (b) Exclusion for Underwriters, Directors, Officers and Employees. The restriction contained in this Section 4 shall not apply to any offer with a view toward public resale made exclu- sively to the Corporation or the underwriters or a selling group acting on its behalf. In addition, the Directors, Officers and employees of the Corporation or any subsidiary thereof shall not be deemed to be a group with respect to their individual acquisi- tion of equity stock of the Corporation. (c) Readoption of Restriction by Shareholders. This Section 4 may be readopted for additional one-year or longer periods by vote of the holders of a majority of the outstanding voting shares present or represented at a duly convened annual or special meeting of Shareholders of the Corporation. (d) Exception in Cases of Advance Approval. This Section 4 shall not apply to any offer or acquisition referred to in (a) above if such offer or acquisition was approved in advance of such offer or acquisition by two-thirds (2/3) of the entire Board utilizing the standard set forth in Section 2(c). (e) Enforcement of this Section 4. The Corporation may by law or by resolution of the Directors adopt such provisions or resolutions as are necessary to provide for the enforcement of this Section 4. (f) Amendments of this Section 4. Notwithstanding any other provisions of these Articles of Incorporation or the By-Laws of the Corporation, and notwithstanding the fact that some lesser percentage may be specified by law, this Section 4 shall not be amended, altered, changed or repealed without: a. the affirmative vote of two-thirds (2/3) of the Board; and b. the affirmative vote by the holders of at least two-thirds (2/3) of the outstanding shares entitled to vote. - 18 - 9 This vote shall be in addition to any vote of the Preferred Stock as may be required by the provisions of any series thereof or by applicable law. The readoption of Section 4 for additional one-year or longer periods, as provided in (c) above, shall not be an amendment, alteration or change for the purposes of this paragraph. Section 5. Amendments (a) Amendments to Articles of Incorporation. Except as otherwise provided for in the Articles above, the affirmative vote of the holders of at least two-thirds of all of the shares of the Corporation entitled to vote for the election of Directors, shall be required to amend or repeal, or to adopt any provision in contravention of or inconsistent with these Articles notwithstanding the fact that a lesser percentage may be specified by law. (b) Amendments to By-Laws. The By-Laws of the Corporation may be amended at any time by the affirmative vote of a majority of the entire Board, subject to repeal, change or adoption of any contravening or inconsistent provision only by vote of the holders of at least two-thirds (2/3) of all the shares entitled to vote on the matter at a meeting expressly called for that purpose. Section 6. Liability Limitations for Officers and Directors. No person who serves the Corporation as a director, an officer, or both, shall have any personal liability to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as such director, officer, or both, except with respect to: (1) any breach of the director's and/or officer's duty of loyalty to the Corporation or its shareholders; (2) acts or omissions which are not in good faith or which involve intentional misconduct or a knowing violation of law; (3) actions for which a director may be liable under New Hampshire RSA 293-A:48, as amended; or (4) any transaction from which the director, officer, or both, derived an improper personal benefit. The foregoing provision shall not be construed to eliminate or limit the liability of a director, an officer, or both, for any act or omission occurring prior to the date on which the Articles of Incorporation of the Corporation were amended to include this Section. Any repeal or modification of this section by the - 19 - 10 shareholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director or officer of the Corporation for acts or omissions occurring prior to the effective date of such repeal or modification. EIGHTH: The address of the initial registered office of the corporation is 194 West Street, Keene, New Hampshire 03431 and the name of its initial registered agent at such address is Howard B. Lane, Jr., Esq. NINTH: The number of directors constituting the initial board of directors of the corporation is 12, and the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected and shall qualify are: Name Address Richard B. Baybutt 664 West Street Keene, NH 03431 Mario G. Farina 133 School Street Keene, NH 03431 Calvin L. Frink West Surry Road Keene, NH 03431 Eugene E. Gaffey 225 Pear Street Chairman Keene, NH 03431 Kenneth W. Hazen 15 West Surry Road Keene, NH 03431 Philip D. Koerner P.O. Box 338 Dublin, NH 03444 Howard B. Lane, Jr., 61 Park Avenue Vice Chairman Keene, NH 03431 Emerson H. O'Brien Four Seasons Spofford, NH 03462 Howard A. Roberts 99 Jordan Road Keene, NH 03431 L. William Slanetz 471 Chapman Road Keene, NH 03431 - 20 - 11 David B. Walters 12 Greenbriar Road Keene, NH 03431 William H. Dennison 23 Shadow Lane Keene, NH 03431 TENTH: The name and address of each incorporator is: Howard B. Lane, Jr., 61 Park Avenue, Keene, New Hampshire 03431. - 21 - EX-10.1 4 EMPLOYMENT AGREEMENT DATED 8/29/97 1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement"), made as of the 29th day of August, 1997 (the "Effective Date"), is by and between CFX Corporation (the "Company"), a New Hampshire corporation with principal executive offices at 102 Main Street, Keene, New Hampshire 03431, and Douglas Crichfield, residing at 20 Stark Hill Highway North, Dunbarton, New Hampshire 03045 (the "Executive"). RECITALS WHEREAS, the Company, through its Board of Directors (the "Board"), considers the maintenance of competent and experienced executive officers to be essential to its long-term success; WHEREAS, in this regard, the Company has determined that it is in its best interests that the Executive continue to serve as Executive Vice President of the Company, pursuant to a written employment agreement; NOW, THEREFORE, in furtherance of the interests described above and in consideration of the respective covenants and agreements herein contained, the parties hereto agree as follows: 1. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: (a) "Applicable Interest" means interest at the rate provided in Section 1274(b)(2)(B) of the Code. (b) "Cause" means the occurrence of any of the following: (i) the willful and continued failure of the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the President which specifically identifies the manner in which the President believes that the Executive has not substantially performed the Executive's duties; (ii) the willful engaging by the Executive in illegal conduct (excluding traffic violations, minor misdemeanors or similar offenses) or gross misconduct that, in the - 22 - 2 Board's reasonable opinion, may reflect adversely on the business or reputation of the Company; (iii) the removal and/or permanent prohibition of the Executive from participation in the conduct of the affairs of the Company or any of its subsidiary banks by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or 1818(g)(1); (iv) the issuance by any court having appropriate jurisdiction of an order under Section 21(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 15 U.S.C. 78u(d)(2), prohibiting the Executive from acting as an officer or director of the Company; or (v) the conviction of the Executive for commission of a felony. (c) "Change in Control" means the occurrence of any of the following events: (i) there shall be consummated any consolidation, merger, stock-for-stock exchange or similar transaction (collectively, "Merger Transactions") involving securities of the Company in which the holders of voting securities of the Company immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of the Company (or, if the Company does not survive the Merger Transaction, voting securities of the corporation surviving such transaction) having less than 50% of the total voting power in an election of directors of the Company (or such other surviving corporation), excluding securities received by any members of such group which represent disproportionate percentage increases in their shareholdings vis-a-vis the other members of such group; (ii) any individual, corporation (other than the Company), partnership, trust, association, pool, syndicate, or any other entity or any group or persons acting in concert (other than an employee benefit plan of the Company or one of its affiliates) becomes the beneficial owner (as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act) as a result of any one or more securities transactions, including gifts and stock repurchases but excluding any Merger Transactions, of securities of the Company possessing one-third or more of the voting power for the election of directors of the Company; (iii) during any period of twenty-four consecutive months, individuals who at the beginning of such period constituted the Board (including for this purpose any new director - 23 - 3 whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or (iv) there shall be consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions, excluding any Merger Transactions), of all, or substantially all, of the assets of the Company to a party which is not controlled by or under common control with the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Company Bonus Plan" means any bonus, stock option, profit-sharing or other cash- or equity-based incentive plan offered by the Company. (f) "Company Benefit Plan" means any pension (including without limitation tax-qualified), thrift, deferred compensation, stock purchase, life insurance, medical, dental, education, accident, disability, welfare, retirement or other employee benefit plan offered by the Company other than a Company Bonus Plan. (g) "Designated Office" means 102 Main Street, Keene, New Hampshire 03431, or such other office of the Company designated by the President from time to time other than in anticipation of, or following a Change in Control. (h) "President" means the President of the Company. (i) "Triggering Event" means the occurrence of any of the following events: (i) the termination by the Company of the employment of the Executive for any reason other than Cause; (ii) the assignment to the Executive without his consent of any duties inconsistent in any material respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, or any other action by the Company which results in a diminution in any material respect in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that - 24 - 4 is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) in anticipation of, or following a Change in Control, the requirement by the Company that the Executive be based at any office or location that is more than 75 miles from the Designated Office; (iv) after the Effective Date, the failure of the Company without the Executive's consent to: (A) continue in effect any Company Bonus Plan in which the Executive participates that is material to the Executive's total compensation, unless a substantially equivalent arrangement, embodied in an ongoing substitute or alternative plan, has been made with respect to such Company Bonus Plan; (B) continue the Executive's participation in any Company Bonus Plan and eligibility for bonuses thereunder, or in any substitute or alternative plan, on a basis at least as favorable as that existing at the date hereof, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants; or (C) continue to provide the Executive with benefits comparable to those received by the Executive under any Company Benefit Plan in which the Executive was participating, at participation costs substantially similar to those paid by the Executive; provided, however, that it shall not be deemed a Triggering Event if the Board, for bona fide business purposes and not in anticipation of or following a Change in Control, modifies the terms or conditions of any Company Bonus Plan or Company Benefit Plan, so long as such modifications have or would have a substantially similar effect upon all executive employees or all employees of the Company who participate or who are eligible to participate in the plan. (v) the Company issues a Non-Renewal Notice to the Executive as provided in Section 2 of this Agreement; (vi) the Company shall have materially breached any provision of this Agreement and such breach shall not have been cured within 15 days after delivery of written notice thereof to the President by the Executive, identifying the breach with reasonable particularity; or (vii) a reduction by the Company in the Executive's base annual salary as in effect on the date hereof, as - 25 - 5 the same may be increased from time to time as provided for in this Agreement. (j) "Willful" means that an action, conduct or deed is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon the instructions or prior approval of the Board or the President or based upon the advice of counsel for the Company, shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. 2. Employment Term. The initial term of employment under this Agreement shall be for a period of three years commencing on the Effective Date. This Agreement shall be extended automatically for one additional year on each annual anniversary date of the Effective Date unless either the Company, through the President, or the Executive gives contrary written notice (the "Non-Renewal Notice") to the other not less than three months in advance of such anniversary date. References herein to the term of this Agreement shall refer both to such initial term and such successive terms. 3. Employment. During the term of employment provided for in this Agreement, the Company agrees to employ the Executive in the office or position set forth in the second Recital of this Agreement, and the Executive agrees to serve in such office or position and to perform the duties and discharge the responsibilities associated therewith or such other duties and responsibilities as may reasonably be assigned to the Executive from time to time by the President. The Executive shall devote all his working time and efforts to the business and affairs of the Company and its subsidiaries, provided, however, that the Executive may, with the approval of the President, serve as a director or officer of any non-competing business or engage in any other activity, including without limitation charitable or community activity, to the extent that it does not inhibit the performance of his duties hereunder. 4. Office and Services. In connection with the Executive's employment hereunder, the Executive shall be based at the Designated Office, except for required travel on the Company's business. The Company shall furnish the Executive with office space, stenographic assistance, and such other facilities and services as shall be suitable to the Executive's position and adequate for the performance of his duties hereunder. - 26 - 6 5. Compensation. The regular compensation and benefits payable to the Executive under this Agreement shall include the following: (a) Salary. The Company shall pay the Executive a base annual salary hereunder of not less than $185,000, payable in equal semimonthly installments or at such other intervals as shall be agreed upon by the parties. The Executive's base annual salary may be increased from time to time as determined by the President and, if so increased, such base annual salary shall not thereafter during the Executive's employment under this Agreement be decreased and the obligation of the Company hereunder to pay the Executive's base annual salary shall thereafter relate to such increased base annual salary. (b) No Separate Board Compensation. The Executive shall not be entitled to receive any fees or additional payments for serving as a member of the Board, as a member of any committee of the Board, or as a member of any board of directors (or the equivalent thereof) or any committee thereof of any subsidiary of the Company. (c) Discretionary Bonuses. During the term of this Agreement, the Executive shall be eligible to participate in an equitable manner with other executive employees of the Company and its subsidiaries in any Company Bonus Plan or in other discretionary bonuses authorized and declared by the Board, and the board of directors (or the equivalent thereof) of the Company's subsidiaries, or by their respective delegees. (d) Participation in Benefit Plans. In addition to any compensation and benefits provided for in this Agreement, the Executive shall be eligible to participate in any Company Benefit Plan or any other employee fringe benefits offered by the Company or its subsidiaries for the benefit of executive employees or all employees generally in which the Executive is eligible to participate. The Executive's participation in any such Company Benefit Plan shall be subject to all generally applicable eligibility requirements thereof and shall not in any way limit or reduce the obligation of the Company to pay the Executive's base annual salary hereunder (except pursuant to, in accordance with, or as required by the generally applicable terms of participation of any such Company Benefit Plan). (e) Vacation. The Executive shall be entitled to a minimum annual paid vacation during the term of this Agreement of four weeks per year or such longer period as the President may approve. - 27 - 7 (f) Reimbursement of Business Expenses. The Company shall promptly reimburse the Executive for all reasonable travel and other business expenses incurred by him in the performance of his duties and responsibilities, subject to such reasonable requirements with respect to substantiation and documentation as may be specified by the Company. 6. Termination Procedures. (a) Termination Notice. If the Executive's employment by the Company is terminated for any reason during the term of this Agreement (other than by reason of the Executive's death or as a result of a consensual termination as provided in Section 8(c) of this Agreement), the terminating party shall provide the other party with written notice (the "Termination Notice") specifying: (i) the effective date of the termination (the "Termination Date"), (ii) the specific provisions of this Agreement upon which the termination is based and that are applicable to the termination, and (iii) a reasonably detailed discussion of the facts and circumstances providing the basis for the termination under the specified provisions of this Agreement. (b) Termination Date. If the Executive's employment is terminated by the Executive, the Termination Date shall not be less than two weeks after the date the Termination Notice is tendered to the Company. If the Executive's employment is terminated by the Company, the Termination Date shall not be less than 30 days after the date the Termination Notice is tendered to the Executive. Termination of the Executive's employment shall occur on the Termination Date even if there is a dispute between the parties relating to the provisions of this Agreement applicable to such termination (a "Termination Dispute"). (c) Termination Dispute. If, prior to the Termination Date, the party receiving the Termination Notice provides written notice to the other party of the existence of a Termination Dispute (which notice shall provide a reasonably detailed discussion of the nature of the dispute, including the specific provisions of this Agreement that the disputing party believes are applicable to the termination), the Termination Dispute shall be resolved by: (i) mutual written agreement of the parties hereto or (ii) a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected). The parties hereto shall pursue the resolution of any Termination Dispute with reasonable diligence. (d) Termination Payments. If there is no Termination Dispute, any amount owed by the Company to the Executive as a result of the termination of the Executive's employment under this - 28 - 8 Agreement shall be payable in immediately available funds on the Termination Date. If there is a Termination Dispute, any amount owed by the Company to the Executive as a result of the termination of the Executive's employment under this Agreement that is not in dispute shall be paid on the Termination Date, and all other amounts shall be paid within five business days of the resolution of the Termination Dispute as provided for in Section 6(c) of this Agreement, together with Applicable Interest. 7. Termination Due to a Triggering Event. (a) If, during the term of this Agreement, the Executive's employment by the Company is terminated (whether by the Company or by the Executive) upon the occurrence of or within 12 months after a Triggering Event, (i) the Company shall make a lump sum cash payment to the Executive in an amount equal to 299% of the Executive's base annual salary at the time the Triggering Event occurs plus the amount of any discretionary bonuses paid by the Company to the Executive within the 12 months immediately preceding the occurrence of the Triggering Event, (ii) the Company shall continue to provide to the Executive for a three-year period the Executive's then-existing coverage under the Company's health, dental and life insurance plans or, if continued coverage under such plans cannot be provided, substantially equivalent coverage under alternative arrangements, and (iii) any restrictions remaining on any restricted shares issued to the Executive under the Company's restricted stock plans shall immediately lapse, any performance shares issued to the Executive under the Company's incentive stock plans shall immediately vest, any stock options and stock appreciation rights granted to the Executive shall become immediately exercisable, and the Executive may exercise any such option or stock appreciation right until the later of the expiration of its original term or one year after the effective date of the Executive's termination, provided that this Section 7(a)(iii) shall be inoperative to the extent that its operation would preclude the application of the pooling of interests accounting method to a business combination in which the Company intends to use such method (subject to the foregoing proviso, in the event of any conflict between the terms of this Section 7(a)(iii) and the terms of any applicable stock or incentive plan or implementing agreement between the Company and the Executive, the terms of this Section 7(a)(iii) shall govern unless prohibited by any applicable law in which case the Company shall take all reasonable steps to ensure that the Executive receives all the economic and financial benefits intended to be conferred by this Section 7(a)(iii)). (b) In the event that the Executive becomes entitled to receive any benefit or payment in connection with a Triggering Event or the Company's termination of the Executive's employment, - 29 - 9 whether pursuant to the terms of this Agreement or otherwise (collectively, the "Total Benefits"), and any of the Total Benefits will be subject to any excise tax (the "Excise Tax") imposed under Section 4999 of the Code, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive from the Gross-Up Payment, after deduction of any federal, state and local income taxes, Excise Tax, and FICA and Medicare withholding taxes on the Gross-Up Payment, shall be equal to the Excise Tax on the Total Benefits. For purposes of determining the amount of such Excise Tax on the Total Benefits, the amount of the Total Benefits that shall be treated as subject to the Excise Tax shall be equal to (i) the Total Benefits, minus (ii) the amount of such Total Benefits that, in the opinion of tax counsel selected by the Company and reasonably acceptable to the Executive ("Tax Counsel"), are not excess parachute payments (within the meaning of Section 280G(b)(1) of the Code). (c) For purposes of Section 7(b), the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Excise Tax is payable and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the effective date of his termination, net of the reduction in federal income taxes which could be obtained from deduction of such state and local taxes (calculated by assuming that any reduction under Section 68 of the Code in the amount of itemized deductions allowable to the Executive applies first to reduce the amount of such state and local income taxes that would otherwise be deductible by the Executive). Except as otherwise provided herein, all determinations required to be made under this Section 7 shall be made by Tax Counsel, which determinations shall be conclusive and binding on the Executive and the Company absent manifest error. (d) In the event that the Excise Tax on the Total Benefits is subsequently determined to be less than the amount taken into account hereunder at the time of termination of the Executive's employment, the Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax, federal, state and local income taxes and FICA and Medicare withholding taxes imposed on the Gross-Up Payment being repaid by the Executive to the extent that such repayment results in a reduction in any such taxes and/ or a federal, state or local income tax deduction) plus Applicable Interest. In the event that the Excise Tax on the Total Benefits is finally determined to exceed the amount taken into account hereunder at the time of the termination of the Executive's - 30 - 10 employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment, which shall be calculated by Tax Counsel in the same manner and using the same assumptions as set forth in Sections 7(b) and 7(c), to the Executive in respect of such excess (plus any interest, penalties or additions payable by the Executive to the Internal Revenue Service or any other federal, state, local or foreign taxing authority with respect to such excess or with respect to the additional Gross-Up Payment) at the time that the amount of such excess is finally determined. (e) Following the occurrence of a Triggering Event, if the Company or the Executive brings any action, suit or proceeding for the enforcement, performance or construction of this Agreement, the Company agrees to reimburse the Executive for all reasonable costs and expenses incurred by him in such action, suit or proceeding, including reasonable attorneys' and accountants' fees and expenses. 8. Other Termination. Notwithstanding any other provision of this Agreement, the Executive's employment hereunder shall terminate under the following circumstances with the following consequences: (a) Termination By Company for Cause. The Company may terminate the Executive's employment under this Agreement for Cause. The termination of the Executive's employment under this Agreement shall not be deemed for Cause unless and until (1) the Company, through the President, delivers reasonable notice to the Executive that it intends to terminate the Executive for Cause, (2) the Executive is given an opportunity, together with counsel, to be heard before the Board, (3) the Executive's termination is approved by the affirmative vote of at least two-thirds of the Board, and (4) the Company provides the Executive with a copy of the resolutions duly adopted by the Board finding that, in the good faith opinion of the Board, the Executive should be terminated for Cause and specifying the particulars thereof in detail. Upon termination for Cause, the Executive will not be entitled to any further compensation for any period subsequent to the effective date of such termination, except for pay or benefits, if any, in accordance with the then existing severance policies of the Company and the terms of the Company Bonus Plans and Company Benefit Plans. (b) Termination By Company for Disability. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall not have performed his duties hereunder on a full-time basis for six consecutive months, the Executive's employment under this Agreement may be terminated by - 31 - 11 the Company upon written notice. Such termination for disability shall require the affirmative vote of a majority of the entire Board. The Executive's compensation during any period of disability prior to the effective date of such termination shall be the amounts normally payable to him in accordance with his then current base annual salary, reduced by the sum of the amounts, if any, paid to the Executive under disability benefit plans maintained by the Company or its subsidiaries. The Executive shall not be entitled to any further compensation from the Company or its subsidiaries for any period subsequent to the effective date of such termination, except for pay or benefits, if any, in accordance with then existing severance policies of the Company or its subsidiaries and the terms of the Company Bonus Plans and Company Benefit Plans. (c) Consensual Termination. The parties hereto may agree at any time to terminate both this Agreement and the Executive's employment hereunder upon such terms and conditions as the parties may mutually agree. (d) Termination By Reason of Death. In the event of the death of the Executive during the term of his employment hereunder, the Company shall pay to the Executive's spouse, or if the Executive leaves no spouse, to the estate of the Executive, a lump sum cash payment in an amount equal to 100% of the Executive's base annual salary as of the date of death, and upon payment of such amount and any other amounts due and owing hereunder and unpaid as of the date of death, this Agreement shall thereupon terminate and no further amounts shall be payable hereunder; provided, however, that nothing hereunder shall impair the Executive's rights, if any, to pay or benefits under the Company Bonus Plans and the Company Benefit Plans. (e) Termination By Executive. If the Executive terminates his employment with the Company for any reason other than the occurrence of a Triggering Event as provided for in Section 7 hereof or a consensual termination as provided for in Section 8(c) hereof, the Executive will not be entitled to any further compensation for any period subsequent to the effective date of such termination, except for pay or benefits, if any, in accordance with the then existing severance policies of the Company and the Company Bonus Plans and the Company Benefit Plans. 9. Supervisory Suspension. In the event the Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the affairs of the Company or any of its subsidiary banks by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(3) or 1818(g)(1), the Company's obligations under this Agreement shall be suspended effective as of the service date of - 32 - 12 the notice of suspension or temporary prohibition, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Company shall (a) pay the Executive all compensation withheld while its obligations under this Agreement were suspended, together with Applicable Interest and (b) reinstate all obligations under this Agreement that were suspended. 10. Confidential Information. During the Executive's employment with the Company and thereafter, the Executive shall not disclose or use in any way any confidential business or technical information or any trade secret acquired in the course of such employment, other than (i) information that is generally known in the Company's industry or acquired from public sources, (ii) as required in the course of such employment, (iii) as required by any court, supervisory authority, administrative agency or applicable law, or (iv) with the prior written consent of the Company. This Section 10 shall survive termination of this Agreement. 11. No-Raid. The Executive agrees that, in the event the Executive's employment with the Company is terminated for any reason whatsoever and as a result of such termination the Executive is entitled to receive compensation, benefits or payments hereunder or under the Company's then existing severance policies that, in the aggregate, equal or exceed 100% of the Executive's base annual salary at the time of termination plus the amount of any discretionary bonuses paid by the Company to the Executive within the 12 months immediately preceding the termination, the Executive shall not, for a period of one year (or such lesser period as may be determined by the President and disclosed to the Executive in writing) after the effective date of the Executive's termination, solicit, actively interfere with the Company's or any Company affiliate's relationship with, or attempt to divert or entice away, any officer of the Company or its affiliates. 12. Payment Obligation Absolute. The obligation of the Company to pay the Executive the compensation, benefits or payments provided herein during the term hereof shall be absolute and unconditional and shall not be affected by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final and the Company will not seek to recover all or any part of such payment from the Executive, or from whosoever may be entitled thereto, for any reason whatsoever except as provided in Section 7(d) hereof. The Executive shall not be obligated to seek other employment in - 33 - 13 mitigation of the amounts payable under any provision of this Agreement and the obtaining of any such other employment shall in no event limit or reduce the obligations of the Company to make the payments required to be made under this Agreement. 13. No Right to Continued Employment. Nothing in this Agreement shall be deemed to give the Executive the right to be retained in the employ of the Company, or to interfere with the right of the Company to discharge the Executive at any time, subject in all cases to the terms of this Agreement. 14. Withholding. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. 15. Successors and Assigns. This Agreement is a personal services contract which may not be assigned by the Company, or assumed from the Company by, any other party without the prior written consent of the Executive. Subject to the foregoing limitation, all rights hereunder shall inure to the benefit of the parties hereto, their personal or legal representatives, heirs, successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, assignment, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume this Agreement and to agree to perform hereunder in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. References herein to the Company will be understood to refer to the successor or successors of the Company, respectively. 16. Notices. Any notice required or desired to be given hereunder shall be in writing and shall be deemed given when delivered personally or sent by certified or registered mail, postage prepaid, to the address of the other party set forth in the first paragraph of this Agreement, provided that any notice to the Company shall be directed to the President, unless the notice is by such person in which case the notice shall be directed to both the Secretary of the Company and the most senior ranking Vice President of the Company. 17. Waiver of Breach. Waiver by any party of a breach of any provision shall not operate as or be construed a waiver by such party of any subsequent breach hereof. 18. Entire Agreement. This agreement contains the entire agreement among the parties concerning the employment of the Executive by the Company, and supersedes any employment or change - 34 - 14 in control agreements between the Executive and the Company or any of its predecessors, subsidiaries or predecessors of subsidiaries. 19. Written Modification, Amendment or Waiver. No modification, amendment or waiver of any provision hereof shall be effective unless in writing specifically referring hereto and signed by the party against whom such provision as modified or amended or such waiver is sought to be enforced. 20. Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party hereto and delivered to the other party, it being understood that all parties need not sign the same counterpart. 21. Governing Law. This Agreement is governed by and is to be construed and enforced in accordance with the laws of the State of New Hampshire applicable to contracts made and to be performed entirely therein. 22. Consent to Jurisdiction. Each party hereto irrevocably consents to the exclusive jurisdiction of the courts of the State of New Hampshire and the federal courts situated in the State of New Hampshire in connection with any action to enforce the provisions of this Agreement, to recover damages or other relief for breach or default under this Agreement, to enforce any decision or award of any arbitrators, or otherwise arising under or by reason of this Agreement. 23. Construction. (a) The section headings of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. (b) All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders where the context so requires. (c) The singular shall include the plural, and vice versa, where the context so requires. (d) All references to sections of, or regulations promulgated under, the Exchange Act, the Code or other statutes shall be deemed also to refer to such sections or regulations as amended from time to time and to any successor provisions to such sections or regulations. All references to employee benefit plans of the Company shall be deemed also to refer to such plans as amended from time to time and to any successor plans thereto. - 35 - 15 24. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without affecting the validity or enforceability of any other term or provision hereof in that or any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted so as to be enforceable. 25. Authorization. The Company represents and warrants that the execution of this Agreement has been duly authorized by resolution of the Board. IN WITNESS WHEREOF, the parties have executed or caused to be executed this Agreement as of the date first above written. CFX CORPORATION By: ----------------------------- Name: Peter J. Baxter Title: President ---------------------------------- Douglas Crichfield - 36 - EX-10.2 5 EMPLOYMENT AGREEMENT DATED 8/12/97 1 EXHIBIT 10.2 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement"), made as of the 12th day of August, 1997 (the "Effective Date"), is by and between CFX Corporation (the "Company"), a New Hampshire corporation with principal executive offices at 102 Main Street, Keene, New Hampshire 03431, and Peter J. Baxter, residing at 19 Pheasant Hill Road, Keene, New Hampshire 03431 (the "Executive"). RECITALS WHEREAS, the Company, through its Board of Directors (the "Board"), considers the maintenance of competent and experienced executive officers to be essential to its long-term success; WHEREAS, in this regard, the Company has determined that it is in its best interests that the Executive continue to serve as President and Chief Executive Officer of the Company, pursuant to a written employment agreement; NOW, THEREFORE, in furtherance of the interests described above and in consideration of the respective covenants and agreements herein contained, the parties hereto agree as follows: 1. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: (a) "Applicable Interest" means interest at the rate provided in Section 1274(b)(2)(B) of the Code. (b) "Cause" means the occurrence of any of the following: (i) the willful and continued failure of the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board which specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties; - 37 - 2 (ii) the willful engaging by the Executive in illegal conduct (excluding traffic violations, minor misdemeanors or similar offenses) or gross misconduct that, in the Board's reasonable opinion, may reflect adversely on the business or reputation of the Company; (iii) the removal and/or permanent prohibition of the Executive from participation in the conduct of the affairs of the Company or any of its subsidiary banks by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or 1818(g)(1); (iv) the issuance by any court having appropriate jurisdiction of an order under Section 21(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 15 U.S.C. 78u(d)(2), prohibiting the Executive from acting as an officer or director of the Company; or (v) the conviction of the Executive for commission of a felony. (c) "Change in Control" means the occurrence of any of the following events: (i) there shall be consummated any consolidation, merger, stock-for-stock exchange or similar transaction (collectively, "Merger Transactions") involving securities of the Company in which the holders of voting securities of the Company immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of the Company (or, if the Company does not survive the Merger Transaction, voting securities of the corporation surviving such transaction) having less than 50% of the total voting power in an election of directors of the Company (or such other surviving corporation), excluding securities received by any members of such group which represent disproportionate percentage increases in their shareholdings vis-a-vis the other members of such group; (ii) any individual, corporation (other than the Company), partnership, trust, association, pool, syndicate, or any other entity or any group or persons acting in concert (other than an employee benefit plan of the Company or one of its affiliates) becomes the beneficial owner (as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act) as a result of any one or more securities transactions, - 38 - 3 including gifts and stock repurchases but excluding any Merger Transactions, of securities of the Company possessing one-third or more of the voting power for the election of directors of the Company; (iii) during any period of twenty-four consecutive months, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or (iv) there shall be consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions, excluding any Merger Transactions), of all, or substantially all, of the assets of the Company to a party which is not controlled by or under common control with the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Company Bonus Plan" means any bonus, stock option, profit-sharing or other cash- or equity-based incentive plan offered by the Company. (f) "Company Benefit Plan" means any pension (including without limitation tax-qualified), thrift, deferred compensation, stock purchase, life insurance, medical, dental, education, accident, disability, welfare, retirement or other employee benefit plan offered by the Company other than a Company Bonus Plan. (g) "Designated Office" means 102 Main Street, Keene, New Hampshire 03431, or such other office of the Company designated by the Board from time to time other than in anticipation of, or following a Change in Control. (h) "Triggering Event" means the occurrence of any of the following events: (i) the termination by the Company of the employment of the Executive for any reason other than Cause; (ii) the assignment to the Executive without his consent of any duties inconsistent in any material - 39 - 4 respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, or any other action by the Company which results in a diminution in any material respect in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) in anticipation of, or following a Change in Control, the requirement by the Company that the Executive be based at any office or location that is more than 75 miles from the Designated Office; (iv) after the Effective Date, the failure of the Company without the Executive's consent to: (A) continue in effect any Company Bonus Plan in which the Executive participates that is material to the Executive's total compensation, unless a substantially equivalent arrangement, embodied in an ongoing substitute or alternative plan, has been made with respect to such Company Bonus Plan; (B) continue the Executive's participation in any Company Bonus Plan and eligibility for bonuses thereunder, or in any substitute or alternative plan, on a basis at least as favorable as that existing at the date hereof, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants; or (C) continue to provide the Executive with benefits comparable to those received by the Executive under any Company Benefit Plan in which the Executive was participating, at participation costs substantially similar to those paid by the Executive; provided, however, that it shall not be deemed a Triggering Event if the Board, for bona fide business purposes and not in anticipation of or following a Change in Control, modifies the terms or conditions of any Company Bonus Plan or Company Benefit Plan, so long as such modifications have or would have a substantially similar effect upon all executive employees or all employees of the Company who participate or who are eligible to participate in the plan. (v) the Company issues a Non-Renewal Notice to the Executive as provided in Section 2 of this Agreement; - 40 - 5 (vi) the Company shall have materially breached any provision of this Agreement and such breach shall not have been cured within 15 days after delivery of written notice thereof to the Board by the Executive, identifying the breach with reasonable particularity; or (vii) a reduction by the Company in the Executive's base annual salary as in effect on the date hereof, as the same may be increased from time to time as provided for in this Agreement. (i) "Willful" means that an action, conduct or deed is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon the instructions or prior approval of the Board or based upon the advice of counsel for the Company, shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. 2. Employment Term. The initial term of employment under this Agreement shall be for a period of three years commencing on the Effective Date. This Agreement shall be extended automatically for one additional year on each annual anniversary date of the Effective Date unless either the Company, through the Board, or the Executive gives contrary written notice (the "Non-Renewal Notice") to the other not less than three months in advance of such anniversary date. References herein to the term of this Agreement shall refer both to such initial term and such successive terms. 3. Employment. During the term of employment provided for in this Agreement, the Company agrees to employ the Executive in the office or position set forth in the second Recital of this Agreement, and the Executive agrees to serve in such office or position and to perform the duties and discharge the responsibilities associated therewith or such other duties and responsibilities as may reasonably be assigned to the Executive from time to time by the Board. The Executive shall devote all his working time and efforts to the business and affairs of the Company and its subsidiaries, provided, however, that the Executive may, with the approval of the Board, serve as a director or officer of any non-competing business or engage in any other activity, including without limitation charitable or community activity, to the extent that it does not inhibit the performance of his duties hereunder. - 41 - 6 4. Office and Services. In connection with the Executive's employment hereunder, the Executive shall be based at the Designated Office, except for required travel on the Company's business. The Company shall furnish the Executive with office space, stenographic assistance, and such other facilities and services as shall be suitable to the Executive's position and adequate for the performance of his duties hereunder. 5. Compensation. The regular compensation and benefits payable to the Executive under this Agreement shall include the following: (a) Salary. The Company shall pay the Executive a base annual salary hereunder of not less than $294,000, payable in equal semimonthly installments or at such other intervals as shall be agreed upon by the parties. The Executive's base annual salary may be increased from time to time as determined by the Board and, if so increased, such base annual salary shall not thereafter during the Executive's employment under this Agreement be decreased and the obligation of the Company hereunder to pay the Executive's base annual salary shall thereafter relate to such increased base annual salary. (b) No Separate Board Compensation. The Executive shall not be entitled to receive any fees or additional payments for serving as a member of the Board, as a member of any committee of the Board, or as a member of any board of directors (or the equivalent thereof) or any committee thereof of any subsidiary of the Company. (c) Discretionary Bonuses. During the term of this Agreement, the Executive shall be eligible to participate in an equitable manner with other executive employees of the Company and its subsidiaries in any Company Bonus Plan or in other discretionary bonuses authorized and declared by the Board, and the board of directors (or the equivalent thereof) of the Company's subsidiaries, or by their respective delegees. (d) Participation in Benefit Plans. In addition to any compensation and benefits provided for in this Agreement, the Executive shall be eligible to participate in any Company Benefit Plan or any other employee fringe benefits offered by the Company or its subsidiaries for the benefit of executive employees or all employees generally in which the Executive is eligible to participate. The Executive's participation in any such Company Benefit Plan - 42 - 7 shall be subject to all generally applicable eligibility requirements thereof and shall not in any way limit or reduce the obligation of the Company to pay the Executive's base annual salary hereunder (except pursuant to, in accordance with, or as required by the generally applicable terms of participation of any such Company Benefit Plan). (e) Vacation. The Executive shall be entitled to a minimum annual paid vacation during the term of this Agreement of four weeks per year or such longer period as the Board may approve. (f) Reimbursement of Business Expenses. The Company shall promptly reimburse the Executive for all reasonable travel and other business expenses incurred by him in the performance of his duties and responsibilities, subject to such reasonable requirements with respect to substantiation and documentation as may be specified by the Company. 6. Termination Procedures. (a) Termination Notice. If the Executive's employment by the Company is terminated for any reason during the term of this Agreement (other than by reason of the Executive's death or as a result of a consensual termination as provided in Section 8(c) of this Agreement), the terminating party shall provide the other party with written notice (the "Termination Notice") specifying: (i) the effective date of the termination (the "Termination Date"), (ii) the specific provisions of this Agreement upon which the termination is based and that are applicable to the termination, and (iii) a reasonably detailed discussion of the facts and circumstances providing the basis for the termination under the specified provisions of this Agreement. (b) Termination Date. If the Executive's employment is terminated by the Executive, the Termination Date shall not be less than two weeks after the date the Termination Notice is tendered to the Company. If the Executive's employment is terminated by the Company, the Termination Date shall not be less than 30 days after the date the Termination Notice is tendered to the Executive. Termination of the Executive's employment shall occur on the Termination Date even if there is a dispute between the parties relating to the provisions of this Agreement applicable to such termination (a "Termination Dispute"). - 43 - 8 (c) Termination Dispute. If, prior to the Termination Date, the party receiving the Termination Notice provides written notice to the other party of the existence of a Termination Dispute (which notice shall provide a reasonably detailed discussion of the nature of the dispute, including the specific provisions of this Agreement that the disputing party believes are applicable to the termination), the Termination Dispute shall be resolved by: (i) mutual written agreement of the parties hereto or (ii) a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected). The parties hereto shall pursue the resolution of any Termination Dispute with reasonable diligence. (d) Termination Payments. If there is no Termination Dispute, any amount owed by the Company to the Executive as a result of the termination of the Executive's employment under this Agreement shall be payable in immediately available funds on the Termination Date. If there is a Termination Dispute, any amount owed by the Company to the Executive as a result of the termination of the Executive's employment under this Agreement that is not in dispute shall be paid on the Termination Date, and all other amounts shall be paid within five business days of the resolution of the Termination Dispute as provided for in Section 6(c) of this Agreement, together with Applicable Interest. (e) Notwithstanding any other provision of this Agreement to the contrary, the Executive's employment under this Agreement may be terminated by the Company for reasons other than Cause only with the affirmative vote of at least two-thirds of the entire Board. 7. Termination Due to a Triggering Event. (a) If, during the term of this Agreement, the Executive's employment by the Company is terminated (whether by the Company or by the Executive) upon the occurrence of or within 12 months after a Triggering Event, (i) the Company shall make a lump sum cash payment to the Executive in an amount equal to 299% of the Executive's base annual salary at the time the Triggering Event occurs plus the amount of any discretionary bonuses paid by the Company to the Executive within the 12 months immediately preceding the occurrence of the Triggering Event, (ii) the Company shall continue to provide to the Executive for a three-year period the Executive's then-existing coverage under the Company's - 44 - 9 health, dental and life insurance plans or, if continued coverage under such plans cannot be provided, substantially equivalent coverage under alternative arrangements, and (iii) any restrictions remaining on any restricted shares issued to the Executive under the Company's restricted stock plans shall immediately lapse, any performance shares issued to the Executive under the Company's incentive stock plans shall immediately vest, any stock options and stock appreciation rights granted to the Executive shall become immediately exercisable, and the Executive may exercise any such option or stock appreciation right until the later of the expiration of its original term or one year after the effective date of the Executive's termination, provided that this Section 7(a)(iii) shall be inoperative to the extent that its operation would preclude the application of the pooling of interests accounting method to a business combination in which the Company intends to use such method (subject to the foregoing proviso, in the event of any conflict between the terms of this Section 7(a)(iii) and the terms of any applicable stock or incentive plan or implementing agreement between the Company and the Executive, the terms of this Section 7(a)(iii) shall govern unless prohibited by any applicable law in which case the Company shall take all reasonable steps to ensure that the Executive receives all the economic and financial benefits intended to be conferred by this Section 7(a)(iii)). (b) In the event that the Executive becomes entitled to receive any benefit or payment in connection with a Triggering Event or the Company's termination of the Executive's employment, whether pursuant to the terms of this Agreement or otherwise (collectively, the "Total Benefits"), and any of the Total Benefits will be subject to any excise tax (the "Excise Tax") imposed under Section 4999 of the Code, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive from the Gross-Up Payment, after deduction of any federal, state and local income taxes, Excise Tax, and FICA and Medicare withholding taxes on the Gross-Up Payment, shall be equal to the Excise Tax on the Total Benefits. For purposes of determining the amount of such Excise Tax on the Total Benefits, the amount of the Total Benefits that shall be treated as subject to the Excise Tax shall be equal to (i) the Total Benefits, minus (ii) the amount of such Total Benefits that, in the opinion of tax counsel selected by the Company and reasonably acceptable to the Executive ("Tax Counsel"), are not excess parachute payments (within the meaning of Section 280G(b)(1) of the Code). - 45 - 10 (c) For purposes of Section 7(b), the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Excise Tax is payable and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the effective date of his termination, net of the reduction in federal income taxes which could be obtained from deduction of such state and local taxes (calculated by assuming that any reduction under Section 68 of the Code in the amount of itemized deductions allowable to the Executive applies first to reduce the amount of such state and local income taxes that would otherwise be deductible by the Executive). Except as otherwise provided herein, all determinations required to be made under this Section 7 shall be made by Tax Counsel, which determinations shall be conclusive and binding on the Executive and the Company absent manifest error. (d) In the event that the Excise Tax on the Total Benefits is subsequently determined to be less than the amount taken into account hereunder at the time of termination of the Executive's employment, the Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax, federal, state and local income taxes and FICA and Medicare withholding taxes imposed on the Gross-Up Payment being repaid by the Executive to the extent that such repayment results in a reduction in any such taxes and/or a federal, state or local income tax deduction) plus Applicable Interest. In the event that the Excise Tax on the Total Benefits is finally determined to exceed the amount taken into account hereunder at the time of the termination of the Executive's employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment, which shall be calculated by Tax Counsel in the same manner and using the same assumptions as set forth in Sections 7(b) and 7(c), to the Executive in respect of such excess (plus any interest, penalties or additions payable by the Executive to the Internal Revenue Service or any other federal, state, local or foreign taxing authority with respect to such excess or with respect to the additional Gross-Up Payment) at the time that the amount of such excess is finally determined. - 46 - 11 (e) Following the occurrence of a Triggering Event, if the Company or the Executive brings any action, suit or proceeding for the enforcement, performance or construction of this Agreement, the Company agrees to reimburse the Executive for all reasonable costs and expenses incurred by him in such action, suit or proceeding, including reasonable attorneys' and accountants' fees and expenses. 8. Other Termination. Notwithstanding any other provision of this Agreement, the Executive's employment hereunder shall terminate under the following circumstances with the following consequences: (a) Termination By Company for Cause. The Company may terminate the Executive's employment under this Agreement for Cause. The termination of the Executive's employment under this Agreement shall not be deemed for Cause unless and until (1) the Company, through the Board delivers reasonable notice to the Executive that it intends to terminate the Executive for Cause, (2) the Executive is given an opportunity, together with counsel, to be heard before the Board, (3) the Executive's termination is approved by the affirmative vote of at least two-thirds of the Board, and (4) the Company provides the Executive with a copy of the resolutions duly adopted by the Board finding that, in the good faith opinion of the Board, the Executive should be terminated for Cause and specifying the particulars thereof in detail. Upon termination for Cause, the Executive will not be entitled to any further compensation for any period subsequent to the effective date of such termination, except for pay or benefits, if any, in accordance with the then existing severance policies of the Company and the terms of the Company Bonus Plans and Company Benefit Plans. (b) Termination By Company for Disability. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall not have performed his duties hereunder on a full-time basis for six consecutive months, the Executive's employment under this Agreement may be terminated by the Company upon written notice. Such termination for disability shall require the affirmative vote of a majority of the entire Board. The Executive's compensation during any period of disability prior to the effective date of such termination shall be the amounts normally payable to him in accordance with his then current base annual salary, reduced by the sum of the amounts, if any, paid to the Executive under disability benefit plans maintained by the Company or its subsidiaries. The - 47 - 12 Executive shall not be entitled to any further compensation from the Company or its subsidiaries for any period subsequent to the effective date of such termination, except for pay or benefits, if any, in accordance with then existing severance policies of the Company or its subsidiaries and the terms of the Company Bonus Plans and Company Benefit Plans. (c) Consensual Termination. The parties hereto may agree at any time to terminate both this Agreement and the Executive's employment hereunder upon such terms and conditions as the parties may mutually agree. (d) Termination By Reason of Death. In the event of the death of the Executive during the term of his employment hereunder, the Company shall pay to the Executive's spouse, or if the Executive leaves no spouse, to the estate of the Executive, a lump sum cash payment in an amount equal to 100% of the Executive's base annual salary as of the date of death, and upon payment of such amount and any other amounts due and owing hereunder and unpaid as of the date of death, this Agreement shall thereupon terminate and no further amounts shall be payable hereunder; provided, however, that nothing hereunder shall impair the Executive's rights, if any, to pay or benefits under the Company Bonus Plans and the Company Benefit Plans. (e) Termination By Executive. If the Executive terminates his employment with the Company for any reason other than the occurrence of a Triggering Event as provided for in Section 7 hereof or a consensual termination as provided for in Section 8(c) hereof, the Executive will not be entitled to any further compensation for any period subsequent to the effective date of such termination, except for pay or benefits, if any, in accordance with the then existing severance policies of the Company and the Company Bonus Plans and the Company Benefit Plans. 9. Supervisory Suspension. In the event the Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the affairs of the Company or any of its subsidiary banks by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(3) or 1818(g)(1), the Company's obligations under this Agreement shall be suspended effective as of the service date of the notice of suspension or temporary prohibition, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Company shall (a) pay the Executive all compensation withheld while its obligations under this - 48 - 13 Agreement were suspended, together with Applicable Interest and (b) reinstate all obligations under this Agreement that were suspended. 10. Confidential Information. During the Executive's employment with the Company and thereafter, the Executive shall not disclose or use in any way any confidential business or technical information or any trade secret acquired in the course of such employment, other than (i) information that is generally known in the Company's industry or acquired from public sources, (ii) as required in the course of such employment, (iii) as required by any court, supervisory authority, administrative agency or applicable law, or (iv) with the prior written consent of the Company. This Section 10 shall survive termination of this Agreement. 11. No-Raid. The Executive agrees that, in the event the Executive's employment with the Company is terminated for any reason whatsoever and as a result of such termination the Executive is entitled to receive compensation, benefits or payments hereunder or under the Company's then existing severance policies that, in the aggregate, equal or exceed 100% of the Executive's base annual salary at the time of termination plus the amount of any discretionary bonuses paid by the Company to the Executive within the 12 months immediately preceding the termination, the Executive shall not, for a period of one year (or such lesser period as may be determined by the Board and disclosed to the Executive in writing) after the effective date of the Executive's termination, solicit, actively interfere with the Company's or any Company affiliate's relationship with, or attempt to divert or entice away, any officer of the Company or its affiliates. 12. Payment Obligation Absolute. The obligation of the Company to pay the Executive the compensation, benefits or payments provided herein during the term hereof shall be absolute and unconditional and shall not be affected by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final and the Company will not seek to recover all or any part of such payment from the Executive, or from whosoever may be entitled thereto, for any reason whatsoever except as provided in Section 7(d) hereof. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable under any provision of - 49 - 14 this Agreement and the obtaining of any such other employment shall in no event limit or reduce the obligations of the Company to make the payments required to be made under this Agreement. 13. No Right to Continued Employment. Nothing in this Agreement shall be deemed to give the Executive the right to be retained in the employ of the Company, or to interfere with the right of the Company to discharge the Executive at any time, subject in all cases to the terms of this Agreement. 14. Withholding. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. 15. Successors and Assigns. This Agreement is a personal services contract which may not be assigned by the Company, or assumed from the Company by, any other party without the prior written consent of the Executive. Subject to the foregoing limitation, all rights hereunder shall inure to the benefit of the parties hereto, their personal or legal representatives, heirs, successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, assignment, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume this Agreement and to agree to perform hereunder in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. References herein to the Company will be understood to refer to the successor or successors of the Company, respectively. 16. Notices. Any notice required or desired to be given hereunder shall be in writing and shall be deemed given when delivered personally or sent by certified or registered mail, postage prepaid, to the address of the other party set forth in the first paragraph of this Agreement, provided that any notice to the Company shall be directed to the Chairman of the Board, unless the notice is by such person in which case the notice shall be directed to both the Secretary of the Company and the most senior ranking Vice President of the Company. 17. Waiver of Breach. Waiver by any party of a breach of any provision shall not operate as or be construed a waiver by such party of any subsequent breach hereof. - 50 - 15 18. Entire Agreement. This agreement contains the entire agreement among the parties concerning the employment of the Executive by the Company, and supersedes any employment or change in control agreements between the Executive and the Company or any of its predecessors, subsidiaries or predecessors of subsidiaries. 19. Written Modification, Amendment or Waiver. No modification, amendment or waiver of any provision hereof shall be effective unless in writing specifically referring hereto and signed by the party against whom such provision as modified or amended or such waiver is sought to be enforced. 20. Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party hereto and delivered to the other party, it being understood that all parties need not sign the same counterpart. 21. Governing Law. This Agreement is governed by and is to be construed and enforced in accordance with the laws of the State of New Hampshire applicable to contracts made and to be performed entirely therein. 22. Consent to Jurisdiction. Each party hereto irrevocably consents to the exclusive jurisdiction of the courts of the State of New Hampshire and the federal courts situated in the State of New Hampshire in connection with any action to enforce the provisions of this Agreement, to recover damages or other relief for breach or default under this Agreement, to enforce any decision or award of any arbitrators, or otherwise arising under or by reason of this Agreement. 23. Construction. (a) The section headings of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. (b) All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders where the context so requires. (c) The singular shall include the plural, and vice versa, where the context so requires. - 51 - 16 (d) All references to sections of, or regulations promulgated under, the Exchange Act, the Code or other statutes shall be deemed also to refer to such sections or regulations as amended from time to time and to any successor provisions to such sections or regulations. All references to employee benefit plans of the Company shall be deemed also to refer to such plans as amended from time to time and to any successor plans thereto. 24. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without affecting the validity or enforceability of any other term or provision hereof in that or any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted so as to be enforceable. 25. Authorization. The Company represents and warrants that the execution of this Agreement has been duly authorized by resolution of the Board. IN WITNESS WHEREOF, the parties have executed or caused to be executed this Agreement as of the date first above written. CFX CORPORATION By: ---------------------------------- Name: Eugene E. Gaffey Title: Chairman of the Board -------------------------------- Peter J. Baxter - 52 - EX-10.3 6 EMPLOYMENT AGREEMENT DATED 8/11/97 1 EXHIBIT 10.3 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement"), made as of the 11th day of August, 1997 (the "Effective Date"), is by and between CFX Corporation (the "Company"), a New Hampshire corporation with principal executive offices at 102 Main Street, Keene, New Hampshire 03431, and Mark A. Gavin, residing at 11 Morgan Lane, Keene, New Hampshire 03431 (the "Executive"). RECITALS WHEREAS, the Company, through its Board of Directors (the "Board"), considers the maintenance of competent and experienced executive officers to be essential to its long-term success; WHEREAS, in this regard, the Company has determined that it is in its best interests that the Executive continue to serve as Executive Vice President and Chief Operating Officer of the Company, pursuant to a written employment agreement; NOW, THEREFORE, in furtherance of the interests described above and in consideration of the respective covenants and agreements herein contained, the parties hereto agree as follows: 1. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: (a) "Applicable Interest" means interest at the rate provided in Section 1274(b)(2)(B) of the Code. (b) "Cause" means the occurrence of any of the following: (i) the willful and continued failure of the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the President which specifically identifies the manner in which the President believes that the Executive has not substantially performed the Executive's duties; - 53 - 2 (ii) the willful engaging by the Executive in illegal conduct (excluding traffic violations, minor misdemeanors or similar offenses) or gross misconduct that, in the Board's reasonable opinion, may reflect adversely on the business or reputation of the Company; (iii) the removal and/or permanent prohibition of the Executive from participation in the conduct of the affairs of the Company or any of its subsidiary banks by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or 1818(g)(1); (iv) the issuance by any court having appropriate jurisdiction of an order under Section 21(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 15 U.S.C. 78u(d)(2), prohibiting the Executive from acting as an officer or director of the Company; or (v) the conviction of the Executive for commission of a felony. (c) "Change in Control" means the occurrence of any of the following events: (i) there shall be consummated any consolidation, merger, stock-for-stock exchange or similar transaction (collectively, "Merger Transactions") involving securities of the Company in which the holders of voting securities of the Company immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of the Company (or, if the Company does not survive the Merger Transaction, voting securities of the corporation surviving such transaction) having less than 50% of the total voting power in an election of directors of the Company (or such other surviving corporation), excluding securities received by any members of such group which represent disproportionate percentage increases in their shareholdings vis-a-vis the other members of such group; (ii) any individual, corporation (other than the Company), partnership, trust, association, pool, syndicate, or any other entity or any group or persons acting in concert (other than an employee benefit plan of the Company or one of its affiliates) becomes the beneficial owner (as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange - 54 - 3 Act) as a result of any one or more securities transactions, including gifts and stock repurchases but excluding any Merger Transactions, of securities of the Company possessing one-third or more of the voting power for the election of directors of the Company; (iii) during any period of twenty-four consecutive months, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or (iv) there shall be consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions, excluding any Merger Transactions), of all, or substantially all, of the assets of the Company to a party which is not controlled by or under common control with the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Company Bonus Plan" means any bonus, stock option, profit-sharing or other cash- or equity-based incentive plan offered by the Company. (f) "Company Benefit Plan" means any pension (including without limitation tax-qualified), thrift, deferred compensation, stock purchase, life insurance, medical, dental, education, accident, disability, welfare, retirement or other employee benefit plan offered by the Company other than a Company Bonus Plan. (g) "Designated Office" means 102 Main Street, Keene, New Hampshire 03431, or such other office of the Company designated by the President from time to time other than in anticipation of, or following a Change in Control. (h) "President" means the President of the Company. (i) "Triggering Event" means the occurrence of any of the following events: - 55 - 4 (i) the termination by the Company of the employment of the Executive for any reason other than Cause; (ii) the assignment to the Executive without his consent of any duties inconsistent in any material respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, or any other action by the Company which results in a diminution in any material respect in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) in anticipation of, or following a Change in Control, the requirement by the Company that the Executive be based at any office or location that is more than 75 miles from the Designated Office; (iv) after the Effective Date, the failure of the Company without the Executive's consent to: (A) continue in effect any Company Bonus Plan in which the Executive participates that is material to the Executive's total compensation, unless a substantially equivalent arrangement, embodied in an ongoing substitute or alternative plan, has been made with respect to such Company Bonus Plan; (B) continue the Executive's participation in any Company Bonus Plan and eligibility for bonuses thereunder, or in any substitute or alternative plan, on a basis at least as favorable as that existing at the date hereof, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants; or (C) continue to provide the Executive with benefits comparable to those received by the Executive under any Company Benefit Plan in which the Executive was participating, at participation costs substantially similar to those paid by the Executive; provided, however, that it shall not be deemed a Triggering Event if the Board, for bona fide business purposes and not in anticipation of or following a Change in Control, modifies the terms or conditions of any Company Bonus Plan or Company Benefit Plan, so long as such modifications have or would have a substantially similar effect upon all - 56 - 5 executive employees or all employees of the Company who participate or who are eligible to participate in the plan. (v) the Company issues a Non-Renewal Notice to the Executive as provided in Section 2 of this Agreement; (vi) the Company shall have materially breached any provision of this Agreement and such breach shall not have been cured within 15 days after delivery of written notice thereof to the President by the Executive, identifying the breach with reasonable particularity; or (vii) a reduction by the Company in the Executive's base annual salary as in effect on the date hereof, as the same may be increased from time to time as provided for in this Agreement. (j) "Willful" means that an action, conduct or deed is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon the instructions or prior approval of the Board or the President or based upon the advice of counsel for the Company, shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. 2. Employment Term. The initial term of employment under this Agreement shall be for a period of three years commencing on the Effective Date. This Agreement shall be extended automatically for one additional year on each annual anniversary date of the Effective Date unless either the Company, through the President, or the Executive gives contrary written notice (the "Non-Renewal Notice") to the other not less than three months in advance of such anniversary date. References herein to the term of this Agreement shall refer both to such initial term and such successive terms. 3. Employment. During the term of employment provided for in this Agreement, the Company agrees to employ the Executive in the office or position set forth in the second Recital of this Agreement, and the Executive agrees to serve in such office or position and to perform the duties and discharge the responsibilities associated therewith or such other duties and responsibilities as may reasonably be assigned to the Executive from time to time by the President. The Executive shall devote all his working time and efforts to the business and affairs of the Company and its subsidiaries, provided, however, that the Executive - 57 - 6 may, with the approval of the President, serve as a director or officer of any non-competing business or engage in any other activity, including without limitation charitable or community activity, to the extent that it does not inhibit the performance of his duties hereunder. 4. Office and Services. In connection with the Executive's employment hereunder, the Executive shall be based at the Designated Office, except for required travel on the Company's business. The Company shall furnish the Executive with office space, stenographic assistance, and such other facilities and services as shall be suitable to the Executive's position and adequate for the performance of his duties hereunder. 5. Compensation. The regular compensation and benefits payable to the Executive under this Agreement shall include the following: (a) Salary. The Company shall pay the Executive a base annual salary hereunder of not less than $160,000, payable in equal semimonthly installments or at such other intervals as shall be agreed upon by the parties. The Executive's base annual salary may be increased from time to time as determined by the President and, if so increased, such base annual salary shall not thereafter during the Executive's employment under this Agreement be decreased and the obligation of the Company hereunder to pay the Executive's base annual salary shall thereafter relate to such increased base annual salary. (b) No Separate Board Compensation. The Executive shall not be entitled to receive any fees or additional payments for serving as a member of the Board, as a member of any committee of the Board, or as a member of any board of directors (or the equivalent thereof) or any committee thereof of any subsidiary of the Company. (c) Discretionary Bonuses. During the term of this Agreement, the Executive shall be eligible to participate in an equitable manner with other executive employees of the Company and its subsidiaries in any Company Bonus Plan or in other discretionary bonuses authorized and declared by the Board, and the board of directors (or the equivalent thereof) of the Company's subsidiaries, or by their respective delegees. (d) Participation in Benefit Plans. In addition to any compensation and benefits provided for in this Agreement, the Executive shall be eligible to participate in - 58 - 7 any Company Benefit Plan or any other employee fringe benefits offered by the Company or its subsidiaries for the benefit of executive employees or all employees generally in which the Executive is eligible to participate. The Executive's participation in any such Company Benefit Plan shall be subject to all generally applicable eligibility requirements thereof and shall not in any way limit or reduce the obligation of the Company to pay the Executive's base annual salary hereunder (except pursuant to, in accordance with, or as required by the generally applicable terms of participation of any such Company Benefit Plan). (e) Vacation. The Executive shall be entitled to a minimum annual paid vacation during the term of this Agreement of four weeks per year or such longer period as the President may approve. (f) Reimbursement of Business Expenses. The Company shall promptly reimburse the Executive for all reasonable travel and other business expenses incurred by him in the performance of his duties and responsibilities, subject to such reasonable requirements with respect to substantiation and documentation as may be specified by the Company. 6. Termination Procedures. (a) Termination Notice. If the Executive's employment by the Company is terminated for any reason during the term of this Agreement (other than by reason of the Executive's death or as a result of a consensual termination as provided in Section 8(c) of this Agreement), the terminating party shall provide the other party with written notice (the "Termination Notice") specifying: (i) the effective date of the termination (the "Termination Date"), (ii) the specific provisions of this Agreement upon which the termination is based and that are applicable to the termination, and (iii) a reasonably detailed discussion of the facts and circumstances providing the basis for the termination under the specified provisions of this Agreement. (b) Termination Date. If the Executive's employment is terminated by the Executive, the Termination Date shall not be less than two weeks after the date the Termination Notice is tendered to the Company. If the Executive's employment is terminated by the Company, the Termination Date shall not be less than 30 days after the date the Termination Notice is tendered to the Executive. Termination of the Executive's employment shall occur on the - 59 - 8 Termination Date even if there is a dispute between the parties relating to the provisions of this Agreement applicable to such termination (a "Termination Dispute"). (c) Termination Dispute. If, prior to the Termination Date, the party receiving the Termination Notice provides written notice to the other party of the existence of a Termination Dispute (which notice shall provide a reasonably detailed discussion of the nature of the dispute, including the specific provisions of this Agreement that the disputing party believes are applicable to the termination), the Termination Dispute shall be resolved by: (i) mutual written agreement of the parties hereto or (ii) a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected). The parties hereto shall pursue the resolution of any Termination Dispute with reasonable diligence. (d) Termination Payments. If there is no Termination Dispute, any amount owed by the Company to the Executive as a result of the termination of the Executive's employment under this Agreement shall be payable in immediately available funds on the Termination Date. If there is a Termination Dispute, any amount owed by the Company to the Executive as a result of the termination of the Executive's employment under this Agreement that is not in dispute shall be paid on the Termination Date, and all other amounts shall be paid within five business days of the resolution of the Termination Dispute as provided for in Section 6(c) of this Agreement, together with Applicable Interest. 7. Termination Due to a Triggering Event. (a) If, during the term of this Agreement, the Executive's employment by the Company is terminated (whether by the Company or by the Executive) upon the occurrence of or within 12 months after a Triggering Event, (i) the Company shall make a lump sum cash payment to the Executive in an amount equal to 299% of the Executive's base annual salary at the time the Triggering Event occurs plus the amount of any discretionary bonuses paid by the Company to the Executive within the 12 months immediately preceding the occurrence of the Triggering Event, (ii) the Company shall continue to provide to the Executive for a three-year period the Executive's then-existing coverage under the Company's health, dental and life insurance plans or, if continued coverage under such plans cannot be provided, substantially - 60 - 9 equivalent coverage under alternative arrangements, and (iii) any restrictions remaining on any restricted shares issued to the Executive under the Company's restricted stock plans shall immediately lapse, any performance shares issued to the Executive under the Company's incentive stock plans shall immediately vest, any stock options and stock appreciation rights granted to the Executive shall become immediately exercisable, and the Executive may exercise any such option or stock appreciation right until the later of the expiration of its original term or one year after the effective date of the Executive's termination, provided that this Section 7(a)(iii) shall be inoperative to the extent that its operation would preclude the application of the pooling of interests accounting method to a business combination in which the Company intends to use such method (subject to the foregoing proviso, in the event of any conflict between the terms of this Section 7(a)(iii) and the terms of any applicable stock or incentive plan or implementing agreement between the Company and the Executive, the terms of this Section 7(a)(iii) shall govern unless prohibited by any applicable law in which case the Company shall take all reasonable steps to ensure that the Executive receives all the economic and financial benefits intended to be conferred by this Section 7(a)(iii)). (b) In the event that the Executive becomes entitled to receive any benefit or payment in connection with a Triggering Event or the Company's termination of the Executive's employment, whether pursuant to the terms of this Agreement or otherwise (collectively, the "Total Benefits"), and any of the Total Benefits will be subject to any excise tax (the "Excise Tax") imposed under Section 4999 of the Code, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive from the Gross-Up Payment, after deduction of any federal, state and local income taxes, Excise Tax, and FICA and Medicare withholding taxes on the Gross-Up Payment, shall be equal to the Excise Tax on the Total Benefits. For purposes of determining the amount of such Excise Tax on the Total Benefits, the amount of the Total Benefits that shall be treated as subject to the Excise Tax shall be equal to (i) the Total Benefits, minus (ii) the amount of such Total Benefits that, in the opinion of tax counsel selected by the Company and reasonably acceptable to the Executive ("Tax Counsel"), are not excess parachute payments (within the meaning of Section 280G(b)(1) of the Code). (c) For purposes of Section 7(b), the Executive shall be deemed to pay federal income taxes at the highest - 61 - 10 marginal rate of federal income taxation in the calendar year in which the Excise Tax is payable and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the effective date of his termination, net of the reduction in federal income taxes which could be obtained from deduction of such state and local taxes (calculated by assuming that any reduction under Section 68 of the Code in the amount of itemized deductions allowable to the Executive applies first to reduce the amount of such state and local income taxes that would otherwise be deductible by the Executive). Except as otherwise provided herein, all determinations required to be made under this Section 7 shall be made by Tax Counsel, which determinations shall be conclusive and binding on the Executive and the Company absent manifest error. (d) In the event that the Excise Tax on the Total Benefits is subsequently determined to be less than the amount taken into account hereunder at the time of termination of the Executive's employment, the Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax, federal, state and local income taxes and FICA and Medicare withholding taxes imposed on the Gross-Up Payment being repaid by the Executive to the extent that such repayment results in a reduction in any such taxes and/or a federal, state or local income tax deduction) plus Applicable Interest. In the event that the Excise Tax on the Total Benefits is finally determined to exceed the amount taken into account hereunder at the time of the termination of the Executive's employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment, which shall be calculated by Tax Counsel in the same manner and using the same assumptions as set forth in Sections 7(b) and 7(c), to the Executive in respect of such excess (plus any interest, penalties or additions payable by the Executive to the Internal Revenue Service or any other federal, state, local or foreign taxing authority with respect to such excess or with respect to the additional Gross-Up Payment) at the time that the amount of such excess is finally determined. (e) Following the occurrence of a Triggering Event, if the Company or the Executive brings any action, suit or proceeding for the enforcement, performance or - 62 - 11 construction of this Agreement, the Company agrees to reimburse the Executive for all reasonable costs and expenses incurred by him in such action, suit or proceeding, including reasonable attorneys' and accountants' fees and expenses. 8. Other Termination. Notwithstanding any other provision of this Agreement, the Executive's employment hereunder shall terminate under the following circumstances with the following consequences: (a) Termination By Company for Cause. The Company may terminate the Executive's employment under this Agreement for Cause. The termination of the Executive's employment under this Agreement shall not be deemed for Cause unless and until (1) the Company, through the President, delivers reasonable notice to the Executive that it intends to terminate the Executive for Cause, (2) the Executive is given an opportunity, together with counsel, to be heard before the Board, (3) the Executive's termination is approved by the affirmative vote of at least two-thirds of the Board, and (4) the Company provides the Executive with a copy of the resolutions duly adopted by the Board finding that, in the good faith opinion of the Board, the Executive should be terminated for Cause and specifying the particulars thereof in detail. Upon termination for Cause, the Executive will not be entitled to any further compensation for any period subsequent to the effective date of such termination, except for pay or benefits, if any, in accordance with the then existing severance policies of the Company and the terms of the Company Bonus Plans and Company Benefit Plans. (b) Termination By Company for Disability. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall not have performed his duties hereunder on a full-time basis for six consecutive months, the Executive's employment under this Agreement may be terminated by the Company upon written notice. Such termination for disability shall require the affirmative vote of a majority of the entire Board. The Executive's compensation during any period of disability prior to the effective date of such termination shall be the amounts normally payable to him in accordance with his then current base annual salary, reduced by the sum of the amounts, if any, paid to the Executive under disability benefit plans maintained by the Company or its subsidiaries. The Executive shall not be entitled to any further compensation from the Company or its subsidiaries for any period subsequent to the effective date of such termination, except - 63 - 12 for pay or benefits, if any, in accordance with then existing severance policies of the Company or its subsidiaries and the terms of the Company Bonus Plans and Company Benefit Plans. (c) Consensual Termination. The parties hereto may agree at any time to terminate both this Agreement and the Executive's employment hereunder upon such terms and conditions as the parties may mutually agree. (d) Termination By Reason of Death. In the event of the death of the Executive during the term of his employment hereunder, the Company shall pay to the Executive's spouse, or if the Executive leaves no spouse, to the estate of the Executive, a lump sum cash payment in an amount equal to 100% of the Executive's base annual salary as of the date of death, and upon payment of such amount and any other amounts due and owing hereunder and unpaid as of the date of death, this Agreement shall thereupon terminate and no further amounts shall be payable hereunder; provided, however, that nothing hereunder shall impair the Executive's rights, if any, to pay or benefits under the Company Bonus Plans and the Company Benefit Plans. (e) Termination By Executive. If the Executive terminates his employment with the Company for any reason other than the occurrence of a Triggering Event as provided for in Section 7 hereof or a consensual termination as provided for in Section 8(c) hereof, the Executive will not be entitled to any further compensation for any period subsequent to the effective date of such termination, except for pay or benefits, if any, in accordance with the then existing severance policies of the Company and the Company Bonus Plans and the Company Benefit Plans. 9. Supervisory Suspension. In the event the Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the affairs of the Company or any of its subsidiary banks by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(3) or 1818(g)(1), the Company's obligations under this Agreement shall be suspended effective as of the service date of the notice of suspension or temporary prohibition, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Company shall (a) pay the Executive all compensation withheld while its obligations under this Agreement were suspended, together with Applicable Interest and (b) reinstate all obligations under this Agreement that were suspended. - 64 - 13 10. Confidential Information. During the Executive's employment with the Company and thereafter, the Executive shall not disclose or use in any way any confidential business or technical information or any trade secret acquired in the course of such employment, other than (i) information that is generally known in the Company's industry or acquired from public sources, (ii) as required in the course of such employment, (iii) as required by any court, supervisory authority, administrative agency or applicable law, or (iv) with the prior written consent of the Company. This Section 10 shall survive termination of this Agreement. 11. No-Raid. The Executive agrees that, in the event the Executive's employment with the Company is terminated for any reason whatsoever and as a result of such termination the Executive is entitled to receive compensation, benefits or payments hereunder or under the Company's then existing severance policies that, in the aggregate, equal or exceed 100% of the Executive's base annual salary at the time of termination plus the amount of any discretionary bonuses paid by the Company to the Executive within the 12 months immediately preceding the termination, the Executive shall not, for a period of one year (or such lesser period as may be determined by the President and disclosed to the Executive in writing) after the effective date of the Executive's termination, solicit, actively interfere with the Company's or any Company affiliate's relationship with, or attempt to divert or entice away, any officer of the Company or its affiliates. 12. Payment Obligation Absolute. The obligation of the Company to pay the Executive the compensation, benefits or payments provided herein during the term hereof shall be absolute and unconditional and shall not be affected by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final and the Company will not seek to recover all or any part of such payment from the Executive, or from whosoever may be entitled thereto, for any reason whatsoever except as provided in Section 7(d) hereof. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable under any provision of this Agreement and the obtaining of any such other employment shall in no event limit or reduce the obligations - 65 - 14 of the Company to make the payments required to be made under this Agreement. 13. No Right to Continued Employment. Nothing in this Agreement shall be deemed to give the Executive the right to be retained in the employ of the Company, or to interfere with the right of the Company to discharge the Executive at any time, subject in all cases to the terms of this Agreement. 14. Withholding. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. 15. Successors and Assigns. This Agreement is a personal services contract which may not be assigned by the Company, or assumed from the Company by, any other party without the prior written consent of the Executive. Subject to the foregoing limitation, all rights hereunder shall inure to the benefit of the parties hereto, their personal or legal representatives, heirs, successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, assignment, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume this Agreement and to agree to perform hereunder in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. References herein to the Company will be understood to refer to the successor or successors of the Company, respectively. 16. Notices. Any notice required or desired to be given hereunder shall be in writing and shall be deemed given when delivered personally or sent by certified or registered mail, postage prepaid, to the address of the other party set forth in the first paragraph of this Agreement, provided that any notice to the Company shall be directed to the President, unless the notice is by such person in which case the notice shall be directed to both the Secretary of the Company and the most senior ranking Vice President of the Company. 17. Waiver of Breach. Waiver by any party of a breach of any provision shall not operate as or be construed a waiver by such party of any subsequent breach hereof. 18. Entire Agreement. This agreement contains the entire agreement among the parties concerning the employment of the Executive by the Company, and supersedes any - 66 - 15 employment or change in control agreements between the Executive and the Company or any of its predecessors, subsidiaries or predecessors of subsidiaries. 19. Written Modification, Amendment or Waiver. No modification, amendment or waiver of any provision hereof shall be effective unless in writing specifically referring hereto and signed by the party against whom such provision as modified or amended or such waiver is sought to be enforced. 20. Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party hereto and delivered to the other party, it being understood that all parties need not sign the same counterpart. 21. Governing Law. This Agreement is governed by and is to be construed and enforced in accordance with the laws of the State of New Hampshire applicable to contracts made and to be performed entirely therein. 22. Consent to Jurisdiction. Each party hereto irrevocably consents to the exclusive jurisdiction of the courts of the State of New Hampshire and the federal courts situated in the State of New Hampshire in connection with any action to enforce the provisions of this Agreement, to recover damages or other relief for breach or default under this Agreement, to enforce any decision or award of any arbitrators, or otherwise arising under or by reason of this Agreement. 23. Construction. (a) The section headings of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. (b) All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders where the context so requires. (c) The singular shall include the plural, and vice versa, where the context so requires. (d) All references to sections of, or regulations promulgated under, the Exchange Act, the Code or other statutes shall be deemed also to refer to such sections or - 67 - 16 regulations as amended from time to time and to any successor provisions to such sections or regulations. All references to employee benefit plans of the Company shall be deemed also to refer to such plans as amended from time to time and to any successor plans thereto. 24. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without affecting the validity or enforceability of any other term or provision hereof in that or any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted so as to be enforceable. 25. Authorization. The Company represents and warrants that the execution of this Agreement has been duly authorized by resolution of the Board. IN WITNESS WHEREOF, the parties have executed or caused to be executed this Agreement as of the date first above written. CFX CORPORATION By: ---------------------------------- Name: Peter J. Baxter Title: President ------------------------------- Mark A. Gavin - 68 - EX-10.4 7 EMPLOYMENT AGREEMENT DATED 8/14/97 1 EXHIBIT 10.4 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement"), made as of the 14th day of August, 1997 (the "Effective Date"), is by and between CFX Corporation (the "Company"), a New Hampshire corporation with principal executive offices at 102 Main Street, Keene, New Hampshire 03431, and Christopher W. Bramley, residing at 199 West Main Street, Westborough, Massachusetts 01581 (the "Executive"). RECITALS WHEREAS, the Company, through its Board of Directors (the "Board"), considers the maintenance of competent and experienced executive officers to be essential to its long-term success; WHEREAS, in this regard, the Company has determined that it is in its best interests that the Executive continue to serve as Executive Vice President of the Company, pursuant to a written employment agreement; NOW, THEREFORE, in furtherance of the interests described above and in consideration of the respective covenants and agreements herein contained, the parties hereto agree as follows: 1. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: (a) "Applicable Interest" means interest at the rate provided in Section 1274(b)(2)(B) of the Code. (b) "Cause" means the occurrence of any of the following: (i) the willful and continued failure of the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the President which specifically identifies the manner in which the President believes that the Executive has not substantially performed the Executive's duties; - 69 - 2 (ii) the willful engaging by the Executive in illegal conduct (excluding traffic violations, minor misdemeanors or similar offenses) or gross misconduct that, in the Board's reasonable opinion, may reflect adversely on the business or reputation of the Company; (iii) the removal and/or permanent prohibition of the Executive from participation in the conduct of the affairs of the Company or any of its subsidiary banks by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or 1818(g)(1); (iv) the issuance by any court having appropriate jurisdiction of an order under Section 21(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 15 U.S.C. 78u(d)(2), prohibiting the Executive from acting as an officer or director of the Company; or (v) the conviction of the Executive for commission of a felony. (c) "Change in Control" means the occurrence of any of the following events: (i) there shall be consummated any consolidation, merger, stock-for-stock exchange or similar transaction (collectively, "Merger Transactions") involving securities of the Company in which the holders of voting securities of the Company immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of the Company (or, if the Company does not survive the Merger Transaction, voting securities of the corporation surviving such transaction) having less than 50% of the total voting power in an election of directors of the Company (or such other surviving corporation), excluding securities received by any members of such group which represent disproportionate percentage increases in their shareholdings vis-a-vis the other members of such group; (ii) any individual, corporation (other than the Company), partnership, trust, association, pool, syndicate, or any other entity or any group or persons acting in concert (other than an employee benefit plan of the Company or one of its affiliates) becomes the beneficial owner (as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act) as a result of any one or more securities transactions, - 70 - 3 including gifts and stock repurchases but excluding any Merger Transactions, of securities of the Company possessing one-third or more of the voting power for the election of directors of the Company; (iii) during any period of twenty-four consecutive months, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); or (iv) there shall be consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions, excluding any Merger Transactions), of all, or substantially all, of the assets of the Company to a party which is not controlled by or under common control with the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Company Bonus Plan" means any bonus, stock option, profit-sharing or other cash- or equity-based incentive plan offered by the Company. (f) "Company Benefit Plan" means any pension (including without limitation tax-qualified), thrift, deferred compensation, stock purchase, life insurance, medical, dental, education, accident, disability, welfare, retirement or other employee benefit plan offered by the Company other than a Company Bonus Plan. (g) "Designated Office" means 470 Main Street, Fitchburg, Massachusetts 01420, or such other office of the Company designated by the President from time to time other than in anticipation of, or following a Change in Control. (h) "President" means the President of the Company. (i) "Triggering Event" means the occurrence of any of the following events: (i) the termination by the Company of the employment of the Executive for any reason other than Cause; - 71 - 4 (ii) the assignment to the Executive without his consent of any duties inconsistent in any material respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, or any other action by the Company which results in a diminution in any material respect in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) in anticipation of, or following a Change in Control, the requirement by the Company that the Executive be based at any office or location that is more than 75 miles from the Designated Office; (iv) after the Effective Date, the failure of the Company without the Executive's consent to: (A) continue in effect any Company Bonus Plan in which the Executive participates that is material to the Executive's total compensation, unless a substantially equivalent arrangement, embodied in an ongoing substitute or alternative plan, has been made with respect to such Company Bonus Plan; (B) continue the Executive's participation in any Company Bonus Plan and eligibility for bonuses thereunder, or in any substitute or alternative plan, on a basis at least as favorable as that existing at the date hereof, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants; or (C) continue to provide the Executive with benefits comparable to those received by the Executive under any Company Benefit Plan in which the Executive was participating, at participation costs substantially similar to those paid by the Executive; provided, however, that it shall not be deemed a Triggering Event if the Board, for bona fide business purposes and not in anticipation of or following a Change in Control, modifies the terms or conditions of any Company Bonus Plan or Company Benefit Plan, so long as such modifications have or would have a substantially similar effect upon all executive employees or all employees of the Company who participate or who are eligible to participate in the plan. - 72 - 5 (v) the Company issues a Non-Renewal Notice to the Executive as provided in Section 2 of this Agreement; (vi) the Company shall have materially breached any provision of this Agreement and such breach shall not have been cured within 15 days after delivery of written notice thereof to the President by the Executive, identifying the breach with reasonable particularity; or (vii) a reduction by the Company in the Executive's base annual salary as in effect on the date hereof, as the same may be increased from time to time as provided for in this Agreement. (j) "Willful" means that an action, conduct or deed is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon the instructions or prior approval of the Board or the President or based upon the advice of counsel for the Company, shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. 2. Employment Term. The initial term of employment under this Agreement shall be for a period of three years commencing on the Effective Date. This Agreement shall be extended automatically for one additional year on each annual anniversary date of the Effective Date unless either the Company, through the President, or the Executive gives contrary written notice (the "Non-Renewal Notice") to the other not less than three months in advance of such anniversary date. References herein to the term of this Agreement shall refer both to such initial term and such successive terms. 3. Employment. During the term of employment provided for in this Agreement, the Company agrees to employ the Executive in the office or position set forth in the second Recital of this Agreement, and the Executive agrees to serve in such office or position and to perform the duties and discharge the responsibilities associated therewith or such other duties and responsibilities as may reasonably be assigned to the Executive from time to time by the President. The Executive shall devote all his working time and efforts to the business and affairs of the Company and its subsidiaries, provided, however, that the Executive may, with the approval of the President, serve as a director or officer of any non-competing business or engage in any - 73 - 6 other activity, including without limitation charitable or community activity, to the extent that it does not inhibit the performance of his duties hereunder. 4. Office and Services. In connection with the Executive's employment hereunder, the Executive shall be based at the Designated Office, except for required travel on the Company's business. The Company shall furnish the Executive with office space, stenographic assistance, and such other facilities and services as shall be suitable to the Executive's position and adequate for the performance of his duties hereunder. 5. Compensation. The regular compensation and benefits payable to the Executive under this Agreement shall include the following: (a) Salary. The Company shall pay the Executive a base annual salary hereunder of not less than $230,464, payable in equal semimonthly installments or at such other intervals as shall be agreed upon by the parties. The Executive's base annual salary may be increased from time to time as determined by the President and, if so increased, such base annual salary shall not thereafter during the Executive's employment under this Agreement be decreased and the obligation of the Company hereunder to pay the Executive's base annual salary shall thereafter relate to such increased base annual salary. (b) No Separate Board Compensation. The Executive shall not be entitled to receive any fees or additional payments for serving as a member of the Board, as a member of any committee of the Board, or as a member of any board of directors (or the equivalent thereof) or any committee thereof of any subsidiary of the Company. (c) Discretionary Bonuses. During the term of this Agreement, the Executive shall be eligible to participate in an equitable manner with other executive employees of the Company and its subsidiaries in any Company Bonus Plan or in other discretionary bonuses authorized and declared by the Board, and the board of directors (or the equivalent thereof) of the Company's subsidiaries, or by their respective delegees. (d) Participation in Benefit Plans. In addition to any compensation and benefits provided for in this Agreement, the Executive shall be eligible to participate in any Company Benefit Plan or any other employee fringe benefits offered by the Company or its subsidiaries for the - 74 - 7 benefit of executive employees or all employees generally in which the Executive is eligible to participate. The Executive's participation in any such Company Benefit Plan shall be subject to all generally applicable eligibility requirements thereof and shall not in any way limit or reduce the obligation of the Company to pay the Executive's base annual salary hereunder (except pursuant to, in accordance with, or as required by the generally applicable terms of participation of any such Company Benefit Plan). (e) Vacation. The Executive shall be entitled to a minimum annual paid vacation during the term of this Agreement of four weeks per year or such longer period as the President may approve. (f) Reimbursement of Business Expenses. The Company shall promptly reimburse the Executive for all reasonable travel and other business expenses incurred by him in the performance of his duties and responsibilities, subject to such reasonable requirements with respect to substantiation and documentation as may be specified by the Company. 6. Termination Procedures. (a) Termination Notice. If the Executive's employment by the Company is terminated for any reason during the term of this Agreement (other than by reason of the Executive's death or as a result of a consensual termination as provided in Section 8(c) of this Agreement), the terminating party shall provide the other party with written notice (the "Termination Notice") specifying: (i) the effective date of the termination (the "Termination Date"), (ii) the specific provisions of this Agreement upon which the termination is based and that are applicable to the termination, and (iii) a reasonably detailed discussion of the facts and circumstances providing the basis for the termination under the specified provisions of this Agreement. (b) Termination Date. If the Executive's employment is terminated by the Executive, the Termination Date shall not be less than two weeks after the date the Termination Notice is tendered to the Company. If the Executive's employment is terminated by the Company, the Termination Date shall not be less than 30 days after the date the Termination Notice is tendered to the Executive. Termination of the Executive's employment shall occur on the Termination Date even if there is a dispute between the - 75 - 8 parties relating to the provisions of this Agreement applicable to such termination (a "Termination Dispute"). (c) Termination Dispute. If, prior to the Termination Date, the party receiving the Termination Notice provides written notice to the other party of the existence of a Termination Dispute (which notice shall provide a reasonably detailed discussion of the nature of the dispute, including the specific provisions of this Agreement that the disputing party believes are applicable to the termination), the Termination Dispute shall be resolved by: (i) mutual written agreement of the parties hereto or (ii) a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected). The parties hereto shall pursue the resolution of any Termination Dispute with reasonable diligence. (d) Termination Payments. If there is no Termination Dispute, any amount owed by the Company to the Executive as a result of the termination of the Executive's employment under this Agreement shall be payable in immediately available funds on the Termination Date. If there is a Termination Dispute, any amount owed by the Company to the Executive as a result of the termination of the Executive's employment under this Agreement that is not in dispute shall be paid on the Termination Date, and all other amounts shall be paid within five business days of the resolution of the Termination Dispute as provided for in Section 6(c) of this Agreement, together with Applicable Interest. 7. Termination Due to a Triggering Event. (a) If, during the term of this Agreement, the Executive's employment by the Company is terminated (whether by the Company or by the Executive) upon the occurrence of or within 12 months after a Triggering Event, (i) the Company shall make a lump sum cash payment to the Executive in an amount equal to 299% of the Executive's base annual salary at the time the Triggering Event occurs plus the amount of any discretionary bonuses paid by the Company to the Executive within the 12 months immediately preceding the occurrence of the Triggering Event, (ii) the Company shall continue to provide to the Executive for a three-year period the Executive's then-existing coverage under the Company's health, dental and life insurance plans or, if continued coverage under such plans cannot be provided, substantially equivalent coverage under alternative arrangements, and - 76 - 9 (iii) any restrictions remaining on any restricted shares issued to the Executive under the Company's restricted stock plans shall immediately lapse, any performance shares issued to the Executive under the Company's incentive stock plans shall immediately vest, any stock options and stock appreciation rights granted to the Executive shall become immediately exercisable, and the Executive may exercise any such option or stock appreciation right until the later of the expiration of its original term or one year after the effective date of the Executive's termination, provided that this Section 7(a)(iii) shall be inoperative to the extent that its operation would preclude the application of the pooling of interests accounting method to a business combination in which the Company intends to use such method (subject to the foregoing proviso, in the event of any conflict between the terms of this Section 7(a)(iii) and the terms of any applicable stock or incentive plan or implementing agreement between the Company and the Executive, the terms of this Section 7(a)(iii) shall govern unless prohibited by any applicable law in which case the Company shall take all reasonable steps to ensure that the Executive receives all the economic and financial benefits intended to be conferred by this Section 7(a)(iii)). (b) In the event that the Executive becomes entitled to receive any benefit or payment in connection with a Triggering Event or the Company's termination of the Executive's employment, whether pursuant to the terms of this Agreement or otherwise (collectively, the "Total Benefits"), and any of the Total Benefits will be subject to any excise tax (the "Excise Tax") imposed under Section 4999 of the Code, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive from the Gross-Up Payment, after deduction of any federal, state and local income taxes, Excise Tax, and FICA and Medicare withholding taxes on the Gross-Up Payment, shall be equal to the Excise Tax on the Total Benefits. For purposes of determining the amount of such Excise Tax on the Total Benefits, the amount of the Total Benefits that shall be treated as subject to the Excise Tax shall be equal to (i) the Total Benefits, minus (ii) the amount of such Total Benefits that, in the opinion of tax counsel selected by the Company and reasonably acceptable to the Executive ("Tax Counsel"), are not excess parachute payments (within the meaning of Section 280G(b)(1) of the Code). (c) For purposes of Section 7(b), the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar - 77 - 10 year in which the Excise Tax is payable and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence on the effective date of his termination, net of the reduction in federal income taxes which could be obtained from deduction of such state and local taxes (calculated by assuming that any reduction under Section 68 of the Code in the amount of itemized deductions allowable to the Executive applies first to reduce the amount of such state and local income taxes that would otherwise be deductible by the Executive). Except as otherwise provided herein, all determinations required to be made under this Section 7 shall be made by Tax Counsel, which determinations shall be conclusive and binding on the Executive and the Company absent manifest error. (d) In the event that the Excise Tax on the Total Benefits is subsequently determined to be less than the amount taken into account hereunder at the time of termination of the Executive's employment, the Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax, federal, state and local income taxes and FICA and Medicare withholding taxes imposed on the Gross-Up Payment being repaid by the Executive to the extent that such repayment results in a reduction in any such taxes and/or a federal, state or local income tax deduction) plus Applicable Interest. In the event that the Excise Tax on the Total Benefits is finally determined to exceed the amount taken into account hereunder at the time of the termination of the Executive's employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment, which shall be calculated by Tax Counsel in the same manner and using the same assumptions as set forth in Sections 7(b) and 7(c), to the Executive in respect of such excess (plus any interest, penalties or additions payable by the Executive to the Internal Revenue Service or any other federal, state, local or foreign taxing authority with respect to such excess or with respect to the additional Gross-Up Payment) at the time that the amount of such excess is finally determined. (e) Following the occurrence of a Triggering Event, if the Company or the Executive brings any action, suit or proceeding for the enforcement, performance or construction of this Agreement, the Company agrees to - 78 - 11 reimburse the Executive for all reasonable costs and expenses incurred by him in such action, suit or proceeding, including reasonable attorneys' and accountants' fees and expenses. 8. Other Termination. Notwithstanding any other provision of this Agreement, the Executive's employment hereunder shall terminate under the following circumstances with the following consequences: (a) Termination By Company for Cause. The Company may terminate the Executive's employment under this Agreement for Cause. The termination of the Executive's employment under this Agreement shall not be deemed for Cause unless and until (1) the Company, through the President, delivers reasonable notice to the Executive that it intends to terminate the Executive for Cause, (2) the Executive is given an opportunity, together with counsel, to be heard before the Board, (3) the Executive's termination is approved by the affirmative vote of at least two-thirds of the Board, and (4) the Company provides the Executive with a copy of the resolutions duly adopted by the Board finding that, in the good faith opinion of the Board, the Executive should be terminated for Cause and specifying the particulars thereof in detail. Upon termination for Cause, the Executive will not be entitled to any further compensation for any period subsequent to the effective date of such termination, except for pay or benefits, if any, in accordance with the then existing severance policies of the Company and the terms of the Company Bonus Plans and Company Benefit Plans. (b) Termination By Company for Disability. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall not have performed his duties hereunder on a full-time basis for six consecutive months, the Executive's employment under this Agreement may be terminated by the Company upon written notice. Such termination for disability shall require the affirmative vote of a majority of the entire Board. The Executive's compensation during any period of disability prior to the effective date of such termination shall be the amounts normally payable to him in accordance with his then current base annual salary, reduced by the sum of the amounts, if any, paid to the Executive under disability benefit plans maintained by the Company or its subsidiaries. The Executive shall not be entitled to any further compensation from the Company or its subsidiaries for any period subsequent to the effective date of such termination, except for pay or benefits, if any, in accordance with then - 79 - 12 existing severance policies of the Company or its subsidiaries and the terms of the Company Bonus Plans and Company Benefit Plans. (c) Consensual Termination. The parties hereto may agree at any time to terminate both this Agreement and the Executive's employment hereunder upon such terms and conditions as the parties may mutually agree. (d) Termination By Reason of Death. In the event of the death of the Executive during the term of his employment hereunder, the Company shall pay to the Executive's spouse, or if the Executive leaves no spouse, to the estate of the Executive, a lump sum cash payment in an amount equal to 100% of the Executive's base annual salary as of the date of death, and upon payment of such amount and any other amounts due and owing hereunder and unpaid as of the date of death, this Agreement shall thereupon terminate and no further amounts shall be payable hereunder; provided, however, that nothing hereunder shall impair the Executive's rights, if any, to pay or benefits under the Company Bonus Plans and the Company Benefit Plans. (e) Termination By Executive. If the Executive terminates his employment with the Company for any reason other than the occurrence of a Triggering Event as provided for in Section 7 hereof or a consensual termination as provided for in Section 8(c) hereof, the Executive will not be entitled to any further compensation for any period subsequent to the effective date of such termination, except for pay or benefits, if any, in accordance with the then existing severance policies of the Company and the Company Bonus Plans and the Company Benefit Plans. 9. Supervisory Suspension. In the event the Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the affairs of the Company or any of its subsidiary banks by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(3) or 1818(g)(1), the Company's obligations under this Agreement shall be suspended effective as of the service date of the notice of suspension or temporary prohibition, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Company shall (a) pay the Executive all compensation withheld while its obligations under this Agreement were suspended, together with Applicable Interest and (b) reinstate all obligations under this Agreement that were suspended. - 80 - 13 10. Confidential Information. During the Executive's employment with the Company and thereafter, the Executive shall not disclose or use in any way any confidential business or technical information or any trade secret acquired in the course of such employment, other than (i) information that is generally known in the Company's industry or acquired from public sources, (ii) as required in the course of such employment, (iii) as required by any court, supervisory authority, administrative agency or applicable law, or (iv) with the prior written consent of the Company. This Section 10 shall survive termination of this Agreement. 11. No-Raid. The Executive agrees that, in the event the Executive's employment with the Company is terminated for any reason whatsoever and as a result of such termination the Executive is entitled to receive compensation, benefits or payments hereunder or under the Company's then existing severance policies that, in the aggregate, equal or exceed 100% of the Executive's base annual salary at the time of termination plus the amount of any discretionary bonuses paid by the Company to the Executive within the 12 months immediately preceding the termination, the Executive shall not, for a period of one year (or such lesser period as may be determined by the President and disclosed to the Executive in writing) after the effective date of the Executive's termination, solicit, actively interfere with the Company's or any Company affiliate's relationship with, or attempt to divert or entice away, any officer of the Company or its affiliates. 12. Payment Obligation Absolute. The obligation of the Company to pay the Executive the compensation, benefits or payments provided herein during the term hereof shall be absolute and unconditional and shall not be affected by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final and the Company will not seek to recover all or any part of such payment from the Executive, or from whosoever may be entitled thereto, for any reason whatsoever except as provided in Section 7(d) hereof. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable under any provision of this Agreement and the obtaining of any such other employment shall in no event limit or reduce the obligations of the Company to make the payments required to be made under this Agreement. - 81 - 14 13. No Right to Continued Employment. Nothing in this Agreement shall be deemed to give the Executive the right to be retained in the employ of the Company, or to interfere with the right of the Company to discharge the Executive at any time, subject in all cases to the terms of this Agreement. 14. Withholding. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. 15. Successors and Assigns. This Agreement is a personal services contract which may not be assigned by the Company, or assumed from the Company by, any other party without the prior written consent of the Executive. Subject to the foregoing limitation, all rights hereunder shall inure to the benefit of the parties hereto, their personal or legal representatives, heirs, successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, assignment, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume this Agreement and to agree to perform hereunder in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. References herein to the Company will be understood to refer to the successor or successors of the Company, respectively. 16. Notices. Any notice required or desired to be given hereunder shall be in writing and shall be deemed given when delivered personally or sent by certified or registered mail, postage prepaid, to the address of the other party set forth in the first paragraph of this Agreement, provided that any notice to the Company shall be directed to the President, unless the notice is by such person in which case the notice shall be directed to both the Secretary of the Company and the most senior ranking Vice President of the Company. 17. Waiver of Breach. Waiver by any party of a breach of any provision shall not operate as or be construed a waiver by such party of any subsequent breach hereof. 18. Entire Agreement. This agreement contains the entire agreement among the parties concerning the employment of the Executive by the Company, and supersedes any employment or change in control agreements between the - 82 - 15 Executive and the Company or any of its predecessors, subsidiaries or predecessors of subsidiaries. 19. Written Modification, Amendment or Waiver. No modification, amendment or waiver of any provision hereof shall be effective unless in writing specifically referring hereto and signed by the party against whom such provision as modified or amended or such waiver is sought to be enforced. 20. Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party hereto and delivered to the other party, it being understood that all parties need not sign the same counterpart. 21. Governing Law. This Agreement is governed by and is to be construed and enforced in accordance with the laws of the State of New Hampshire applicable to contracts made and to be performed entirely therein. 22. Consent to Jurisdiction. Each party hereto irrevocably consents to the exclusive jurisdiction of the courts of the State of New Hampshire and the federal courts situated in the State of New Hampshire in connection with any action to enforce the provisions of this Agreement, to recover damages or other relief for breach or default under this Agreement, to enforce any decision or award of any arbitrators, or otherwise arising under or by reason of this Agreement. 23. Construction. (a) The section headings of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. (b) All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders where the context so requires. (c) The singular shall include the plural, and vice versa, where the context so requires. (d) All references to sections of, or regulations promulgated under, the Exchange Act, the Code or other statutes shall be deemed also to refer to such sections or regulations as amended from time to time and to any - 83 - 16 successor provisions to such sections or regulations. All references to employee benefit plans of the Company shall be deemed also to refer to such plans as amended from time to time and to any successor plans thereto. 24. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without affecting the validity or enforceability of any other term or provision hereof in that or any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted so as to be enforceable. 25. Authorization. The Company represents and warrants that the execution of this Agreement has been duly authorized by resolution of the Board. IN WITNESS WHEREOF, the parties have executed or caused to be executed this Agreement as of the date first above written. CFX CORPORATION By: ---------------------------------- Name: Peter J. Baxter Title: President ----------------------------------- Christopher W. Bramley - 84 - EX-23.1 8 CONSENT OF SHATSWELL MACLEOD & COMPANY, P.C. 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference herein, in the Registration Statement on Form S-8 pertaining to the CFX Corporation 1986 Stock Option Plan (File No. 33-17071), in the Registration Statement on Form S-8 pertaining to the CFX Corporation 1992 Stock Purchase Plan (File No. 33-52598), in the Registration Statement on Form S-8 pertaining to the CFX Corporation 1995 Stock Option Plan (File No. 33-61787), and in the Registration Statement on Form S-3 pertaining to the CFX Corporation Dividend Reinvestment and Stock Purchase Plan (File No. 33-54363) of our report dated January 13, 1997, except for Note 20 as to which the date is February 13, 1997, included in the Annual Report of Portsmouth Bank Shares, Inc. and Subsidiary for the year ended December 31, 1996. /s/ Shatswell, MacLeod & Company, P.C. -------------------------------------- Shatswell, MacLeod & Company, P.C. West Peabody, Massachusetts September 11, 1997 - 85 - EX-23.2 9 CONSENT OF KPMG PEAT MARWICK 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the by reference herein, in the Registration Statement on Form S-8 pertaining to the CFX Corporation 1986 Stock Option Plan (File No. 33-17071), in the Registration Statement on Form S-8 pertaining to the CFX Corporation 1992 Stock Purchase Plan (File No. 33-52598), in the Registration Statement on Form S-8 pertaining to the CFX Corporation 1995 Stock Option Plan (File No. 33-61787), and in the Registration Statement on Form S-3 pertaining to the CFX Corporation Dividend Reinvestment and Stock Purchase Plan (File No. 33-54363) of our report dated January 22, 1997, relating to the consolidated balance sheets of Community Bankshares, Inc. and subsidiaries as of December 31, 1996 and 1995 and June 30, 1995, and related consolidated statements of income, changes in stockholders' equity and cash flows for the year ended December 31, 1996, the six months ended December 31, 1995, and for each of the years in the two year period ended June 30, 1995, which report appears in the December 31, 1996 annual report on Form 10-K of Community Bankshares, Inc. /s/ KPMG Peat Marwick LLP -------------------------- KPMG Peat Marwick LLP Boston, Massachusetts September 11, 1997 - 86 - EX-23.3 10 CONSENT OF WOLF & COMPANY, P.C. 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement on Form S-3 pertaining to the CFX Corporation Dividend Reinvestment and Stock Purchase Plan (File No. 33-54363) of our report dated January 29, 1997, except for Note W as to which the date is March 24, 1997, with respect to the consolidated financial statements of CFX Corporation as of December 31, 1996, and for the year then ended, incorporated by reference in the Annual Report on Form 10-K of CFX Corporation for the year ended December 31, 1996. /s/ Wolf & Company, P.C. -------------------------- Wolf & Company, P.C. Boston Massachusetts September 12, 1997 EX-99.1 11 PRESS RELEASE DATED AUGUST 29, 1997 1 EXHIBIT 99.1 [CFX NEWS RELEASE LETTERHEAD] CFX CORPORATION COMPLETES COMMUNITY BANKSHARES AND PORTSMOUTH BANK SHARES MERGERS Keene, NH, August 29, 1997 -- CFX Corporation (AMEX: CFX) announced that it is completing its mergers with Community Bankshares, Inc. ("Community") and Portsmouth Bank Shares, Inc. ("Portsmouth"). Pursuant to the definitive agreements, each of Community's 2,489,000 outstanding and Portsmouth's 5,907,000 outstanding shares of common stock were converted into 2.113 shares and .9314 shares, respectively, of the Company's Common Stock, resulting in the issuance of 5,259,000 shares and 5,502,000 shares, respectively, of the Company's Common Stock to Community and Portsmouth shareholders. Cash will be paid in lieu of issuing fractional shares. Community's two banking subsidiaries, Concord Savings Bank and Centerpoint Bank, headquartered in Concord, New Hampshire and Bedford, New Hampshire, respectively, were merged into CFX's New Hampshire subsidiary, CFX Bank in the merger. Similarly, Portsmouth's banking subsidiary, Portsmouth Savings Bank, headquartered in Portsmouth, New Hampshire, was merged into CFX Bank in the merger. Both the Community and Portsmouth mergers will be accounted for by the pooling-of-interests method of accounting. Peter J. Baxter, President and Chief Executive Officer of CFX Corporation said, "We welcome the shareholders, customers, employees, and communities of Community and Portsmouth to the CFX family of community banks. As a combined company, all customers will share in the many benefits of a larger and more diversified community banking company." Mr. Baxter added, "We also welcome Douglas Crichfield to our company who will assume the position of President and Chief Executive Officer of CFX Bank. Mr. Crichfield was the President and Chief Executive Officer of Community and comes to us with many years of community banking experience and a philosophy which blends well with our existing franchise. In addition, Mark E. Simpson, President of Portsmouth Savings Bank will continue to be a leading representative of CFX in the seacoast region." CFX Corporation is a multi-bank holding company with total assets of $2.8 billion. The Company's three banking subsidiaries are CFX Bank, headquartered in Keene, New Hampshire, Orange Savings Bank, headquartered in Orange, Massachusetts, and The Safety Fund National Bank, headquartered in Fitchburg, Massachusetts. CFX Mortgage, Inc., CFX Bank's mortgage banking subsidiary, services approximately $895 million in mortgage loans for others. In addition, CFX Funding L.L.C., a 51% owned subsidiary of CFX Bank that engages in the facilitation of lease financing and rated securitizations, now services over $117 million in leases for others. The Company operates 58 full service offices, 3 loan production offices, and 88 automated teller and remote service banking locations in New Hampshire and central Massachusetts, and operates a trust division with $405 million in assets. ### -88- EX-99.2 12 PRO FORMA FINANCIAL INFORMATION 1 EXHIBIT 99.2 CFX Corporation - Portsmouth Bank Shares, Inc. - Communty Bankshares, Inc. -- Pooling Accounting Pro Forma Combined Condensed Balance Sheet June 30, 1997 (UNAUDITED)
CFX PORTSMOUTH Pro Forma (In thousands, except per share data) (Historical) (Historical) Adjustments - --------------------------------------------------------------------------------------------------------------------------- Assets Cash and due from banks $58,846 $7,161 Interest bearing deposits with other banks (5) 10,211 39,858 Securities available for sale 364,360 87,201 Securities held to maturity 30,247 29,302 Mortgage loans held for sale 14,089 0 Loans and leases 1,286,669 90,049 Less allowance for loan and lease losses 16,042 687 ---------------- ------------------- ---------------- Net Loans and Leases 1,270,627 89,362 0 Premises and equipment 28,553 887 Mortgage servicing rights 5,937 0 Goodwill and deposit base intangibles 8,925 0 Foreclosed real estate 5,631 96 Bank-owned life insurance 32,120 0 Other assets 29,484 5,586 ---------------- ------------------- ---------------- $1,859,030 $259,453 $0 ---------------- ------------------- ---------------- Liabilities and Shareholders' Equity Deposits: Interest bearing $1,099,236 $185,444 Noninterest bearing 159,124 4,425 ---------------- ------------------- ---------------- Total Deposits 1,258,360 189,869 0 Advances from FHLBB 326,754 0 Other borrowed funds (5) 117,919 0 Other liabilities 17,672 2,293 ---------------- ------------------- ---------------- Total Liabilities 1,720,705 192,162 0 Shareholders' Equity Preferred stock 0 0 Common stock (1)(2)(3) 8,788 669 3,486 Paid-in capital 99,269 35,577 (9,850) Retained earnings 32,023 36,598 Net unrealized gains (losses) on securities available for sale, after tax effects (1,164) 811 Cost of common stock in treasury (591) (6,364) 6,364 ---------------- ------------------- ---------------- Total Shareholders' Equity 138,325 67,291 0 ---------------- ------------------- ---------------- $1,859,030 $259,453 $0 ---------------- ------------------- ---------------- Number of common shares outstanding (1) 13,144 5,907 ---------------- ------------------- Common shareholders' equity per share (4) $10.52 $11.39 ---------------- ------------------- CFX Pro Forma Combined w/ COMMUNITY Pro Forma (In thousands, except per share data) PORTSMOUTH (Historical) Adjustments - ---------------------------------------------------------------------------------------------------------------------------- Assets Cash and due from banks $66,007 $25,708 Interest bearing deposits with other banks (5) 50,069 12 (10,000) Securities available for sale 451,561 115,494 Securities held to maturity 59,549 37,737 Mortgage loans held for sale 14,089 3,668 Loans and leases 1,376,718 416,523 Less allowance for loan and lease losses 16,729 4,224 ------------------ ------------------ ----------------- Net Loans and Leases 1,359,989 412,299 0 Premises and equipment 29,440 9,833 Mortgage servicing rights 5,937 1,750 Goodwill and deposit base intangibles 8,925 0 Foreclosed real estate 5,727 1,001 Bank-owned life insurance 32,120 0 Other assets 35,070 8,372 ------------------ ------------------ ----------------- $2,118,483 $615,874 ($10,000) ------------------ ------------------ ----------------- Liabilities and Shareholders' Equity Deposits: Interest bearing $1,284,680 $362,805 Noninterest bearing 163,549 65,755 ------------------ ------------------ ----------------- Total Deposits 1,448,229 428,560 0 Advances from FHLBB 326,754 87,667 Other borrowed funds (5) 117,919 51,208 (10,000) Other liabilities 19,965 5,346 ------------------ ------------------ ----------------- Total Liabilities 1,912,867 572,781 (10,000) Shareholders' Equity Preferred stock 0 0 Common stock (1)(2)(3) 12,943 2,489 1,016 Paid-in capital 124,996 22,514 (1,016) Retained earnings 68,621 18,002 Net unrealized gains (losses) on securities available for sale, after tax effects (353) 88 Cost of common stock in treasury (591) 0 ------------------ ------------------ ----------------- Total Shareholders' Equity 205,616 43,093 0 ------------------ ------------------ ----------------- $2,118,483 $615,874 ($10,000) ------------------ ------------------ ----------------- Number of common shares outstanding (1) 18,646 2,489 ------------------ ------------------ ----------------- Common shareholders' equity per share (4) $11.03 $17.32 ------------------ ------------------ CFX Pro Forma CFX Fully Combined w/ Pro Forma (In thousands, except per share data) COMMUNITY Combined - ------------------------------------------------------------------------------------------------------------------ Assets Cash and due from banks $84,554 $91,715 Interest bearing deposits with other banks (5) 223 40,081 Securities available for sale 479,854 567,055 Securities held to maturity 67,984 97,286 Mortgage loans held for sale 17,757 17,757 Loans and leases 1,703,192 1,793,241 Less allowance for loan and lease losses 20,266 20,953 ----------------- --------------- Net Loans and Leases 1,682,926 1,772,288 Premises and equipment 38,386 39,273 Mortgage servicing rights 7,687 7,687 Goodwill and deposit base intangibles 8,925 8,925 Foreclosed real estate 6,632 6,728 Bank-owned life insurance 32,120 32,120 Other assets 37,856 43,442 ----------------- --------------- $2,464,904 $2,724,357 ----------------- --------------- Liabilities and Shareholders' Equity Deposits: Interest bearing $1,462,041 $1,647,485 Noninterest bearing 224,879 229,304 ----------------- --------------- Total Deposits 1,686,920 1,876,789 Advances from FHLBB 414,421 414,421 Other borrowed funds (5) 159,127 159,127 Other liabilities 23,018 25,311 ----------------- --------------- Total Liabilities 2,283,486 2,475,648 Shareholders' Equity Preferred stock 0 0 Common stock (1)(2)(3) 12,293 16,448 Paid-in capital 120,767 146,494 Retained earnings 50,025 86,623 Net unrealized gains (losses) on securities available for sale, after tax effects (1,076) (265) Cost of common stock in treasury (591) (591) ----------------- --------------- Total Shareholders' Equity 181,418 248,709 ----------------- --------------- $2,464,904 $2,724,357 ----------------- --------------- Number of common shares outstanding (1) 18,402 23,904 ----------------- --------------- Common shareholders' equity per share (4) $9.86 $10.40 ----------------- ---------------
2 CFX CORPORATION-- PORTSMOUTH BANK SHARES, INC. -- COMMUNITY BANKSHARES, INC. PRO FORMA COMBINED CONDENSED INCOME STATEMENT For the Six Months Ended June 30, 1997 (UNAUDITED)
CFX Pro Forma CFX PORTSMOUTH Combined (In thousands, except per share data) (Historical) (Historical) w/ PORTSMOUTH - ----------------------------------------------------------------------------------------------------------------------------- Interest income: Interest on loans and leases $ 49,992 $ 3,828 $ 53,820 Interest and dividends on securities 11,438 3,387 14,825 Other interest income (5) 336 1,991 2,327 ------------------- ----------------------- --------------------- Total Interest and Dividend Income 61,766 9,206 70,972 Interest expense: Interest on deposits 22,159 4,021 26,180 Interest on borrowings (5) 8,823 0 8,823 ------------------- ----------------------- --------------------- Total Interest Expense 30,982 4,021 35,003 ------------------- ----------------------- --------------------- Net Interest and Dividend Income 30,784 5,185 35,969 Provision for loan and lease losses 1,404 0 1,404 ------------------- ----------------------- --------------------- Net Interest and Dividend Income after Provision for Loan and Lease Losses 29,380 5,185 34,565 Other income 8,578 509 9,087 Other expense 24,771 1,703 26,474 ------------------- ----------------------- --------------------- Income before Income Taxes 13,187 3,991 17,178 Income taxes 3,638 955 4,593 ------------------- ----------------------- --------------------- Net Income 9,549 3,036 12,585 Preferred stock dividends 0 0 0 ------------------- ----------------------- --------------------- Net Income Available to Common Stock $ 9,549 $ 3,036 $ 12,585 ------------------- ----------------------- --------------------- ------------------- ----------------------- --------------------- Weighted average common shares outstanding (6) 13,058 5,838 18,496 ------------------- ----------------------- --------------------- Earnings per share $ 0.73 $ 0.52 $ 0.68 CFX Pro Forma COMMUNITY Pro Forma Combined (In thousands, except per share data) (Historical) Adjustments w/ COMMUNITY - -------------------------------------------------------------------------- ------------------- --------------------- Interest income: Interest on loans and leases $ 18,251 $ 68,243 Interest and dividends on securities 4,160 15,598 Other interest income (5) 57 (58) 335 -------------------- ------------------- --------------------- Total Interest and Dividend Income 22,468 (58) 84,176 Interest expense: Interest on deposits 7,549 29,708 Interest on borrowings (5) 3,201 (58) 11,966 -------------------- ------------------- --------------------- Total Interest Expense 10,750 (58) 41,674 -------------------- ------------------- --------------------- Net Interest and Dividend Income 11,718 0 42,502 Provision for loan and lease losses 558 1,962 -------------------- ------------------- --------------------- Net Interest and Dividend Income after Provision for Loan and Lease Losses 11,160 0 40,540 Other income 2,586 11,164 Other expense 9,211 33,982 -------------------- ------------------- --------------------- Income before Income Taxes 4,535 0 17,722 Income taxes 1,688 5,326 -------------------- ------------------- --------------------- Net Income 2,847 0 12,396 Preferred stock dividends 0 0 -------------------- ------------------- --------------------- Net Income Available to Common Stock $ 2,847 $ - $ 12,396 -------------------- ------------------- --------------------- -------------------- ------------------- --------------------- Weighted average common shares outstanding (6) 2,523 18,389 -------------------- ------------------- --------------------- Earnings per share $ 1.13 $ 0.67 CFX Fully Pro Forma (In thousands, except per share data) Combined - ------------------------------------------------ -------------------- Interest income: Interest on loans and leases $ 72,071 Interest and dividends on securities 18,985 Other interest income (5) 2,326 -------------------- Total Interest and Dividend Income 93,382 Interest expense: Interest on deposits 33,729 Interest on borrowings (5) 11,966 -------------------- Total Interest Expense 45,695 -------------------- Net Interest and Dividend Income 47,687 Provision for loan and lease losses 1,962 -------------------- Net Interest and Dividend Income after Provision for Loan and Lease Losses 45,725 Other income 11,673 Other expense 35,685 -------------------- Income before Income Taxes 21,713 Income taxes 6,281 -------------------- Net Income 15,432 Preferred stock dividends 0 -------------------- Net Income Available to Common Stock $ 15,432 -------------------- -------------------- Weighted average common shares outstanding (6) 23,827 -------------------- Earnings per share $ 0.65
3 CFX CORPORATION-- PORTSMOUTH BANK SHARES, INC. -- COMMUNITY BANKSHARES, INC. PRO FORMA COMBINED CONDENSED INCOME STATEMENT For the Six Months Ended June 30, 1996 (UNAUDITED)
CFX PORTSMOUTH (In thousands, except per share data) (Historical) (Historical) - ------------------------------------------------------------------------------------------------------- Interest income: Interest on loans and leases $ 42,427 $ 3,561 Interest and dividends on securities 9,532 3,474 Other interest income 673 1,998 -------------------- -------------------- Total Interest and Dividend Income 52,632 9,033 Interest expense: Interest on deposits 20,008 4,028 Interest on borrowings 4,604 0 -------------------- -------------------- Total Interest Expense 24,612 4,028 -------------------- -------------------- Net Interest and Dividend Income 28,020 5,005 Provision for loan and lease losses 1,655 0 -------------------- -------------------- Net Interest and Dividend Income after Provision for Loan and Lease Losses 26,365 5,005 Other income 7,824 874 Other expense 23,027 1,789 -------------------- -------------------- Income before Income Taxes 11,162 4,090 Income taxes 3,594 1,194 -------------------- -------------------- Net Income 7,568 2,896 Preferred stock dividends 0 0 -------------------- -------------------- Net Income Available to Common Stock $ 7,568 $ 2,896 -------------------- -------------------- -------------------- -------------------- Weighted average common shares outstanding (6) 12,726 5,792 -------------------- -------------------- Earnings per share $ 0.59 $ 0.50 CFX CFX Pro Forma Pro Forma Combined COMMUNITY Combined (In thousands, except per share data) w/ PORTSMOUTH (Historical) w/ COMMUNITY - ------------------------------------------------------------------------ ------------------ --------------------- Interest income: Interest on loans and leases $ 45,988 $ 15,603 $ 58,030 Interest and dividends on securities 13,006 4,042 13,574 Other interest income 2,671 225 898 --------------- ------------------ ------------------- Total Interest and Dividend Income 61,665 19,870 72,502 Interest expense: Interest on deposits 24,036 7,432 27,440 Interest on borrowings 4,604 2,254 6,858 --------------- ------------------ ------------------- Total Interest Expense 28,640 9,686 34,298 --------------- ------------------ ------------------- Net Interest and Dividend Income 33,025 10,184 38,204 Provision for loan and lease losses 1,655 575 2,230 --------------- ------------------ ------------------- Net Interest and Dividend Income after Provision for Loan and Lease Losses 31,370 9,609 35,974 Other income 8,698 2,129 9,953 Other expense 24,816 8,006 31,033 --------------- ------------------ ------------------- Income before Income Taxes 15,252 3,732 14,894 Income taxes 4,788 1,328 4,922 --------------- ------------------ ------------------- Net Income 10,464 2,404 9,972 Preferred stock dividends 0 0 0 --------------- ------------------ ------------------- Net Income Available to Common Stock $ 10,464 $ 2,404 $ 9,972 --------------- ------------------ ------------------- --------------- ------------------ ------------------- Weighted average common shares outstanding (6) 18,121 2,480 17,966 --------------- ------------------ ------------------- Earnings per share $ 0.58 $ 0.97 $ 0.56 CFX Fully Pro Forma (In thousands, except per share data) Combined - ------------------------------------------------------------------------- Interest income: Interest on loans and leases $ 61,591 Interest and dividends on securities 17,048 Other interest income 2,896 ------------------ Total Interest and Dividend Income 81,535 Interest expense: Interest on deposits 31,468 Interest on borrowings 6,858 ------------------ Total Interest Expense 38,326 ------------------ Net Interest and Dividend Income 43,209 Provision for loan and lease losses 2,230 ------------------ Net Interest and Dividend Income after Provision for Loan and Lease Losses 40,979 Other income 10,827 Other expense 32,822 ------------------ Income before Income Taxes 18,984 Income taxes 6,116 ------------------ Net Income 12,868 Preferred stock dividends 0 ------------------ Net Income Available to Common Stock $ 12,868 ------------------ ------------------ Weighted average common shares outstanding (6) 23,361 ------------------ Earnings per share $ 0.55
4 NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (1) Common Stock at June 30, 1997: CFX, $0.66 2/3 par value, 22,500,000 authorized shares, of which 13,181,500 shares have been issued and 13,143,623 are outstanding. At the annual meeting held on July 30, 1997, the shareholders of CFX approved an amendment to CFX's Articles of Incorporation to increase the number of authorized shares of CFX Common Stock from 22,500,000 to 50,000,000. The amendment became effective on August 20, 1997 upon filing of Articles of Amendment to CFX's Articles of Incorporation with the New Hampshire Secretary of State. Portsmouth, $0.10 par value, 25,000,000 authorized shares, of which 6,692,092 shares have been issued and 5,907,242 are outstanding. Community, $1.00 par value, 4,500,000 authorized shares, of which 2,488,737 shares have been issued and are outstanding. (2) The pro forma financial statements reflect the exchange of Portsmouth and Community common stock for CFX common stock in connection with the acquisitions at the exchange ratios of .9314 and 2.113, respectively. In combining the companies, a pro forma adjustment at June 30, 1997 was made to reflect the issuance of 5,502,005 shares of CFX common stock to Portsmouth shareholders and 5,258,701 shares of CFX common stock to Community shareholders in exchange for the outstanding shares of Portsmouth and Community common stock. (3) The Acquisition Agreements provide that each holder of Portsmouth and Community Common Stock, who would otherwise have been entitled to a fraction of CFX common stock, will receive cash in lieu of such fractional share. Such cash payments have not been reflected in the pro forma information. (4) Pro forma common shareholders' equity per share was computed by dividing combined historical common shareholders' equity by the sum of the common shares outstanding at period end, adjusted to give effect to one or both of the acquisitions, the exchange ratios of .9314 and 2.113, respectively. (5) Pro forma adjustment is for Federal Funds sold to Community by CFX totaling $10,000,000 at June 30, 1997. Interest associated with the Federal Funds sold during the period between the Companies was $58,000. (6) Pro forma weighted average common shares outstanding represent the historical weighted average common shares outstanding of CFX during the periods, plus the historical weighted average common shares outstanding of Portsmouth (as restated to reflect the 2% stock dividend paid on March 15, 1997) and Community, adjusted to give effect to one or both of the acquisitions, the exchange ratios of .9314 and 2.113, respectively. (7) The unaudited pro forma combined condensed income statements do not reflect material nonrecurring charges, totaling approximately $7.7 million in the aggregate, net of related tax effects, attributable to the Portsmouth Acquisition and the Community Acquisition. -----END PRIVACY-ENHANCED MESSAGE-----