<PAGE>
As filed with the Securities and Exchange Commission
on April 21, 1999
Registration No.
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4 EF
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
ROCKPORT NATIONAL BANCORP, INC.
-------------------------------
(Exact name of Registrant as specified in its charter)
------------------------------------------------------
MASSACHUSETTS 551111 04-3461422
- ---------------------------- ------------------------- ------------------
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
-----------------------------
ROCKPORT NATIONAL BANCORP, INC.
16 MAIN STREET
ROCKPORT, MASSACHUSETTS 01966
TEL. (978) 546-3411
-------------------
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
16 MAIN STREET
ROCKPORT, MASSACHUSETTS 01966
TEL. (978) 546-3411
-------------------
(Address of principal place of business or intended principal
place of business)
PETER A. ANDERSON
16 MAIN STREET
ROCKPORT, MA 01966
TEL. (978) 546-3411
-------------------
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With copies of all communications to:
PATRICIA D. ANDERSON, ESQ.
J. J. CRANMORE, ESQ.
CRANMORE, FITZGERALD & MEANEY
49 WETHERSFIELD AVENUE
HARTFORD, CONNECTICUT 06114
TELEPHONE (860) 522-9100
---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
-----------------
If any of the securities being registered on this Form are to be offered:
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [X]
<TABLE>
<CAPTION>
======================================================================================================================
CALCULATION OF REGISTRATION FEE
======================================================================================================================
Title of Each Class of
Securities to be Proposed Maximum Amount Proposed Maximum Aggregate Offering Amount of Registration
Registered to be Registered Offering Price Per Unit Price Fee *
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock par value 209,775 $23.96 $5,026,209 $1,397.29
$ .01 per share
======================================================================================================================
</TABLE>
* Estimated solely for the purpose of computing the registration fee.
Pursuant to Rule 457(f)(2), the maximum aggregate offering price has been
determined on the basis of the book value of the shares of common stock,
$1.00 par value of Rockport National Bank on March 31, 1999.
<PAGE>
ROCKPORT NATIONAL BANK
AND
ROCKPORT NATIONAL BANCORP, INC.
16 MAIN STREET
ROCKPORT, MASSACHUSETTS 01966
(978) 546-3411
PROXY STATEMENT AND PROSPECTUS
209,775 Shares of Common Stock
par value $.01 per share of Rockport National Bancorp, Inc.
We are furnishing this combined Proxy Statement and Prospectus to Rockport
National Bank shareholders in order to solicit proxies for use at the Annual
Shareholder Meeting to be held on June 15, 1999, and at any and all adjournments
thereof.
The Boards of Directors of Rockport National Bank ( the "Bank") and its
proposed holding company, Rockport National Bancorp, Inc. (the "Company") have
agreed to reorganize into a bank holding company structure. If shareholders
approve the proposal, the Company will acquire the Bank in a reorganization
transaction (the "Reorganization"). The Bank will become a separate subsidiary
of the Company and will remain headquartered in Rockport, Massachusetts. The
Reorganization will transfer the Bank's ownership to the Company in order to
take advantage of the benefits available to bank holding companies which are not
available to banks. We believe the Reorganization will benefit the Bank's
shareholders. If you are a Bank shareholder, you will receive one share of
Company Common Stock for each share of Bank Common Stock you own on the date of
the Reorganization, as described below.
This document also relates to the election of eight directors of the Bank for
a one year term and the ratification of the appointment of Wolf & Company, P.C.
as the Bank's independent certified public accountants for the year ended
December 31, 1999.
SHARES OF THE COMPANY COMMON STOCK ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY. THESE
SECURITIES ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF YOUR
ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED OR DISAPPROVED THE COMPANY COMMON STOCK TO BE ISSUED IN
THE REORGANIZATION OR DETERMINED IF THIS PROXY STATEMENT AND PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
IF THE REORGANIZATION IS APPROVED BY SHAREHOLDERS AND EFFECTED BY THE BANK, BANK
SHAREHOLDERS WHO FOLLOW THE PROCEDURES SET FORTH IN SECTION 215A OF THE NATIONAL
BANK ACT WILL HAVE DISSENTERS' RIGHTS OF APPRAISAL. A COPY OF THAT SECTION IS
ATTACHED AS EXHIBIT B TO THE PROXY STATEMENT AND PROSPECTUS.
May 13, 1999
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY................................................................. 4
HISTORICAL AND PRO FORMA COMBINED CAPITALIZATION........................ 8
RISK FACTORS............................................................ 8
PROPOSAL I - ELECTION OF DIRECTORS...................................... 10
PROPOSAL II - RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT ACCOUNTANTS................................ 16
PROPOSAL III - APPROVAL OF THE PLAN AND AGREEMENT OF
REORGANIZATION................................................ 16
Vote Required........................................................... 18
Description of the Company Debt......................................... 18
Rights of Dissenting Shareholders....................................... 18
Federal Tax Consequences of the Reorganization.......................... 19
Accounting Treatment.................................................... 20
Resale of the Company Stock Issued in the Reorganization................ 21
DESCRIPTION OF ROCKPORT NATIONAL BANCORP, INC........................... 21
Organization and Operation.............................................. 21
Management.............................................................. 21
Indemnification of Directors, Officers and Others....................... 23
Property................................................................ 23
Regulation and Supervision.............................................. 23
Effects of Government Policy............................................ 27
Legal Proceedings....................................................... 28
DESCRIPTION OF INTERIM BANK............................................. 28
DESCRIPTION OF ROCKPORT NATIONAL BANK................................... 28
General................................................................. 28
Properties.............................................................. 29
Employees............................................................... 29
Regulation and Supervision.............................................. 30
Legal Proceedings....................................................... 30
Competition............................................................. 30
SELECTED HISTORICAL INFORMATION......................................... 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION............................................ 32
INDEX TO FINANCIAL STATEMENTS........................................... 43
DESCRIPTION OF CAPITAL STOCK............................................ 44
COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF THE
BANK AND THE COMPANY................................................ 44
General................................................................. 44
Summary of Anti-takeover Provisions..................................... 45
Classified Board...................................................... 46
Absence of Cumulative Voting.......................................... 46
Increased Vote and Fair Price Provisions for Business
Combinations......................................................... 46
Massachusetts Anti-takeover Laws...................................... 47
Increased Shareholder Vote for Amendment or Repeal of Certain
Provisions in Articles of Organization............................... 48
Bylaw Amendments........................................................ 48
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Removal of Directors.................................................... 49
Dividends............................................................... 49
Preemptive Rights....................................................... 49
Par Value and Book Value................................................ 50
Mergers, Sales of Assets and
Similar Transactions............................................. 50
Appraisal Rights........................................................ 50
MARKET PRICE OF AND DIVIDENDS ON THE BANK'S SHARES
AND RELATED SHAREHOLDER MATTERS..................................... 50
Price Range of Shares................................................... 50
Dividends............................................................... 51
LEGAL MATTERS........................................................... 51
INDEPENDENT ACCOUNTANTS................................................. 52
OTHER MATTERS........................................................... 52
WHERE YOU CAN FIND MORE INFORMATION..................................... 52
</TABLE>
EXHIBITS
- --------
A. Plan and Agreement of Reorganization
B. 12 U.S.C. Section 215a
C. Office of the Comptroller of the Currency, Banking Circular 259
3
<PAGE>
SUMMARY
This summary highlights some information from this Proxy Statement and
Prospectus. You should read carefully this entire Proxy Statement and
Prospectus, including the Exhibits, and the other documents we have referred you
to. See "WHERE YOU CAN FIND MORE INFORMATION." (Page 52)
INTRODUCTION
Your vote is very important. For this reason, the Board of Directors is
requesting that you allow your Common Stock to be represented at the Annual
Meeting by the Proxies named in the enclosed Proxy Card. This Proxy Statement
and Prospectus is being sent to you in connection with this request and has been
prepared for the Board by our management. "We", "our", "Bank" and the "Company"
each refers to Rockport National Bank or the proposed holding company, Rockport
National Bancorp, Inc. The Proxy Statement and Prospectus is first being sent
to the Bank's shareholders on or about May 13, 1999.
This Proxy Statement and Prospectus relates to the election of eight
Directors of the Bank for a one year term and the ratification of the
appointment of Wolf & Company, P.C. as the Bank's independent certified public
accountants for the year ending December 31, 1999. This document also relates
to a Plan and Agreement of Reorganization (the "Plan") pursuant to which the
Company will acquire all of the Bank's outstanding shares of stock. Under the
Plan, the Bank will be merged with and into the Interim National Bank of
Rockport, a newly formed national banking association (the "Merger"). As a
result of the Merger, the separate existence of the Bank will cease and the
combined entity will operate under the name of Rockport National Bank as a
wholly-owned subsidiary of the Company. As a result of the Reorganization
(except for Bank dissenting shares), each share of Bank stock will be converted
into one share of Common Stock of the Company.
This document also constitutes the Prospectus of the Company with respect
to the shares of Company Common Stock to be received by the Bank's shareholders
pursuant to the Reorganization.
THE ANNUAL MEETING
DATE, TIME AND PLACE. The Annual Meeting will be held on June 15, 1999, at
10:00 a.m. at the Bank's Main Office, 16 Main Street, Rockport, Massachusetts.
ATTENDING THE ANNUAL MEETING. If you are a holder of record and you plan
to attend the Annual Meeting, please indicate this on your Proxy Card. If you
want to vote in person your Common Stock held in street name, you will have to
get a proxy in your name from the registered holder.
GENERAL INFORMATION ABOUT VOTING
WHO CAN VOTE. You are entitled to vote your Common Stock if our records
showed that you held your shares as of May 10, 1999. At the close of business
on May 10, 1999, a total of 209,775 shares of Common Stock were outstanding and
entitled to vote. Each share of Common Stock has one vote, however,
shareholders may cumulate their votes to elect directors. The enclosed Proxy
Card shows the number of shares which you are entitled to vote. Your individual
vote is confidential and will not be disclosed to third parties.
4
<PAGE>
VOTING BY PROXIES. If your Common Stock is held by a broker, bank or other
nominee, you will receive instructions from them which you must follow in order
to have your shares voted. If you hold your shares in your own name as a holder
of record, you may instruct the Proxies how to vote your Common Stock by
signing, dating and mailing the Proxy Card in the postage paid envelope which we
have provided to you. Of course, you can always come to the meeting and vote
your shares in person. If you sign and return a Proxy Card without giving
specific voting instructions, your shares will be voted as recommended by our
Board of Directors. If any other matters not described in the Proxy Statement
and Prospectus are presented at the meeting, the Proxies will use their own
judgment to determine how to vote your shares. If the meeting is adjourned,
your Common Stock may be voted by the Proxies on the new meeting date as well,
unless you have revoked your proxy instructions.
HOW YOU MAY REVOKE YOUR PROXY INSTRUCTIONS. To revoke your proxy
instructions, you must advise the Bank's Chief Financial Officer in writing
before your Common Stock has been voted by the Proxies at the meeting, or
deliver later proxy instructions or attend the meeting and vote your shares in
person. The written revocation should be sent to Margaret A. Murphy, Chief
Financial Officer, Rockport National Bank, 16 Main Street, Rockport
Massachusetts 01966.
HOW VOTES ARE COUNTED. The Annual Meeting will be held if a majority of
the outstanding Common Stock entitled to vote is represented at the meeting. If
you have returned valid proxy instructions or attend the meeting in person, your
Common Stock will be counted for the purpose of determining whether there is a
quorum, even if you wish to abstain from voting on some or all matters
introduced to the meeting. "Broker non-votes" also count for quorum purposes.
If you hold your Common Stock through a broker, bank or other nominee, generally
the nominee may only vote the Common Stock which it holds for you in accordance
with your instructions. However, if it has not received your instructions
within ten days of the meeting, the nominee may vote on matters which stock
exchange rules determine to be routine. If a nominee cannot vote on a
particular matter because it is not routine, there is a "broker non-vote" on
that matter. We do not count abstentions and broker non-votes as votes for or
against any proposal.
RECOMMENDATION TO SHAREHOLDERS
The Bank's Board recommends that you vote FOR the election of the eight
nominees to the Bank's Board of Directors and FOR the proposal to approve the
ratification of the Board's selection of Wolf & Company, P.C. to serve as
accountants of the Bank for the year ended December 31, 1999. The Bank's Board
also believes that the Reorganization is in your best interest and unanimously
recommends that you vote FOR the proposal to approve the Plan.
COST OF THIS PROXY SOLICITATION. We will pay the cost of this proxy
solicitation. In addition to the soliciting proxies by mail, we expect that a
number of our employees will solicit shareholders for the same type of proxy,
personally and by telephone. None of these employees will receive any
additional or special compensation for doing this. We will, upon request,
reimburse brokers, banks and other nominees for their expenses in sending proxy
material to their principals and obtaining their proxies.
5
<PAGE>
PURPOSES OF THE REORGANIZATION (SEE PAGE 21)
The sole purpose of the Reorganization is to form a bank holding company
which will own one hundred percent of the outstanding voting stock of the Bank.
The Reorganization will transfer the Bank's ownership to the Company in order to
take advantage of the benefits available to bank holding companies which are not
available to banks. Should the Reorganization be approved by shareholder and
regulators, the Company will be owned by the same persons who currently own the
Bank's Common Stock (except for those shareholders who dissent and elect to
receive the value of their stock in cash).
Management believes that the Company's ownership of the Bank will enable
the Bank to continue to meet the changing financial needs of all segments of the
Bank's community.
CONDITIONS TO REORGANIZATION (SEE PAGE 17)
To complete the Reorganization, we must meet a number of conditions in
addition to obtaining the vote of our shareholders, including the following:
. no law or injunction may effectively prohibit the Reorganization;
. we must receive all necessary approvals of governmental authorities;
and
. we must receive a legal opinion that the Reorganization will be
treated as a tax-free reorganization under the Internal Revenue Code.
In some instances, if we wish to waive a condition, we may be required to
resolicit the approval of the Bank's shareholders.
RIGHTS OF DISSENTING SHAREHOLDERS (SEE PAGE 18)
Shareholders of the Bank who dissent from the Plan and Agreement of
Reorganization have the right to be paid the value of their shares if they
comply with the procedures of the National Bank Act. The text of the pertinent
statutory provisions is set forth as Exhibit B.
CERTAIN FEDERAL INCOME TAXES (SEE PAGE 19)
We have structured the Reorganization so that the Bank, its shareholders
and the Company will not recognize any gain or loss for federal income tax
purposes in the Reorganization, except for taxes payable because of cash
received by Bank shareholders pursuant to the exercise of dissenters' rights.
6
<PAGE>
BUSINESS OF THE BANK AND THE COMPANY (SEE PAGE 21)
The Bank is chartered as a national bank under the laws of the United
States and conducts a commercial banking business through its main office
located in Essex County, Massachusetts in the Town of Rockport, Massachusetts.
The Company will be a registered bank holding company organized under the laws
of Massachusetts. The principal executive offices of the Bank and the Company
are located at 16 Main Street, Rockport, Massachusetts 01966, telephone (978)
546-3411. Upon completion of the Plan and Agreement of Reorganization, the
Company will own all of the outstanding common stock of the Bank.
REGULATORY APPROVALS (SEE PAGE 16)
The Merger must be approved by the Office of the Comptroller of the
Currency and the Federal Reserve Board also has the authority to disapprove the
transaction. A notice has been filed with the Federal Reserve Board and is
currently pending. Additionally, the application to the Office of the
Comptroller of the Currency has been filed and is currently pending.
MANAGEMENT OF THE COMPANY (SEE PAGE 21)
The directors and officers of the Company are persons now serving as
directors and officers of the Bank.
WHAT THE BANK SHAREHOLDERS WILL RECEIVE (SEE PAGE 16)
If you are a Bank shareholder and the Reorganization is approved, you will
receive one share of the Company Common Stock for each share of the Bank Common
Stock you own on the date of the Reorganization.
TERMINATION OF THE PLAN (SEE PAGE 17)
We may terminate the Plan at any time before the Reorganization actually
takes place.
CERTAIN DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
Once the Reorganization occurs, the Bank's shareholders (other than
dissenting shareholders) will automatically become shareholders of the Company,
and their rights will be governed by Massachusetts law rather than the National
Bank Act and by the Company's corporate governing documents, including its
Articles of Organization. You can find a detailed discussion of the differences
between the rights of the Bank and the Company shareholders in this Proxy
Statement-Prospectus under the heading entitled "COMPARISON OF THE RIGHTS OF THE
SHAREHOLDERS OF THE BANK AND THE COMPANY" at page 44.
7
<PAGE>
HISTORICAL AND PRO FORMA COMBINED CAPITALIZATION
------------------------------------------------
(Unaudited)
December 31, 1998
(000's Omitted)
The following table sets forth the capitalization at December 31, 1998 of
the Bank and the Company, and the pro forma combined capitalization of the Bank
--- -----
and the Company after giving effect to the Reorganization. This table should be
read in conjunction with the historical financial statements and notes thereto
of the Bank contained elsewhere in the Proxy Statement and Prospectus.
<TABLE>
<CAPTION>
Holding Pro Forma Pro Forma
Bank Company Adjustments Combined
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bank Loan (1) $120 $(120)
Shareholders' Equity:
Common Stock
Rockport National Bank $1.00 Par
Value; Authorized 500,000 Shares;
Issued and Outstanding 209,775 Shares $ 210 (210)
Common Stock of Rockport National
Bancorp, Inc. $.01 Par Value;
Authorized 1,000,000 Shares; Issued
and 2 2
Outstanding 209,775 Shares (2)
Additional Paid in Capital 647 208 $ 855
Retained Earnings 4,050 4,050
Accumulated Other Comprehensive
Income 12 12
--------- ------------
Total Shareholders' Equity $4,919 $4,919
========= ============
Book Value Per Share of Common $23.45 $23.45
- ------------------------------
Stock
-----
========= ============
</TABLE>
(1) Both the net interest payable on the $120,000 borrowing by the
Company and the estimated $50,000 of expenses which will be incurred in
connection with the Reorganization will not have a significant effect on
combined pro forma earnings per share
(2) The Company was incorporated in Massachusetts on March 23, 1999,
with authorized share capital of 1,000,000 shares for the purpose of acquiring
all of the outstanding common stock of the Bank. See "DESCRIPTION OF THE PLAN
AND AGREEMENT OF REORGANIZATION". In connection with the Reorganization, the
Company has arranged to borrow $120,000 from a non-affiliated financial
institution. See "Description of Company Debt". The $120,000 will be used for
the capitalization of the Interim Bank which will merge with the Bank. Upon
completion of this transaction, the $120,000 of newly created capital and
surplus will be retired and the loan from the independent financial institution
will be repaid. Based upon the assumption that the Reorganization is
consummated and all of the issued and outstanding shares of the Bank are
exchanged for shares of the Company, the pro forma consolidated financial
statements of the Company are equivalent to the historical financial statements
of the Bank. Accordingly, the pro forma combined balance sheet and income
statement are not presented herein.
RISK FACTORS
In addition to the other information contained in this document, the
following factors should be considered carefully in evaluating the Company's
Common Stock.
THE COMPANY'S FINANCIAL CONDITION
Bank shareholders who elect to receive Company Common Stock in exchange for
Bank Common Stock do so without the ability of analyzing the historical
financial performance of the Company. The Company is a newly formed
Massachusetts corporation and has no history of financial performance. The
Company's financial condition after the Reorganization will depend on the
operation and profitability of the Bank after the Reorganization. As the Company
continues to operate, in the future, additional factors may affect its
profitability including, among others: (1) the
8
<PAGE>
businesses started or acquired by the Company other than the Bank; (2) the
nature of federal or state laws and regulations applicable to the Company; and
(3) the effect of management.
SUPERVISION AND REGULATION
Bank holding companies and banks operate in a highly regulated environment
and are subject to extensive supervision and examination by federal and state
regulatory agencies. The Company is subject to the Bank Holding Company Act of
1956, as amended, and to regulation and supervision by the Federal Reserve
Board. The Bank, as a national banking association, is subject to regulation and
supervision by the Office of the Comptroller of the Currency and, as a result of
the insurance of its deposits, the Federal Deposit Insurance Corporation. These
regulations are intended primarily for the protection of depositors, rather than
for the benefit of investors. The Company and the Bank are subject to changes in
federal law, as well as changes in regulation and governmental policies, income
tax laws and accounting principles. The effects of any potential changes cannot
be predicted but could adversely affect the business and operations of the
Company and the Bank in the future.
Federal Reserve Board policy requires a bank holding company such as the
Company to serve as a source of financial strength to its banking subsidiaries
and commit resources to their support. The agency has required bank holding
companies to contribute cash to their troubled bank subsidiaries based upon this
"source of strength" regulation, which could have the effect of decreasing funds
available for distributions to shareholders.
DIVIDEND HISTORY AND RESTRICTIONS ON ABILITY TO PAY DIVIDENDS
It is the policy of the Federal Reserve Board that bank holding companies
should pay cash dividends on common stock only out of income available over the
past year and only if prospective earnings retention is consistent with the
organization's expected future needs and financial condition. The policy
provides that bank holding companies should not maintain a level of cash
dividends that undermines the bank holding company's ability to serve as a
source of strength to its banking subsidiaries.
As a practical matter, the Company's ability to pay dividends is generally
limited by the Bank's ability to dividend funds to the Company. As a national
bank, the declaration and payment of dividends by the Bank must be in accordance
with the National Bank Act. As of December 31, 1998 approximately $1,146,000 of
the undistributed net income of the Bank was theoretically available for
distribution to the Company as dividends. However, the ability of the Bank to
declare and pay such dividends would be subject to safe and sound banking
practices.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this document that are subject to
risks and uncertainties. Forward-looking statements include the information
concerning possible or assumed future results of operations of the Bank or the
Company set forth under "Purposes of the Reorganization" and statements preceded
by, followed by or including words such as "believes," "anticipates," "plans",
"expects" and similar expressions. For those statements, we claim the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. You should understand that
the following important factors, in addition to those discussed elsewhere in
this document and the documents we incorporate by
9
<PAGE>
reference, could affect our future results and could cause those results to
differ materially from those expressed in our forward-looking statements:
1. our revenues after the Reorganization are lower than we expect, our
restructuring charges are higher than we expect, we lose more deposits,
customers or business than we expect, or our operating costs after the
Reorganization are greater than we expect;
2. competition among depository and other financial institutions increases
significantly;
3. we have more trouble obtaining regulatory approvals for the
Reorganization than we expect;
4. we have more trouble integrating our businesses or retaining key
personnel than we expect;
5. our costs savings from the Reorganization are less than we expect, or
we are unable to obtain those cost savings as soon as we expect;
6. changes in the interest rate environment reduces our margins;
7. general economic or business conditions are worse than we expect;
8. legislative or regulatory changes adversely affect our business;
9. technological changes and systems integration are harder to make or
more expensive than we expect; and
10. adverse changes occur in the securities markets.
PROPOSAL I
ELECTION OF DIRECTORS
An entire Board of Directors, consisting of eight members, is to be elected
at the Annual Meeting to hold office until the next annual meeting and the
election of their successors.
VOTE REQUIRED. Directors must be elected by a plurality of the votes cast
at the meeting. This means that the director nominee with the most affirmative
votes for a particular slot is elected for that slot. In an uncontested
election for directors, the plurality requirement is not a factor. Votes
withheld for any Director will not be counted. Unless directed to the contrary,
the proxy confers to the proxy holder the authority to cumulate votes as
provided by the National Bank Act in such a manner as to elect all or as many as
possible of the nominees listed below.
VOTING BY THE PROXIES. The Proxies will vote your Common Stock in
accordance with your instructions. If you have not given specific instructions
to the contrary, your Common Stock will be voted to approve the election of the
nominees named in the proxies. Although we know of no reason why any of the
nominees would not be able to serve, if any nominee is unavailable for election,
the Proxies would vote your Common Stock to approve the election of any
substitute nominee proposed by the Board of Directors.
10
<PAGE>
GENERAL INFORMATION ABOUT THE NOMINEES. The following table sets forth
selected information relative to each nominee for election as a Director at this
Annual Meeting. All of the nominees are currently Directors. Each has agreed
to be named in this Proxy Statement and Prospectus, and to serve if elected.
Each of the nominees attended at least 75% of the meetings of the board and
committees on which the nominee served in the last year. Unless stated
otherwise, all of the nominees have been continuously employed by their present
employers for more than five years.
<TABLE>
<CAPTION>
Name, Age Common Stock Owned
Position Held Director of Individually or
with Rockport Rockport Beneficially as of
National Principal National Bank May 10, 1999 (1)
Bank Occupation Since Shares Percent
- ------------------------ ------------------------------ ------------------------ -------------------
<S> <C> <C> <C>
Peter A. President and Chief Executive 1992 1,775 .85%
Anderson, 53 Officer, Rockport National
President and Bank
Chief Exec.
Officer,
Director
Wendel W. Former Vice President/ 1993 3,000 1.43%
Cook, 67 General Mgr. Eastman
Director Kodak
James W. Lieutenant Colonel, 1977 20,230 9.64% (2)
Curtis, Jr., US Army (Retired)
72, Director
and Vice
Chairman of
the Board
Herbert L. Former Vice President 1986 4,900 2.34% (3)
Elwell, 76, Cape
Director Ann Tool Company
Richard J. Treasurer 1990 2,875 1.37% (4)
Meringer, 53 Meringer Enterprises
Director Inc.
Theodore A. Retired President & 1983 8,310 3.96%
Scharfenstein, Chief Executive Officer,
59, Director and Addison Gilbert Hospital
Chairman of the General Manager of the
Board Rockport Chamber Music Festival
(5)
Michael C. Shea, Attorney 1997 800 .38%
52, Director
Robert H. Owner and operator 1993 2,700 1.29% (6)
Welcome, 61 Peg Leg Inn and Peg
Director Leg Restaurant
All Directors as a
group (8 persons) 44,590 21.26%
- ------------------------ ====== ======
Footnotes on next page
</TABLE>
11
<PAGE>
1. Percentages are based upon the 209,775 shares of Common Stock
outstanding. The definition of "beneficially owned" with respect to
ownership of the Bank's common stock includes in addition to direct and
indirect beneficial ownership by the reporting person, ownership of such
securities (1) by the spouse (except where legally separated), and minor
children of such person and (2) by any relative of the reporting person
who has the same home as such person.
2. Includes 6,200 shares owned by Mr. Curtis' spouse.
3. Includes 3,800 shares jointly owned by Mr. Elwell's spouse and his son.
4. Includes 1,060 shares owned by Meringer Enterprises, Inc. of which Mr.
Meringer is Treasurer and 668 shares owned by Mr. Meringer's spouse.
5. In 1998, Mr. Scharfenstein became the General Manager of the Rockport
Chamber Musical Festival.
6. Includes 200 shares owned by Peg Leg Restaurant.
There are no arrangements or understandings between any of the Directors or
any other persons pursuant to which any of the above Directors have been
selected as Directors.
BOARD OF DIRECTORS MEETINGS. The Board of Directors of the Bank met twelve
(12) times in 1998. The Board of Directors has established various committees
including the: Audit Committee, Loan Committee, Asset Liability Committee,
Planning Committee, Benefit Committee, Insurance Committee, Real
Estate/Renovation Committee, Salary Committee and Nominating Committee.
All members of the Board of Directors serve on the Audit Committee. During
1998, the Committee met two (2) times.
All members of the Board of Directors serve on the Loan Committee. During
1998, the Committee met twelve (12) times.
All members of the Board of Directors serve on the Asset Liability
Committee. During 1998, the Committee met four (4) times as part of a regular
monthly Board of Directors Meeting.
All members of the Board of Directors serve on the Planning Committee.
During 1998, the Planning Committee met three (3) times.
The members of the Benefits Committee are Messrs. Scharfenstein, Cook,
Welcome and Shea. During 1998, the Benefits Committee met two (2) times.
The members of the Insurance Committee are Messrs. Scharfenstein, Meringer
and Cook. During 1998, the Insurance Committee met one (1) time.
The members of the Real Estate/Renovation Committee are Messrs. Curtis and
Elwell. During 1998, the Real Estate/Renovation Committee met thirty-four (34)
times.
12
<PAGE>
The members of the Salary Committee are Messrs. Scharfenstein, Curtis, Cook
and Shea. During 1998, the Salary Committee met two (2) times.
The members of the Nominating Committee are Messrs. Scharfenstein, Curtis,
Elwell and Welcome. During 1998, the Nominating Committee met one (1) time.
DIRECTORS FEES. In 1998, non-employee directors of the Bank received $250
for each meeting of the Board of Directors of the Bank which they attended, $250
for each Loan Committee meeting which they attended, and $125 for all other
committee meetings which they attended. In addition, non-employee directors of
the Bank received a bonus of $1,000 and a retainer for their service as a
director. The Chairman of the Bank's Board of Directors received a $2,500
retainer and the Vice Chairman received a $1,750 retainer. Finally, non-
employee directors receive a fee of $500 for attendance at banking seminars.
EXECUTIVE OFFICERS OF THE BANK. Peter A. Anderson was appointed President
and Chief Executive Officer of the Bank in April of 1992. Prior to joining the
Bank, Mr. Anderson held the position of President of the former Saybrook Bank
and Trust Company in Old Saybrook, Connecticut from 1988-1991.
Margaret A. Murphy was appointed Vice President and Chief Financial Officer
of the Bank in August of 1993 and promoted to Senior Vice President in April of
1995. Ms. Murphy was promoted to Executive Vice President in December of 1998.
Prior to joining the Bank, Ms. Murphy served as Controller for Methuen Co-
operative Bank.
EXECUTIVE COMPENSATION OF PRINCIPAL OFFICERS
The following table provides certain information regarding the compensation
paid to the President and Chief Executive Officer of the Bank for services
rendered in all capacities during the fiscal years ended December 31, 1998, 1997
and 1996. No other current executive officer of the Bank received cash
compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
NAME AND PRINCIPAL ALL
POSITION YEAR SALARY($) (1) BONUS($) OTHER COMPENSATION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peter A. Anderson 1998 $102,493 $20,000 (2) $230 (5)
President and 1997 99,159 15,000 (3)
Chief Executive Officer 1996 92,401 10,000 (4)
</TABLE>
______________________
1. Compensation above does not include accrual of benefits under the Bank's
defined pension plan.
2. Amount reflects bonus granted in 1997 and paid in 1998. Mr. Anderson was
granted a bonus of $12,000 in 1998 which was paid in 1999.
3. Amount reflects bonus granted in 1996 and paid in 1997.
4. Amount reflects bonus granted in 1995 and paid in 1996.
5. Amount reflects Mr. Anderson's taxable benefit portion of the Split
Dollar Life Insurance Policy (See Supplemental Executive Retirement Plans).
13
<PAGE>
INSURANCE. In addition to the cash compensation paid to the executive
officers of the Bank, the executive officers receive group life, health,
hospitalization and medical insurance coverage. However, these plans do not
discriminate in scope, terms, or operation, in favor of officers or directors of
the Bank and are available generally to all full-time employees.
EMPLOYMENT AGREEMENTS. The Bank has not entered into any employment
contracts with any of its employees.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS. The Bank entered into Supplemental
Employee Retirement Plan Agreements (SERP) with Peter A. Anderson, President and
Chief Executive Officer and Margaret A. Murphy, Chief Financial Officer, both
dated April 14, 1998 and amended June 24, 1998. The purpose of the SERP is to
provide President Anderson and Ms. Murphy with increased retirement benefits at
age 65 or in the event of a "Change of Control," as that term is defined in the
SERP. Should Mr. Anderson and Ms. Murphy continue to be employed by the Bank
until age 65 or until a "Change of Control," they will be entitled to receive
the balance in a liability reserve account established on the books of the Bank
for their benefit. The liability reserve account is increased or decreased each
calendar year by an amount equal to the annual earnings or loss for the calendar
year determined by an "Index" less the "Opportunity Cost" for that year. The
"Index" for any year is the aggregate annual income from the life insurance
contracts specified in the SERP as in effect on the date of the SERP or if the
contracts for life insurance are actually purchased by the Bank then the actual
policies as of the dates they were purchased shall be used in the calculations
for the Index. The "Opportunity Cost" for any year is calculated by taking the
sum of the premiums set forth in the insurance policies plus the amount of any
benefits paid to Mr. Anderson and Ms. Murphy pursuant to the SERP plus the
amount of all previous years Opportunity Cost and multiplying that sum by the
interest expense of the Bank expressed as a percentage as reported in the
Uniform Bank Performance Report for the third quarter for that year plus 50
basis points. Upon attaining the age of 65, Mr. Anderson and Ms. Murphy can
elect the method of payment from the balance in each of their respective
liability reserve account as a lump sum or in equal installments for 5, 10, 15
or 20 years. Pursuant to the SERP, the Bank has purchased Split Dollar Life
Insurance Policies on the lives of President Anderson and Ms. Murphy. The Bank
owns both policies and Mr. Anderson and Ms. Murphy have designated beneficiaries
of the policy. Upon their deaths, the insured's beneficiaries are entitled to
80% of the net at risk insurance portion of the proceeds which is the total
proceeds less the cash value of the policy.
PENSION PLAN. The Bank has a qualified pension plan covering substantially
all of its full-time employees who meet certain eligibility requirements.
Benefits are generally based on years of service and average annual salary. The
Plan is funded through a qualified trust and currently meets the minimum funding
requirements under applicable law.
All full-time employees of the Bank who have completed one year of service
and attained age 21 are covered by the Plan. Benefits upon normal retirement,
the later of age 65 or the 5th anniversary of participation is based on years of
credited service (up to a maximum of 25 years) and final average compensation
(based on rate of pay) of the highest consecutive 60 months out of the last 120
months immediately preceding retirement or termination. An employee is 100%
vested after completing 5 years of service and can retire early upon obtaining
age 55 and completing ten years of service. The benefit formula is 2.4% of
final average compensation less 2% of Social Security multiplied by the number
of years of service.
14
<PAGE>
<TABLE>
<CAPTION>
Average
(5 year) Estimated Annual Retirement Benefit*
------------------------------------
Final Total Years of Service
------------------------------------
Compensation 15 20 25 or more
- ------------------ ------- ------- ----------
<S> <C> <C> <C>
$25,000 $ 9,000 $12,000 $15,000
50,000 18,000 24,000 30,000
75,000 27,000 36,000 45,000
100,000 36,000 48,000 60,000
125,000 45,000 60,000 75,000
150,000 54,000 72,000 90,000
</TABLE>
* The estimates are based upon a straight life annuity and do not reflect
reductions at retirement for Social Security benefits.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ----------------------------------------------
Some of the directors and officers of the Bank, as well as firms and
companies with which they are associated, are or have been customers of the Bank
and as such have had banking transactions with the Bank. As a matter of policy,
loans to directors and officers are made in the ordinary course of business on
substantially the same terms, including interest rates, collateral and repayment
terms, as those prevailing at the time for comparable transactions with other
persons and do not involve more than the normal risk of collectibility or
present other unfavorable features.
Some of the Directors and Officers of the Bank and companies or
organizations with which they are associated, have had, and may have in the
future, banking transactions with the Bank in the ordinary course of the Bank's
business. Total loans to such persons and their associates amounted to $101,295
as of December 31, 1998 or an aggregate principal amount equal to 2.1% of the
equity capital accounts of the Bank. During 1998 advances of $48,218 were made
and repayments totaled $110,826.
Federal banking laws and regulations limit the aggregate amount of
indebtedness of all insiders. Pursuant to such laws and regulations, banks may
extend credit to officers, directors, principal shareholders or any related
interest of such persons, if the extension of credit to such persons is in an
amount that, when aggregated with the amount of all outstanding extensions of
credit to such individuals, does not exceed the Bank's unimpaired capital and
unimpaired surplus. As of December 31, 1998, the aggregate amount of extensions
of credit to Bank insiders was well below this limit.
Michael C. Shea, a Director of the Bank, is a partner in the law firm Pino
& Shea which renders legal services to the Bank. During 1998, Pino & Shea
rendered certain legal services to the Bank in connection with various matters.
15
<PAGE>
PRINCIPAL SHAREHOLDERS
With the exception of Director James W. Curtis, Jr. of Rockport,
Massachusetts who owns or controls 20,230 shares or 9.64% of the outstanding
common stock of the Bank, the Bank is not aware of any beneficial owner of five
percent (5%) or more of the Bank's Common Stock.
PROPOSAL II
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee has selected the independent accounting firm of Wolf &
Company, P.C. to serve as the Bank's auditors for the fiscal year ending
December 31, 1999.
The affirmative vote of a majority of the number of votes entitled to be
cast by the Common Stock represented at the meeting is required to ratify the
appointment. A member of Wolf & Company, P.C. will be present at the meeting and
will be available to respond to appropriate questions by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION
OF THE APPOINTMENT OF WOLF & COMPANY, P.C.
PROPOSAL III
APPROVAL OF THE PLAN AND AGREEMENT OF REORGANIZATION
Shareholders will consider and vote upon the Plan, as a result of which, if
approved, the business of the Bank will be conducted as a wholly-owned
subsidiary of the Company, a Massachusetts corporation and a proposed bank
holding company. Shareholders of the Bank will receive one share of the common
stock of the Company in exchange for each share of the common stock of the Bank
owned by such shareholder on the record date. A copy of the Plan is attached as
Exhibit A.
The Company was incorporated under Massachusetts law on March 23, 1999, at
the direction of management of the Bank. The Company will hold and own all of
the stock of the newly-organized Interim Bank. The Reorganization will be
accomplished by merging the Bank with and into the Interim Bank (the "Merger").
On April 21, 1999, the Company filed a notice (the "Notice") with the
Boston office of the Federal Reserve Board (the "FRB") of its intention to
become a bank holding company of the Bank and the Notice is currently pending.
An application was filed on March 26, 1999, with the Office of the Comptroller
of the Currency (the "OCC") for approval of the Merger pursuant to the Bank
Merger Act of 1966 and the application is currently pending. The OCC's final
approval of the Merger is subject to, among other things, that the transaction
receive the approval of the Bank's shareholders. However, it should be noted
that:
16
<PAGE>
THE OCC'S APPROVAL REFLECTS ONLY ITS VIEW THAT THE TRANSACTION DOES NOT
CONTRAVENE APPLICABLE COMPETITIVE STANDARDS IMPOSED BY LAW, AND THAT THE
TRANSACTION IS CONSISTENT WITH REGULATORY POLICIES RELATING TO SAFETY AND
SOUNDNESS;
THE OCC'S APPROVAL IS NOT AN OPINION BY THE OCC THAT THE PROPOSED TRANSACTION
IS FAVORABLE TO THE SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW, OR THAT THE
OCC HAS CONSIDERED THE ADEQUACY OF THE TERMS OF THE TRANSACTION; AND
THE OCC'S APPROVAL IS NOT AN ENDORSEMENT OR RECOMMENDATION OF THE REORGANIZATION
Even following approval by Shareholders, the Reorganization may be terminated by
the Board of Directors if:
. The number of shares voted against the Reorganization shall make
consummation of the Reorganization unwise;
. The number of shares which dissent from the Reorganization shall make
consummation of the Reorganization unwise;
. Any action, suit, proceeding or claim has been instituted, made or
threatened relating to the Reorganization which shall make
consummation of the Reorganization inadvisable in the opinion of
either the Board of Directors of the Bank or the Interim Bank;
. Any action, consent or approval, governmental or otherwise, shall not
have been obtained;
. A tax opinion stating that under the Internal Revenue Code of 1986, as
amended, neither gain nor loss will be recognized for federal income
tax purposes to the Bank, the Interim Bank, the Company or the
shareholders (other than the dissenting shareholders who elect
appraisal rights) of the Bank by reason of the transactions
contemplated by the Plan shall not have been obtained; or
. For any other reason consummation of the Reorganization is inadvisable
in the opinion of the respective Board of Directors of either the Bank
or the Interim Bank.
Upon consummation of the Reorganization, shareholders of the Bank will
become shareholders of the Company. Each shareholder of the Bank shall be
entitled to exchange one share of the common stock of the Bank for one share of
the common stock of the Company. Until so exchanged, the certificates
representing shares of common stock of the Bank will represent the common stock
of the Company into which such shares have been converted. However, the Company
at any time may withhold any dividends declared upon the common stock of the
Company in respect of shares represented by un-exchanged certificates until such
shares are presented for exchange, at which time the dividends so withheld on
such shares shall be paid without additional interest.
17
<PAGE>
The expenses of the Reorganization are estimated to be between $25,000 and
$50,000. In the event the Reorganization is not consummated, such expenses as
are incurred, including the cost of organizing the Company, will be assumed and
paid for by the Bank.
VOTE REQUIRED
Consummation of the Reorganization requires the approval of two-thirds of
the outstanding shares of common stock of the Bank and the Interim Bank.
Approximately 22% of the outstanding shares of common stock of the Bank are
owned by the executive officers and Directors of the Bank and their affiliates,
while 100% of the outstanding shares of common stock of the Interim Bank are
owned by the Company. The Bank has been advised that all of its executive
officers and Directors intend to vote their shares of Bank common stock for
approval of the Reorganization, and the Company has indicated its intention to
vote its shares of the Interim Bank in favor of the Reorganization.
DESCRIPTION OF THE COMPANY DEBT
The Company has arranged to borrow $120,000 for a period of up to ninety
(90) days from another financial institution, which is not an affiliate of the
Company or the Bank, to be used for capitalization of the Interim Bank. The
loan will bear interest at the market rate of interest and will be repaid upon
consummation of the Reorganization. The source of funds for the Company's
repayment of the loan will be proceeds from the retirement of Bank stock, all of
which will be owned by the Company, in an amount equal to the capitalization of
the Interim Bank.
RIGHTS OF DISSENTING SHAREHOLDERS
Any Bank shareholder who elects to exercise the right to dissent and who
complies with the requirements of 12 U.S.C. Section 215a, attached hereto as
Exhibit B, shall be entitled to receive the value of the shares held by the
shareholder in lieu of the Company's Common Stock. THE FOLLOWING DISCUSSION IS
ONLY A SUMMARY OF THE STEPS WHICH MUST BE TAKEN FOR THE EFFECTIVE EXERCISE OF
DISSENTERS' RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY THE PROVISIONS SET FORTH
IN EXHIBIT B. SHAREHOLDERS CONTEMPLATING THE EXERCISE OF DISSENTERS' RIGHTS
SHOULD CAREFULLY REVIEW EXHIBIT B AND CONSULT WITH HIS OR HER LEGAL COUNSEL.
A shareholder of the Bank who (a) votes "AGAINST" the approval of the
Merger or (b) has given notice in writing to Rockport National Bank at or prior
to the Annual Meeting that the shareholder dissents from the transactions
contemplated by the Plan, shall be entitled to receive the value of the shares
held by the shareholder when the Merger is approved by the OCC by providing a
written request at any time within thirty (30) days after the date of the
consummation of the Merger accompanied by the surrender of the shareholder's
stock certificates. Such notice and written request shall be sent to Peter A.
Anderson, President and Chief Executive Officer, Rockport National Bank, 16 Main
Street, Rockport, Massachusetts 01966. The Bank presently intends to promptly
inform all shareholders of the Bank who have timely dissented in accordance with
12 U.S.C. Section 215a of the date that the Merger is consummated.
18
<PAGE>
The value of such shares shall be determined as of the effective date of
the Merger by a committee of three persons: one to be selected by majority vote
of the dissenting shareholders entitled to receive payment in cash, one by the
directors of the banking association, and the third by the two appraisers so
chosen. The valuation agreed upon by any two of the three appraisers which were
chosen shall govern. However, if the value agreed upon shall not be
satisfactory to any dissenting shareholder who has requested payment, such
shareholder may within five (5) days after being notified of the appraised value
of the shares, appeal to the OCC. The OCC shall reappraise the shares and this
valuation shall be final and binding upon the dissenting shareholder.
The OCC attempts to arrive at a fair estimate of the value of a bank's
shares by selecting an appropriate valuation method or a combination of methods.
The various methods utilized by the OCC are set forth in Banking Circular 259
dated March 10, 1992 and attached hereto as Exhibit C. Exhibit C also summarizes
the results of appraisals performed by the OCC between January 1, 1985 and
September 30, 1991.
If within ninety (90) days from the date of consummation of the Merger for
any reason one or more of the appraisers is not selected as provided for in the
National Bank Act, or the appraisers fail to determine the value of such shares,
the OCC shall upon written request of any interested party cause an appraisal to
be made which shall be final and binding on all parties. The expenses of the
OCC in making the reappraisal, or the appraisal as the case may be, shall be
paid by the banking association resulting from the Merger. The value of the
shares ascertained shall be promptly paid to the dissenting shareholder by the
banking association resulting from the Merger.
FEDERAL TAX CONSEQUENCES OF THE REORGANIZATION
The Company has asked the law firm of Cranmore, FitzGerald & Meaney,
special counsel to the Bank and the Company, for its opinion concerning the
federal income tax consequences of the Reorganization. The Bank has not sought
to obtain a determination of the tax consequences of the Reorganization from the
Internal Revenue Service and shareholders of the Bank are urged to consult their
personal tax or financial advisors as to the federal and state tax consequences
of the proposed reorganization to them.
It is the opinion of special counsel that:
1. The transaction contemplated by the Plan will constitute a
reorganization under Section 368(a) of the Internal Revenue Code.
2. No gain or loss will be recognized by a Bank shareholder receiving
solely shares of the Company Common Stock in exchange for all of his or
her Bank Common Stock.
In connection with the opinion, representations were made to Cranmore,
FitzGerald & Meaney by Bank management to the following effect: that there was
no plan or intention by Bank shareholders owning more than 5% of the shares of
the Bank Common Stock and the management of the Bank knows of no plan or intent
on the part of the remaining holders of Bank Common Stock to sell or dispose of
shares of Company Common Stock that Bank shareholders will be entitled to
19
<PAGE>
receive in the Reorganization that would reduce the number of shares of Company
stock held after the Reorganization by former Bank shareholders to a number of
shares having the value at the time of the Reorganization of less than 50% of
the total value of all shares of Bank stock outstanding immediately before the
Reorganization. For these purposes cash paid to dissenting shareholders, if
any, will be considered cash received on the sale or disposition of Company
Common Stock that such shareholders are entitled to receive in the
Reorganization.
Shareholders of the Bank who exercise their dissenters' appraisal rights
and receive cash in exchange for their shares of Bank Common Stock will
recognize taxable income or loss for federal income tax purposes in connection
with the transaction. The amount of that income or loss and the tax treatment
of that income or loss (that is whether it constitutes ordinary income or loss,
short-term capital gain or loss or long-term capital gain or loss) will turn
upon a number of factual considerations peculiar to the individual shareholder.
Shareholders of the Bank considering exercising their dissenters' appraisal
rights with respect to their shares of Bank Common Stock should consult their
personal income tax advisors for specific advice with respect to the income tax
consequences of that exercise.
Shareholders of the Bank should be aware of the following: such an opinion
of counsel is subject to satisfaction of representations and conditions stated
in the opinion; such an opinion relies upon the facts set forth or referred to
in the opinion, including facts stated or represented by responsible officers of
the Bank; and an opinion of counsel is not binding upon the Internal Revenue
Service or the courts.
THE FOREGOING DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE
INTERNAL REVENUE CODE, EXISTING AND PROPOSED U.S. TREASURY REGULATIONS
THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE
FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING
VALIDITY OF THIS DISCUSSION. BANK SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISERS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE REORGANIZATION TO
THEM, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
The Reorganization will be recorded for accounting and financial reporting
purposes as a Reorganization of entities under common ownership in a manner
similar to a "pooling of interests". The Company expects to receive a letter
from Wolf & Company, P.C., independent accountants, substantially to the effect
that it is proper to account for the Reorganization in such manner. If such
accounting treatment is not available, receipt of such letter nevertheless will
not be such a condition to consummation of the Reorganization if accounting for
the Reorganization as a purchase would not result in a material change in the
pro forma combined financial condition or results of operations from such pro
forma condition and results prepared on a pooling of interests basis as set
forth herein.
20
<PAGE>
RESALE OF THE COMPANY STOCK ISSUED IN THE REORGANIZATION
Company Common Stock to be issued to shareholders of the Bank in connection
with the Reorganization will be freely transferable under the Securities Act of
1933, as amended, except for the shares issued to any person who may be deemed
to be an "affiliate" of the Bank within the meaning of Rule 145 under the
Securities Act of 1933, as amended. The term "affiliate" is defined as a person
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with the Company. An affiliate
generally may not sell, transfer or otherwise dispose of any Company Common
Stock obtained as a result of the Reorganization except in compliance with the
Securities Act of 1933, as amended and the rules and regulations promulgated
thereunder. The stock certificates representing Company Common Stock issued to
such affiliates in the Reorganization will bear a legend summarizing the
foregoing restrictions. It is expected that the affiliates of the Bank will be
able to sell such shares without registration so long as any such sales are in
accordance with applicable provisions of the Securities Act of 1933, as amended,
and the Securities and Exchange Commission's rules and regulations thereunder.
DESCRIPTION OF ROCKPORT NATIONAL BANCORP, INC.
----------------------------------------------
ORGANIZATION AND OPERATION
The Company, a Massachusetts corporation, was incorporated on March 23,
1999 at the direction of the Board of Directors of the Bank for the purpose of
acquiring 100% of the outstanding common stock of the Bank. The Company has not
yet engaged in any business activity. On April 21, 1999, the Company filed a
notice with the Board of Governors of the Federal Reserve System to become a
bank holding company by acquisition of 100% of the shares of the Bank. The
Company's Notice is currently pending.
The Company has no present plans to engage in any activities other than
acting as a company for the capital stock of the Bank. The Company does not
contemplate any substantial expenditures for equipment, plant or additional
personnel in the near future, and, accordingly, the Company does not expect that
it will be necessary to raise additional funds to meet its capital requirements
through the end of 1999. However, as the Bank's asset size continues to expand
along with the need for increased facilities it is possible that additional
equity for the Bank may be desirable. The existence of the Company will provide
greater flexibility in meeting the future capital needs of the Bank.
MANAGEMENT
The initial Board of Directors of the Company will be comprised of the
individuals who currently serve as directors to the Bank. These individuals
will also simultaneously continue to serve as directors of the Bank. However,
directors of the Company are elected for staggered terms of three years, as
opposed to directors of the Bank who must stand for reelection each year.
21
<PAGE>
The following sets forth alphabetically the names of the persons who are
currently the directors of the Bank and the positions held by such persons in
the Company and the year of expiration of such person's term as a director of
the Company:
<TABLE>
<CAPTION>
Position Position with Bank
Name of Individual With Bank and the Company Expiration of Term
- ------------------ --------------- ------------------ ------------------
<S> <C> <C> <C>
Peter A. Anderson President, Chief President, Chief 2000
Executive Officer Executive Officer
and Director and Director
Wendel W. Cook Director Director 2001
James W. Curtis, Jr. Director Director 2002
Herbert L. Elwell Director Director 2002
Richard J. Meringer Director Director 2001
Theodore A. Scharfenstein Director Director 2002
Michael C. Shea Director Director 2000
Robert H. Welcome Director Director 2001
</TABLE>
The Company's Board of Directors is divided into three classes, each class
being approximately equal in size. Each class of directors will stand for
reelection once every three years. Directors of the Bank will, however, stand
for reelection every year. See "COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF THE
BANK AND THE COMPANY".
The executive officers of the Company are appointed by the Board of
Directors of the Company. The executive officers of the Company will be Peter
A. Anderson, President and Chief Executive Officer and Margaret A. Murphy, Chief
Financial Officer, Treasurer and Clerk each of whom are presently officers of
the Bank.
There are no arrangements or understandings between any of the directors or
any other persons pursuant to which any of the above directors have been
selected as directors. The business experience of each of the directors and
executive officers during the past five years is summarized under "Proposal I-
Election of Directors". Because the Company has no present plans to engage in
any activity other than acting as a bank holding company for the stock of the
Bank, it is expected that it will be necessary for the officers and directors of
the Company to devote only a small portion of their time to Company management.
22
<PAGE>
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company, the Company has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Massachusetts law generally permits indemnification of directors and
officers for expenses incurred by them by reason of their position with the
corporation, if the director or officer has acted in good faith and with the
reasonable belief that his conduct was in the best interests of the corporation.
The Company's Bylaws provide that each person made a party in any proceeding by
reason of the fact that he or she was a director, officer, employee or agent of
the Company shall be indemnified by the Company against all expense and
liability reasonably incurred by such indemnitee in connection with such
proceeding, provided that such indemnitee shall undertake to repay such payment
if he shall be adjudicated to be not entitled to indemnification.
In addition to the indemnification provisions described above,
Massachusetts law permits, and the Company's Articles of Organization provide,
that no director shall be personally liable to the Company or its shareholders
for monetary damages for breaches of fiduciary duty except where such
exculpation is expressly prohibited. In Massachusetts, a director is not
exculpated from liability under provisions of Massachusetts law relating to
unlawful payments of dividends and unlawful stock purchases or redemptions. In
addition, the Company's Articles of Organization provide that this limitation
cannot apply to liability of a director (i) for breach of the director's duty of
loyalty to the corporation or its shareholders, (ii) for acts and omissions not
in good faith or which involve intentional misconduct or knowing violation of
law; or (iii) for any transaction from which the director derived an improper
personal benefit.
PROPERTY
The Company owns no properties. In the event that its business will
require office space, the amount will be minimal and will be located in the
Bank's main office.
REGULATION AND SUPERVISION
The Company will be a bank holding company registered pursuant to the
provisions of the Bank Holding Company Act of 1956, as amended (the "Holding
Company Act"), and consequently will be subject to regulation and examination by
the FRB. Bank holding companies are required to file annually with the FRB a
report of their operations and they and their subsidiaries are subject to
examination by the Board of Governors of the Federal Reserve System.
23
<PAGE>
The Holding Company Act also requires prior approval by the FRB before a
bank holding company (1) merges or consolidates with another bank holding
company, or (2) acquires directly or indirectly ownership or control of voting
shares of a bank if after such acquisition it would own or control directly or
indirectly more than five percent of the voting stock of such bank, except where
50 percent or more is already owned, or (3) acquires substantially all of the
assets of any bank.
The Holding Company Act further provides that the FRB shall not approve any
acquisition, reorganization or consolidation which would result in a monopoly or
which would be in furtherance of any combination or conspiracy to monopolize or
attempt to monopolize the business of banking in any part of the United States.
Further, the FRB may not approve any other proposed acquisition. reorganization
or consolidation, the effect of which may be substantially to lessen competition
or to tend to create a monopoly in any section of the country, or which in any
other manner would be in restraint of trade, unless the anti-competitive effects
of the proposed transaction are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs of the
community to be served.
The FRB permits bank holding companies to engage in activities so closely
related to banking or managing or controlling banks as to be a proper incident
thereto. While the types of permissible activities are subject to change by the
FRB, the following list comprises the principal activities that presently may be
conducted by a bank holding company.
1. Making, acquiring or servicing loans and other extensions of credit
for its own account or for the account of others, such as would be
made by the following types of companies: consumer finance, credit
card, mortgage, commercial finance and factoring.
2. Operating as an industrial bank, Morris Plan or industrial loan
company in the manner authorized by state law so long as the
institution does not both accept demand deposits and make commercial
loans.
3. Operating as a trust company in the manner authorized by federal or
state law so long as the institution does not make certain types of
loans or investments or accept deposits, except as may be permitted by
the FRB.
4. Subject to certain limitations, acting as an investment or financial
advisor to investment companies and other persons.
5. Leasing personal and real property or acting as agent, broker, or
advisor in leasing property, provided that it is reasonably
anticipated that the transaction will compensate the lessor for not
less than the lessor's full investment in the property.
6. Making equity and debt investments in corporations or projects
designed primarily to promote community welfare.
24
<PAGE>
7. Providing to others financially oriented data processing or
bookkeeping services.
8. Subject to certain limitations, acting as an insurance agent or broker
in relation to insurance for itself and its subsidiaries or for
insurance directly related to extensions of credit by the bank holding
company system.
9. Subject to certain limitations, acting as underwriter for credit life
insurance and credit accident and health insurance that is directly
related to extensions of credit by the bank holding company system.
10. Providing courier services of a limited character.
11. Subject to certain limitations, providing management consulting
advice to nonaffiliated banks and nonbank depository institutions.
12. Selling money orders having a face value of $1,000 or less, travelers'
checks and United States savings bonds.
13. Performing appraisals of real estate.
14. Subject to certain conditions, acting as intermediary for the
financing of commercial or industrial income-producing real estate by
arranging for the transfer of the title, control and risk of such a
real estate project to one or more investors.
15. Providing securities brokerage services, related securities credit
activities pursuant to FRB Regulation T and incidental activities such
as offering custodial services, individual retirement accounts and
cash management services, if the securities brokerage services are
restricted to buying and selling securities solely as agent for the
account of customers and do not include securities underwriting or
dealing or investment advice or research services.
16. Underwriting and dealing in obligations of the United States, general
obligations of states and their political subdivisions and other
obligations such as bankers' acceptances and certificates of deposit.
17. Subject to certain limitations, providing by any means, general
information and statistical forecasting with respect to foreign
exchange markets; advisory services designed to assist customers in
monitoring, evaluating and managing their foreign exchange exposures;
and certain transactional services with respect to foreign exchange.
25
<PAGE>
18. Subject to certain limitations, acting as a futures commission
merchant in the execution and clearance on major commodity exchanges
of futures contracts and options on futures contracts for bullion,
foreign exchange, government securities, certificates of deposit and
other money market instruments.
19. Subject to certain limitations, providing commodity trading and
futures commission merchant advice.
20. Providing consumer financial counseling that involves counseling,
educational courses and distribution of instructional materials to
individuals on consumer-oriented financial management matters,
including debt consolidation, mortgage applications, bankruptcy,
budget management, real estate tax shelters, tax planning, retirement
and estate planning, insurance and general investment management, so
long as this activity does not include the sale of specific products
or investments.
21. Providing tax planning and preparation advice such as strategies
designed to minimize tax liabilities and includes, for individuals,
analysis of the tax implications of retirement plans, estate planning
and family trusts. For corporations, tax planning includes the
analysis of the tax implications of mergers and acquisitions,
portfolio mix, specific investments, previous tax payments and year-
end tax planning. Tax preparation involves the preparation of tax
forms and advice concerning liability based on records and receipts
supplied by the client.
22. Providing check guaranty services to subscribing merchants.
23. Subject to certain limitations, operating a collection agency and
credit bureau.
24. Acquiring and operating thrift institutions, including savings and
loan associations, building and loan associations and Federal Deposit
Insurance Corporation (the "FDIC") insured savings banks.
25. Operating a credit bureau, subject to certain limitations.
A bank holding company and its subsidiaries, are prohibited from engaging
in certain tie-in arrangements in connection with any extension of credit or
sale of any property or services. Subsidiary banks of a bank holding company are
subject to certain restrictions imposed by the Federal Reserve Act on any
extension of credit to the bank holding company or any of its subsidiaries, or
investments in the stock or other securities thereof, and on the taking of such
stock or securities as collateral for loans to any borrower.
26
<PAGE>
The Bank is also subject to FRB regulations regarding the maintenance of
reserves. Under such regulations, the Bank must maintain reserves against its
transaction accounts and non-personal time deposits.
Bank holding companies have broad authority to repurchase their equity
securities. A bank holding company may repurchase its equity securities without
regulatory approval if the bank holding company is "well capitalized", "well
managed", and is not the subject of any unresolved supervisory issues. If all
of the above factors do not exist, a bank holding company would need to obtain
prior approval from the Federal Reserve Board in order to repurchase equity
securities which would exceed ten percent (10%) of its net worth in any twelve
(12) month period.
Under FRB regulations, a bank holding company is required to serve as a
source of financial and managerial strength to its subsidiary banks and may not
conduct its operations in an unsafe or unsound manner. In addition, it is the
FRB's policy that in serving as a source of strength to its subsidiary banks, a
bank holding company should stand ready to use available resources to provide
adequate capital funds to its subsidiary banks during periods of financial
stress or adversity and should maintain the financial flexibility and capital-
raising capacity to obtain additional resources for assisting its subsidiary
banks. A bank holding company's failure to meet its obligation to serve as a
source of strength to its subsidiary banks will generally be considered by the
FRB to be an unsafe and unsound banking practice or a violation of the FRB
regulations or both.
The FRB has established capital adequacy guidelines for bank holding
companies.
EFFECTS OF GOVERNMENT POLICY
Legislation adopted in recent years has substantially increased the scope
of regulations applicable to the Bank and the Company and the scope of
regulatory supervisory authority and enforcement power over the Bank and the
Company.
Virtually every aspect of the Bank's business is subject to regulation with
respect to such matters as the amount of reserves that must be established
against various deposits, the establishment of branches, reorganizations,
nonbanking activities and other operations. Numerous laws and regulations also
set forth special restrictions and procedural requirements with respect to the
extension of credit, credit practices, the disclosure of credit terms and
discrimination in credit transactions.
The descriptions of the statutory provisions and regulations applicable to
banks and bank holding companies set forth above do not purport to be a complete
description of such statutes and regulations and their effects on the Bank and
the Company. Proposals to change the laws and regulations governing the banking
industry are frequently introduced in Congress, in the state legislatures and
before the various bank regulatory agencies. The likelihood and timing of any
changes and the impact such changes might have on the Bank and the Company are
difficult to determine.
27
<PAGE>
LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property the subject of,
any legal proceedings other than in the ordinary course of business before any
court, administrative agency or other tribunal and no such proceedings are known
to be contemplated.
DESCRIPTION OF INTERIM BANK
---------------------------
The Interim National Bank of Rockport ("Interim Bank") has been chartered
under the laws of the United States, but has not commenced business with the
public. The Interim Bank has been organized solely for purposes of effecting
the Reorganization and has not engaged in any banking business. The
Reorganization will be accomplished by merging the Bank with and into the
Interim Bank pursuant to the Plan. Interim Bank will be capitalized by the
Company, its parent corporation. Upon consummation of the Reorganization, the
corporate existence of the Bank and the Interim Bank will be merged and
continued in the continuing bank (the "Continuing Bank") which shall do business
under the Bank's name as "Rockport National Bank" and the capital of Interim
Bank will be returned to the Company to enable the Company to repay its loan.
The Continuing Bank will be deemed to be the same corporation as the Bank and
the Interim Bank and will be responsible for all debts, obligations, liabilities
and contracts of both entities. Additionally, all rights of both the Bank and
the Interim Bank in and to any type of property, contract or chose in action
shall inure to the Continuing Bank. Copies of the Articles of Association and
Bylaws of the Interim Bank may be obtained without charge upon written request
to Peter A. Anderson, President, Rockport National Bank, 16 Main Street,
Rockport, Massachusetts 01966.
DESCRIPTION OF ROCKPORT NATIONAL BANK
-------------------------------------
GENERAL
The Bank was organized as a national bank in 1865 under the banking laws of
the United States of America and operates with its main office and one branch
office in Rockport, Massachusetts. The Bank operates a supermarket branch in
Gloucester. The Bank has trust powers but these powers are not currently
exercised.
The Bank has two wholly-owned subsidiaries, Headland Securities Corporation
and Twin Lights Securities Corporation, which invest in investment securities.
The Bank has offered, and plans to continue to offer, traditional community
bank products and services to businesses and individuals in, and around,
Rockport, Massachusetts. The Bank does not offer international, trust,
municipal trading or other such products and services.
Although the summer tourist season brings an increase in transactional
volume, the Bank's deposits do not vary to a significant extent on a seasonal
basis. Similarly, the Bank's loan demand is not seasonal to any great extent
and is based primarily on loans secured by real estate.
28
<PAGE>
PROPERTIES
The Bank's main office and King Street Branch Office are owned by the Bank
and are free from any mortgages or encumbrances. The Bank also operates a
supermarket branch office in Gloucester, Massachusetts which is leased. These
locations are considered by Management to be in good condition and to be
adequate to meet the Bank's current and presently foreseeable needs in serving
the Rockport community. The Bank has no current plans to establish additional
banking offices, or to expand its existing facilities.
EMPLOYEES
The Bank currently has 28 year-round full-time employees, 7 part-time
employees and one or more additional seasonal employees in the summer. The
Bank's employees are not represented by any collective bargaining unit.
Relations between the Bank's Management and employees are considered to be good.
REGULATION AND SUPERVISION
The Bank exists and operates as a national banking association under
federal law, and as such is required to comply with all laws applicable to
national banking associations. The Bank is a member of the Federal Reserve
System, and its deposits are insured by the FDIC to the extent permitted by law.
The Bank and its operations are subject to federal law and certain state laws
applicable to national banks and to the regulations applicable to national banks
promulgated by the OCC, the Board of Governors of the Federal Reserve System
(the "Federal Reserve System"), and the FDIC. As a national bank, the Bank is
regularly examined by the OCC.
The Bank and the commercial banking and financial services industries are
affected by general economic conditions and the monetary and fiscal policies of
the Federal Reserve System.
The Bank is further subject to certain restrictions imposed by the Federal
Reserve Act and other national banking laws, including those on extensions of
credit to any affiliates, on any investments in the stock or other securities of
affiliates, on the taking of such stock or securities as collateral for loans of
any borrower, and on the total obligation of any one person or entity which may
be outstanding to the Bank at any one time.
The Bank is subject to various state and federal statutes relating to
loans. The maximum legal rate of interest which the Bank may charge on a loan
depends on a variety of factors such as the type of borrower, the purpose of the
loan, the amount of the loan and the date on which the loan is made. There are
several different state and federal statutes which set maximum legal rates of
interest for various lending institutions. If a loan qualifies under more than
one statute, as a national bank, generally, the Bank may charge the highest rate
for which such loan is eligible.
29
<PAGE>
LEGAL PROCEEDINGS
Except for actions in which the Bank is a plaintiff, and which arise in the
normal course of the business of banking, the Bank is not a party to any pending
legal proceedings before any court, administrative agency or other tribunal.
Furthermore, the Bank is not aware of any litigation which is threatened against
it in any court, administrative agency or other tribunal.
COMPETITION
The Bank is one of only two banks with offices in Rockport, Massachusetts.
In addition to Rockport National Bank, a state chartered mutual savings bank is
the only other bank located in or operating a branch in Rockport, Massachusetts.
Numerous financial institutions have offices proximate to Rockport,
including some large depository institutions which have far greater financial
and other resources than the Bank. In addition, these banks have higher lending
limits and provide certain services that the Bank does not provide.
Banks compete on the basis of price, including rates paid on deposits and
charged on borrowings, convenience and quality of service. Savings and loan
associations are able to compete aggressively with commercial banks in the
important area of consumer lending. Credit unions and small loan companies are
each significant factors in the consumer market. Insurance companies,
investment firms, credit and mortgage companies, brokerage firms, cash
management accounts, money-market funds and retailers are all significant
competitors for various types of business. Some nonbank competitors are not
subject to the same extensive regulation as banks and thus in certain respects
may have a competitive advantage over banks in providing certain services.
In competing, the Bank draws its strength from its position as community
bank with personal service, flexibility and prompt responsiveness to the needs
of its customers.
30
<PAGE>
SELECTED HISTORICAL INFORMATION
-------------------------------
The following selected financial data for the five years ended December 31,
1998, is derived from the financial statements of the Bank and should be read in
conjunction with the financial statements and notes thereto of the Bank located
elsewhere in this Proxy Statement and Prospectus. The per share data has been
computed based on 209,775 shares of Bank Common Stock issued and outstanding.
<TABLE>
<CAPTION>
(Dollars in thousands except for per share data)
------------------------------------------------
AT OR FOR YEARS ENDED DECEMBER 31
- -------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------
STATEMENT OF INCOME DATA
<S> <C> <C> <C> <C> <C>
Interest Income $ 3,978 $ 3,815 $ 3,549 $ 3,382 $ 3,304
Interest Expense 1,209 1,176 1,110 1,051 927
Net Interest Income 2,769 2,639 2,439 2,331 2,377
Other Income 498 451 327 338 334
Noninterest Expense 2,378 2,127 1,870 1,772 1,833
Income before
income taxes 889 963 896 897 877
Income Taxes 327 356 384 392 369
Net Income 562 607 512 505 508
PER SHARE DATA
Net Income 2.68 2.89 2.44 2.41 2.42
Cash Dividends 1.00 0.90 0.70 0.65 0.40
Declared
Book Value 23.45 21.74 19.76 17.98 16.18
BALANCE SHEET DATA
Loans, Net 7,286 30,535 28,413 27,553 26,040
Total Assets 59,603 51,896 49,153 46,620 45,702
Total Deposits 54,021 46,996 44,853 42,579 41,402
Total Liabilities 54,684 47,336 45,008 42,848 42,309
Shareholders' Equity 4,919 4,560 4,145 3,771 3,394
</TABLE>
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
OVERVIEW
- --------
The mission statement of the Rockport National Bank provides significant
insights into the standards of performance set by its Board of Directors:
"The Bank's purpose is to be a full service independent community financial
institution. We are committed to providing financial services of the
highest quality and value to our depositors and borrowers and maintaining
our role as a financial resource to our market area. We will achieve our
objective by remaining financially strong, being responsive to the needs of
our local community and by producing the human and material resources
required to support efficient and profitable operations."
As part of its strategic plan, the Bank established a new branch in a
neighboring community in late 1997. This new location has positively impacted
the Bank's growth in loans and deposits during 1998, but also significantly
increased the Bank's operating expenses during the past year. The costs
attributed to this branch, combined with a lower yield on earning assets,
resulted in a decrease of $44,701, or 7.37%, in net income to $561,993 in 1998
compared to $606,694 in 1997. Earnings per share similarly decreased by $.21 to
$2.68 in 1998 compared to $2.89 in 1997.
The decrease in net income was anticipated as a result of the opening of
the new branch. The Bank's pro-forma analysis projected the branch would
sustain a loss for the first two years of operation, with a break-even
performance expected in the third year. Due to the geographical constraints of
the Bank's established locations, the development of this new market is
considered vital to the success of the Bank's future growth.
The declining yield on earning assets during the last year has been widely
experienced within the banking industry. The Bank is reviewing its potential
sources of fee income to try to supplement its lower yields on loans and
investments. Due to the Bank's relatively small asset size and difficulty in
absorbing significant increases in operating overhead, opportunities for
marketing other services to its customer base such as sales of insurance and
investments are limited.
Although the Bank's net income in 1998 was lower than the results achieved
in 1997, the past year's financial performance is still considered historically
strong. In response to the Bank's abundant capital, strong asset quality and
earnings, the Board of Directors increased the dividends declared on the Bank's
common stock during 1998 to $1.00 per share from $.90 per share in 1997.
32
<PAGE>
RESULTS OF OPERATIONS
---------------------
NET INTEREST AND DIVIDEND INCOME
- --------------------------------
The Bank's principal earning assets are its loan portfolio and its
securities portfolio. The securities portfolio represents approximately 29% of
total assets and serves a dual purpose of providing revenue to the Bank and
acting as a potential source of liquidity. The Bank's net income is largely
reliant on net interest and dividend income, which is the difference between
interest and dividends earned on earning assets and interest paid on deposits
and borrowed funds. The Bank's net interest and dividend income increased
$130,147, or 4.93%, to $2,768,823 for 1998 compared to $2,638,676 for 1997. This
increase was primarily due to an increase in average loan balances due to a
favorable rate environment for the consumer and increased loan origination
efforts by the Bank. The actual yield on loans decreased from 8.88% in 1997 to
8.57% in 1998 due to this sustained lower interest rate environment that
impacted both repricing of adjustable rate loans and new loans originated. The
Bank's net interest margin has gradually decreased from 5.45% for the year ended
December 31, 1997 to 5.31% for the year ended 1998. The net interest spread
measures the difference in yield between interest earning assets and interest
bearing liabilities. The Bank's net interest spread has decreased from 4.69% for
the year ended December 31, 1997 to 4.57% for the year ended December 31, 1998.
The tightening of both the net interest margin and the net interest spread
reflect the overall lower interest rate environment experienced in 1998 compared
to 1997, and the increased local competition for loan customers.
PROVISION FOR LOAN LOSSES
- -------------------------
The provision for loan losses is a charge to operations, when appropriate,
to bring the total allowance for loan losses to a level considered adequate by
management. The level of the allowance for loan losses is determined by
management based on its evaluation of the known as well as inherent risks in the
Bank's loan portfolio. Management's periodic evaluation is based on an
examination of the portfolio, past loss experience, current economic conditions,
the results of the most recent regulatory examination and other outside review.
The Bank did not make any provision for loan losses in 1998 or 1997.
OTHER INCOME
- ------------
Total other income increased $46,858, or 10.38%, to $498,307 for 1998 from
$451,449 for 1997. This increase was due primarily to an increase of $43,242 in
fees received for residential mortgage loans originated for the secondary market
under table funding arrangements. The Bank also realized an increase of
$29,252, or 18.82%, in service charges on credit cards in 1998 compared to 1997
due to the growth in the Bank's merchant credit card processing operations.
Other income increased $26,291 or 51.06%, to $77,780 in 1998 from $51,489 in
1997 primarily due to an increase in cash surrender value of $12,839 on life
insurance policies purchased in 1998 to fund a Supplemental Executive Retirement
Plan and a gain on the sale of other real estate owned of $12,839. In 1997,
the Bank realized a gain of $50,850 in the disposition of appreciated stock,
originally acquired as collateral for a defaulted loan. The Bank contributed
the stock to a public charitable foundation, which is listed as a charitable
contribution of $101,250 under Operating Expenses in the 1997 Consolidated
Statement of Income. The foundation provides grants to charitable organizations
within the communities served by the Bank.
33
<PAGE>
OPERATING EXPENSES
- ------------------
Total operating expenses increased $250,723 or 11.79%, to $2,377,962 for
1998 compared to $2,127,239 for 1997. Salaries and employee benefits increased
$140,348, or 13.32%, to $1,194,231 in 1998 from $1,053,883 in 1997. The
increase was due primarily to an increase in staff as a result of the opening of
a third full service branch in December 1997.
Occupancy and equipment expenses increased $103,561, or 52.58%, to $300,507
in 1998 compared to $196,946 in 1997. This increase is largely due to the lease
and equipment costs of the new branch and increased depreciation expense due to
a major renovation of the Main Office which was completed in early 1998.
PROVISION FOR INCOME TAXES
- --------------------------
The provision for income taxes decreased $29,017, or 8.15%, to $327,175 in
1998 from $356,192 in 1997. This decrease is mainly the result of the decrease
in pre-tax income from 1998 to 1997.
FINANCIAL CONDITION
- -------------------
Total assets increased $7,707,555, or 14.85%, to $59,603,428 at December
31, 1998 from $51,895,873 at the end of 1997. The increase in assets was
primarily due to a higher level of loans which were largely funded by a
corresponding growth in deposits. Net loans increased $6,750,924, or 22.11%,
to $37,285,751 at the end of 1998 from $30,534,827 at the close of 1997.
Other assets increased $320,853, or 179.60%, to $499,500 at December 31,
1998 from $178,647 at the end of 1997. This increase was generally attributable
to the purchase of bank owned life insurance to fund a Supplemental Retirement
Plan for the Bank's Chief Executive Officer and Chief Financial Officer. The
cash surrender value of the life insurance as of December 31, 1998 was $363,000.
Total liabilities increased $7,348,709, or 15.52%, to $54,684,426 at the
end of 1998 from $47,335,717 at the close of 1997. Deposits, the Bank's primary
source of funds, grew by $7,025,807, or 14.95%, to $54,021,426 at December 31,
1998 from $46,995,619 at December 31, 1997. The Bank attributes the significant
growth to the convenient hours of operations, locations and drive up facilities
of its branch network. The aggregate of non-term accounts which include demand,
money market, NOW and savings accounts, increased $6,073,742, or 16.28%, to
$43,392,328 at year end 1998 from $37,318,586 at year end 1997. Time deposits
increased by $952,065, or 9.84%, to $10,629,098 at December 31, 1998 from
$9,677,033 at December 31, 1997.
Due to the growth of deposits in 1998, the Bank had no short term borrowed
funds at the close of 1998, compared to $108,000 of overnight borrowings as of
December 31, 1997. Due to broker of $500,000 at year end 1998 represents a
liability for an investment security purchased in December 1998 with a
settlement date of January 1999. Other liabilities decreased by $69,098, or
29.77%, to $163,000 at year end 1998 compared to $232,098 at the close of 1997
due to a decrease in the Bank's outstanding income tax liability at the end of
1998 compared to the end of the prior year.
34
<PAGE>
ASSET/LIABILITY MANAGEMENT
- --------------------------
The Bank's assets and liabilities are managed in accordance with policies
established and reviewed by the Board of Directors. The Bank's Asset and
Liability Management Committee implements and monitors compliance with these
policies regarding the Bank's asset and liability management practices with
regard to interest rate risk, capital and liquidity.
INTEREST RATE RISK
- ------------------
Interest rate risk management involves managing the extent to which
interest-sensitive assets and interest-sensitive liabilities are matched.
Maintaining an appropriate level of matching is a method of avoiding wide
fluctuations in net interest margin during periods of changing interest rates.
The difference between interest-sensitive assets and interest-sensitive
liabilities is known as the "interest-sensitive gap" ("GAP"). The Bank uses
model simulation to evaluate the impact on earnings of potential changes in
interest rates.
The Bank is currently asset sensitive which means that the Bank's net
interest income would increase in rising interest rate environments and decrease
in declining interest rate environments. The Bank has taken steps to decrease
the potential impact which declining interest rates could have on earnings by
purchasing investment securities with longer maturity dates and lengthening the
first adjustment period on adjustable rate loans originated for the Bank's loan
portfolio.
LIQUIDITY RISK
- --------------
Financial institutions must maintain liquidity to meet daily requirements
of depositors and borrowers, take advantage of market opportunities, and provide
a cushion against unforeseen needs. Liquidity needs can be met by reducing
assets or increasing liabilities. The Bank's sources of liquid assets are cash
and amounts due from banks, federal funds sold and investment securities
available for sale. The bank's liquid assets totaled $4,020,359 at December 31,
1998 compared to $3,532,369 at December 31, 1997. Maturing and repaying loans
are another source of asset liquidity.
The Bank meets its liability liquidity by attracting deposits with
competitive rates, utilizing a seasonal line of credit with the Federal Reserve
Bank and borrowing funds from the Federal Home Loan Bank. At December 31,
1998, the Bank had available lines of credit with the Federal Reserve Bank and
with the Federal Home Loan Bank of Boston of $1,000,000 and $935,000,
respectively. At December 31, 1997, the Bank had short term borrowings of
$65,000 with the Federal Reserve Bank and $43,000 with the Federal Home Loan
Bank.
CAPITAL
- -------
At December 31, 1998 the Bank had $4,919,002 in shareholders' equity
compared with $4,560,156 at the end of 1997. From a regulatory perspective, the
Bank's capital ratios place it in the well capitalized category , which is the
strongest capital category for an institution. Federal regulatory banking
agencies impose three minimum capital requirements on the Bank's assets and
risk-based assets based on total capital , Tier 1 capital, and a leverage
capital ratio. The various capital ratios of the Bank for December 31, 1998 and
1997 are as follows:
35
<PAGE>
<TABLE>
<CAPTION>
Required
Minimum
Level Actual Actual
to be "well- December 31, December 31,
capitalized" 1998 1997
- ---------------------------------------------------------------
<S> <C> <C> <C>
Total Risk-Based 10.0% 14.4% 17.1%
Tier 1 Risk-Based 6.0 13.1 15.8
Leverage 5.0 8.5 8.9
</TABLE>
DISCLOSURES RELATING TO "YEAR 2000"
- -----------------------------------
The "Year 2000 issue" ("Y2K") relates to a wide array of potential computer
issues which may arise from the inability of computer hardware and software to
properly process date-sensitive data relating to the Year 2000, years thereafter
and certain dates in the Year 1999.
THE STATE OF THE BANK'S READINESS
- ---------------------------------
A bank wide Y2K compliance program has been implemented to determine Y2K
issues and define a plan to ensure Y2K compliance. The compliance program is
segmented by phases; awareness, inventory, assessment, renovation, validation,
implementation and post-implementation. In 1997, a Y2K committee was formed
which is predominantly comprised of the senior management of the Bank. This
committee currently briefs the Board of Directors monthly on the progress of the
Y2K effort. The compliance program as it relates to awareness, inventory,
assessment, renovation, validation and implementation is essentially complete
regarding mission critical systems. The remainder of the Y2K compliance program
is scheduled to be completed by June 30, 1999, barring unforeseen problems.
The awareness phase involved the dissemination of Y2K information bank-wide
and the establishment of a multi-disciplined team to plan and develop a strategy
to coordinate all aspects of the problem. The inventory phase involved listing
each piece of hardware, software and any other products used by the Bank that
contain embedded microchips. The assessment phase involved analyzing the
results of the inventory phase and determining the most cost-effective
solutions. The renovation phase involved correcting or replacing all known
deficiencies in our products or systems. The validation phase tested the new or
upgraded systems and the implementation certified the systems as Y2K compliant.
The Bank utilizes a third part servicer for most of its core banking
applications. In June and December of 1998, the servicer conducted extensive
Y2K testing and in March of 1999 the servicer tested its disaster recovery
procedures. The Bank has been advised that the servicer is making acceptable
progress in meeting its established goals for Y2K compliance. The Bank does not
foresee any Y2K compliance problems caused by the servicer at the present time.
36
<PAGE>
THE RISKS OF THE BANK'S Y2K ISSUES
- ----------------------------------
Failure to resolve a material Y2K problem could result in the interruption
in, or failure of , certain business activities or bank operations. From a
customer's perspective, a Y2K problem could affect a borrower's ability to repay
a loan if their employer or business was impacted. To raise customers' level of
awareness regarding this issue, the Bank mailed informational brochures to its
customers and co-sponsored a Y2K seminar in 1998.
From a liquidity perspective, the Bank is exposed to a withdrawal crisis if
significant funds are withdrawn by worried consumers. The Bank has developed a
contingency plan to ensure that adequate funds are available from multiple
sources in the event that consumer fears heighten as the end of 1999
approaches.
The Bank is subject to examination by the Office of the Comptroller of the
Currency who are actively reviewing the adequacy of banks' compliance efforts
with regulatory guidelines. If the Bank fails to adequately satisfy regulatory
requirements, it may be subject to formal or informal regulatory enforcement
actions. Management does not consider this to be a probable outcome given the
Bank's current state of preparation for Y2K.
THE COSTS TO ADDRESS THE BANK'S Y2K ISSUES
- ------------------------------------------
Any costs to modify computer systems to solely correct Y2K problems are
expensed when incurred. The 1998 Y2K expenses amounted to approximately $5,000
and the 1999 expenses in this regard are estimated to be $25,000.
THE BANK'S CONTINGENCY PLAN
- ---------------------------
As part of its contingency planning, the Bank has developed a Y2K business
resumption plan which supplements its Disaster Recovery Policy. In the event of
a loss of power, heat or telephone service, the Bank plans to re-deploy employee
resources, as necessary, to help ensure manual completion of critical
operational functions. The Bank plans to test the business resumption plan
during the second calendar quarter of 1999.
The Bank has developed contingency plans for its mission critical systems
and will continue to refine these plans in 1999. However, there can be no
assurance that the Bank's efforts in this regard will be sufficient to avoid
unforeseen business interruptions or other problems caused by Y2K issues.
STATISTICAL INFORMATION
- -----------------------
The following supplementary information required under Guide 3 (Statistical
Disclosure by Bank Holding Companies) should be read in conjunction with the
related financial statements and notes thereto which are a part of this Proxy
Statement and Prospectus.
37
<PAGE>
INTEREST RATES AND INTEREST DIFFERENTIAL
- ----------------------------------------
The following table presents the condensed average balance sheets and the
components of net interest differential for the two years ended December 31,
1998 and 1997.
<TABLE>
<CAPTION>
(Dollars in Thousands) 1998 1997
--------------------------- ---------------------------
Interest Interest
Average Earned/ Yield/ Average Earned/ Yield/
Balance Paid Rate Balance Paid Rate
------- -------- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Earning Assets:
Loans $33,364 $2,860 8.57% $30,213 $2,682 8.88%
Taxable Securities 16,761 1,022 6.10 17,385 1,090 6.27
Tax-exempt Securities 211 10 4.74 213 10 4.69
Net unrealized gain on
Securities 11 26
Federal funds sold 1,595 86 5.39 601 33 5.49
--------- -------- ------- ------
Total interest earning assets 51,942 3,978 7.66 48,438 3,815 7.88
-------- ------
Allowance for loan losses (672) (690)
Cash & due from Banks 1,744 1,747
Premise, Equipment 1,149 758
Other Assets 814 536
--------- -------
Total Assets $54,977 $50,789
========= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
NOW/Money market deposits $13,566 248 1.83% $12,657 237 1.87%
Savings deposits 15,211 432 2.84 13,283 368 2.77
Time deposits 10,127 520 5.13 10,085 523 5.19
--------- -------- ------- ------
Total Deposits 38,904 1,200 3.08 36,025 1,128 3.13
Borrowed funds 160 9 5.63 850 48 5.65
--------- -------- ------- ------
Total interest bearing liabilities 39,064 1,209 3.09 36,875 1,176 3.19
-------- ------
Demand deposits 10,873 9,304
Other liabilities 283 241
Shareholders' Equity 4,757 4,369
--------- -------
Total Liabilities and Equity $54,977 $50,789
========= =======
Net interest income $2,769 $2,639
======== ======
Net interest spread 4.57% 4.69%
Net interest margin 5.31 5.45
</TABLE>
(1) Includes non-accruing loan balances and interest received on non-accruing
loans.
The following table shows, for the period indicated, the dollar amount of
changes in interest income and interest expense resulting from changes in volume
and interest rates.
38
<PAGE>
<TABLE>
<CAPTION>
(000's in thousands)
1998 as compared to 1997
Due to a change in
Volume (1) Rate (1) Total
----------------------------------------
<S> <C> <C> <C>
Interest income from:
Loans $280 $(102) $178
Taxable securities (39) (29) (68)
Tax-exempt securities - - -
Federal funds sold 55 (2) 53
---- ----- ----
Total 296 (133) 163
---- ----- ----
Interest expense on:
NOW/Money market deposits 17 (6) 11
Savings deposits 53 11 64
Time deposits 2 (5) (3)
----
Borrowed funds (39) - (39)
---- ----- ----
Total 33 33
---- ----- ----
Net interest income $263 $(133) $130
==== ===== ====
</TABLE>
(1) The change in interest attributed to both rate and volume has been allocated
to the changes in the rate and the volume on a pro-rated basis.
Loan Portfolio
- --------------
The following table summarizes the distribution of the Bank's loan portfolio as
of December 31 for the years indicated:
<TABLE>
<CAPTION>
(In Thousands) 1998 1997
--------- --------
<S> <C> <C>
Commercial, financial & agricultural $ 2,020 $ 1,327
Real estate-construction and land development 2,067 884
Real estate-residential 20,298 17,663
Real estate-commercial 11,223 8,958
Consumer 2,332 2,374
Other 8 3
-------------------
37,948 31,209
Allowance for loan losses (662) (674)
-------------------
Net Loans $37,286 $30,535
===================
</TABLE>
Loan maturities for commercial, financial and agricultural at December 31,
1998 were as follows: $832,000 due in one year or less; $1,112,000 due
after one year through five years; $76,000 due after five years. Of the
Bank's commercial, financial and agricultural loans due after one year,
$297,000 have floating or adjustable rates and $891,000 have fixed rates.
39
<PAGE>
Loan maturities for real estate construction and land development at
December 31, 1998 were as follows: $2,042,000 due in one year or less;
$25,000 due after one year through five years; none due after five years.
Of the Bank's real estate construction and land development loans due after
one year, none have floating or adjustable rates and $25,000 have fixed
rates.
Summary of Loan Loss Experience
-------------------------------
The following table summarizes historical data with respect to loans
outstanding, loan losses and recoveries, and the allowance for loan losses
at December 31 for each of the years indicated:
<TABLE>
<CAPTION>
(In Thousands) 1998 1997
---- ----
<S> <C> <C>
Average loans outstanding,
net of unearned income $33,364 $30,213
</TABLE>
<TABLE>
<CAPTION>
Allowance for Loan Losses
-------------------------
(In thousands) 1998 1997
---- ----
<S> <C> <C>
Balance at beginning of period $ 674 $ 687
----- -----
Charge-offs
Real estate - Construction - -
Real estate - Residential - (6)
Real estate - Commercial (21) -
Commercial, Financial and Agricultural - -
Consumer (23) (31)
----- -----
Total Charge-offs (44) (37)
----- -----
Recoveries:
Real estate - Construction - -
Real estate - Residential - -
Real estate - Commercial 1 -
Commercial, Financial and Agricultural - 9
Consumer 31 15
----- -----
Total Recoveries 32 24
----- -----
Net charge-offs (12) (13)
----- -----
Provision for loan losses 0 0
----- -----
Balance at period end $ 662 $ 674
===== =====
Ratio of net charge-offs to average loans .04% .04%
</TABLE>
40
<PAGE>
Non-Accrual, Past Due and Restructured Loans
- --------------------------------------------
It is the policy of the Bank to discontinue the accrual of interest on loans
when, in the judgment of management, the collection of the full amount of
interest is considered doubtful. This will generally occur once a loan has
become 90 days past due, unless the loan is well secured and in the process of
collection. Restructured loans generally may have a reduced interest rate, an
extension of loan maturity, future benefits for current concessions and a
partial forgiveness of principal or interest. The following table sets forth
information on non-accrual, past due and restructured loans as of December 31,
for each of the years indicated:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
----- -----
<S> <C> <C>
Loans, non-accrual $ 261 $ 367
Loans past due 90 days or
more and still accruing 261 150
----- -----
Total $ 522 $ 517
===== =====
</TABLE>
The amount of interest income recorded during 1998 and 1997 on non-accrual loans
and restructured loans outstanding at December 31, 1998 and 1997 amounted to
$28,796 and $54,478, respectively. Had these loans performed in accordance with
their original terms, the amount recorded would have been $28,623 in 1998 and
$49,631 in 1997.
As of December 31, 1998, there were no loans which are not now included above
where known information about possible credit problems of borrowers which caused
management to have serious doubts as to the ability of such borrowers to comply
with the present loan repayment terms.
Industry concentrations in the Bank's loan portfolio include inns and bed and
breakfast establishments which total $1,720,481. Additionally, there is a
geographical concentration as the Bank's market area is Rockport and Gloucester,
Massachusetts.
Allowance for Loan Losses
- -------------------------
The following table reflects the allocation of the allowance for loan losses and
the percentage of loans in each category to total outstanding loans as of
December 31 for each of the years indicated:
<TABLE>
<CAPTION>
1998 1997
------------------------- ---------------------------
Percent of loans Percent of loans
(Dollar in Thousands) in category in category
Amount to total loans Amount to total loans
------ ----------------- ------ -------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 43.3 5.3% $ 74.0 4.3%
Real estate - construction 15.9 5.4 9.0 2.8
Real estate - residential 134.4 53.6 122.7 56.6
Real estate - commercial 129.5 29.6 102.9 28.7
Consumer 81.3 6.1 153.3 7.6
Other .4 0.0 - 0.0
Unallocated 257.2 0.0 212.1 0.0
------ ----- ------ -----
Total $ 662 100.0% $ 674 100.0%
====== ==== ====== =====
</TABLE>
41
<PAGE>
Deposits
- --------
As of December 31, 1998, the Bank had certificates of deposit in amounts of
$100,000 and over aggregating $404,000. These certificates of deposit mature
as follows:
<TABLE>
<CAPTION>
Maturity Amount
-------- ------
<S> <C>
3 months or less $ -
Over 3 months through 6 months 404,000
Over 6 months through 12 months -
Over 12 months -
--------
Total $404,000
========
</TABLE>
Return on Equity and Assets
- ---------------------------
The following table summarizes various financial ratios of the Bank for each of
the last two years:
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997
------ ------
<S> <C> <C>
Return on average total assets ( net income
divided by average total assets) 1.02% 1.19%
Return on average stockholders' equity (net income
divided by average stockholders' equity) 11.81 13.89
Dividend payout ratio (total declared dividends
divided by net income) 37.33 31.12
Equity to assets ratio (average stockholders' equity
as a percentage of average total assets) 8.65 8.60
</TABLE>
42
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
<TABLE>
<CAPTION>
<S> <C>
THE BANK AND SUBSIDIARIES
Independent Auditors' Report..................................................F-1
Consolidated Balance Sheets at December 31, 1998 and 1997.....................F-2
Consolidated Statements of Income for the Years Ended
December 31, 1998 and 1997....................................................F-3
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1998 and 1997................................F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997.............................................F-5 to F-6
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1998 and 1997......................................F-7 to F-29
</TABLE>
43
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Rockport National Bank
We have audited the accompanying consolidated balance sheets of Rockport
National Bank and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rockport National
Bank and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
WOLF & COMPANY, P.C.
Boston, Massachusetts
February 10, 1999, except for Note 12
which is as of February 23, 1999
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
------------------ -----------------
<S> <C> <C>
Cash and due from banks $ 1,837,860 $ 2,502,213
Federal funds sold 1,150,000 -
------------------ -----------------
Total cash and cash equivalents 2,987,860 2,502,213
Securities available for sale, at fair value 1,032,499 1,030,156
Securities held to maturity, at amortized cost 16,019,491 15,959,349
Federal Reserve Bank stock, at cost 25,700 25,700
Federal Home Loan Bank of Boston stock, at cost 220,000 205,700
Loans, net 37,285,751 30,534,827
Premises and equipment, net 1,144,896 1,077,162
Accrued interest receivable 387,731 382,119
Other assets 499,500 178,647
------------------ -----------------
$ 59,603,428 $ 51,895,873
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 54,021,426 $ 46,995,619
Short-term borrowings - 108,000
Due to broker 500,000 -
Other liabilities and accrued expenses 163,000 232,098
------------------ -----------------
Total liabilities 54,684,426 47,335,717
------------------ -----------------
Commitments and contingencies
Stockholders' equity:
Common stock, $1.00 par value; 500,000 shares
authorized; 209,775 shares issued and outstanding 209,775 209,775
Additional paid-in capital 646,693 646,693
Retained earnings 4,050,198 3,697,980
------------------ -----------------
4,906,666 4,554,448
Accumulated other comprehensive income 12,336 5,708
------------------ -----------------
Total stockholders' equity 4,919,002 4,560,156
------------------ -----------------
$ 59,603,428 $ 51,895,873
================== =================
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
<S> <C> <C>
Interest and dividend income:
Interest and fees on loans $ 2,859,581 $ 2,681,845
Interest and dividends on securities:
Taxable interest 1,006,845 1,078,740
Tax-exempt interest 9,755 9,755
Dividends 15,236 12,256
Interest on short-term investments 86,441 32,802
---------------- ----------------
Total interest and dividend income 3,977,858 3,815,398
---------------- ----------------
Interest expense:
Interest on deposits 1,200,417 1,128,341
Other interest 8,618 48,381
---------------- ----------------
Total interest expense 1,209,035 1,176,722
---------------- ----------------
Net interest and dividend income 2,768,823 2,638,676
---------------- ----------------
Other income:
Service charges on deposit accounts 176,463 177,540
Service charges on credit cards 184,652 155,400
Loan referral fees 59,412 16,170
Gain on disposition of equity securities - 50,850
Other income 77,780 51,489
---------------- ----------------
Total other income 498,307 451,449
---------------- ----------------
Operating expenses:
Salaries and employee benefits 1,194,231 1,053,883
Occupancy and equipment 300,507 196,946
Data processing 286,412 252,158
Charitable contribution - 101,250
FDIC and other regulatory 29,398 26,063
Other general and administrative 567,414 496,939
---------------- ----------------
Total operating expenses 2,377,962 2,127,239
---------------- ----------------
Income before income taxes 889,168 962,886
Provision for income taxes 327,175 356,192
---------------- ----------------
Net income $ 561,993 $ 606,694
================ ================
Earnings per share $ 2.68 $ 2.89
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Shares of Additional
Common Common Paid-In Retained
Stock Stock Capital Earnings
--------------- -------------- -------------- ------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 209,775 $209,775 $ 646,693 $ 3,280,084
------------------
Comprehensive income:
Net income - - - 606,694
Change in net unrealized gain on securities
available for sale, net of reclassification
adjustment and tax effects - - - -
Total comprehensive income
Cash dividends declared ($.90 per share) - - - (188,798)
--------------- -------------- -------------- ------------------
Balance at December 31, 1997 209,775 209,775 646,693 3,697,980
Comprehensive income:
Net income - - - 561,993
Change in net unrealized gain on securities
available for sale, net of reclassification
adjustment and tax effects - - - -
Total comprehensive income
Cash dividends declared ($1.00 per share) - - - (209,775)
--------------- -------------- -------------- ------------------
Balance at December 31, 1998 209,775 $209,775 $ 646,693 $ 4,050,198
=============== ============== ============== ==================
<CAPTION>
Accumulated
Other Total
Comprehensive Stockholders'
Income Equity
--------------- ------------------
Balance at December 31, 1996 $ 8,390 $ 4,144,942
------------------
Comprehensive income:
Net income - 606,694
Change in net unrealized gain on securities
available for sale, net of reclassification
adjustment and tax effects (2,682) (2,682)
------------------
Total comprehensive income 604,012
------------------
Cash dividends declared ($.90 per share) - (188,798)
--------------- ------------------
Balance at December 31, 1997 5,708 4,560,156
------------------
Comprehensive income:
Net income - 561,993
Change in net unrealized gain on securities
available for sale, net of reclassification
adjustment and tax effects 6,628 6,628
------------------
Total comprehensive income 568,621
------------------
Cash dividends declared ($1.00 per share) - (209,775)
--------------- ------------------
Balance at December 31, 1998 $ 12,336 $ 4,919,002
=============== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 561,993 $ 606,694
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 149,591 88,120
Net amortization of investments 25,125 34,566
Gain on disposition of equity securities - (50,850)
Deferred tax benefit (28,000) (24,000)
Charitable contribution in the form of equity securities - 101,250
(Increase) decrease in accrued interest receivable (5,612) 42,272
Increase in other assets (297,449) (21,076)
Increase (decrease) in other liabilities and
accrued expenses (69,098) 77,152
----------------- -----------------
Net cash provided by operating
activities 336,550 854,128
----------------- -----------------
Cash flows from investing activities:
Proceeds from calls/maturities of securities held
to maturity 3,240,000 5,000,000
Purchase of securities available for sale - (1,028,203)
Purchase of securities held to maturity (3,993,900) (4,048,016)
Proceeds from amortization of mortgage-backed
securities 1,177,514 663,799
Purchase of Federal Home Loan Bank stock (14,300) (159,050)
Net increase in loans (6,718,490) (2,097,496)
Recoveries of previously charged-off loans (32,434) (24,030)
Additions to premises and equipment (217,325) (581,158)
----------------- -----------------
Net cash used in investing activities (6,558,935) (2,274,154)
----------------- -----------------
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits 7,025,807 2,142,751
Net increase (decrease) in short-term borrowings (108,000) 108,000
Dividends paid (209,775) (188,798)
---------------- ----------------
Net cash provided by financing
activities 6,708,032 2,061,953
---------------- ----------------
Net increase in cash and cash equivalents 485,647 641,927
Cash and cash equivalents at beginning of year 2,502,213 1,860,286
---------------- ----------------
Cash and cash equivalents at end of year $2,987,860 $2,502,213
================ ================
Supplemental disclosure:
Interest paid on deposit accounts $1,197,441 $1,130,501
Other interest paid 8,531 48,381
Income taxes paid 407,487 320,532
Increase in due to broker 500,000 -
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Rockport
National Bank (the "Bank") and its wholly-owned subsidiaries, Headland
Securities Corporation and Twin Lights Securities Corporation, which invest
in investment securities. All significant intercompany balances and
transactions have been eliminated in consolidation.
Business
The Bank provides a variety of financial services to individuals and small
businesses through its three offices on Cape Ann. Its primary deposit
products are checking, savings and term certificate accounts and its primary
lending products are residential and commercial mortgages, small business
and consumer loans.
Use of Estimates
In preparing consolidated financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of
the date of the balance sheet and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. A material estimate that is particularly susceptible to
significant change in the near term relates to the determination of the
allowance for loan losses.
Reclassifications
Certain amounts have been reclassified in the 1997 consolidated financial
statements to conform to the 1998 presentation.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, cash items, due from banks and Federal Funds sold which mature
within ninety days.
F-7
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Securities
Debt securities that management has the positive intent and ability to hold
to maturity are classified as "held to maturity" and recorded at amortized
cost. Securities that are purchased and held principally for the purpose of
selling them in the near term are classified as "trading securities" and
reflected at fair value, with unrealized gains and losses included in
earnings. Securities not classified as either of the above are classified
as "available for sale" and reflected at fair value, with unrealized gains
and losses excluded from earnings and reported in accumulated other
comprehensive income.
Purchase premiums and discounts are amortized to earnings by a method which
approximates the interest method over the terms of the investments.
Declines in value of held to maturity and available for sale securities that
are deemed to be other than temporary are reflected in earnings when
identified. Gains and losses on sales of securities are recorded on the
trade date and determined using the specific identification basis.
Loans
The Bank grants mortgage, commercial, small business and consumer loans to
customers. A substantial portion of the loan portfolio is represented by
mortgage loans in Rockport and surrounding communities. The ability of the
Bank's debtors to honor their contracts is dependent upon the real estate,
construction and general economic sectors.
Loans, as reported, have been reduced by unadvanced loan funds and the
allowance for loan losses. Interest on loans is generally recognized on a
simple interest basis. Interest on loans is not accrued on loans which are
identified as impaired or when in the judgment of management the
collectibility of the principal or interest becomes doubtful. Interest
income previously accrued on such loans is reversed against current period
interest income. Interest income on all nonaccrual loans is recognized only
to the extent of interest payments received.
Allowance For Loan Losses
The allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to earnings. Loan
losses are charged against the allowance when management believes the
collectibility of the loan balance is unlikely. Subsequent recoveries, if
any, are credited to the allowance.
F-8
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Allowance For Loan Losses (concluded)
The allowance for loan losses is evaluated on a regular basis by management
and is based upon management's periodic review of the collectibility of the
loans in light of known and inherent risks in the nature and volume of the
loan portfolio, adverse situations that may affect the borrower's ability to
repay, estimated value of any underlying collateral and prevailing economic
conditions. The evaluation is inherently subjective as it requires
estimates that are susceptible to significant revision as more information
becomes available.
A loan is considered impaired when, based on current information and events,
it is probable that a creditor will be unable to collect the scheduled
payments of principal or interest when due according to the contractual
terms of the loan agreement. Factors considered by management in
determining impairment include payment status, collateral value, and the
probability of collecting scheduled principal and interest payments when
due. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Management determines
the significance of payment delays and payment shortfalls on a case-by-case
basis, taking into consideration all of the circumstances surrounding the
loan and the borrower, including the length of the delay, the reasons for
the delay, the borrower's prior payment record, and the amount of the
shortfall in relation to the principal and interest owed. Impairment is
measured on a loan by loan basis by either the present value of expected
future cash flows discounted at the loan's effective interest rate, the
loan's obtainable market price, or the fair value of the collateral if the
loan is collateral dependent. Substantially all of the Bank's loans which
have been identified as impaired have been measured by the fair value of
existing collateral.
Large groups of smaller balance homogeneous loans are collectively evaluated
for impairment. Accordingly, the Bank's consumer loans are collectively
evaluated for impairment.
Premises and Equipment
Land is carried at cost. Buildings, leasehold improvements and equipment
are stated at cost less accumulated depreciation and amortization calculated
principally on the straight-line method over the estimated useful lives of
the asset.
F-9
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax assets
or liabilities are expected to be realized or settled. As changes in tax
laws or rates are enacted, deferred tax assets and liabilities are adjusted
accordingly through the provision for income taxes. The loan loss allowance
maintained for financial reporting purposes is a temporary difference with
allowable recognition of a related deferred tax asset if it is deemed
realizable.
Retirement Plan
The compensation cost of an employee's pension benefit is recognized on the
net periodic pension cost method over the employee's approximate service
period. The aggregate cost method is utilized for funding purposes.
Earnings Per Share
Earnings per share is calculated based on the weighted average number of
common shares outstanding during the year.
Comprehensive Income
The Bank adopted Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income," as of January 1, 1998. Accounting
principles generally require that recognized revenue, expenses, gains and
losses be included in net income. Although certain changes in assets and
liabilities, such as unrealized gains and losses on available-for-sale
securities, are reported as a separate component of the equity section of
the balance sheet, such items, along with net income, are components of
total comprehensive income. The adoption of SFAS No. 130 had no effect on
the Bank's net income or stockholders' equity.
F-10
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)
Comprehensive Income (concluded)
The components of the change in other comprehensive income and related tax
effects are as follows:
Years Ended December 31,
------------------------------------
1998 1997
------------ ------------
Unrealized holding gains on
available-for-sale securities $11,224 $46,206
Reclassification adjustment for gains
realized in income - (50,850)
------------ ------------
Net unrealized gains (losses) 11,224 (4,644)
Tax effect (4,596) 1,962
------------ ------------
Net-of-tax amount $6,628 $ (2,682)
============ ============
Recent Accounting Pronouncements
In February 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," effective for fiscal years beginning after December 15, 1997. The
Statement revises employers' disclosures about pension and other postretirement
benefit plans. It does not change the measurement or recognition of those plans.
The Statement standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practical, requires additional information
on changes in the benefit obligations and fair values of plan assets that will
facilitate financial analysis, and eliminates certain disclosures that were
previously required by generally accepted accounting principles. The Bank has
adopted these disclosure requirements for the years ended December 31, 1998 and
1997.
F-11
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SECURITIES
The amortized cost and estimated fair value of securities, with gross
unrealized gains and losses, follows:
<TABLE>
<CAPTION>
December 31, 1998
----------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------------ -------------- -------------- ------------------
<S> <C> <C> <C> <C>
Securities available for sale
- -----------------------------
Federal agency $ 1,011,519 $ 20,980 $ - $ 1,032,499
================== ============== ============== ==================
Securities held to maturity
- ---------------------------
U.S. Government and
federal agency $ 11,756,430 $ 119,167 $ - $ 11,875,597
Mortgage-backed 4,052,892 33,468 (61,261) 4,025,099
State and municipal 210,169 4,271 - 214,440
------------------ -------------- -------------- ------------------
Total debt securities $ 16,019,491 $ 156,906 $ (61,261) $ 16,115,136
================== ============== ============== ==================
December 31, 1997
----------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------------ -------------- -------------- ------------------
<CAPTION>
Securities available for sale
- -----------------------------
Federal agency $ 1,020,400 $ 9,756 $ - $ 1,030,156
================== ============== ============== ==================
Securities held to maturity
- ---------------------------
U.S. Government and
federal agency $ 11,008,460 $ 54,872 $ (7,265) $ 11,056,067
Mortgage-backed 4,739,074 29,685 (70,395) 4,698,364
State and municipal 211,815 2,643 - 214,458
------------------ -------------- -------------- ------------------
Total debt securities $ 15,959,349 $ 87,200 $ (77,660) $ 15,968,889
================== ============== ============== ==================
</TABLE>
F-12
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
INVESTMENT SECURITIES (concluded)
The amortized cost and estimated fair value of debt securities by contractual
maturity at December 31, 1998 are shown below. Expected maturities will differ
from contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
--------------------------------------- ----------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Within 1 year $ - $ - $ 4,728,869 $ 4,757,789
After 1 to 5 years 1,011,519 1,032,499 6,027,561 6,115,777
After 5 to 10 years - - 1,210,169 1,216,471
----------------- ------------------ ------------------ ------------------
1,011,519 1,032,499 11,966,599 12,090,037
Mortgage-backed - - 4,052,892 4,025,099
----------------- ------------------ ------------------ ------------------
$ 1,011,519 $ 1,032,499 $ 16,019,491 $ 16,115,136
================= ================== ================== ==================
</TABLE>
At December 31, 1998, U.S. Government and federal agency obligations with an
amortized cost of $997,844 and a fair value of $1,017,187 were pledged to secure
treasury tax and loan and public funds on deposit.
During 1998 and 1997, proceeds from calls of debt securities held to maturity
were $1,800,000 and $2,000,000, respectively, resulting in no gains or losses.
There were no sales of debt securities during 1998 and 1997.
There are no securities of issuers, other than the U.S. Government or its
agencies, whose aggregate amortized cost exceeded 10% of stockholders' equity at
December 31, 1998.
F-13
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. LOANS
Loans consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1998 1997
----------------- ------------------
<S> <C> <C>
Residential real estate $ 19,032,900 $ 16,400,664
Commercial real estate 11,222,832 9,086,809
Construction and land development 2,627,211 1,570,078
Home equity 1,264,439 1,262,014
Consumer 2,331,468 2,374,212
Commercial 2,020,284 1,196,565
Other 8,136 3,669
----------------- ------------------
38,507,270 31,894,011
Unadvanced funds on construction
and land development (559,616) (685,620)
----------------- ------------------
37,947,654 31,208,391
Allowance for loan losses (661,903) (673,564)
----------------- ------------------
Loans, net $ 37,285,751 $ 30,534,827
================= ==================
</TABLE>
An analysis of the allowance for loan losses follows:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Balance at beginning of year $ 673,564 $ 687,379
Charged-off loans and overdrafts (44,095) (37,845)
Recoveries of loans previously
charged-off 32,434 24,030
-------------- --------------
Balance at end of year $ 661,903 $ 673,564
============== ==============
</TABLE>
F-14
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
LOANS (continued)
The following is a summary of information pertaining to impaired and non-
accrual loans:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1998 1997
--------------- ----------------
<S> <C> <C>
Impaired loans without a valuation allowance $ 261,671 $ 279,734
Impaired loans with a valuation allowance - 87,049
--------------- ----------------
Total impaired loans $ 261,671 $ 366,783
=============== ================
Valuation allowance allocated to impaired loans $ - $ 20,000
=============== ================
Non-accrual loans $ 261,671 $ 366,783
Accruing loans past due 90 days or more 260,542 150,117
--------------- ----------------
$ 522,213 $ 516,900
=============== ================
<CAPTION>
Years Ended December 31,
---------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Average investment in impaired loans $ 314,897 $ 546,583
============== ==============
Interest income recognized on impaired loans $ 28,796 $ 54,778
============== ==============
Interest income recognized on a cash basis
on impaired loans $ 28,796 $ 54,778
============== ==============
</TABLE>
No additional funds are committed to be advanced in connection with impaired
loans.
F-15
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
LOANS (concluded)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Loans outstanding at beginning of year $ 163,903 $ 259,703
Advances 48,218 -
Repayments (110,826) (95,800)
-------------- --------------
Loans outstanding at end of year $ 101,295 $ 163,903
============== ==============
</TABLE>
4. PREMISES AND EQUIPMENT
A summary of the cost and accumulated depreciation and amortization of
premises and equipment, with estimated useful lives, follows:
Certain directors of the Bank and entities in which they have a significant
ownership interest are customers of the Bank. Loans to such individuals and
entities are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------- Estimated
1998 1997 Useful Lives
---------------- ----------------- -------------------
<S> <C> <C> <C>
Land $ 84,163 $ 84,163
Buildings and improvements 1,088,328 609,419 10 - 50 years
Leasehold improvements 23,625 19,583 4 years
Furniture and equipment 794,897 655,601 1 - 20 years
Construction in process - 413,475
---------------- -----------------
1,991,013 1,782,241
Accumulated depreciation and
amortization (846,117) (705,079)
---------------- -----------------
$ 1,144,896 $ 1,077,162
================ =================
</TABLE>
At December 31, 1997, construction in progress represented disbursements
made for renovations to the main office, which were completed during the
year ended December 31, 1998.
Depreciation and amortization expense amounted to $149,591 and $88,120 for
the years ended December 31, 1998 and 1997, respectively.
F-16
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
PREMISES AND EQUIPMENT (concluded)
Pursuant to the terms of noncancelable lease agreements in effect at
December 31, 1998, pertaining to banking premises, future minimum rent
commitments are as follows:
Years Ending
December 31,
-------------------
1999 $ 42,000
2000 42,000
2001 38,000
--------------
$ 122,000
==============
The Bank has one five year option to renew the lease which is not included
above. Total rent expense for the years ended December 31, 1998 and 1997
amounted to $41,600 and $3,467, respectively.
5. DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1998 1997
------------------ ------------------
<S> <C> <C>
Demand $ 10,573,998 $ 8,935,212
Regular Savings 16,405,282 13,802,693
NOW accounts 9,052,243 9,054,387
Money market accounts 7,360,805 5,526,294
Time deposits 10,629,098 9,677,033
------------------ ------------------
Total deposits $ 54,021,426 $ 46,995,619
================== ==================
</TABLE>
At December 31, 1998 and 1997, the balances of time deposits greater than
$100,000 amounted to $404,000 and $409,110, respectively.
F-17
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DEPOSITS (concluded)
A summary of time deposits, by maturity, is as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------------------------- -----------------------------------
Weighted Weighted
Average Average
Amount Rate Amount Rate
------------------ ------------- ----------------- -------------
<S> <C> <C> <C> <C>
Within 1 year $ 8,461,629 5.02% $ 8,134,708 5.18%
After 1 year through 3 years 1,278,559 5.11 1,459,548 5.34
After 3 years through 5 years 888,910 5.22 82,777 5.50
------------------ -----------------
$ 10,629,098 5.05% $ 9,677,033 5.20%
================== =================
</TABLE>
Interest on deposits, classified by type, is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1998 1997
----------------- ----------------
<S> <C> <C>
Regular Savings $ 432,410 $ 368,152
NOW accounts 85,448 81,762
Money market accounts 162,680 155,262
Time deposits 519,879 523,165
----------------- ----------------
$ 1,200,417 $ 1,128,341
================= ================
</TABLE>
6. SHORT-TERM BORROWINGS
The Bank has available lines of credit ("LOC") with the Federal Reserve Bank
and Federal Home Loan Bank of Boston ("FHLB") in the amount of $1,000,000
and $935,000, respectively.
At December 31, 1997, short-term borrowings consisted of the following:
Federal Reserve Bank - LOC $ 65,000
Federal Home Loan Bank - LOC 43,000
--------------
$ 108,000
==============
F-18
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SHORT-TERM BORROWINGS (concluded)
Borrowings from the FHLB are secured by a blanket lien on qualified
collateral, defined principally as 75% of the carrying value of first
mortgage loans on owner-occupied residential property and 90% of the market
value of U.S. Government and federal agency securities.
The average borrowings outstanding for 1998 and 1997 amounted to $159,675
and $850,114, respectively. Interest paid on these funds was $8,618 and
$48,381, respectively, with a weighted average rate of 5.40% for 1998 and
5.69% for 1997. The maximum amount outstanding at any month end was
$1,707,000 and $2,358,000 for 1998 and 1997, respectively.
7. INCOME TAXES
Allocation of federal and state income taxes between current and deferred
portions is as follows:
<TABLE>
<CAPTION> Years Ended December 31,
---------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Current tax provision:
Federal $ 301,500 $ 305,074
State 53,675 75,118
-------------- --------------
355,175 380,192
-------------- --------------
Deferred tax benefit:
Federal (12,000) (18,000)
State (16,000) (6,000)
-------------- --------------
(28,000) (24,000)
-------------- --------------
$ 327,175 $ 356,192
============== ==============
</TABLE>
F-19
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
INCOME TAXES (continued)
The reasons for the differences between the statutory federal income tax
rate and the effective tax rates are summarized as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1998 1997
--------- ---------
<S> <C> <C>
Statutory rate 34.0% 34.0%
Increase (decrease) resulting from:
State taxes, net of federal tax benefit 2.8 4.7
Non-taxable appreciation of securities donated - (1.8)
Other, net - 0.1
--------- ---------
Effective tax rates 36.8% 37.0%
========= =========
</TABLE>
The components of the net deferred tax asset, included in other assets, are
as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Deferred tax assets:
Federal $ 234,000 $ 230,000
State 81,000 79,000
-------------- --------------
315,000 309,000
-------------- --------------
Deferred tax liability:
Federal (192,644) (197,048)
State (55,000) (68,000)
-------------- --------------
(247,644) (265,048)
-------------- --------------
Net deferred tax asset $ 67,356 $ 43,952
============== ==============
</TABLE>
F-20
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
INCOME TAXES (concluded)
The tax effects of each type of income and expense item that give rise to
deferred taxes are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Cash basis of accounting $ (118,000) $ (129,000)
Net unrealized gain on securities
available for sale (8,644) (4,048)
Depreciation (9,000) (12,000)
Allowance for loan losses 175,000 175,000
Employee benefit plans 28,000 16,000
Other - (2,000)
--------------- ---------------
Net deferred tax asset $ 67,356 $ 43,952
=============== ===============
</TABLE>
A summary of the change in the net deferred tax asset is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1998 1997
-------------- ---------------
<S> <C> <C>
Balance at beginning of year $ 43,952 $ 17,990
Deferred tax benefit 28,000 24,000
Change in net unrealized gain on
securities available for sale (4,596) 1,962
-------------- ---------------
Balance at end of year $ 67,356 $ 43,952
============== ===============
</TABLE>
8. OFF-BALANCE SHEET ACTIVITIES
Credit Related Financial Instruments
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit. Such
commitments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the accompanying
consolidated balance sheets.
F-21
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OFF-BALANCE SHEET ACTIVITIES (concluded)
Credit Related Financial Investments (concluded)
The Bank's exposure to credit loss is represented by the contractual amount
of these commitments. The Bank uses the same credit policies in making
commitments as it does for on-balance-sheet instruments.
At December 31, 1998 and 1997, the following financial instruments were
outstanding whose contract amounts represent credit risk:
<TABLE>
<CAPTION>
Contract Amount
------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
Commitments to grant loans $ 2,439,500 $ 769,400
Unadvanced funds on credit cards 2,038,167 2,015,187
Unadvanced funds on home equity lines of credit 1,431,261 789,486
Unadvanced funds on commercial lines of credit 483,813 248,643
Unadvanced funds on overdraft protection agreements 376,018 327,023
Standby letters-of-credit 27,900 62,900
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. The commitments for home equity
lines of credit may expire without being drawn upon. Therefore, the total
commitment amounts do not necessarily represent future cash requirements.
The Bank evaluates each customer's credit worthiness on a case by case
basis. Commitments to grant loans and home equity lines of credit are
collateralized by real estate.
Unadvanced funds on commercial lines of credit, credit cards and overdraft
protection agreements are commitments for possible future extensions of
credit to existing customers. These lines of credit are unsecured and
usually do not contain a specified maturity date and may not be drawn upon
to the total extent to which the Bank is committed.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party and are primarily
issued to support borrowing arrangements. Essentially all letters of credit
outstanding as of December 31, 1997 had expiration dates within one year.
The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loans to customers. At December 31,
1998, the standby letter of credit amounting to $27,900 was secured by a
deposit account held by the Bank.
F-22
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. EMPLOYEE BENEFIT PLANS
Retirement Plan
The Bank provides pension benefits for eligible employees through a
qualified defined benefit plan. Substantially all employees participate in
the retirement plan on a non-contributing basis, and are fully vested after
5 years of such service. Information pertaining to the activity in the plan
is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1998 1997
----------------- -----------------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 1,035,776 $ 934,749
Service cost 71,321 54,307
Interest cost 70,824 63,861
Actuarial loss - 27,745
Expected benefit payments (48,000) (44,886)
----------------- -----------------
Benefit obligation at end of year 1,129,921 1,035,776
----------------- -----------------
Change in plan assets:
Fair value of plan assets at beginning of year 1,041,136 910,806
Actual return on plan assets 86,779 149,614
Employer contribution 19,669 27,419
Expected benefit payments (52,077) (46,703)
----------------- -----------------
Fair value of plan assets at end of year 1,095,507 1,041,136
----------------- -----------------
Funded status (34,414) 5,360
Unrecognized net actuarial gain (10,277) (9,077)
Unrecognized asset obligation (5,322) (7,055)
----------------- -----------------
Accrued pension cost $ (50,013) $ (10,772)
================= =================
</TABLE>
F-23
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
EMPLOYEE BENEFIT PLANS (concluded)
Retirement Plan (concluded)
The components of net periodic pension cost are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Service cost $ 71,321 $ 54,307
Interest cost 70,824 63,861
Expected return on plan assets (81,502) (71,252)
Amortization of asset obligation (1,733) (1,733)
--------------- ---------------
$ 58,910 $ 45,183
=============== ===============
</TABLE>
For plan years ended December 31, 1998 and 1997, actuarial assumptions
include an assumed discount rate on benefit obligations and an expected
long-term rate of return on plan assets of 7% and 8%, respectively, for both
years. An annual salary increase of 5.0% was utilized for both years.
401(k) Plan
The Bank has a 401(k) plan for eligible employees. Each employee reaching
the age of 19 and having completed at least 1,000 hours of service in one
consecutive twelve-month period becomes a participant in the 401(k) plan.
Participating employees may contribute up to 15% of salary to the plan up to
a maximum amount allowable under federal regulations. There were no
contributions made by the Bank to the plan for the years ended December 31,
1998 and 1997.
Supplemental Retirement Benefit
During 1998, the Bank entered into Supplemental Retirement Plans with its
Chief Executive Officer and its Chief Financial Officer. The Plans provide
for supplemental post retirement benefits as defined in the Plans and
contain certain change in control and death benefits. The Bank has
purchased life insurance to provide funding for this obligation, the cash
surrender value of which is included in other assets and amounted to
approximately $363,000. There was no liability at December 31, 1998.
F-24
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. STOCKHOLDERS' EQUITY
Minimum regulatory capital requirements
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Bank's consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of its assets, liabilities and certain off-
balance-sheet items as calculated under regulatory accounting practices.
The capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
following table) of total and Tier 1 capital (as defined) to average assets
(as defined). Management believes, as of December 31, 1998 and 1997, that
the Bank meets all capital adequacy requirements to which they are subject.
As of December 31, 1998, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well capitalized, the Bank must maintain minimum total risk-based, Tier 1
risk-based and Tier 1 leverage ratios as set forth in the following table.
There are no conditions or events since the notification that management
believes have changed the Bank's category. The Bank's actual capital
amounts and ratios as of December 31, 1998 and 1997 are also presented in
the table.
F-25
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
STOCKHOLDERS' EQUITY (concluded)
Minimum regulatory capital requirements (concluded)
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------------------------------------------
Minimum
To Be Well
For Minimum Capitalized Under
Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------------------------------------- ------------------------
Amount Ratio Amount Ratio Amount Ratio
----------- -------- ----------- --------- ----------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total Capital $ 5,347 14.4% $2,985 8.0% $ 3,732 10.0%
(to risk weighted assets)
Tier 1 Capital 4,907 13.1 1,493 4.0 2,239 6.0
(to risk weighted assets)
Tier 1 Capital 4,907 8.5 $2,310 - 8.5 - 2,887 5.0
(to average assets) 2,887 5.0
</TABLE>
11. CHARITABLE FOUNDATION
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------------------------------------------
Minimum
To Be Well
For Minimum Capitalized Under
Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------------ ----------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------------------------ ----------- --------- ----------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total Capital $ 4,915 17.1% $ 2,304 8.0% $ 2,880 10.0%
(to risk weighted assets)
Tier 1 Capital 4,554 15.8 1,152 4.0 1,728 6.0
(to risk weighted assets)
Tier 1 Capital 4,554 8.9 2,055 - 4.0 - 2,568 5.0
(to average assets) 2,568 5.0
</TABLE>
F-26
<PAGE>
During 1997, the Bank made a donation to a public charity to provide grants
to charitable organizations. The Bank donated marketable equity securities
with a cost basis and market value of $50,400 and $101,250, respectively, at
the date of transfer. Such securities had been classified as available for
sale and, accordingly, the transfer resulted in the Bank recognizing the net
unrealized appreciation of the securities of $50,850 in the consolidated
statement of income.
12. HOLDING COMPANY FORMATION
On February 23, 1999, the Bank's Board of Directors voted to approve the
formation of a Bank Holding Company. If adopted, the Bank would become a
wholly-owned subsidiary of the newly formed Bank Holding Company, Rockport
National Bancorp, Inc. ("the Company"). Shareholders of the Bank would
receive one share of common stock of the Company in exchange for each share
of stock in the Bank. Reorganization of the Bank as a wholly-owned
subsidiary of the Company is subject to regulatory and shareholder approval.
F-27
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
requires disclosure of estimated fair values of all financial instruments
where it is practicable to estimate such values. In cases where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. Accordingly, the derived fair value
estimates cannot be substantiated by comparison to independent markets and,
in many cases, could not be realized in immediate settlement of the
instrument. Statement No. 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value
of the Bank.
The following methods and assumptions were used by the Bank in estimating
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts of these financial
-------------------------
instruments approximate fair values.
Securities: Fair values for securities, excluding Federal Reserve Bank
----------
stock and Federal Home Loan Bank stock, are based on quoted market
prices. The carrying value of Federal Reserve Bank stock is deemed to
approximate fair value. The carrying value of the Federal Home Loan
Bank stock approximates fair value based on the redemption provisions
of the Federal Home Loan Bank of Boston.
Loans: For variable-rate loans that reprice frequently and with no
-----
significant change in credit risk, fair values are based on carrying
values. Fair values for other loans are estimated using discounted
cash flow analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality.
Deposits: The fair values disclosed for demand deposits (e.g.,
--------
interest and non-interest checking, savings, and certain types of money
market accounts) are, by definition, equal to the amount payable on
demand at the reporting date (i.e., their carrying amounts). Fair
values for fixed-rate time deposits are estimated using a discounted
cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.
Short-term borrowings: The carrying amounts of these short-term lines
---------------------
of credit approximate fair values.
F-28
<PAGE>
ROCKPORT NATIONAL BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
FAIR VALUE OF FINANCIAL INSTRUMENTS (concluded)
Accrued interest: The carrying amounts of accrued interest approximate
----------------
fair value.
Off-balance-sheet instruments: Fair values for off-balance-sheet
-----------------------------
lending commitments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing. The fair values
for these instruments are not material.
The carrying amount and estimated fair value of the Bank's financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------------------------- ----------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------------ ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 2,987,860 $ 2,987,860 $ 2,502,213 $ 2,502,213
Securities available
for sale 1,032,499 1,032,499 1,030,156 1,030,156
Securities held to
maturity 16,019,491 16,115,136 15,959,349 15,968,889
Federal Reserve
Bank stock 25,700 25,700 25,700 25,700
Federal Home Loan
Bank stock 220,000 220,000 205,700 205,700
Loans, net 37,285,751 37,928,000 30,534,827 30,631,000
Accrued interest
receivable 387,731 387,731 382,119 382,119
Financial liabilities:
Deposits 54,021,426 54,051,000 46,995,619 47,013,000
Short-term borrowings - - 108,000 108,000
</TABLE>
F-29
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Bank's authorized Common Stock consists of 500,000 shares of common
stock, par value of $1.00 per share (the "Bank Shares"), of which 209,775 shares
are issued and outstanding, all of which are to be exchanged on a share for
share basis for stock of the Company. The authorized common stock of the
Company consists of 1,000,000 shares of common stock, par value of $.01 per
share (the "Company Shares") of which 209,775 shares are expected to be issued
and outstanding after the Reorganization.
All Bank Shares currently outstanding are fully paid and nonassessable
except as provided pursuant to the National Bank Act. However, such assessment
provisions have not been used by the OCC in recent years. All Company Shares to
be issued as a result of the Reorganization will be, fully paid and
nonassessable. While holders of Bank Shares have preemptive rights, shares
issued by the Company will not have preemptive rights and, as a result, new
shares of the Company could be offered to the public or to other investors
without first being offered to the shareholders of the Company. There are no
redemption or sinking fund provisions applicable to either the Bank Shares or
the Company Shares. Cumulative voting is presently permitted to holders of Bank
Shares in the election of directors. However, cumulative voting will not be
permitted in the election of directors of the Company. See "COMPARISON OF THE
RIGHTS OF SHAREHOLDERS OF THE BANK AND THE COMPANY."
COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF THE BANK
AND THE COMPANY
GENERAL
The following discussion briefly summarizes certain differences between the
rights of shareholders of the Bank and the Company as well as the laws affecting
national banks and Massachusetts corporations.
If the Reorganization is consummated, all shareholders who own shares of
the Bank's Common Stock (except dissenting shareholders who exercise their
appraisal rights) will become owners of shares of the Common Stock of the
Company. The Bank is a national banking association governed by its Articles of
Association, Bylaws and by the laws and regulations governing national banks.
In contrast, the Company is a business corporation governed by its Articles of
Organization, Bylaws and by the corporate laws of the Commonwealth of
Massachusetts. Upon consummation of the Reorganization, the Company will become
a Bank Holding Company also governed by the laws affecting bank holding
companies and by regulations promulgated by the Federal Reserve Board.
The Company's Articles of Organization authorizes the issuance of 1,000,000
shares of common stock with a par value of $.01 per share. If the Plan is
effected, up to 209,775 of such shares will be issued and outstanding. The
Bank's Articles of Association authorize the issuance of 500,000 shares of
common stock with a par value of $1.00 per share, of which 209,775 shares were
issued and outstanding on the record date.
44
<PAGE>
The Company's Articles of Organization permit the Board of Directors of the
Company to issue additional common stock without the approval of the
shareholders of the Company.
SUMMARY OF ANTI-TAKEOVER PROVISIONS
The Company's Articles of Organization and Bylaws provide certain
provisions which may make it difficult for persons or entities to gain control
of the Company (so-called "anti-takeover provisions"). Among the anti-takeover
protections which are afforded to the Company are: (1) provision for a
classified (or staggered) board of directors; (2) absence of cumulative voting
rights in the election of directors; (3) increased ("super-majority") vote
requirements for certain mergers, consolidations, or sales of substantially all
of the assets of the Company or for similar business combinations; (4)
prohibition of amendments to the Bylaws unless approved by directors or the
affirmative vote of at least two-thirds of the shareholders; (5) prohibition of
amendments to certain provisions of the Articles of Organization unless the
amendment has been first approved by the affirmative vote of up to 80% of the
shares outstanding and entitled to vote.
While the above-listed provisions in the Articles of Organization and
Bylaws of the Company were adopted to benefit the shareholders of the Company,
such provisions in certain circumstances could have effects which would not
necessarily be in the best interests of certain shareholders. These negative
effects might include: (i) making more difficult or discouraging a future
takeover attempt, particularly if it is not approved by the Board of Directors
of the Company and even if a majority of shareholders might deem the attempt to
be in their best interests; or (ii) making it more difficult to remove incumbent
directors and officers of the Company, even if a majority of the shareholders
desire to do so and regardless of the reasons therefor; or (iii) limiting the
opportunity of shareholders to participate in certain transactions with the
Company from which some of them might otherwise benefit.
In addition to these anti-takeover protections, the Board of Directors of
the Company has the authority, subject to certain limitations, to direct
repurchases of, or issue additional Company Common Stock. Further, under the
Holding Company Act, a takeover of the Company by another company (as defined in
the Bank Holding Company Act) would be subject to the prior approval of the
Board of Governors of the Federal Reserve System. A takeover by an individual
or a group not defined as a company under the Holding Company Act would be
subject to prior notice and possible denial under the Federal Change in Bank
Control Act of 1978. Other legal requirements, particularly under the federal
banking and securities laws, also regulate or restrict in various ways attempted
takeovers of banks and bank holding companies.
45
<PAGE>
Classified Board. While directors of the Bank are elected each year for a one
- ----------------
year term, the Articles of Organization of the Company provide that the Board of
Directors of the Company will be divided into three approximately equal classes,
to serve staggered three-year terms. Thus, as a general rule, replacement of a
majority of the Board of Directors will require at least two annual meetings,
even if holders of a majority of the voting stock of the Company favor such
replacement. Such classification should act to moderate the pace of any change
in control of the Board of Directors of the Company by extending the time
required to replace a majority of the directors. Such extension might tend to
discourage to some extent a tender offer or other takeover bid by any entity or
group desiring to obtain control of the Company.
Classification of the Board of Directors of the Company is intended to
enable the Board to protect more effectively the interests of the remaining
shareholders in the event that another corporation or group obtains voting
control of a major block of the voting stock of the Company, but it will also
make it more difficult for the shareholders to change the composition of the
Board of Directors even in situations when this might be considered desirable,
for instance on account of a poor performance record or misconduct of one or
more of the incumbent directors. The provision for a classified Board is, of
course, operative even though no tender offer or takeover bid has been or is
being made for control of the Company.
Absence of Cumulative Voting. Unlike the rights of shareholders of the Bank
- ----------------------------
under the National Bank Act, the Articles of Organization of the Company
specifically deny cumulative voting in the election of directors.
Without cumulative voting, holders of a majority of the voting shares
present at an annual meeting will be able to elect all of the directors to be
elected at that meeting, and no persons holding shares or proxies representing
less than a majority of the shares present will be able to elect any director,
as they might if cumulative voting were applicable. The absence of cumulative
voting is intended to prevent an entity or group which has accumulated a
significant minority block of shares from obtaining representation on the Board
of Directors of the Company, unless and until such entity or group is able to
persuade enough of the remaining shareholders of the Company to vote for its
representatives so that it controls a majority of the votes.
Increased Vote and Fair Price Provisions For Business Combinations. The
- ------------------------------------------------------------------
National Bank Act requires the approval of two-thirds of the capital stock of
the Bank and the approval of the OCC in connection with any merger or
consolidation of the Bank with any other bank, and requires the approval of two-
thirds of the capital stock of the Bank in connection with any voluntary
liquidation or dissolution of the Bank.
Under Article VI, Section 5 of the Company's Articles of Organization,
none of the above-described transactions could be entered into by the Company
unless one of the following conditions shall have been met: (i) the transaction
shall have been approved by at least 80% of the total number of shares of stock
of the Company entitled to vote on the matter and by at least a majority of the
total number of shares of stock of the Company entitled to vote on the matter
not owned by the entity which is a party to the transaction, or any subsidiary
or affiliate thereof (the "Receiving Entity"); (ii) the transaction shall have
been approved by at least 80% of the members
46
<PAGE>
of the Board of Directors of the Company not affiliated with the Receiving
Entity (hereinafter the "Unaffiliated Directors"); (iii) the transaction shall
have been approved by a majority of the Unaffiliated Directors prior to the date
on which the Receiving Entity first acquired any share of the Company's stock;
or (iv) the transaction shall have been approved by the holders of at least a
majority of the shares of each class of stock of the Company entitled to vote on
the matter and by at least a majority of the shares of each class of stock of
the Company entitled to vote on the matter not owned by the Receiving Entity or
any stockholder of the Receiving Entity, and the aggregate of the cash and fair
market value of all consideration to be paid to holders of the common stock of
the Company is equal to a Premium Price described in the next paragraph. The
provisions of the Company's Articles of Organization which set forth the
requirements for approval of the above-described transactions may not be amended
except by the affirmative vote of at least 80% of the shares of each class of
stock of the Company outstanding and entitled to vote.
The Premium Price provisions referred to in (iv) above require that the
Receiving Entity pay the Company's remaining shareholders an amount equal to
the greater of (a) the highest price paid per share by the Receiving Entity in
acquiring any of the Company's stock; or (b) an amount which is at least four
times the per share book value of the Company's common stock as of the last day
of the most recent fiscal quarterly period of the Company preceding the date of
the vote of shareholders approving the transaction in question; provided,
however, that the consideration to be paid to the holders of the common stock of
the Company shall be in the same form as that paid by the Receiving Entity in
acquiring the shares of the common stock held by it except to the extent that
any stockholder of the Company shall otherwise agree.
The Company believes that these increased vote and premium price provisions
for business combinations will help increase the likelihood that any such
proposed transaction will be on terms fair to all of the shareholders of the
Company, particularly if the transaction is proposed by a dominant shareholder
who might be able to obtain approval by a simple majority primarily on the basis
of its own shareholdings, even if the transaction were not in the best interests
of or were opposed by a majority of the remaining shareholders. On the other
hand, the increased vote requirement may in effect grant a minority of the
shareholders a veto over a transaction favored by a majority of the
shareholders, even if it were also favored by all or a majority of the Board of
Directors of the Company.
Massachusetts Anti-takeover Laws. Chapter 110D of the Massachusetts General
--------------------------------
Laws covers "control share acquisitions" affecting corporations incorporated in
Massachusetts that have 200 shareholders or more and possess certain statutory
indicia reflecting additional substantial ties to Massachusetts (as is the case
with the Company). After the Reorganization the Company will have just less
than 200 shareholders . Chapter 110D limits the voting rights of beneficial
ownership of shares held by persons who have acquired an additional 20% or more
of the voting power of the target corporation. Under this statute, shares
acquired in a control share acquisition retain the same voting rights as all
other shares of the same class or series only to the extent authorized by a vote
of the majority of all shares entitled to vote for the election of directors,
excluding such acquired shares. A corporation that is otherwise subject to
Chapter 110D may expressly provide in its articles of organization or bylaws
that the statute does not apply. The Company has not included any such "opt
out" provision in either the Company's Articles of Organization or Bylaws.
47
<PAGE>
Chapter 110F of the Massachusetts General Laws provides that if any
acquiror buys 5% or more of a target company's stock, where the target company
has 200 or more shareholders and possesses certain statutory indicia reflecting
substantial ties or nexus to Massachusetts (as is the case with the Company),
without the prior approval of the target company's board of directors, such
acquiror generally may not, for a period of three years, (i) complete the
acquisition of the target company through a merger, (ii) pledge or sell any
assets of the target company or (iii) engage in other self-dealing transactions
with the target company. The prior board of directors approval requirement does
not apply if the acquiror buys at least 90% of the target company's outstanding
stock in the transaction in which it crosses the 5% threshold or if the
acquiror, after crossing the threshold, obtains the approval of the target
company's board of directors and two-thirds of the target company's stock held
by persons other than the acquiror. A corporation that would otherwise be
covered by Chapter 110F may expressly provide in its articles of organization
that the statute does not apply. The Company's Articles of Organization do not
contain any such "opt out" provision.
Increased Shareholder Vote for Amendment or Repeal of Certain Provisions in
---------------------------------------------------------------------------
Articles of Organization. Under Massachusetts Law, amendments of a
- ------------------------
corporation's articles of organization generally require the approval of the
holders of a majority of the outstanding stock entitled to vote thereon.
However, certain amendments to a corporation's articles of organization require
a two-thirds vote. Massachusetts law also permits provisions in the articles of
organization which require a greater vote than the vote otherwise required by
law for any shareholder action. The Company's Articles of Organization require
that certain provisions may only be amended by the affirmative vote of at least
80% of the shares entitled to vote thereon. The requirement of an increased
shareholder vote is designed to prevent a shareholder with a majority of the
voting power of the Company from avoiding the requirements of the previously
discussed provisions of the Articles of Organization by simply amending and
undoing all of the provisions. One effect of these increased shareholder vote
provisions may be to give management or minority shareholders veto power over
future changes in the Articles of Organization regardless of whether the changes
are desired or beneficial to a majority of the shareholders, thereby
discouraging changes which a majority of the shareholders may approve, and
thereby assisting management in retaining their positions.
BYLAW AMENDMENTS
Under Massachusetts law, the power to adopt, amend or repeal bylaws lies in
the shareholders entitled to vote; provided, however, that if authorized by the
corporation's articles of organization, the bylaws may confer the power to
adopt, amend or repeal bylaws upon the directors. The Company's Bylaws provide
that its Bylaws may be amended by the affirmative vote of a majority of the
directors unless a higher vote or shareholder vote is required by law, the
Articles of Organization or Bylaws. In addition, the Company's Bylaws provide
that they may be amended by shareholders by two-thirds of the total votes
eligible to be cast at a duly constituted meeting.
48
<PAGE>
The purpose of these various provisions of the Company's Articles of
Organization and Bylaws is to limit the circumstances and conditions under which
an individual or entity may acquire control of the Company and to limit and
prescribe the conditions under which large blocks of the Company's stock may be
purchased. As a result of these provisions, the price of the Company's stock
may not be subject to the same price increases that it might enjoy without
provisions such as these.
REMOVAL OF DIRECTORS
The National Bank Act does not contain any provision regarding the removal
of directors by shareholders. In addition, there are no provisions in the
Bank's Articles of Association or Bylaws which specifically address the ability
of shareholders to remove directors from office.
Under the Bylaws of the Company, shareholders would only have the right to
remove Directors of the Company from office only for cause which is limited to
(i) conviction of a felony, (ii) declaration of unsound mind by order of court,
(iii) gross dereliction of duty, (iv) commission of any action involving moral
turpitude, or (v) commission of an action which constitutes intentional
misconduct or a knowing violation of law if such action in either event results
both in an improper substantial personal benefit and a material injury to the
Company. A Director may be removed for cause only after reasonable notice and
opportunity to be heard before the body proposing removal.
DIVIDENDS
Under Massachusetts law, the payment of dividends and the redemption or
repurchase of a corporation's stock are generally permissible, if such actions
do not violate the corporation's articles of organization, provided that the
corporation is not insolvent or rendered insolvent by the action.
The holders of the common stock of the Bank are entitled to dividends when
and if declared by the Bank's Board of Directors out of funds legally available
therefor. National banks are subject to provisions of the National Bank Act,
which, among other things, generally limit the payment of dividends by national
banks if such dividends would exceed the Bank's net profits, or impair the
Bank's capital structure. Funds for the payment of dividends and interest
expenses of the Company are expected to be obtained primarily from dividends of
the Company's subsidiary bank.
PREEMPTIVE RIGHTS
Shareholders of the Bank are generally entitled to preemptive rights to
acquire Bank stock upon any issuance thereof by the Bank. Unless otherwise
provided in a corporation's articles of organization, Massachusetts law does not
grant preemptive rights. The Company's Articles of Organization do not provide
for preemptive rights. As a result, new shares of the authorized capital stock
of the Company could be offered to the public or to other investors without
first being offered to the shareholders of the Company resulting in a dilution
of ownership interest to existing security holders.
49
<PAGE>
PAR VALUE AND BOOK VALUE
The Bank's common stock has a par value of $1.00 per share. The Company's
common stock has a par value of $.01 per share. However, the book value of the
common stock of the Company immediately after consummation of the transaction is
expected to be approximately equal to the book value of the common stock of the
Bank immediately prior to consummation of the transaction.
MERGERS, SALES OF ASSETS AND SIMILAR TRANSACTIONS
In addition to requiring regulatory approval under federal banking law, a
conversion, merger or consolidation involving the Bank or the sale, lease,
exchange, mortgage, pledge or other disposition of all or substantially all of
the assets of the Bank (as well as an exchange of stock of a national bank by
the Company as contemplated hereby) must be approved by the affirmative vote of
the holders of at least two-thirds of the outstanding shares of each class,
whether or not otherwise entitled to vote.
Massachusetts law provides that an agreement of merger, consolidation or
sale or other disposition of all or substantially all of a corporation's assets
must be adopted by the affirmative vote of holders of two-thirds of the
outstanding stock entitled to vote thereon or a lesser amount if the articles of
organization provide otherwise but not less than a majority, but does not
require the separate vote of any class of such stock unless any such agreement
would adversely affect the rights of any class of stock. Additionally,
Massachusetts law provides that for an agreement of merger, the vote of the
shareholders of the surviving Massachusetts corporation is generally not
required, unless its articles of organization provide otherwise and need only be
approved by a vote of its directors if certain statutory criteria is met. The
Company's Articles of Organization do not require such approval.
APPRAISAL RIGHTS
Applicable federal banking law provides dissenters' rights of appraisal in
a merger or consolidation to the shareholders of the merging bank but not to
shareholders of the surviving bank. (See "Rights of Dissenting Shareholders".)
Under Massachusetts law, appraisal rights are available in connection with
certain statutory mergers or consolidations, except that such rights are not
available when the corporation is to be the surviving corporation and no vote of
its shareholders is required for the merger.
MARKET PRICE OF AND DIVIDENDS ON THE BANK'S
-------------------------------------------
SHARES AND RELATED SHAREHOLDER MATTERS
--------------------------------------
PRICE RANGE OF SHARES
The Bank's common stock is traded in the over-the-counter market. The
market for the Bank's Common Stock has not been active. There are no market
makers for the Bank's stock. As of May 10, 1999, there were 209,775 shares
issued and outstanding which were held by approximately 168 shareholders. The
following table sets forth transactions in the Bank's common stock as of the end
of the most recently completed fiscal quarter of the current fiscal year and of
each quarter of the two most recently completed fiscal years:
50
<PAGE>
<TABLE>
<CAPTION>
1997 HIGH/LOW
--------
<S> <C> <C>
First Quarter...... 18 17 1/2
Second Quarter..... 17 3/4 17 3/4
Third Quarter...... 19 18 1/2
Fourth Quarter..... * *
1998
First Quarter...... 28 24
Second Quarter..... 28 26
Third Quarter...... 31 7/8 28
Fourth Quarter..... 33 1/4 31 7/8
1999
First Quarter...... 33 1/4 31
Second Quarter
(April 1, through
April 8, 1999).... 32 3/4 32 1/4
</TABLE>
Source: Bloomberg, L.P.
*There were no trades in the Bank's Common Stock during the fourth
quarter of 1997.
DIVIDENDS
All shares of the Bank's Common Stock are entitled to participate equally and
ratably in such dividends as may be declared by the Board of Directors out of
funds legally available therefore. During 1998, 1997 and 1996, the Bank declared
annual dividends of $1.00, $.90 and $.70 per share, respectively.
After the consummation of the Reorganization, holders of Company Common Stock
will be entitled to dividends and other distributions as may be declared from
time to time by the Board of Directors of the Company out of the funds legally
available therefor. While the Company will not be subject to the statutory
restrictions on the payment of dividends applicable to a national banking
association, the Company's ability to pay dividends will depend upon and be
limited by the dividends paid by the Bank to the Company. Further, the ability
of the Company to pay dividends will, of course, also depend upon the Company's
earnings, capital requirements, financial condition and cash requirements,
general business conditions and other pertinent factors not presently
determinable.
LEGAL MATTERS
-------------
The legality of the shares offered hereby will be passed upon for the Company
and the Bank by the law firm of Cranmore, FitzGerald & Meaney, 49 Wethersfield
Avenue, Hartford, Connecticut 06114.
51
<PAGE>
INDEPENDENT ACCOUNTANTS
-----------------------
Wolf & Company, P.C., One International Place, Boston, Massachusetts 02110-
9801, independent accountants, served as auditors for the Bank for the years
ended December 31, 1998, 1997, and 1996. Wolf & Company, P.C. has been appointed
to serve as auditors for the Bank and the Company for the year ending December
31, 1999. Representatives of Wolf & Company, P.C. will be present at the Annual
Meeting of the Bank's shareholders to respond to appropriate shareholder
questions.
OTHER MATTERS
-------------
The Annual Meeting is called for the purpose set forth in the notice. Bank
management does not know of any matter for action by shareholders at such
meeting other than the matters described in the notice. However, the enclosed
Proxy will confer discretionary authority with respect to matters which are not
known to management at the time of the printing hereof and which may properly
come before the meeting. It is the intention of the persons named in the Proxy
to vote the Proxy in accordance with the recommendations of management.
WHERE YOU CAN FIND MORE INFORMATION
-----------------------------------
The Company filed a Registration Statement on Form S-4 to register with the
SEC, the Company Common Stock to be issued to Bank shareholders in the
Reorganization. This Proxy Statement and Prospectus is a part of that
Registration Statement and constitutes a prospectus of the Company in addition
to being a proxy statement of the Bank for the Annual Meeting. As allowed by
the SEC rules, this Proxy Statement and Prospectus does not contain all the
information you can find in the Registration Statement. You may read and copy
any reports, statements or other information filed by the Company at the SEC's
public reference rooms in Washington, D.C., New York, or Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. The Company's SEC filings are also available to the public
from commercial document retrieval services and at the Website maintained by the
SEC at "http://www.sec.gov."
52
<PAGE>
Exhibit A
PLAN AND AGREEMENT OF REORGANIZATION
AGREEMENT TO MERGE
between
ROCKPORT NATIONAL BANK
and
THE INTERIM NATIONAL BANK OF ROCKPORT
under the charter of
THE INTERIM NATIONAL BANK OF ROCKPORT
under the title of
ROCKPORT NATIONAL BANK
This Agreement is made between Rockport National Bank, a national banking
association located at 16 Main Street, Rockport, County of Essex in the
Commonwealth of Massachusetts, and The Interim National Bank of Rockport
(hereinafter referred to as "Interim Bank"), a national banking association
located at the same address, and is assented to by Rockport National Bancorp,
Inc., a Massachusetts corporation (hereinafter referred to as "Holding
Company").
Rockport National Bank and Interim Bank are banks duly organized under the
banking laws of the United States of America. As of December 31, 1998, Rockport
National Bank had capital stock issued and outstanding in the amount of $209,775
(divided into 209,775 shares of common stock of the par value of $1.00 per
share), surplus of $646,693 and undivided profits of $4,050,198.
Interim Bank was organized on March 26, 1999 and has authorized capital
stock in the amount of $500,000 (divided into 500,000 shares of common stock of
the par value of $1.00 per share). Immediately prior to the merger becoming
effective, 100,000 shares of Interim Bank shall be issued and outstanding and
Interim Bank shall have a surplus in the amount of $20,000. The merger hereby
provided for shall hereinafter be called the "merger."
Holding Company is a corporation duly organized under the laws of the
Commonwealth of Massachusetts and has its principal office in the Town of
Rockport, County of Essex, Commonwealth of Massachusetts. Holding Company's
authorized capital stock consists of 1,000,000 shares of common stock, of the
par value of $0.01 per share.
A majority of the Board of Directors of the Interim Bank and a majority of
the Board of Directors of Rockport National Bank have, respectively, approved
this Agreement and authorized its execution. A majority of the Board of
Directors of the Holding Company has approved this Agreement, agreed that the
Holding Company shall join in and be bound by it, and authorized the
undertakings hereinafter made by the Holding Company.
<PAGE>
2
This Agreement is and shall be deemed to be a plan of reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986, as amended.
NOW THEREFORE, in consideration of the premises, Rockport National Bank and
the Interim Bank, joined in by the Holding Company, hereby make this Agreement
prescribing the terms and conditions of merger of Rockport National Bank with
and into the Interim Bank as follows:
Section 1.
Rockport National Bank shall be merged into The Interim National Bank of
Rockport under the charter of the latter, but shall retain the charter number of
Rockport National Bank, Charter Number 1194.
Section 2.
The name of the receiving association (hereinafter referred to as the
"association") shall be Rockport National Bank.
Section 3.
The business of the association shall be that of a national banking
association. This business shall be conducted by the association at its main
office which shall be located at Rockport, Massachusetts, and at its legally
established branches.
Section 4.
The amount of outstanding capital stock of the association shall be
$500,000, divided into 500,000 shares of common stock, each of $1.00 one dollar
par value, and at the time the merger shall become effective, the association
shall have a surplus of $666,693 and undivided profits, including capital
reserves, which when combined with the capital and surplus will be equal to the
combined capital structures of the merging banks as stated in the preamble of
this Agreement, adjusted however, for normal earnings and expenses (and if
applicable, purchase accounting adjustments) between December 31, 1998, and the
effective time of the merger, and for cash payment of $120,000 upon consummation
of the merger to the Holding Company as set forth under Section 7 and/or Section
8 of this Agreement.
<PAGE>
3
Section 5.
All assets as they exist at the effective time of the merger shall pass to
and vest in the association without any conveyance or other transfer. The
association shall be responsible for all of the liabilities of every kind and
description of each of the merging banks existing as of the effective time of
the merger. A committee of six directors, three to be appointed by the Board of
Directors of each bank at the time of the merger shall have satisfied
themselves, that the statement of condition of each bank as of March 31, 1999,
fairly presents its financial condition and since such date there has been no
material adverse change in the financial condition or business of either bank.
Section 6.
This Agreement shall be submitted to the shareholders of Rockport National
Bank and Interim Bank for ratification and confirmation at meetings to be called
and held in accordance with the applicable provisions of law and their
respective Articles of Association and Bylaws. Rockport National Bank and
Interim Bank shall proceed expeditiously and cooperate fully in the procurement
of any other consents and approvals and in the taking of any other action, and
the satisfaction of all other requirements prescribed by law, or otherwise
necessary for consummation of the merger on the terms herein provided including,
without being limited to, the preparation and submission of an application to
the Office of the Comptroller of the Currency of the United States for approval
of the merger under the provisions of Section 18(c) of the Federal Deposit
Insurance Act, as amended, 12 U.S.C. Section 1828(c), and Section 215a of Title
12, United States Code.
Section 7.
Upon the merger becoming effective:
(a) Each share of the common stock of Rockport National Bank shall, by
virtue of this Agreement and without any action on the part of the holder
hereof, be converted into and become one (1) share of the common stock of
Holding Company. Each holder of any such shares of Rockport National Bank which
shall have been so converted into common stock of Holding Company shall, upon
surrender in proper form to the Association for cancellation of one or more
stock certificates (hereinafter called "Old Certificates") which, prior to the
merger becoming effective, represented common stock or Rockport National Bank,
be entitled to receive as evidence of the shares so converted one or more stock
certificates (hereinafter called "New Certificates") bearing the name of Holding
Company as issuer for the number of shares of Holding Company represented by
such Old Certificates when surrendered. Until so surrendered, each Old
Certificate shall be deemed, for all corporate purposes, to evidence the
ownership of the number of shares of common stock of the Holding Company which
the holder thereof would be entitled to receive upon
<PAGE>
4
its surrender, except that Holding Company may withhold, from the holder of
shares represented by such Old Certificates, distribution of any or all
dividends declared by Holding Company on such shares until such time as such Old
Certificates shall be surrendered in exchange for one or more New Certificates,
at which time dividends so withheld by Holding Company with respect to such
shares shall be delivered, without interest thereon, to the shareholder to whom
such New Certificates are issued.
(b) The shares of common stock of Rockport National Bank outstanding
immediately before the merger becomes effective shall be cancelled immediately
after the merger becomes effective and the Association shall repay an amount
equal to the $120,000 capital of the Interim Bank to the Holding Company. The
amount of the total capital of the Association outstanding upon completion of
the merger shall be equal to the total capital of Rockport National Bank
immediately before the merger.
(c) No cash shall be allocated to shareholders of Rockport National Bank
(except as to those shareholders who elect to dissent from the plan of merger as
provided in Section 11 hereof) or to any other person, firm or corporation, and
to shareholders of Rockport National Bank of record at the time the merger
becomes effective, there shall be allocated such amount and such number of
shares of common stock of Holding Company, with a par value of ($0.01) one cent
per share, as shall be equal to the amount and the number of shares of common
stock of Rockport National Bank outstanding immediately before the merger, such
allocation to be made on the basis of one (1) share of common stock of Holding
Company for each one (1) shares of common stock of Rockport National Bank held
of record at the time of the merger.
Section 8.
None of the banks shall declare nor pay any dividend to its shareholders
between the date of the Agreement and the time at which the merger shall become
effective, nor dispose of any of its assets in any other manner except in the
normal course of business and for adequate value, except, however, that upon
consummation of the merger, the association shall declare a special dividend and
pay its sole shareholder, the Holding Company, an amount equal to the $120,000
initial capital of the Interim Bank.
Section 9.
The present Board of Directors of Interim Bank shall continue to serve as
the Board of Directors of the association until the next annual meeting or until
such time as their successors have been elected and have qualified.
<PAGE>
5
Section 10.
Effective as of the time this merger shall become effective as specified in
the merger approval to be issued by the Comptroller of the Currency, the
articles of association of the association shall read in their entirety as
provided in Schedule A, attached hereto, and the bylaws of the association shall
read in their entirety as provided in Schedule B, attached hereto.
Section 11.
This Agreement may be terminated by the unilateral action of the Board of
Directors of any participant prior to the approval of the shareholders of the
participant or by the mutual consent of the board of all participants after any
shareholder group has taken affirmative action. Because time is of the essence
to this Agreement, if for any reason the transaction shall not have been
consummated by December 31, 1999, this Agreement shall terminate automatically
as of that date unless extended, in writing, prior to this date by mutual action
of the boards of directors of the participants.
In addition, this Agreement may be terminated by unilateral action of the
Board of Directors of any participant prior to the consummation of the merger,
if such Board of Directors is of the opinion that:
(a) The number of shares of capital stock of Rockport National Bank voted
against the merger, or in respect of which written notice is given purporting to
dissent from the merger, shall make consummation of the merger unwise; or
(b) Any action, suit, proceeding or claim has been instituted, made or
threatened relating to the proposed merger which shall make consummation of the
merger inadvisable in the opinion of either the Board of Directors of Rockport
National Bank or the Board of Directors of the Interim Bank; or
(c) Any action, consent or approval, governmental or otherwise, which is,
in the opinion of counsel for Rockport National Bank or may be, necessary to
permit or enable the association, upon and after the merger, to conduct all or
any part of the business and activities of the Bank up to the time of the merger
in the manner in which such activities and business are then conducted shall not
have been obtained; or
(d) There shall not have been obtained an opinion of counsel or a ruling
from the Internal Revenue Service satisfactory in form and substance to Rockport
National Bank and counsel for Rockport National Bank to the effect that under
the Internal Revenue Code of 1986, as amended, neither gain nor loss will be
recognized for federal income tax purposes to Rockport National Bank,
<PAGE>
6
the Interim Bank, the Holding Company or the shareholders (other than the
dissenting shareholders who elect appraisal rights) of Rockport National Bank by
reason of the transactions contemplated herein and as to such further matters
relating to the tax consequences of the transaction contemplated hereby, as
Rockport National Bank or its counsel may deem advisable; or
(e) For any other reason consummation of the merger is inadvisable in the
opinion of the respective Board of Directors of either Rockport National Bank or
Interim Bank.
Section 12.
This Agreement shall be ratified and confirmed by the affirmative vote of
shareholders of each of the merging banks owning at least two-thirds of its
capital stock outstanding, at a meeting to be held on the call of the directors;
and the merger shall become effective at the time specified in a merger approval
to be issued by the Comptroller of the Currency of the United States.
WITNESS, the signatures and seals of Rockport National Bank, The Interim
National Bank of Rockport (In Organization), and Rockport National Bancorp,
Inc. this 13th day of April, 1999, each by its president or a vice president and
attested to by its cashier or secretary, pursuant to a resolution of its Board
of Directors, acting by a majority, and witness the signatures of a majority of
each of the Board of Directors:
Rockport National Bank
By /s/ Peter A. Anderson
----------------------------
Peter A. Anderson
Its: President
Attest: /s/ Margaret A. Murphy
-------------------------------
Margaret A. Murphy
Its: Executive Vice President
and Chief Financial Officer
<PAGE>
7
(Seal of Bank)
The Directors of Rockport National Bank:
/s/ Peter A. Anderson /s/ Wendel W. Cook
--------------------------------------- ----------------------------------
Peter A. Anderson Wendel W. Cook
/s/ Herbert L. Elwell /s/ James W. Curtis, Jr.
---------------------------------------- ---------------------------------
Herbert L. Elwell James W. Curtis, Jr.
/s/ Richard J. Meringer /s/ Theodore A. Scharfenstein
-------------------------------------- ---------------------------------
Richard J. Meringer Theodore A. Scharfenstein
/s/ Michael C. Shea /s/ Robert H. Welcome
---------------------------------------- ---------------------------------
Michael C. Shea Robert H. Welcome
<PAGE>
8
The Interim National Bank of Rockport
(In Organization)
By: /s/ Peter A. Anderson
--------------------------------------
Peter A. Anderson
Its: President
Attest: /s/ Margaret A. Murphy
-------------------------
Margaret A. Murphy
Its: Executive Vice President
and Chief Financial Officer
(Seal of Bank)
Directors of The Interim National Bank of Rockport
(In Organization):
/s/ Peter A. Anderson /s/ Wendel W. Cook
----------------------------- ------------------------------------
Peter A. Anderson Wendel W. Cook
/s/ Herbert L. Elwell /s/ James W. Curtis, Jr.
----------------------------- ------------------------------------
Herbert L. Elwell James W. Curtis, Jr.
/s/ Richard J. Meringer /s/ Theodore A. Scharfenstein
----------------------------- -------------------------------------
Richard J. Meringer Theodore A. Scharfenstein
/s/ Michael C. Shea /s/ Robert H. Welcome
----------------------------- -------------------------------------
Michael C. Shea Robert H. Welcome
<PAGE>
9
Rockport National Bancorp, Inc.
/s/ Peter A. Anderson
--------------------------------
Peter A. Anderson
Its: President
Attest: /s/ Margaret A. Murphy
---------------------------
Margaret A. Murphy
Its: Secretary
(Seal of Corporation)
The Directors of Rockport National Bancorp, Inc.
/s/ Peter A. Anderson /s/ Wendel W. Cook
-------------------------------- -----------------------------------
Peter A. Anderson Wendel W. Cook
/s/ Herbert L. Elwell /s/ James W. Curtis, Jr.
-------------------------------- -----------------------------------
Herbert L. Elwell James W. Curtis, Jr.
/s/ Richard J. Meringer /s/ Theodore A. Scharfenstein
-------------------------------- ------------------------------------
Richard J. Meringer Theodore A. Scharfenstein
/s/ Michael C. Shea /s/ Robert H. Welcome
-------------------------------- ------------------------------------
Michael C. Shea Robert H. Welcome
<PAGE>
10
COMMONWEALTH OF MASSACHUSETTS )
) SS. ROCKPORT
COUNTY OF ESSEX )
On this 13th day of April, 1999, before me, a notary public for this
commonwealth and county, personally came Peter A. Anderson, as president and
chief executive officer, and Margaret A. Murphy as executive vice president and
chief financial officer, of Rockport National Bank, and each in his/her capacity
acknowledged this instrument to be the act and deed of the association and the
seal affixed to it to be its seal; and also came: Peter A. Anderson, Wendel W.
Cook, Herbert L. Elwell, James W. Curtis, Jr., Richard J. Meringer, Theodore A.
Scharfenstein, Michael C. Shea and Robert H. Welcome being a majority of the
Board of Directors of Rockport National Bank, and each of them acknowledged this
instrument to be the act and deed of the association and of himself/herself as
director of it.
WITNESS my official seal and signature this day and year.
/s/ Patricia A. Paradis
-----------------------------------------
Notary Public,
Commonwealth of Massachusetts,
Essex County.
My commission expires: 07/31/2003
----------
COMMONWEALTH OF MASSACHUSETTS )
) SS. ROCKPORT
COUNTY OF ESSEX )
On this 13th day of April, 1999, before me, a notary public for this
commonwealth and county, personally came Peter A. Anderson, as president and
chief executive officer, and Margaret A. Murphy as executive vice president and
chief financial officer, of The Interim National Bank of Rockport, and each in
his/her capacity acknowledged this instrument to be the act and deed of the
association and the seal affixed to it to be its seal; and also came: Peter A.
Anderson, Wendel W. Cook, Herbert L. Elwell, James W. Curtis, Jr., Richard J.
Meringer, Theodore A. Scharfenstein, Michael C. Shea and Robert H. Welcome being
a majority of the Board of Directors of The Interim National Bank of Rockport,
and each of them acknowledged this instrument to be the act and deed of the
association and of himself/herself as director of it.
WITNESS my official seal and signature this day and year.
/s/ Patricia A. Paradis
--------------------------------------------
Notary Public,
Commonwealth of Massachusetts,
Essex County.
My commission expires: 07/31/2003
<PAGE>
11
COMMONWEALTH OF MASSACHUSETTS )
) SS. ROCKPORT
COUNTY OF ESSEX )
On this 13th day of April, 1999, before me, a notary public for this
commonwealth and county, personally came Peter A. Anderson, as president and
chief executive officer, and Margaret A. Murphy as secretary, of Rockport
National Bancorp, Inc., and each in his/her capacity acknowledged this
instrument to be the act and deed of the association and the seal affixed to it
to be its seal; and also came: Peter A. Anderson, Wendel W. Cook, Herbert L.
Elwell, James W. Curtis, Jr., Richard J. Meringer, Theodore A. Scharfenstein,
Michael C. Shea and Robert H. Welcome being a majority of the Board of Directors
of Rockport National Bancorp, Inc., and each of them acknowledged this
instrument to be the act and deed of the association and of himself/herself as
director of it.
WITNESS my official seal and signature this day and year.
/s/ Patricia A. Paradis
------------------------------------------
Notary Public,
Commonwealth of Massachusetts,
Essex County.
My commission expires: 07/31/2003
-----------
<PAGE>
Schedule A
ROCKPORT NATIONAL BANK
----------------------
ARTICLES OF ASSOCIATION
-----------------------
FIRST. The title of this Association shall be Rockport National Bank.
- -----
SECOND. The Main Office of the Association shall be in Rockport, County of
- ------
Essex, State of Massachusetts. The general business of the Association shall be
conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not less than
- -----
five nor more than twenty-five (25) shareholders, the exact number to be fixed
and determined from time to time by resolution of a majority of the full Board
of Directors or by resolution of the shareholders at any annual or special
meeting thereof. Each Director, during the full term of his directorship, shall
own a minimum of $1,000 par value of stock of this Association. Any vacancy in
the Board of Directors may be filled by action of the Board of Directors. The
Board of Directors, by vote of a majority of the full Board may, between Annual
Meetings of the Shareholders, increase the membership of the Board by not more
than two, provided the number of Directors shall at no time exceed twenty-five.
FOURTH. There shall be an annual meeting of the shareholders the purpose of
- ------
which shall be the election of Directors and the transaction of whatever other
business may be brought before said meeting. It shall be held at the main office
or other convenient place as the Board of Directors may designate, on the day of
each year specified therefore in the Bylaws, but if no election is held on that
day, it may be held on any subsequent day according to such lawful rules as may
be prescribed by the Board of Directors.
Nominations for election to the Board of Directors may be made by the Board
of Directors or by any stockholder of any outstanding class of capital stock of
the Bank entitled to vote for election of directors. Nominations, other than
those made by or on behalf of the existing management of the Bank, shall be made
in writing and shall be delivered or mailed to the President of the Bank not
less than 14 days nor more than 50 days prior to any meeting of stockholders
called for the election of directors, provided, however, that if less than 21
days notice of the meeting is given to shareholders, such nomination shall be
mailed or delivered to the President of the Bank not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such notification shall contain the following information to the extent
known to the notifying shareholder: (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of the bank that will be voted for each
proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of capital stock of the Bank owned by
the notifying shareholder. Nominations not made in accordance herewith may, in
his/her discretion, be disregarded by the Chairperson of the meeting, and upon
his/her instructions, the vote tellers may disregard all votes cast for each
such nominee.
<PAGE>
Instruction: The authorized amount of capital stock may include a limited
number of shares to be held by the Association as authorized but unissued
shares. Authorized but unissued shares may be issued from time to time in the
discretion of the Board of Directors, with the prior approval of the Comptroller
of the Currency, for any proper consideration.
FIFTH. The authorized amount of capital stock of this Association shall be
- -----
500,000 shares of common stock of the par value of one dollar ($1.00) per share;
but said capital stock may be increased or decreased from time to time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the corporation
shall have any pre-emptive or preferential right of subscription to any shares
of any class of stock of the corporation, whether now or hereafter authorized,
or to any obligations convertible into stock of the corporation, issued, or
sold, nor any right of subscription to any thereof other than such, if any, as
the Board of Directors, in its discretion may from time to time determine and at
such price as the Board of Directors may from time to time fix.
SIXTH. The Board of Directors shall appoint one of its members President of this
- -----
Association, who shall be Chairperson of the Board, unless the Board appoints
another director to be the Chairperson. The Board of Directors shall have the
power to appoint one or more Vice Presidents; and to appoint a Cashier and such
other officers and employees as may be required to transact the business of this
Association.
The Board of Directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all Bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the location of
- -------
the main office to any other place within the limits of Rockport, without the
approval of the shareholders but subject to the approval of the Comptroller of
the Currency; and shall have the power to establish or change the location of
any branch or branches of the Association to any other location, without the
approval of the shareholders but subject to the approval of the Comptroller of
the Currency.
EIGHTH. The corporate existence of this Association shall continue until
- ------
terminated in accordance with the laws of the United States.
2
<PAGE>
NINTH. The Board of Directors of this Association, or any 3 or more shareholders
- -----
owning, in the aggregate, not less than 10 percent of the stock of this
Association, may call a special meeting of shareholders at any time. Unless
otherwise provided by the laws of the United States, a notice of the time,
place, and purpose of every annual and special meeting of the shareholders shall
be given by first-class mail, postage prepaid, mailed at least ten days prior to
the date of such meeting to each shareholder of record at his address as shown
upon the books of this Association.
TENTH. Any person, his/her heirs, executors, or administrators, may be
- -----
indemnified or reimbursed by the Association for reasonable expenses actually
incurred in connection with any action, suit or proceeding, civil or criminal,
to which he/she or they shall be made a party by reason of his/her being or
having been a director, officer, or employee of the Association or of any firm,
corporation, or organization which he/she served in any capacity at the request
of the Association: Provided, however, that no person shall be so indemnified or
-----------------
reimbursed in relation to any matter in such action, suit, or proceeding which
has been made the subject of a compromise settlement except with the approval of
a court of competent jurisdiction, or the holders of record of a majority of the
outstanding shares of the Association, or the Board of Directors, acting by vote
of directors not parties to the same or substantially the same action, suit, or
proceeding, constituting a majority of the whole number of directors. The
foregoing right of indemnification or reimbursement shall not be exclusive of
other rights to which such persons, his/her heirs, executors or administrators,
may be entitled as a matter of law.
Expenses incurred in connection with a threatened or pending action, suit
or proceeding may be paid by the Association in advance of the final disposition
of such action, suit or proceeding only if, prior to the advancement of
expenses, the Board of Directors has made a good faith determination that all of
the following conditions have been met:
(i) The officer, director or employee has a substantial likelihood of
prevailing on the merits;
(ii) In the event the officer, director or employee does not prevail, he
or she will have the financial capacity to reimburse the Association;
and
(iii) Payment of expenses by the Association will not adversely affect the
Association's safety and soundness.
If at anytime the Board believes, or should reasonably believe that either
conditions (i), (ii), or (iii) are no longer met, the Association must cease
paying such expenses or premiums. The Board shall enter into a written agreement
with the director, officer or employee specifying the conditions under which he
or she will be required to reimburse the Association. The agreement shall
require reimbursement for expenses already paid, if and to the extent the Board
finds that the director, officer or employee willfully misrepresented factors
relevant to the Board's determination of conditions (i) or (ii), or if a final
decision assessing penalties or requiring payments is returned. The Association
must ensure that it complies with all applicable laws and regulations affecting
loans to directors,
3
<PAGE>
officers and employees, including but not limited to 12 U.S.C. (S)(S) 84, 375a
and 375b and 12 C.F.R. (S) 215, in the event reimbursement is required.
The Association may, upon the affirmative vote of a majority of its
Board of Directors, purchase insurance for the purpose of indemnifying its
directors, officers and other employees to the extent that such indemnifications
are allowed in the preceding paragraphs. Such insurance may, but need not, be
for the benefit of all directors, officers, or employees.
ELEVENTH. These Articles of Association may be amended at any regular or special
- --------
meeting of the shareholders by the affirmative vote of the holders of a majority
of the stock of this Association, unless the vote of the holders of a greater
amount of stock is required by law, and in that case by the vote of the holders
of such greater amount.
4
<PAGE>
Schedule B
ROCKPORT NATIONAL BANK
----------------------
BYLAWS
------
ARTICLE I
---------
Meetings of Shareholders
------------------------
Section 1.1. Annual Meeting. The regular annual meeting of the shareholders
--------------
for the election of directors and the transaction of whatever other business may
properly come before the meeting, shall be held at the Main Office of the
Association, 16 Main Street, Town of Rockport, State of Massachusetts or such
other places as the Board of Directors may designate, at 4 o'clock, on the 2nd
Tuesday of June of each year. Notice of such meeting shall be mailed, postage
prepaid, at least ten days prior to the date thereof, addressed to each
shareholder at his address appearing on the books of the Association. If, from
any cause, an election of directors is not made on the said day, the Board of
Directors shall order the election to be held on some subsequent day, as soon
thereafter as practicable, according to the provisions of law; and notice
thereof shall be given in the manner herein provided for the annual meeting.
Section 1.2. Special Meetings. Except as otherwise specifically provided by
----------------
statute, special meetings of the shareholders may be called for any purpose at
any time by the Board of Directors or by any three (3) or more shareholders
owning, in the aggregate, not less than ten (10%) percent of the stock of the
Association. Every such special meeting, unless otherwise provided by law, shall
be called by mailing, postage prepaid, not less than ten (10) days prior to the
date fixed for such meeting, to each shareholder at his address appearing on the
books of the Association a notice stating the purpose of the meeting.
Section 1.3. Nominations for Director. Nominations for election to the
------------------------
Board of Directors may be made by the Board of Directors or by any stockholder
of any outstanding class of capital stock of the Association entitled to vote
for the election of directors. Nominations, other than those made by or on
behalf of the existing management of the Association, shall be made in writing
and shall be delivered or mailed to the President of the Bank and to the
Comptroller of the Currency, Washington, D.C., not less than fourteen (14) days
nor more than fifty (50) days prior to any meeting of shareholders called for
the election of directors, provided however, that if less than twenty-one (21)
days notice of the meeting is given to shareholders, such nomination shall be
mailed or delivered to the President of the Bank and to the Comptroller of the
Currency not later than the close of business on the seventh day following the
day on which the notice of meeting was mailed. Such notification shall contain
the following information to the extent known to the notifying shareholder:
(a) the name and address of each proposed nominee;
(b) the principal occupation of each proposed nominee;
(c) the total number of shares of capital stock of the Bank that will be
voted for each proposed nominee;
(d) the name and residence address of the notifying shareholder; and
<PAGE>
(e) the number of shares of capital stock of the Bank owned by the
notifying shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the Chairperson of the meeting, and upon his/her instructions,
the vote tellers may disregard all votes cast for each such nominee.
Section 1.4. Judges of Election. Every election of directors shall be
------------------
managed by two judges, who shall be appointed by the Board of Directors. The
judges of election shall hold and conduct the election at which they are
appointed to serve; and, after the election, they shall file with the
Chairperson or Secretary a certificate under their hands, certifying the result
thereof and the names of the directors elected. The judges of election, at the
request of the Chairperson of the meeting, shall act as tellers of any other
vote by ballot taken at such meeting, and shall certify the result thereof.
Section 1.5. Proxies. Shareholders may vote at any meeting of the
-------
shareholders by proxies duly authorized in writing, but no officer or employee
of this Association shall act as proxy. Proxies shall be valid only for one
meeting, to be specified therein, and any adjournments of such meeting.
Section 1.6. Quorum. A majority of the outstanding capital stock,
------
represented in person or by proxy, shall constitute a quorum of any meeting of
the shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
Section 1.7. Conduct of Meetings. The Chairman of the Board of Directors
-------------------
or, in his absence, the President shall preside over and chair any meetings of
shareholders. Unless another person is appointed by the chairperson of the
meeting, the cashier shall act as secretary to any meetings of shareholders. The
chairperson of the meeting shall have all the powers and authority vested in a
presiding officer by law or practice, including such authority as may be
necessary or helpful under the circumstances in order to conduct an orderly
meeting. The Board of Directors may from time to time adopt Rules for the
conduct of the annual or any special meetings of shareholders, to the extent
that such Rules do not conflict with applicable law or the provisions of the
Bank's Articles of Association or Bylaws. Unless specifically required by such
Rules, or the Bylaws or Articles of Association of the Bank, strict compliance
with the provisions of Roberts Rules of Order, or Parliamentary Procedure is not
required. Rather, in accordance with the Rules and these Bylaws, the chairperson
shall have the right and duty to preserve order and conduct the meeting in
accordance with such chairperson's reasonable exercise of good faith and
fundamental fairness.
A copy of the Rules of Conduct, as may be adopted from time to time by the
Board of Director's, shall be available for reference at the meeting.
2
<PAGE>
ARTICLE II
----------
Directors
---------
Section 2.1. Board of Directors. The Board of Directors (hereinafter
------------------
referred to as the "Board"), shall have power to manage and administer the
business and affairs of the Association. Except as expressly limited by law, all
corporate powers of the Association shall be vested in and may be exercised by
said Board.
Section 2.2. Number. The Board shall consist of not less than five (5) nor
------
more than twenty-five (25) shareholders, the exact number within such minimum
and maximum limits to be fixed and determined from time to time by resolution of
a majority of the shareholders at any meeting thereof. The Board of Directors by
vote of a majority of the full Board may between Annual Meetings of the
Shareholders increase the membership of the Board by not more than two (2),
provided the number of Directors shall at no time exceed twenty-five (25).
Section 2.3. Organization Meeting. The Chairperson or Secretary, upon
--------------------
receiving the certificate of the judges, of the result of any election, shall
notify the directors-elect of their election and of the time at which they are
required to meet at the Main Office of the Association for the purpose of
organizing the new Board and electing and appointing officers of the Association
for the succeeding year. Such meeting shall be held on the day of the election
or as soon thereafter as practicable, and, in any event, within thirty days
thereof. If, at the time fixed for such meeting, there shall not be a quorum
present, the directors present may adjourn the meeting, from time to time, until
a quorum is obtained.
Section 2.4. Regular Meetings. The Regular Meetings of the Board of
----------------
Directors shall be held, without notice, every other Tuesday at 4 p.m. at the
Main Office. When any regular meeting of the Board falls upon a holiday, the
meeting shall be held on the next banking business day unless the Board shall
designate some other day.
Section 2.5. Special Meetings. Special meetings of the Board of Directors
----------------
may be called by the chairperson of the Board of Association, or at the request
of three (3) or more directors. Each member of the Board of Directors shall be
given notice stating the time and place, by telephone, letter, or in person, of
each such special meeting.
Section 2.6. Quorum. A majority of the directors shall constitute a quorum
------
at any meeting, except when otherwise provided by law; but a less number may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice.
Section 2.7. Vacancies. When any vacancy occurs among the directors, the
---------
remaining members of the Board, in accordance with the laws of the United
States, may appoint a director to fill such vacancy at any regular meeting of
the Board, or at a special meeting called for that purpose.
3
<PAGE>
Section 2.8. Operation in State of Emergency. In the event of an emergency
-------------------------------
declared by a proper governmental authority, Local, State or Federal, and until
declaration of the termination of such emergency, or in the event of a disaster
which renders ordinary operations of the Bank or communications in the area
practically impossible, and until the effects of such a disaster are
substantially overcome, the officers and employees of the Bank shall continue to
conduct its affairs with the assistance of those members of the Board who are
readily available. The powers and duties of the Board may be exercised and
performed by said available members with or without formal meetings and free
from the usual notice and quorum requirements. The emergency powers herein
granted shall cease upon declaration of the termination of the emergency or the
overcoming of the same as aforesaid.
ARTICLE III
-----------
Committees of the Board
-----------------------
Section 3.1. Loan Committee. There shall be a Loan Committee composed of
--------------
four (4) Directors, appointed by the Board annually or more often. The Loan
Committee shall have power to discount and purchase bills, notes and other
evidences of debt, to buy and sell bills of exchange, to examine and approve
loans and discounts, to exercise authority regarding loans and discounts, and to
exercise, when the Board is not in session, all other powers of the Board they
may lawfully be delegated. The Loan Committee shall keep minutes of its
meetings, and such minutes shall be submitted at the next regular meeting of the
Board of Directors at which a quorum is present, and any action taken by the
Board with respect thereto shall be entered in the minutes of the Board.
Section 3.2. Investment Committee. There shall be an Investment Committee
--------------------
composed of four (4) Directors, appointed by the Board annually or more often.
The Investment Committee shall have the power to insure adherence to Investment
Policy, to recommend amendments thereto, to purchase and sell securities, to
exercise authority regarding investments and to exercise, when the Board is not
in session, all other powers of the Board regarding investment securities that
may be lawfully delegated. The Investment Committee shall keep minutes of its
meetings, and such minutes shall be submitted at the next regular meeting of the
Board of Directors at which a quorum is present, and any action taken by the
Board with respect thereto shall be entered in the minutes of the Board.
Section 3.3. Examining Committee. There shall be an Examining Committee
-------------------
composed of not less than three (3) Directors, exclusive of any active officers,
appointed by the Board annually or more often, whose duty it shall be to make an
examination at least once during each calendar year and within fifteen (15)
months of the last such examination into the affairs of the Association or cause
suitable examinations to be made by auditors responsible only to the Board of
Directors and to report the result of such examination in writing to the Board
at the next regular meeting thereafter. Such report shall state whether the
Association is in a sound condition, whether adequate internal controls and
procedures are being maintained and shall recommend to the Board such changes in
the manner of conducting the affairs of the Association as shall be deemed
advisable.
4
<PAGE>
Section 3.4. Other Committees. The Board of Directors may appoint, from
----------------
time to time, from its own members, other committees of one or more persons, for
such purposes and with such powers as the Board may determine.
ARTICLE IV
----------
Officers and Employees
----------------------
Section 4.1. Chairperson of the Board. The Board of Directors shall appoint
------------------------
one of its member to be Chairperson of the Board to serve at the pleasure of the
Board. Such person shall preside at all meetings of the Board of Directors. The
Chairperson of the Board shall supervise the carrying out of the policies
adopted or approved by the Board; shall have general executive powers, as well
as the specific powers conferred by these Bylaws; shall also have and may
exercise such further powers and duties as from time to time may be conferred
upon, or assigned by the Board of Directors.
The Board of Directors shall appoint one of its members to be Vice
Chairperson. In the absence of the Chairperson, the Vice Chairperson shall act
as the Chairperson.
Section 4.2. President. The Board of Directors shall appoint one of its
---------
members to be President of the Association. In the absence of the Chairperson
and Vice Chairperson, the President shall preside at any meeting of the Board.
The President shall have general executive powers, and shall have and may
exercise any and all other powers and duties pertaining by law, regulation, or
practice, to the Office of President, or imposed by these Bylaws. The President
shall also have and may exercise such further powers and duties as from time to
time may be conferred, or assigned by the Board of Directors.
Section 4.3. Vice President. The Board of Directors may appoint one or more
--------------
Vice Presidents. Each Vice President shall have such powers and duties as may be
assigned by the Board of Directors. One Vice President shall be designated by
the Board of Directors, in the absence of the President, to perform all the
duties of the President.
Section 4.4. Cashier. The Board of Directors shall appoint a Cashier, who
-------
shall provide for the keeping of proper records of all transactions of the
Association; shall have and may exercise any and all other powers and duties
pertaining by law, regulation or practice, to the Office of Cashier, or imposed
by these Bylaws; and shall also perform such other duties as may be assigned
from time to time, by the Board of Directors.
Section 4.5 Secretary. The Board of Directors shall appoint a Secretary, or
---------
other designated officer who shall be Secretary of the Board of the Association,
and shall keep accurate minutes of all meetings. The Secretary shall attend to
the giving of all notices required by these Bylaws to be given; shall be
custodian of the corporate seal, records, documents and papers of the
Association; and shall also perform such other duties as may be assigned from
time to time, by the Board of Directors.
5
<PAGE>
Section 4.6. Other Officers. The Board of Directors may appoint one or more
--------------
Assistant Vice Presidents, one or more Trust Officers, One or more Assistant
Secretaries, one or more Assistant Cashiers, one or more Managers and Assistant
Managers of Branches and such other officers and Attorneys-in-fact as from time
to time may appear to the Board of Directors to be required or desirable to
transact the business of the Association. Such officers shall respectively
exercise such powers and perform such duties as pertain to their several
offices, or as may be conferred upon, or assigned to, them by the Board of
Directors, the Chairperson of the Board, or the President.
Section 4.7. Tenure of Office. The President and all other officers shall
----------------
hold office for the current year for which the Board was elected, unless they
shall resign, become disqualified, or be removed; and any vacancy occurring in
the Office of President shall be filled promptly by the Board of Directors.
Section 4.8 In State of Emergency. Ranking and Replacement. The Board shall
---------------------
rank the Officers. In the event of the absence or disability of the President,
the ranking Officer shall have all of the powers and perform all of the duties
of the President.
1. President
2. Vice President (senior) (if active)
3. Vice President (junior) (if active)
4. Asst Vice President (if any)
5. Cashier
6. Asst Cashier (senior)
7. Asst Cashier (junior)
8. Branch Manager
ARTICLE V
---------
Trust Department
----------------
Section 5.1. Trust Department. There shall be a department of the
----------------
Association known as the Trust Department which shall perform the fiduciary
responsibilities of the Association.
Section 5.2. Trust Officer. There shall be a Trust Officer of this
-------------
Association whose duties shall be to manage, supervise and direct all the
activities of the Trust Department. Such persons shall do or cause to be done
all things necessary or proper in carrying on the business of the Trust
Department in accordance with the provisions of law and applicable regulations;
and shall act pursuant to opinion of counsel where such opinion is deemed
necessary. Opinions of counsel shall be retained on file in connection with all
important matters pertaining to fiduciary activities. The Trust Officer shall be
responsible for all assets and documents held by the Association in connection
with fiduciary matters.
The Board of Directors may appoint such other officers of the Trust
Department as it may deem necessary, with such duties as may be assigned.
6
<PAGE>
Section 5.3. Trust Investment Committee. There shall be a Trust Investment
--------------------------
Committee of this Association composed of three (3) members, who shall be
capable and experienced officers or directors of the Association. All
investments of funds held in a fiduciary capacity shall be made, retained or
disposed of only with the approval of the Trust Investment Committee; and the
Committee shall keep minutes of all its meetings, showing the disposition of all
matters considered and passed upon by it. The Committee shall, promptly after
the acceptance of an account for which the bank has investment responsibilities,
review the assets thereof, to determine the advisability of retaining or
disposing of such assets. The committee shall conduct a similar review at least
once during each calendar year thereafter and within fifteen months of the last
such review. A report of all such reviews, together with the action taken as a
result thereof, shall be noted in the minutes of the Committee.
Section 5.4. Trust Audit Committee. The Board of Directors shall appoint a
---------------------
committee of three (3) Directors, exclusive of any active officers of the
Association, which shall, at least once during each calendar year and within
fifteen months of the last such audit make suitable audits of the Trust
Department or cause suitable audits to be made by auditors responsible only to
the Board of Directors, and, at such time shall ascertain whether the department
has been administered in accordance with the law, Part 9 of the Regulations of
the Comptroller of the Currency, and sound fiduciary principles.
Section 5.5. Trust Department Files. There shall be maintained in the Trust
----------------------
Department files containing all fiduciary records necessary to assure that its
fiduciary responsibilities have been properly undertaken and discharged.
Section 5.6. Trust Investments. Funds held in a fiduciary capacity shall be
-----------------
invested in accordance with the instrument establishing the fiduciary
relationship and local law. Where such instrument does not specify the character
and class of investments to be made and does not vest in the bank a discretion
in the matter, funds held pursuant to such instrument shall be invested in
investments in which corporate fiduciaries may invest under local law.
ARTICLE VI
----------
Stock and Stock Certificates
----------------------------
Section 6.1. Transfers. Shares of stock shall be transferable on the books
---------
of the Association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer,
shall, in proportion to his shares, succeed to all rights of the prior holder of
such shares.
Section 6.2. Stock Certificates. Certificates of stock shall bear the
------------------
signature of the President (which may be engraved, printed, or impressed), and
shall be signed manually or by facsimile process by the Secretary, Assistant
Secretary, Cashier, Assistant Cashier, or any other officer appointed by the
Board of Directors for that purpose, to be known as an Authorized Officer, and
the seal of the Association shall be engraved thereon. Each certificate shall
recite on its face that the stock represented thereby is transferable only upon
the books of the Association properly endorsed.
7
<PAGE>
ARTICLE VII
-----------
Corporate Seal
--------------
Section 7.1. Corporate Seal. The President, the Cashier, the Secretary or
--------------
any Assistant Cashier or Assistant Secretary, or other officer thereunto
designated by the Board of Directors, shall have authority to affix the
corporate seal to any document requiring such seal, and to attest the same. Such
seal shall be substantially in the following form:
ARTICLE VIII
------------
Miscellaneous Provisions
------------------------
Section 8.1. Fiscal Year. The Fiscal Year of the Association shall be the
-----------
calendar year.
Section 8.2. Execution of Instruments. All agreements, indentures,
------------------------
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
in behalf of the Association by the Chairperson of the Board, or the President,
or by any Vice President, or the Secretary, or the Cashier, or, if in connection
with exercise of fiduciary powers of the Association, by any of said officers or
by any Trust Officer. Any such instruments may also be executed, acknowledged,
verified, delivered, or accepted in behalf of the Association in such other
manner and by such other officers as the Board of Directors may from time to
time direct. The provisions of Section 8.2. are supplementary to any other
provisions of these Bylaws.
Section 8.3. Records. The Article of Association, the Bylaws and the
-------
proceedings of all meetings of the shareholders, the Board of Directors, and
standing committees of the Board, shall be recorded in appropriate minute books
provided for the purpose. The minutes of each meeting shall be signed by the
Secretary, Cashier or other Officer appointed to act as Secretary of the
meeting.
ARTICLE IX
----------
Bylaws
------
Section 9.1. Inspection. A copy of the Bylaws, with all amendments thereto,
----------
shall at all times be kept in a convenient place at the Main Office of the
Association, and shall be open for inspection to all shareholders, during
banking hours.
Section 9.2. Amendments. The Bylaws may be amended, altered or repealed, at
----------
any regular meeting of the Board of Directors, by a vote of a majority of the
total number of Directors.
8
<PAGE>
EXHIBIT B
(S)215A. MERGER OF NATIONAL BANKS OR STATE BANKS INTO NATIONAL BANKS
(A) APPROVAL OF COMPTROLLER, BOARD AND SHAREHOLDERS; MERGER AGREEMENT; NOTICE;
CAPITAL STOCK; LIABILITY OF RECEIVING ASSOCIATION
One or more national banking associations or one or more State banks, with
the approval of the Comptroller, under an agreement not inconsistent with this
subchapter, may merge into a national banking association located within the
same State, under the charter of the receiving association. The merger
agreement shall --
(1) be agreed upon in writing by a majority of the board of directors of
each association or State bank participating in the plan of merger;
(2) be ratified and confirmed by the affirmative vote of the shareholders
of each such association or State bank owning at least two-thirds of its
capital stock outstanding, or by a greater proportion of such capital stock
in the case of a State bank if the laws of the State where it is organized
so require, at a meeting to be held on the call of the directors, after
publishing notice of time, place, and object of the meeting for four
consecutive weeks in a newspaper of general circulation published in the
place where the association or State bank is located, or, if there is no
such newspaper, then in the newspaper of general circulation published
nearest thereto, and after sending such notice to each shareholder of
record by certified or registered mail at least ten days prior to the
meeting, except to those shareholders who specifically waive notice, but
any additional notice shall be given to the shareholders of such State bank
which may be required by the laws of the State where it is organized.
Publication of notice may be waived, in cases where the Comptroller
determines that an emergency exists justifying such waiver, by unanimous
action of the shareholders of the association or State banks;
(3) specify the amount of the capital stock of the receiving association,
which shall not be less than that required under existing law for the
organization of a national bank in the place in which it is located and
which will be outstanding upon completion of the merger, the amount of
stock (if any) to be allocated, and cash (if any) to be paid, to the
shareholders of the association or State bank being merged into the
receiving association; and
(4) provide that the receiving association shall be liable for all
liabilities of the association or State bank being merged into the
receiving association.
(B) DISSENTING SHAREHOLDERS
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such
<PAGE>
meeting to the presiding officer that he dissents from the plan of merger, shall
be entitled to receive the value of the shares so held by him when such merger
shall be approved by the Comptroller upon written request made to the receiving
association at any time before thirty days after the date of consummation of the
merger, accompanied by the surrender of his stock certificates.
(C) VALUATION OF SHARES
The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the merger, by an appraisal made by a committee of
three persons, composed of (1) one selected by the vote of the holders of the
majority of the stock, the owners of which are entitled to payment in cash; (2)
one selected by the directors of the receiving association; and (3) one selected
by the two so selected. The valuation agreed upon by any two of the three
appraisers shall govern. If the value so fixed shall not be satisfactory to any
dissenting shareholder who has requested payment, that shareholder may, within
five days after being notified of the appraised value of his shares, appeal to
the Comptroller, who shall cause a reappraisal to be made which shall be final
and binding as to the value of the shares of the appellant.
(D) APPLICATION TO SHAREHOLDERS OF MERGING ASSOCIATIONS: APPRAISAL BY
COMPTROLLER; EXPENSES OF RECEIVING ASSOCIATION; SALE AND RESALE OF SHARES;
STATE APPRAISAL AND MERGER LAW
If, within ninety days from the date of consummation of the merger, for any
reason one or more of the appraisers is not selected as herein provided, or the
appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be
promptly paid to the dissenting shareholders by the receiving association. The
shares of stock of the receiving association which would have been delivered to
such dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertised public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or persons and at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State
bank shall be determined in the manner prescribed by the law of the State in
such cases, rather than as provided in this section, if such provision is made
in the State law; and no such merger shall be in contravention of the law of the
State under which such bank is incorporated. The provisions of the subsection
shall apply only to shareholders of (and stock owned by them in) a bank or
association being merged into the receiving association.
2
<PAGE>
(E) STATUS OF RECEIVING ASSOCIATION; PROPERTY RIGHTS AND INTEREST VESTED AND
HELD AS FIDUCIARY
The corporate existence of each of the merging banks or banking
associations participating in such merger shall be merged into and continued in
the receiving association and such receiving association shall be deemed to be
the same corporation as each bank or banking association participating in the
merger. All rights, franchises, and interests of the individual merging banks
or banking associations in and to every type of property (real, personal, and
mixed) and choses in action shall be transferred to and vested in the receiving
association by virtue of such merger without any deed or other transfer. The
receiving association, upon the merger and without any order or other action on
the part of any court or otherwise, shall hold and enjoy all rights of property,
franchises, and interest, including appointments, designations, and nominations,
and all other rights and interests as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver, and
committee of estates of lunatics, and in every other fiduciary capacity, in the
same manner and to the same extent as such rights, franchises, and interests
were held or enjoyed by any one of the merging banks or banking associations at
the time of the merger, subject to the conditions hereinafter provided.
(F) REMOVAL AS FIDUCIARY; DISCRIMINATION
Where any merging bank or banking association, at the time of the merger,
was acting under appointment of any court as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver, or
committee of estates of lunatics, or in any other fiduciary capacity, the
receiving association shall be subject to removal by a court of competent
jurisdiction in the same manner and to the same extent as was such merging bank
or banking association prior to the merger. Nothing contained in this section
shall be considered to impair in any manner the right of any court to remove the
receiving association and to appoint in lieu thereof a substitute trustee,
executor, or other fiduciary, except that such right shall not be exercised in
such a manner as to discriminate against national banking associations, nor
shall any receiving association be removed solely because of the fact that it is
a national banking association.
(G) ISSUANCE OF STOCK BY RECEIVING ASSOCIATION; PREEMPTIVE RIGHTS
Stock of the receiving association may be issued as provided by the terms
of the merger agreement, free from any preemptive rights of the shareholders of
the respective merging banks.
3
<PAGE>
Exhibit C
BC-259
BANKING ISSUANCE
- --------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- -------------------------------------------------------------------------------
Type: Banking Circular Subject: Stock Appraisals
- -------------------------------------------------------------------------------
To: Chief Executive Officers of National Banks, Deputy Comptrollers (District)
Department and Division Heads, and Examining Personnel
PURPOSE
- -------
This Banking Circular informs all national banks of the valuation methods used
by the Office of the Comptroller of the Currency (OCC) to estimate the value of
a bank's shares when requested to do so by a shareholder dissenting to the
conversion, merger, or consolidation of its bank. The results of appraisals
performed by the OCC between January 1, 1985, and September 20, 1991 are
summarized.
References: 12 U.S.C. 214a, 215 and 215a; 12 CFR 11.590 (Item 2)
BACKGROUND
- ----------
Under 12 U.S.C. Section 214a, a shareholder dissenting from a conversion,
consolidation, or merger involving a national bank is entitled to receive the
value of his or her shares from the resulting bank. A valuation of the shares
shall be made by a committee of three appraisers (a representative of the
dissenting shareholder, a representative of the resulting bank, and a third
appraiser selected by the other two). If the committee is formed and renders an
appraisal that is acceptable to the dissenting shareholder, the process is
complete and the appraised value of the shares is paid to the dissenting
shareholder by the resulting bank. If, for any reason, the committee is not
formed or if it renders an appraisal that is not acceptable to the dissenting
shareholder, an interested party may request an appraisal by the OCC. 12 U.S.C.
Section 215 provides these appraisal rights to any shareholder dissenting to a
consolidation. Any dissenting shareholder of a target bank in a merger is also
entitled to these appraisal rights pursuant to 12 U.S.C. Section 215a. The
above provides only a general overview of the appraisal process. The specific
requirements of the process are set forth in the statutes themselves.
METHOD OF VALUATION USED
- ------------------------
Through its appraisal process, the OCC attempts to arrive at a fair estimate of
the value of a bank's shares. After reviewing the particular facts in each case
and the available information on a bank's shares, the OCC selects an appropriate
valuation method, or combination of methods, to determine a reasonable estimate
of the shares' value.
Date: March 10, 1992 Page 1 of 5
<PAGE>
Market Value
- ------------
The OCC uses various methods to establish the market value of shares being
appraised. If sufficient trading in the shares exists and the prices are
available from direct quotes from the Wall Street Journal or a market-maker,
---- ------ -------
those quotes are considered in determining the market value. If no market value
is readily available, or if the market value is not well established, the OCC
may use other methods of estimating market value, such as the investment value
and adjusted book value methods.
Investment Value
- ----------------
Investment value requires an assessment of the value to investors of a share in
the future earnings of the target bank. Investment value is estimated by
applying an average price/earnings ratio of banks with similar earnings
potential to the earnings capacity of the target bank.
The peer group selection is based on location, size, and the earnings patterns.
If the state in which the subject bank is located provides a sufficient number
of comparable banks using location, size and earning patterns as the criteria
for selection, the price/earnings ratios assigned to the banks are applied to
the earnings per share estimated for the subject bank. In order to select a
reasonable peer group when there are too few comparable independent banks in a
location that is comparable to that of the subject bank, the pool of banks from
which a peer group is selected is broadened by including one-bank holding
company banks in a comparable location, and/or by selecting banks in less
comparable locations, including adjacent states, that have earnings patterns
similar to the subject bank.
Adjusted Book Value
- -------------------
The OCC also uses an "adjusted book value" method for estimating value.
Historically, the OCC has not placed any weight on the bank's "unadjusted book
value" since that value is based on historical acquisition costs of the bank's
assets, and does not reflect investors' perceptions of the value of the bank as
an ongoing concern. Adjusted book value is calculated by multiplying the book
value of the target bank's assets per share times the average market price to
book value ratio of comparable banking organizations. The average market price
to book value ratio measures the premium or discount to book value, which
investors attribute to shares of similarly situated banking organizations.
Both the investment value method and the adjusted book value method present
appraised values which are based on the target bank's value as a going concern.
These techniques provide estimates of the market value of the shares of the
subject bank.
Date: March 10, 1992 Page 2 of 5
<PAGE>
OVERALL VALUATION
- -----------------
The OCC may use more than one of the above-described methods in deriving the
value of shares of stock. If more than one method is used, varying weights may
be applied in reaching an overall valuation. The weight given to the value by a
particular valuation method is based on how accurately the given method is
believed to represent market value. For example, the OCC may give more weight
to a market value representing infrequent trading by shareholders than to the
value derived from the investment value method when the subject bank's earnings
trend is so irregular that it is considered to be a poor predictor of future
earnings.
PURCHASE PREMIUMS
- -----------------
For mergers and consolidations, the OCC recognizes that purchase premiums do
exist and may, in some instances, be paid in the purchase of small blocks of
shares. However, the payment of purchase premiums depends entirely on the
acquisition or control plans of the purchasers, and such payments are not
regular or predictable elements of market value. Consequently, the OCC's
valuation methods do not include consideration of purchase premiums in arriving
at the value of shares.
STATISTICAL DATA
- ----------------
The chart below lists the results of appraisals the OCC performed between
January 1, 1985 and September 30, 1991. The OCC provides statistical data on
book value and price/earnings ratios for comparative purposes, but does not
necessarily rely on such data in determining the value of the banks' shares.
Dissenting shareholders should not view these statistics as determinative for
future appraisals.
In connection with disclosures given to shareholders under 12 CFR 11.590 (Item
2), banks may provide shareholders a copy of this Banking Circular or disclose
the information in the Banking Circular, including the past results of OCC
appraisals. If the bank discloses the past results of the OCC appraisals, it
should advise shareholders that: (1) the OCC did not rely on all the information
set forth in the chart in performing each appraisal; and, (2) the OCC's past
appraisals are not necessarily determinative of its future appraisals of a
particular bank's shares.
Date: March 10, 1992 Page 3 of 5
<PAGE>
APPRAISAL RESULTS
- -----------------
<TABLE>
<CAPTION>
OCC Average Price/
Appraisal Appraisal Price Book Earnings Ratio
Date * Value Offered Value of Peer Group
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
1/1/85 107.05 110.00 178.29 5.3
1/2/85 73.16 NA 66.35 6.8
1/15/85 53.41 60.00 83.95 4.8
1/31/85 22.72 20.00 38.49 5.4
2/01/85 30.63 24.00 34.08 5.7
2/25/85 27.74 27.55 41.62 5.9
4/30/85 25.98 35.00 42.21 4.5
7/30/85 3,153.10 2,640.00 6,063.66 NC
9/1/85 17.23 21.00 21.84 4.7
11/22/85 316.74 338.75 519.89 5.0
11/22/85 30.28 NA 34.42 5.9
12/16/85 66.29 77.00 89.64 5.6
12/27/85 60.85 57.00 119.36 5.3
12/31/85 61.77 NA 73.56 5.9
12/31/85 75.79 40.00 58.74 12.1
1/12/86 19.93 NA 26.37 7.0
3/14/86 59.02 200.00 132.20 3.1
4/21/86 40.44 35.00 43.54 6.4
5/2/86 15.50 16.50 23.69 5.0
7/3/86 405.74 NA 612.82 3.9
7/31/86 297.34 600.00 650.63 4.4
- ----------------------------------------------------------
</TABLE>
* - The "Appraisal Date" is the consummation date for the conversion,
consolidation or merger.
NA - Not Available NC - Not Computed
Date: March 10, 1992 Page 4 of 5
<PAGE>
APPRAISAL RESULTS
- -----------------
<TABLE>
<CAPTION>
OCC Average Price/
Appraisal Appraisal Price Book Earnings Ratio
Date * Value Offered Value of Peer Group
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
8/22/86 103.53 106.67 136.23 NC
12/26/86 16.66 NA 43.57 4.0
12/31/86 53.39 95.58 69.66 7.1
5/1/87 186.42 NA 360.05 5.1
6/11/87 50.46 70.00 92.35 4.5
6/11/87 38.53 55.00 77.75 4.5
7/31/87 13.10 NA 20.04 6.7
8/26/87 55.92 57.52 70.88 NC
8/31/87 19.55 23.75 30.64 5.0
8/31/87 10.98 NA 17.01 4.2
10/6/87 56.48 60.00 73.11 5.6
3/15/88 297.63 NA 414.95 6.1
6/2/88 27.26 NA 28.45 5.4
6/30/88 137.78 NA 215.36 6.0
8/30/88 768.62 677.00 1,090.55 10.7
3/31/89 773.62 NA 557.30 7.9
5/26/89 136.47 180.00 250.42 4.5
5/29/90 9.87 NA 11.04 9.9
- ----------------------------------------------------------
</TABLE>
* The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA - Not Available NC - Not Computed
For more information regarding the OCC's stock appraisal process, contact the
Office of the Comptroller of the Currency, Bank Organization and Structure.
/s/ Frank Maguire
-----------------------------------------------------
Frank Maguire
Acting Senior Deputy Comptroller
Corporate Policy and Economic Analysis
Date: March 10, 1992 Page 5 of 5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 67 of Chapter 156B of the Massachusetts General Laws, the
Massachusetts Business Corporation Law (the "MBCL") provides, in effect, that a
corporation may indemnify any person made a party to any action by reason of the
fact that he is or was a director, officer, employee or agent of the corporation
against, in the case of a non-derivative action, judgments, fines, amounts paid
in settlement and reasonable expenses (including attorney's fees) incurred by
him as a result of such action, and in the case of a derivative action, against
expenses (including attorney's fees), if in either type of action he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. This indemnification does not apply, in a
derivative action, to matters as to which it is adjudged that the director,
officer, employee or agent is liable to the corporation, unless upon court order
it is determined that, despite such adjudication of liability, but in view of
all the circumstances of the case, he is fairly and reasonable entitled to
indemnity for expenses, and, in a non-derivative action, to any criminal
proceeding in which such person had reasonable cause to believe his conduct was
unlawful.
Article V, Section 9 of the Company's Bylaws provides that the Company
shall indemnify each person who is or was an officer, director, employee or
agent of the Company against all liabilities and expenses reasonably incurred by
such indemnitee in connection with such proceeding, provided that such
indemnitee shall undertake to repay such payment if he shall be adjudicated to
be not entitled to indemnification.
Item 21. Exhibit and Financial Statements Schedules
The exhibit and financial statement schedules filed as part of this
Registration Statement are as follows:
Exhibit Number Name of Exhibit
- -------------- ---------------
2 Plan and Agreement of Reorganization included as Exhibit A
hereto
3.1 Articles of Organization
3.2 Bylaws
4 Specimen Common Stock Certificate of Rockport National Bancorp,
Inc.
5 Opinion of Cranmore, FitzGerald & Meaney Regarding Legality
8 Opinion of Cranmore, FitzGerald & Meaney Regarding Tax Matters
10.1 Indexed Executive Salary Continuation Plan by and between
Rockport National Bank and Peter A. Anderson
<PAGE>
Exhibit Number Name of Exhibit
- -------------- ---------------
10.2 Index Executive Salary Continuation Plan by and between Rockport
National Bank and Margaret M. Murphy
23.1 Consent of Counsel
23.2 Consent of Wolf & Company, P.C.
27. Financial Data Schedule
99.1 Form of President's Letter to Shareholders
of Rockport National Bank
99.2 Form of Notice of Annual Meeting of Shareholders of
Rockport National Bank
99.3 Form of Proxy to be delivered to Shareholders of
Rockport National Bank
99.4 Form of Question and Answer Pamphlet to be sent to Shareholders
of Rockport National Bank
______________________
(b) Financial Statement Schedules.
No financial statement schedules are filed because the required information
is not applicable or is included in the consolidated financial statements or
related notes.
Item 22. Undertakings
(a) The undersigned Registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being made, a post-
effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
<PAGE>
Provided, however, that paragraphs (a) (1) (i) and (a) (1) (ii) do not
-----------------
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) That prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form which respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(4) That every prospectus (i) that is filed pursuant to paragraph (3)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(5) That, for the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Rockport, Commonwealth of
Massachusetts, on April 13, 1999.
ROCKPORT NATIONAL BANCORP, INC.
By: /s/ Peter A. Anderson
---------------------------------------
Peter A. Anderson
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Peter A. Anderson /s/ Wendel W. Cook
- ------------------------------------------ --------------------------------
Peter A. Anderson Wendel W. Cook
President and Chief Executive Director
Officer and Director April 13, 1999
April 13, 1999
/s/ James W. Curtis, Jr. /s/ Herbert L. Elwell
- ------------------------------------------ --------------------------------
James W. Curtis, Jr. Herbert L. Elwell
Director Director
April 13, 1999 April 13, 1999
/s/ Richard J. Meringer /s/ Margaret A. Murphy
- ----------------------------------------- --------------------------------
Richard J. Meringer Margaret A. Murphy
Director Executive Vice President
April 13, 1999 and Chief Financial Officer
April 13, 1999
/s/ Theodore A. Scharfenstein /s/ Michael C. Shea
- ------------------------------------ --------------------------------
Theodore A. Scharfenstein Michael C. Shea
Director Director
April 13, 1999 April 13, 1999
/s/ Robert H. Welcome
- ---------------------------------------
Robert H. Welcome
Director
April 13, 1999
<PAGE>
Exhibit 3.1
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place
Boston, Massachusetts 02108-1512
ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B)
ARTICLE I
The exact name of the corporation is:
ROCKPORT NATIONAL BANCORP, INC.
ARTICLE II
The purpose of the corporation is to engage in the following business
activities:
To become and be a bank holding company controlling, directly or
indirectly, voting shares of one or more commercial banking institutions or
other organizations and to engage, directly or indirectly, in any activity,
business or transaction permissible to a bank holding company.
To subscribe for, purchase, take, receive, underwrite, invest or reinvest
in, or otherwise acquire, own, use, employ, hold, vote, accept, endorse,
guarantee, take and hold as security, discount or have discounted, sell,
exchange, lend, lease, transfer, assign, negotiate, mortgage, pledge, encumber,
create a security interest in or otherwise dispose of, and generally to deal in
and with, stocks, bonds, bills, commercial papers, notes, debentures, mortgages,
certificates and other evidences of interest, participations, investment
contracts, warrants, rights, loans, drafts, checks, bills of exchange, bank and
trade and other acceptances, warehouse receipts and other documents and
instruments of title, cable transfers and other commercial and trade papers,
choses in action and certificates or evidences of indebtedness, and any other
obligations and securities (all hereinafter sometimes referred to generally as
"securities") (a) of trust companies, national banking associations, banking
companies, savings banks, cooperative banks, other corporations, joint stock
companies, trusts, associations, partnerships, joint ventures, firms and other
entities and persons, domestic or foreign (all hereinafter sometimes referred to
generally as "concerns"), and (b) of the United States of America, and of any
state thereof (including the District of Columbia, Puerto Rico, or any
possession of the United States), and of any county, district or municipality or
other political subdivision and of any agency or public corporation of any of
the foregoing, and of any foreign government or political subdivision or agency
or public corporation thereof, and while the owner or any of the aforesaid to
exercise all of the rights, powers and privileges of ownership in the same
manner and to the same extent that an individual might.
<PAGE>
To engage or participate generally, directly or indirectly, including,
without limitation, as a partner, in financial and other commercial and trading
transactions, undertakings and operations of all kinds, and in the promotion,
advancement and assistance, financial or otherwise, of the same, and to transact
any of the business in which it engages or participates, either as principal and
on its own account or as a partner or as agent, factor, broker, manager,
assignee or other representative and on commission or otherwise.
To undertake, carry on, assist or participate in the organization,
reorganization, consolidation or liquidation of any concerns and to promote or
assist the same, financially or otherwise.
To acquire and pay for in cash or securities of the corporation or
otherwise the whole or any part of the goodwill, rights, assets and property,
and to undertake, guarantee, endorse, or assume the whole or any part of the
obligations or liabilities, including, without limiting the generality of the
foregoing, leases and other contracts, of any concern.
To borrow money and otherwise contract indebtedness, with or without
security, to issue, repurchase or otherwise acquire, hold, sell, assign,
transfer, mortgage, pledge, or otherwise dispose of and deal with stocks, bonds,
debentures, notes and other evidences of indebtedness, warrants, rights and
other securities of this corporation and to secure the same by the mortgage,
charge, hypothecation, pledge or other transfer or encumbrance of all or any
part of the assets of this corporation.
To lend money to, guarantee or otherwise lend credit to, and aid in any
manner, with or without security, any concern, any obligation of which or any
interest in which is held by this corporation or in the affairs or property of
which this corporation has a lawful interest; and to secure any undertaking made
by it in pursuance of the foregoing by the mortgage, pledge or other transfer of
all or any part of its assets.
To buy, lease or otherwise acquire, hold, manage, improve, care for,
supervise, exchange, sell, let, lease, pledge, mortgage or otherwise dispose of
or encumber any and all personal property or real estate or any interest
therein, in any state of the United States, including the District of Columbia,
Puerto Rico, any possession of the United States, or any foreign country.
To carry on any business permitted by the laws of the Commonwealth of
Massachusetts to a corporation organized under Chapter 156B.
To do any or all of the things herein set forth to the same extent as
natural persons might or could do in any part of the world as principals,
agents, contractors, partners, or otherwise, and either alone or in connection,
in conjunction, or in association with others, and to do every other act or
acts, and thing or things, incidental or appurtenant to or growing out of or
connected with the foregoing purposes or any part or parts thereof, provided the
same be not inconsistent with the laws under which this corporation is
organized.
<PAGE>
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue.
- ------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
- ------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ------------------------------------------------------------------------------
Common: Common: 1,000,000 $0.01
- ------------------------------------------------------------------------------
Preferred: Preferred:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ARTICLE IV
If more than one class of stock is authorized, state a distinguished
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
The following is a description of each of the different classes of stock
with, if any, the preferences, voting rights, qualifications, special or
relative rights or privileges for each class thereof:
1. Common Stock.
------------
(a) Subject to the preference and other rights of any shares of
Preferred Stock that may be issued and outstanding, the holders of the
Common Stock shall be entitled to receive dividends when and as declared by
the Board of Directors out of funds legally available therefor.
(b) In the event of any liquidation, dissolution or winding up of the
affairs of this corporation, after payment to the holders of any shares of
Preferred Stock then issued and outstanding of the amounts to which they
are entitled pursuant to the resolutions or votes of the Board of Directors
providing for the issue of such Preferred Stock, the holders of the Common
Stock shall be entitled to share ratably in all assets then remaining
subject to distribution to the stockholders.
(c) The holders of Common Stock shall be entitled to one vote for each
of the shares held by them of record on the books of this corporation at
the time for determining holders thereof entitled to vote. Except as
otherwise expressly provided in the resolutions or votes creating a series
of Preferred Stock, or where (notwithstanding the provisions of these
Articles of Organization) a separate class vote is conferred by law on any
class or series of stock, the holders of Common Stock shall vote together
with the holders of the Preferred Stock, if any, outstanding and entitled
to vote, as one class.
<PAGE>
2. Stockholders Rights.
-------------------
Stockholders shall have no preemptive rights. Stockholders shall have no
right to cumulate shares in any election of directors or other matter submitted
to stockholders for vote.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
None.
ARTICLE VI
Other lawful provisions if any, for the conduct and regulation of business
and affairs of this corporation for its voluntary dissolution, or for limiting,
defining, or regulating the powers of this corporation, or of its directors or
stockholders, or of any class of stockholders:
1. Meetings of the stockholders of this corporation may be held at any
place within the United States.
2. The Directors may make, amend or repeal the by-laws in whole or in
part, except with respect to any provision thereof which by law, these Articles
of Organization or the by-laws requires action by the stockholders.
3. The Board of Directors shall be divided into three classes: Class 1,
Class 2 and Class 3, which shall be as nearly equal in number as possible. Each
Director shall serve for a term ending on the date of the third Annual Meeting
of Stockholders following the Annual Meeting at which such Director was elected;
provided, however, that each initial Director in Class 1 shall hold office until
the Annual Meeting of Stockholders in 2000; each initial Director in Class 2
shall hold office until the Annual Meeting of Stockholders in 2001; and each
initial Director in Class 3 shall hold office until the Annual Meeting of
Stockholders in 2002.
4. Any vacancy in the Board of Directors including a vacancy resulting
from the enlargement of the Board unless and until filled by the stockholders,
may be filled by a majority of the Directors present at any meeting of the
Directors at which a quorum is present.
5. (a) Neither this corporation nor any of its subsidiaries shall be a
party to any of the transactions specified in this Section 5(a) (a "Subject
Transaction") or enter into any agreement providing for any Subject Transaction
unless one or more of the conditions specified in Section 5(b) below shall have
been satisfied:
4
<PAGE>
(i) any merger or consolidation (whether in a single transaction or a
series of related transactions) other than a merger or consolidation of
this corporation and any of its subsidiaries or a merger or consolidation
of any subsidiaries of this corporation;
(ii) any sale, lease, exchange, transfer or distribution of all or
substantially all or a substantial portion of the property or assets of
this corporation or any of its subsidiaries, including its goodwill;
(iii) the issuance of any securities, or of any rights, warrants or
options to acquire any securities of this corporation or any of its
subsidiaries, to any stockholder other than by stock dividend declared and
paid to all stockholders of this corporation or pursuant to an employee
stock ownership plan or an employee stock option plan established by this
corporation;
(iv) any reclassification of the stock of this corporation 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 this corporation or any of
its subsidiaries held by any person;
(v) the dissolution of this corporation or any subsidiary thereof or
any partial or complete liquidation of this corporation or any subsidiary
thereof.
(b) This corporation or any of its subsidiaries may enter into any
Subject Transaction if one or more of the following conditions shall have been
satisfied and any additional approval or consent required by law shall have been
obtained:
(i) the Subject Transaction shall have been approved by the holders of
a least 80% of the shares of each class of the stock of this corporation
outstanding and entitled to vote on the matter, and by at least a majority
of the shares of each class of the stock of this corporation outstanding
and entitled to vote on the matter which are not owned, directly or
indirectly, by the entity, (a) other than this corporation, which is a
party to the proposed merger or consolidation, (b) to which the assets of
this corporation are proposed to be sold, leased, exchanged, transferred or
distributed, or to which securities of this corporation or any of its
subsidiaries are proposed to be issued or whose ownership share of this
corporation or any of its subsidiaries is proposed to be increased, (c) or
to which the assets of this corporation are proposed to be distributed on
any dissolution or liquidation (such entity together with any subsidiary or
affiliate being referred to as the "Receiving Entity");
(ii) the Subject Transaction shall have been approved by at least 80%
of the Directors of this corporation not affiliated with, or owners, either
directly or indirectly, of shares of the Receiving Entity (the
"Unaffiliated Directors"); or
(iii) the Subject Transaction shall have been approved by a majority of
Unaffiliated Directors prior to the date on which the Receiving Entity
first acquired any share of stock of this corporation.
5
<PAGE>
(c) Notwithstanding the foregoing, a Subject Transaction shall not be
subject to the requirements of Section 5(b) if:
(i) the Subject Transaction is approved by the holders of at least a
majority of the shares of each class of the stock of this corporation
outstanding and entitled to vote on the matter, and by the holders of at least
a majority of the shares of each class of the stock of this corporation
outstanding and entitled to vote on the matter not owned, directly or
indirectly, by the Receiving Entity; and
(ii) the aggregate of the cash and fair market value of all consideration
to be paid per share to the holders of the Common Stock of this corporation in
connection with the Subject Transaction (when adjusted for stock splits, stock
dividends, reclassification of shares or otherwise) shall be equal to the
greater of : (a) the highest price per share paid by the Receiving Entity in
acquiring any of this corporation's Common Stock; or (b) an amount which is at
least four times the per share book value of this corporation's Common Stock
as of the last day of the most recent fiscal quarterly period of this
corporation preceding the date of the vote of stockholders approving the
Subject Transaction; provided, however, that the consideration to be paid to
the holders of the Common Stock of this corporation shall be in the same form
as that paid by the Receiving Entity in acquiring the shares of the Common
Stock held by it except to the extent that any stockholder of this corporation
shall otherwise agree.
6. In connection with the exercise of the judgment of the Directors of
this corporation in determining what is in the best interest of this corporation
and its stockholders when evaluating: (a) a Subject Transaction or a proposal by
a Receiving Entity or any other person or persons to make a Subject Transaction,
or (b) a tender or exchange offer or a proposal by a Receiving Entity or other
person or persons to make a tender or exchange offer, the Directors shall, 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 they deem relevant: (i) the social and economic effects of the
transaction on this corporation and its subsidiaries, employees, depositors,
loan and other customers, creditors and other elements of the communities in
which this corporation and its subsidiaries operate or are located; (ii) the
business and financial conditions and earnings prospects of such Receiving
Entity or other person or persons, including, but not limited to, debt service
and other existing or likely financial obligations of such Receiving Entity or
other person or persons, and the possible effects of such conditions upon this
corporation and its subsidiaries and the other elements of the communities in
which this corporation and its subsidiaries operate or are located; and (iii)
the competence, experience, and integrity of such Receiving Entity or other
person or persons and its or their management.
7. Sections 3, 4, 5 and 6 of this Article 6 and this Section 7 may not be
amended or repealed except by the affirmative vote of at least 80% of the shares
of each class of the stock of this corporation outstanding and entitled to vote.
6
<PAGE>
8. Notwithstanding any provisions of law imposing such liability, no
Director of the corporation shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty by such Director
as a Director; provided, however, that this Section 8 shall not eliminate or
limit the liability of a Director (i) for any breach of the Director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under sections sixty-one or sixty-two of chapter 156B of the
Massachusetts General Laws, or (iv) for any transaction from which the Director
derived an improper personal benefit. No amendment to or repeal of this Section
8 shall apply to or have any effect on the liability or alleged liability of any
Director of the corporation for or with respect to any acts or omissions of such
Director occurring prior to such amendment or repeal.
ARTICLE VII
This effective date of organization of the corporation shall be the date
approved and filed by the Secretary of the Commonwealth. If a later effective
date is desired, specify such date which shall not be more than thirty days
after the date of filing.
ARTICLE VIII
The information contained in Article VIII is not a permanent part of the
Articles of Organization.
a. The street address (post office boxes are not acceptable) of the
principal office of the corporation in Massachusetts is:
16 Main Street, Rockport, MA 01966
b. The name, residential address and post office address of each director
and officer of the corporation is as follows:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
President: Peter A. Anderson 4 Prospect Street
Rockport, MA 01966
Treasurer: Margaret A. Murphy 3 Teaberry Lane
Burlington, MA 01803
Clerk: Margaret A. Murphy 3 Teaberry Lane
Burlington, MA 01803
Directors: Peter A. Anderson 4 Prospect Street
Rockport, MA 01966
Wendel W. Cook 73 Marmion Way
Rockport, MA 01966
7
<PAGE>
Directors: James W. Curtis, Jr. 37 Phillips Avenue
Rockport, MA 01966
Herbert L. Elwell 18 Wallace Road
Rockport, MA 01966
Richard J. Meringer 44 School Street
Rockport, MA 01966
Theodore A.
Scharfenstein 157 South Street
Rockport, MA 01966
Michael C. Shea One Lee Way
Rockport, MA 01966
Robert H. Welcome 7 Straitsmouth Way
Rockport, MA 01966
c. The fiscal year (i.e., tax year) of the corporation shall end on the
last day of the month of:
December
d. The name and business address of the resident agent, if any, of the
corporation is:
Peter A. Anderson, 16 Main Street, Rockport, MA 01966
ARTICLE IX
Bylaws of the corporation have been duly adopted and the president, treasurer,
clerk and directors whose names are set forth above, have been duly elected.
IN WITNESS WHEREOF AND UNDER THE PAINS AND PENALTIES OF PERJURY, I/we, whose
signature(s) appear below as incorporator(s) and whose name(s) and business or
residential address(es) are clearly typed or printed beneath each signature do
hereby associate with the intention of forming this corporation under the
provisions of General Laws, Chapter 156B and do hereby sign these Articles of
Organization as incorporator(s) this 23rd day of March, 1999.
/s/ Elizabeth Pryor
- -----------------------------------------------
Elizabeth Pryor, 2 Oliver St., Boston, MA 02109
/s/ Tammy Fischer
- ---------------------------------------------
Tammy Fischer, 2 Oliver St., Boston, MA 02109
/s/ Amy Berteletti
- ----------------------------------------------
Amy Berteletti, 2 Oliver St., Boston, MA 02109
8
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B)
==================================================================
I hereby certify that, upon examination of these Articles of
Organization, duly submitted to me, it appears that the
provisions of the General Laws relative to the organization of
corporations have been complied with, and I hereby approve said
articles; and the filing fee in the amount of $200.00 having been
paid, said articles are deemed to have been filed with me this
23RD day of March, 1999.
Effective date: March 23,1999
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
FILING FEE: One tenth of one percent of the total authorized
capital stock, but not less than $200.00. For the purpose of
filing, shares of stock with a par value less than $1.00, or no
par stock, shall be deemed to have a par value of $1.00 per share
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
CT CORPORATION SYSTEM
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2 Oliver Street
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Boston, Massachusetts 02109
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Telephone: (617) 482-4420
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9
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Exhibit 3.2
ROCKPORT NATIONAL BANCORP, INC.
BYLAWS
------
ARTICLE I - STOCKHOLDERS
------------------------
1. Place of Meeting. All meetings of stockholders shall be held
----------------
within Massachusetts unless the Articles of Organization permit the holding of
stockholder meetings outside Massachusetts, in which event such meetings may be
held either within or without Massachusetts. Meetings of stockholders shall be
held at the principal office of the Corporation unless a different place is
fixed by the Directors or the President and stated in the notice of the meeting.
2. Annual Meeting. The annual meeting of stockholders shall be held on
--------------
the fourth Tuesday of April in each year (or if that be a legal holiday in the
place where the meeting is to be held, on the next succeeding full business day)
at 10:00 a.m., unless a different hour is fixed by the Directors or the
President and stated in the notice of the meeting. The purposes for which the
annual meeting is to be held, in addition to those prescribed by law, by the
Articles of Organization or by these Bylaws, may be specified by the Directors
or the President. If no annual meeting is held in accordance with the foregoing
provisions, a special meeting may be held in lieu thereof and any action taken
at such meeting shall have the same effect as if taken at the annual meeting.
2A. Matters to be Considered at an Annual Meeting. At any annual meeting of
---------------------------------------------
stockholders or any special meeting in lieu of annual meeting of stockholders
(the "Annual Meeting"), only such business shall be conducted, and only such
proposals shall be acted upon, as shall have been properly brought before such
Annual Meeting. To be considered as properly brought before an Annual Meeting,
business must be: (a) specified in the notice of meeting, (b) otherwise
properly brought before the meeting by, or at the direction of, the Board of
Directors, or (c) otherwise properly brought before the meeting by any holder of
record (both as of the time notice of such proposal is given by the stockholder
as set forth below and as of the record date for the Annual Meeting in question)
of any shares of capital stock of the Corporation entitled to vote at such
Annual Meeting who complies with the requirements set forth in this Bylaw.
In addition to any other applicable requirements, for business to be properly
brought before an Annual Meeting by a stockholder of record of any shares of
capital stock entitled to vote at such Annual Meeting, such stockholder shall:
(i) give timely notice as required by this Bylaw to the Clerk of the Corporation
and (ii) be present at such meeting, either in person or by a representative.
For Annual Meetings, a stockholder's notice shall be timely if delivered to, or
mailed to and received by, the Corporation at its principal executive office not
less than 75 days nor more than 120 days prior to the anniversary date of the
immediately preceding Annual Meeting (the "Anniversary Date"); provided,
however, that in the event the Annual Meeting is scheduled to be held on a date
more than 30 days before the Anniversary Date or more than 60 days after the
Anniversary Date, a
<PAGE>
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not later than the close
of business on the later of (A) the 75th day prior to the scheduled date of such
Annual Meeting or (B) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation.
For purposes of these Bylaws, "public announcement" shall mean: (i)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (ii) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (iii) a letter or report sent to stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A stockholder's notice to the Clerk shall set forth as to each matter
proposed to be brought before an Annual Meeting: (i) a brief description of the
business the stockholder desires to bring before such Annual Meeting and the
reasons for conducting such business at such Annual Meeting, (ii) the name and
address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation's capital stock beneficially owned by the stockholder proposing such
business, (iv) the names and addresses of the beneficial owners, if any, of any
capital stock of the Corporation registered in such stockholder's name on such
books, and the class and number of shares of the Corporation's capital stock
beneficially owned by such beneficial owners, (v) the names and addresses of
other stockholders known by the stockholder proposing such business to support
such proposal, and the class and number of shares of the Corporation's capital
stock beneficially owned by such other stockholders, and (vi) any material
interest of the stockholder proposing to bring such business before such meeting
(or any other stockholders known to be supporting such proposal) in such
proposal.
If the Board of Directors or a designated committee thereof determines that
any stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Bylaw or that the information provided in a stockholder's
notice does not satisfy the information requirements of this Bylaw in any
material respect, such proposal shall not be presented for action at the Annual
Meeting in question. If neither the Board of Directors nor such committee makes
a determination as to the validity of any stockholder proposal in the manner set
forth above, the presiding officer of the Annual Meeting shall determine whether
the stockholder proposal was made in accordance with the terms of this Bylaw.
If the presiding officer determines that any stockholder proposal was not made
in a timely fashion in accordance with the provisions of this Bylaw or that the
information provided in a stockholder's notice does not satisfy the information
requirements of this Bylaw in any material respect, such proposal shall not be
presented for action at the Annual Meeting in question. If the Board of
Directors, a designated committee thereof or the presiding officer determines
that a stockholder proposal was made in accordance with the requirements of this
Bylaw, the presiding officer shall so declare at the Annual Meeting and ballots
shall be provided for use at the meeting with respect to such proposal.
3. Special Meetings. Special meetings of stockholders may be called by the
----------------
Board of Directors. Special meetings shall be called by the Clerk or in case of
the death, absence, incapacity or refusal of the Clerk, by any other officer,
upon written application of one or more stockholders
2
<PAGE>
who hold at least (i) 66 2/3% in interest of the capital stock entitled to vote
at such meeting or (ii) such lesser percentage, if any, as shall be determined
to be the maximum percentage which the Corporation is permitted by applicable
law to establish for the call of such a meeting. Application to a court pursuant
to Section 34(b) of Chapter 156B of the General Laws of the Commonwealth of
Massachusetts requesting the call of a special meeting of stockholders because
none of the officers is able and willing to call such a meeting may be made only
by stockholders who hold at least (i) 66 2/3% in interest of the capital stock
entitled to vote at such meeting or (ii) such lesser percentage, if any, as
shall be determined to be the maximum percentage which the Corporation is
permitted by applicable law to establish for the call of such a meeting. The
hour, date and place of any special meeting and the record date for determining
the stockholders having the right to notice of and to vote at such meeting shall
be determined by the Board of Directors or the President. At a special meeting
of stockholders, only such business shall be conducted, and only such proposals
shall be acted upon, as shall have been stated in the written notice of the
special meeting and otherwise properly brought before the special meeting.
4. Notice of Meetings. A written notice of every meeting of stockholders,
------------------
stating the place, date and hour thereof, and the purposes for which the meeting
is to be held, shall be given by the Clerk or an Assistant Clerk or other
officer at least seven days before the meeting to each stockholder entitled to
vote thereat and to each stockholder who, by law, by the Articles of
Organization or by these Bylaws, is entitled to such notice, by leaving such
notice with him or at his residence or usual place of business, or by mailing it
postage prepaid and addressed to him at his address as it appears upon the books
of the Corporation. Such notice shall be deemed to be delivered when hand
delivered to such address or deposited in the mail so addressed, with postage
prepaid. Whenever any notice is required to be given to a stockholder by law,
by the Articles of Organization or by these Bylaws, no such notice need be given
if a written waiver of notice, executed before or after the meeting by the
stockholder or his attorney thereunto duly authorized, is filed with the records
of the meeting, if communication with such stockholder is unlawful, or if such
stockholder attends such meeting, unless such attendance was for the express
purpose of objecting at the beginning of the meeting because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any annual or special meeting of stockholders need be specified in
any written waiver of notice.
5. Quorum. Unless the Articles of Organization or the provisions of law
------
otherwise require, a majority in interest of all stock issued, outstanding and
entitled to vote on any matter shall constitute a quorum with respect to that
matter, except that if two or more classes of stock are outstanding and entitled
to vote as separate classes, then in the case of each such class a quorum shall
consist of a majority in interest of the stock of that class issued, outstanding
and entitled to vote. If a quorum is not present, a majority in interest of the
stockholders present or the presiding officer may adjourn the meeting from time
to time and the meeting may be held as adjourned without further notice other
than an announcement at the meeting at which the adjournment is taken of the
hour, date and place to which the meeting is adjourned. At such adjourned
meeting at which a quorum is present, any business may be transacted which might
have been transacted at the meeting as originally noticed. The stockholders
present at a duly constituted meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
3
<PAGE>
6. Adjournments; Rescheduling of Meetings. The Board of Directors may
--------------------------------------
postpone and reschedule any previously scheduled annual or special meeting of
stockholders, and a record date with respect thereto, regardless of whether any
notice or public disclosure with respect to any such meeting or record date has
been sent or made pursuant to Section 2A of this Article I or Section 4 of
Article II hereof or otherwise. In no event shall the public announcement of an
adjournment, postponement or rescheduling of any previously scheduled Annual
Meeting of stockholders commence a new time period for the giving of a
stockholder's notice under Section 2A of Article I and Section 4 of Article II
of these Bylaws.
When any meeting is convened, the presiding officer may adjourn the meeting
if (a) no quorum is present for the transaction of business, (b) the Board of
Directors determines that adjournment is necessary or appropriate to enable the
stockholders to consider fully information which the Board of Directors
determines has not been made sufficiently or timely available to stockholders,
or (c) the Board of Directors determines that adjournment is otherwise in the
best interests of the Corporation. When any Annual Meeting or special meeting
of stockholders is adjourned to another hour, date or place, notice need not be
given of the adjourned meeting other than an announcement at the meeting at
which the adjournment is taken of the hour, date and place to which the meeting
is adjourned.
7. Voting and Proxies. Each stockholder shall have one vote for each share
------------------
of stock entitled to vote held by him of record according to the records of the
Corporation and a proportionate vote for a fractional share so held by him,
unless otherwise provided by the Articles of Organization. Stockholders may
vote either in person or by written proxy dated not more than six months before
the meeting named therein. Notwithstanding the preceding sentence, a proxy
coupled with an interest sufficient in law to support an irrevocable power,
including, without limitation, an interest in the shares or in the Corporation
generally, may be made irrevocable if it so provides, need not specify the
meeting to which it relates, and shall be valid and enforceable until the
interest terminates, or for such shorter period as may be specified in the
proxy. Proxies shall be filed with the Clerk of the meeting, or of any
adjournment thereof, before being voted. Except as otherwise limited therein,
proxies shall entitle the persons named therein to vote at any adjournment of
such meeting, but shall not be valid after final adjournment of such meeting. A
proxy with respect to stock held in the name of two or more persons shall be
valid if executed by one of them, unless at or prior to exercise of the proxy
the Corporation receives a specific written notice to the contrary from any one
of them. A proxy purporting to be executed by or on behalf of a stockholder
shall be deemed valid unless challenged at or prior to its exercise.
8. Action at Meeting. When a quorum is present, the holders of a majority of
-----------------
the stock present or represented and voting on a matter (or if entitled to vote
as separate classes, then in the case of each class, the holders of a majority
of the stock of that class present or represented and voting on a matter), shall
decide any matter to be voted on by the stockholders except where a larger vote
is required by law, by the Articles of Organization or by these Bylaws. Any
election by stockholders shall be determined by a plurality of the votes cast by
the stockholders entitled to vote at the election, except where a greater vote
is required by law, by the Articles of Organization or by these Bylaws. No
ballot shall be required for such election unless requested by a stockholder
present or represented at the meeting and entitled to vote in the election.
4
<PAGE>
9. Action Without a Meeting. Any action required or permitted to be taken at
------------------------
a meeting of the stockholders may be taken without a meeting if all the
stockholders (including any actions or powers reserved to the shareholders under
these Bylaws) entitled to vote on a matter consent to the action in writing and
the written consents are filed with the records of the meeting of stockholders.
Each such consent shall be treated for all purposes as a vote at the meeting.
The procedures set forth in Section 10 of this Article I and Section 3 of
Article IV shall apply to shareholder action taken without a meeting in
connection with this Section.
10. Voting Procedures and Inspectors of Elections. In advance of any meeting
---------------------------------------------
of stockholders, the Board of Directors may appoint one or more inspectors to
act at an annual or special meeting of stockholders and make a written report
thereon. Any inspector may, but need not, be an officer, employee or agent of
the Corporation. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspector(s) shall (i) ascertain the number of shares outstanding
and the voting power of each, (ii) determine the shares represented at a meeting
and the validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares represented at the meeting, and their
count of all votes and ballots. The inspector(s) may appoint or retain other
persons or entities to assist the inspector(s) in the performance of the duties
of the inspector(s). The presiding officer may review all determinations made
by the inspector(s), and in so doing the presiding officer shall be entitled to
exercise his sole judgment and discretion and he shall not be bound by any
determinations made by the inspector(s). All determinations by the inspector(s)
and, if applicable, the presiding officer shall be subject to further review by
any court of competent jurisdiction.
The Board of Directors may remove the inspector(s) at any time. The officer
presiding at any annual or special meeting of stockholders may remove the
inspector(s) at any time during such meeting.
11. Presiding Officer. The Chairman or, in his absence, the President or,
-----------------
in his absence, such other officer, shall preside at all annual or special
meetings of stockholders and shall have the power, among other things, to
adjourn such meetings at any time and from time to time in accordance with the
provisions of Sections 5 and 6 of this Article I. The order of business and all
other matters of procedure at any meeting of the stockholders shall be
determined by the presiding officer.
12. Rules of Conduct. The Board of Directors may from time to time adopt
----------------
Rules for the conduct of the annual or any special meetings of shareholders, to
the extent that such Rules do not conflict with applicable law or the provisions
of the Corporation's Articles of Incorporation by Bylaws. Unless specifically
required by such Rules, or the Bylaws or Articles of Organization of the
Corporation, strict compliance with the provisions of Roberts Rules of Order, or
Parliamentary Procedure is not required. Rather, in accordance with the Rules
and these Bylaws, the chairperson shall have the right and duty to preserve
order and conduct the meeting in accordance with such chairperson's reasonable
exercise of good faith in fundamental fairness.
5
<PAGE>
A copy of the Rules of Conduct, as may be adopted from time to time by the
Board of Directors, shall be available for reference at any meeting of
shareholders.
ARTICLE II - DIRECTORS
----------------------
1. Powers. The business of the Corporation shall be managed by a Board of
------
Directors which may exercise all the powers of the Corporation except as
otherwise provided by law, by the Articles of Organization or by these Bylaws.
In the event of a vacancy in the Board of Directors, the remaining Directors,
except as otherwise provided by law, by the Articles of Organization or by these
Bylaws, may exercise the powers of the full Board until the vacancy is filled.
In particular, and without limiting the generality of the foregoing, the
Directors may at any time issue all or from time to time any part of the
unissued capital stock of the Corporation from time to time authorized under the
Articles of Organization and may determine, subject to any requirements of law,
the consideration for which stock is to be issued and the manner of allocating
such consideration between capital and surplus.
2. Election and Eligibility. (a) A Board of Directors of such number as shall
------------------------
be fixed by resolution duly adopted from time to time by the Board of Directors,
shall be elected by the stockholders at the annual meeting. The Directors shall
hold office in the manner provided in the Articles of Organization. Unless
waived by the affirmative vote of at least two-thirds of the stockholders or
two-thirds of the Directors then in office, no person shall be eligible to be a
director of the Corporation unless such person: (1) is not, and has not been for
a period of at least six (6) months prior to the date of his election, an
officer or director of any bank (other than a subsidiary of the Corporation) any
bank holding company (as defined in Section 2 of the Bank Holding Company Act of
1956, as amended) or any company in competition with the Corporation or any
subsidiary thereof; and (2) has been a United States citizen for at least six
(6) months.
3. Vacancies. Any vacancy in the Board of Directors (other than a vacancy
---------
caused by the death, resignation, or removal of a Director) including a vacancy
resulting from the enlargement of the Board, unless and until filled by the
stockholders, may be filled by a majority of the Directors present at any
meeting of the Directors at which a quorum is present.
Should a Director resign, be removed from office or die, and should the
remaining Directors fail to fill the vacancy within forty-five (45) days of the
effective date of the resignation or removal, or within forty-five (45) days of
the death of the director, then the total number of Directors shall
automatically be decreased by the number of unfilled vacancies.
4. Director Nominations. Nominations of candidates for election as Directors
--------------------
of the Corporation at any Annual Meeting may be made only (a) by, or at the
direction of, a majority of the Board of Directors or (b) by any holder of
record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of the capital stock of the Corporation entitled to
vote at such Annual Meeting who complies with the timing, informational and
other requirements set forth in this Bylaw. Any stockholder who has complied
with the timing, informational and other requirements set forth
6
<PAGE>
in this Bylaw and who seeks to make such a nomination, or his, her or its
representative, must be present in person at the Annual Meeting. Only persons
nominated in accordance with the procedures set forth in this Bylaw shall be
eligible for election as Directors at an Annual Meeting.
Nominations, other than those made by, or at the direction of, the Board of
Directors, shall be made pursuant to timely notice in writing to the Clerk of
the Corporation as set forth in this Bylaw. For Annual Meetings, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not less than 75 days nor
more than 120 days prior to the Anniversary Date; provided, however, that in the
event the Annual Meeting is scheduled to be held on a date more than 30 days
before the Anniversary Date or more than 60 days after the Anniversary Date, a
stockholder's notice shall be timely if delivered to, or mailed and received by,
the Corporation at its principal executive office not later than the close of
business on the later of (i) the 75th day prior to the scheduled date of such
Annual Meeting or (ii) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation.
A stockholder's notice to the Clerk shall set forth as to each person whom
the stockholder proposes to nominate for election or re-election as a Director
(i) the name, age, business address and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) the class and
number of shares of the Corporation's capital stock which are beneficially owned
by such person on the date of such stockholder notice, and (iv) the consent of
each nominee to serve as a Director if elected. A stockholder's notice to the
Clerk shall further set forth as to the stockholder giving such notice (i) the
name and address, as they appear on the Corporation's stock transfer books, of
such stockholder and of the beneficial owners (if any) of the Corporation's
capital stock registered in such stockholder's name and the name and address of
other stockholders known by such stockholder to be supporting such nominee(s),
(ii) the class and number of shares of the Corporation's capital stock which are
held of record, beneficially owned or represented by proxy by such stockholder
and by any other stockholders known by such stockholder to be supporting such
nominee(s) on the record date for the Annual Meeting in question (if such date
shall then have been made publicly available) and on the date of such
stockholder's notice, and (iii) a description of all arrangements or
understandings between such stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder.
If the Board of Directors or a designated committee thereof determines that
any stockholder nomination was not made in accordance with the terms of this
Bylaw or that the information provided in a stockholder's notice does not
satisfy the informational requirements of this Bylaw in any material respect,
then such nomination shall not be considered at the Annual Meeting in question.
If neither the Board of Directors nor such committee makes a determination as to
whether a nomination was made in accordance with the provisions of this Bylaw,
the presiding officer of the Annual Meeting shall determine whether a nomination
was made in accordance with such provisions. If the presiding officer
determines that any stockholder nomination was not made in accordance with the
terms of this Bylaw or that the information provided in a stockholder's notice
does not satisfy the informational requirements of this Bylaw in any material
respect, then such nomination shall not be considered at the Annual Meeting in
question. If the Board of Directors, a
7
<PAGE>
designated committee thereof or the presiding officer determines that a
nomination was made in accordance with the terms of this Bylaw, the presiding
officer shall so declare at the Annual Meeting and ballots shall be provided for
use at the meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second sentence of the second
paragraph of this Bylaw, in the event that the number of Directors to be elected
to the Board of Directors of the Corporation is increased and there is no public
announcement by the Corporation naming all of the nominees for director or
specifying the size of the increased Board of Directors at least 75 days prior
to the Anniversary Date, a stockholder's notice required by this Bylaw shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if such notice shall be delivered to, or
mailed to and received by, the Corporation at its principal executive office not
later than the close of business on the 15th day following the day on which such
public announcement is first made by the Corporation.
No person shall be elected by the stockholders as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Bylaw. Election of Directors at the Annual Meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such Annual Meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as Directors at
the Annual Meeting in accordance with the procedures set forth in this Section
shall be provided for use at the Annual Meeting.
5. Tenure.
------
(a) Except as otherwise provided by law, by the Articles of Organization
or by these Bylaws, each Director shall serve until his successor is elected and
qualified or until his earlier resignation, removal from office or death.
(b) The Board of Directors shall be divided into three classes: Class 1,
Class 2 and Class 3, which shall be as nearly equal in number as possible. Each
Director shall serve for a term ending on the date of the third annual meeting
of Stockholders following the annual meeting at which such Director was elected
or, if the Director was not elected at an annual meeting, until the end of the
term of the class to which he was elected; provided, however, that each initial
Director in Class 1 shall hold office until the annual meeting of Stockholders
in 2000; each initial Director in Class 2 shall hold office until the annual
meeting of Stockholders in 2001; and each initial Director in Class 3 shall hold
office until the annual meeting of Stockholders in 2002.
In the event of any increase or decrease in the authorized number of
Directors, (1) each Director then serving as such shall nevertheless continue as
a Director of the class of which he is a member until the expiration of his
current term, or his earlier resignation, removal from office or death, and (2)
the newly-created or eliminated directorships resulting from such increase or
decrease shall be apportioned by the Board of Directors among the three classes
of Directors so as to maintain such classes as nearly equal as possible.
8
<PAGE>
(c) Any Director may resign by delivering his written resignation to the
Corporation at its principal office or to the President or Clerk. Such
resignation shall be effective upon receipt unless it is specified at some other
time or upon the happening of some other event.
6. Removal.
-------
(a) Removal by Directors. A Director may be removed, with or without cause,
--------------------
by vote of a majority of the Directors then in office.
(b) Removal by Stockholders. Stockholders may remove a Director only with
-----------------------
cause and only by the affirmative vote of at least two-thirds (or such other
percentage required by the Articles of Organization, these Bylaws or applicable
law, but in no case less than the maximum percentage which the Corporation is
permitted by applicable law to establish for the removal of a Director by
stockholders) of the total votes which would be eligible to be cast by
stockholders in the election of such Director.
For purposes of this Section 6, "cause," with respect to the removal of any
Director shall mean only (i) conviction of a felony, (ii) declaration of unsound
mind by order of court, (iii) gross dereliction of duty, (iv) commission of any
action involving moral turpitude, or (v) commission of an action which
constitutes intentional misconduct or a knowing violation of law if such action
in either event results both in an improper substantial personal benefit and a
material injury to the Corporation. A Director may be removed for cause only
after reasonable notice and opportunity to be heard before the body proposing
removal.
7. Meetings. Regular meetings of the Directors may be held without call or
--------
notice at such places, within or without Massachusetts, and at such times as the
Directors may from time to time determine, provided that any Director who is
absent when such determination is made shall be given notice of the
determination. A regular meeting of the Directors may be held without a call or
notice at the same place as the annual meeting of stockholders, or the special
meeting held in lieu thereof, following such meeting of stockholders.
Special meetings of the Directors may be held at any time and place, within
or without Massachusetts, designated in a call by the President, Treasurer or
one or more Directors.
Unless otherwise provided by law or the Articles of Organization, members of
the Board of Directors may participate in a meeting of the Board of Directors by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time. Participation by such means shall constitute presence in person at a
meeting.
8. Notice of Special Meetings. Notice of all special meetings of the
--------------------------
Directors shall be given to each Director by the Secretary, by the Clerk, or
Assistant Clerk, or in case of the death, absence, incapacity or refusal of such
person, by the officer or one of the Directors calling the meeting. Notice
shall be given to each Director in person or by telephone or by telegram sent to
his business or home address at least forty-eight hours in advance of the
meeting, or by written notice mailed to
9
<PAGE>
his business or home address at least seventy-two hours in advance of the
meeting. Notice need not be given to any Director if a written waiver of notice,
executed by him before or after the meeting, is filed with the records of the
meeting, or to any Director who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him. A notice or waiver of
notice of a Directors meeting need not specify the purpose of the meeting.
9. Quorum. At any meeting of the Directors, a majority of the Directors then
------
in office shall constitute a quorum. Less than a quorum may adjourn any meeting
from time to time without further notice.
10. Action at Meeting. At any meeting of the Directors at which a quorum is
-----------------
present, the vote of a majority of those present, unless a different vote is
specified by law, by the Articles of Organization or by these Bylaws, shall be
sufficient to take any action.
11. Action by Consent. Any action required or permitted to be taken at any
-----------------
meeting of the Directors may be taken without a meeting if all the Directors
consent to the action in writing and the written consents are filed with the
records of the Directors meeting. Each such consent shall be treated for all
purposes as a vote at a meeting.
12. Committees. The Directors may by vote of a majority of the Directors
----------
then in office, elect from their number an Executive committee or other
committees and may by like vote delegate thereto some or all of their powers
except those which by law, by the Articles of Organization or by these Bylaws
they are prohibited from delegating. Except as the Directors may otherwise
determine, any such committee may make rules for the conduct of its business,
but unless otherwise provided by the Directors or in such rules, its business
shall be conducted as nearly as may be in the same manner as is provided by
these Bylaws for the Directors. All members of such committees shall hold such
offices at the pleasure of the Board of Directors. The Board of Directors by
vote of a majority of the Directors then in office may abolish any such
committee at any time. Any committee to which the Board of Directors delegates
any of its powers or duties shall keep records of its meetings and shall report
its action to the Board of Directors. The Board of Directors shall have power
to rescind any action of any committee, but no such rescission shall have
retroactive effect.
13. Amendment of Certain Sections. Sections (3), (5(b)) and (13) of this
-----------------------------
Article II may not be altered, amended or repealed except by the affirmative
vote of at least seventy-five percent (75%) of the shares of each class of the
stock of the Corporation outstanding and entitled to vote. Sections 2, 4, 5(a),
5(c) and 6 of this Article II may not be altered, amended or repealed except by
the affirmative vote of at least sixty-six and two thirds percent (66 2/3%) of
the total number of Directors then in office or by an affirmative vote of at
least sixty-six and two-thirds percent (66 2/3%) of the shares of each class of
stock of the Corporation outstanding and entitled to vote.
10
<PAGE>
ARTICLE III - OFFICERS
----------------------
1. Enumeration. The officers of the Corporation shall consist of a Chairman
-----------
of the Board, a President, a Treasurer, a Clerk, and such other officers,
including a Vice Chairman of the Board, one or more vice Presidents (including
one or more Executive Vice Presidents), Assistant Treasurers, and Assistant
Clerks as the Directors may determine.
2. Election. The Chairman of the Board, President, Treasurer and Clerk shall
--------
be elected annually by the Directors at their first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Directors at
such meeting or at any other meeting.
3. Qualification. The President shall be a Director. No officer need be a
-------------
stockholder. Any two or more offices may be held by the same person, provided
that the President and Clerk shall not be the same person. The Clerk shall be a
resident of Massachusetts unless the Corporation has a resident agent appointed
for the purpose of service of process. Any officer may be required by the
Directors to give bond for the faithful performance of his duties to the
Corporation in such amount and with such sureties as the Directors may
determine.
4. Tenure. Except as otherwise provided by law, by the Articles of
------
Organization or by these Bylaws, the Chairman of the Board, President, Treasurer
and Clerk shall hold office until the first meeting of the Directors following
the annual meeting of stockholders and thereafter until his successor is chosen
and qualified; and all other officers shall hold office until the first meeting
of the Directors following the annual meeting of stockholders and until their
successors are chosen and qualified, or for such shorter term as the Board of
Directors may fix at the time such officers are chosen. Any officer may resign
by delivering his written resignation to the Corporation at its principal office
or to the President or Clerk and such resignation shall be effective upon
receipt unless it is specified to be effective at some other time or upon the
happening of some other event.
5. Removal. The Directors may remove any officer with or without cause by
-------
a vote of a majority of the entire number of Directors then in office, provided
that an officer may be removed for cause only after reasonable notice and
opportunity to be heard by the Board of Directors prior to action thereon.
6. Chairman of the Board. The Chairman of the Board shall preside at all
---------------------
meetings of the Directors and the Stockholders and shall have such other powers
and duties as are usually vested in the office of Chairman of the Board or as
may be vested in him by the Board of Directors.
7. President. Unless otherwise provided by the Board of Directors, the
---------
President shall be the chief executive officer of the Corporation and shall,
subject to the direction of the Directors, have general supervision and control
of its business. The President, in the absence of the Chairman of the Board,
shall preside at all meetings of stockholders and Directors.
11
<PAGE>
8. Vice Presidents. The Executive Vice President, or if there shall be no
---------------
Executive Vice President, the Vice Presidents in the order determined by the
Directors, shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President and shall perform such other
duties and shall have such other powers as the Directors may from time to time
prescribe.
9. Treasurer and Assistant Treasurers. The Treasurer shall, subject to the
----------------------------------
direction of the Directors, have general charge of the financial affairs of the
Corporation and shall cause to be kept accurate books of account. He shall have
custody of all funds, securities and valuable documents of the Corporation,
except as the Directors may otherwise provide.
The Assistant Treasurer, or if there shall be more than one, the Assistant
Treasurers in the order determined by the Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and shall have such other powers
as the Directors may from time to time prescribe.
10. Clerk and Assistant Clerks. The Clerk shall keep a record of the
--------------------------
meetings of stockholders. Unless a Transfer Agent is appointed, the Clerk shall
keep or cause to be kept in Massachusetts, at the principal office of the
Corporation or at his office, the stock and transfer records of the Corporation,
in which are contained the names of all stockholders and the record address, and
the amount of stock held by each.
If there is no Secretary or Assistant Secretary, the Clerk shall keep a
record of the meetings of the Directors.
The Assistant Clerk, or if there shall be more than one, the Assistant Clerks
in the order determined by the Directors, shall, in the absence or disability of
the Clerk, perform the duties and exercise the powers of the Clerk and shall
perform such other duties and shalt have such other powers as the Directors may
from time to time prescribe.
11. Other Powers and Duties. Each officer shall, subject to these Bylaws,
-----------------------
have in addition to the duties and powers specifically set forth in these
Bylaws, such duties and powers as are customarily incident to his office, and
such duties and powers as the Directors may from time to time designate.
12. Salaries. The salaries and other compensation of officers, agents and
--------
employees of the Corporation shall be fixed from time to time by or under
authority of the Board of Directors. No officer shall be prevented from
receiving a salary or other compensation by reason of the fact that such person
is also a Director of the Corporation.
12
<PAGE>
ARTICLE IV - CAPITAL STOCK
--------------------------
1. Certificate of Stock. Each stockholder shall be entitled to a
--------------------
certificate of the capital stock of the Corporation in such form as may be
prescribed from time to time by the Directors. However, the Board of Directors
may provide that such stock be uncertificated. The certificate, if any, shall be
signed by the President, or a Vice President, and by the Treasurer or an
Assistant Treasurer, but when a certificate is counter-signed by a transfer
agent or a registrar, other than a Director, officer or employee of the
Corporation, such signature may be a facsimile. In case any officer who has
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
time of its issue.
Every certificate for shares of stock which are subject to any restriction on
transfer pursuant to the Articles of Organization, the Bylaws or any agreement
to which the Corporation is a party, shall have conspicuously noted on the face
or back of the certificate either the full text of the restriction or a
statement of the existence of such restrictions and a statement that the
Corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge. Every certificate issued when the
Corporation is authorized to issue more than one class or series of stock shall
set forth on its face or back either the full text of the preferences, voting
powers, qualifications and special and relative rights of the shares of each
class and series authorized to be issued or a statement of the existence of such
preferences, powers, qualifications and rights and a statement that the
Corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge.
2. Transfers. Subject to the, restrictions, if any, stated or noted on the
---------
stock certificates, shares of stock may be transferred on the books of the
Corporation by the surrender to the Corporation or its Transfer Agent of the
certificate therefore properly endorsed or accompanied by a written assignment
and power of attorney properly executed, with necessary transfer stamps affixed,
and with such proof of the authenticity of signature as the Corporation or its
Transfer Agent may reasonably require. Except as may be otherwise required by
law, by the Articles of Organization or by these Bylaws, the Corporation shall
be entitled to treat the record holder of stock as shown on its books as the
owner of such stock for all purposes, including the payment of dividends and the
right to vote with respect thereto, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the Corporation in accordance with the requirements of these Bylaws.
It shall be the duty of each stockholder to notify the Corporation of his
post office address and of his taxpayer identification number.
3. Record Date. The Directors may fix in advance a time not more than sixty
-----------
days preceding the date of any meeting of stockholders or the date for the
payment of any dividend or the making of any distribution to stockholders or the
last day on which the consent or dissent of stockholders may be effectively
expressed for any purpose, as the record date of determining the stockholders
having the right to notice of and to vote at such meeting, and any adjournment
thereof, or the right to receive such dividend or distribution or the right to
give such consent or dissent. In such case,
13
<PAGE>
only stockholders of record on such record date shall have such right,
notwithstanding any transfer of stock on the books of the Corporation after the
record date. Without fixing such record date the Directors may for any of such
purposes close the transfer books for all or any part of such period.
If no record date is fixed and the transfer books are not closed, the record
date for determining the stockholders having the right to notice of or to vote
at a meeting of stockholders shall be at the close of business on the date next
preceding the day on which notice is given, and the record date for determining
the stockholders for any other purpose shall be at the close of business on the
day on which the Board of Directors acts with respect thereto.
4. Replacement of Certificates. In case of the alleged loss or destruction
---------------------------
or the mutilation of a certificate of stock, a duplicate certificate may be
issued in place thereof, upon such terms as the Directors may prescribe,
including the presentation of reasonable evidence of such loss, destruction or
mutilation and the giving of such indemnity as the Directors may require for the
protection of the Corporation or any transfer agent or registrar.
5. Issue of Capital Stock. The Board of Directors shall have the authority to
----------------------
issue or reserve for issue from time to time the whole or any part of the
capital stock of the Corporation which may be authorized from time to time, to
such persons or organizations, for such consideration, whether cash, property,
services or expenses and on such terms as the Board of Directors may determine,
including without limitation the granting of options, warrants, or conversion or
other rights to subscribe to said capital stock. Pursuant to Section 12 of
Article II, the Board of Directors may, if permitted by law, delegate some or
all of its authority under this Section 5 to one or more committees of
Directors.
ARTICLE V - MISCELLANEOUS PROVISIONS
------------------------------------
1. Fiscal Year. Except as from time to time otherwise determined by the
-----------
Directors, the fiscal year of the Corporation shall be the calendar year.
2. Seal. The seal of the Corporation shall, subject to alteration by the
----
Directors, bear its name, the word "Massachusetts", and the year of its
incorporation.
3. Execution of Instruments. All checks, deeds, leases, transfers,
------------------------
contracts, bonds, notes and other obligations authorized to be executed by an
officer of the Corporation on its behalf shall be signed by the President or the
Treasurer except as the Directors may generally or in particular cases otherwise
determine.
4. Voting of Securities. Except as the Directors way otherwise designate,
--------------------
the President or Treasurer way waive notice of, and act as, or appoint any
person or persons to act as, proxy or attorney-in-fact for this Corporation
(with or without power of substitution) at, any meeting of stockholders or
shareholders of any other corporation or organization, the securities of which
may be held by this Corporation.
14
<PAGE>
5. Corporate Records. The original, or attested copies, of the Articles of
-----------------
Organization, Bylaws and records of all meetings of the incorporators and
stockholders, and the Stock and transfer records, which shall contain the names
of all stockholders and the record address and the amount of stock held by each,
shall be kept in Massachusetts at the principal office of the Corporation, or at
the office of its transfer Agent or of the Clerk. The stock and transfer
records, which shall contain the names of all stockholders and the record
address and the amount of stock held by each, shall be kept at the principal
office of the Corporation in Massachusetts, or at an office of its Transfer
Agent or Clerk. Said copies and records need not all be kept in the same
office. They shall be available at all reasonable times to the inspection of
any stockholder for any proper purpose, but not to secure a list of stockholders
for the purpose of selling said list or copies thereof or of using the same for
a purpose other than in the interest of the applicant, as a stockholder,
relative to the affairs of the Corporation.
6. Evidence of Authority. A certificate by the Clerk or an Assistant Clerk,
---------------------
or a Temporary Clerk, as to any action taken by the stockholders, Directors,
Executive Committee, or any officer or representative of the Corporation shall
as to all persons who rely thereon in good faith be conclusive evidence of such
action.
7. Articles of Organization. All references in these Bylaws to the Articles
------------------------
of Organization shall be deemed to refer to the Articles of Organization of the
Corporation, as amended and in effect from time to time.
8. Transactions with Interested Parties. In the absence of fraud, no
------------------------------------
contract or other transaction between this Corporation and any other corporation
or any firm, association, partnership or person shall be affected or invalidated
by the fact that any Director or officer of this Corporation is pecuniarily or
otherwise interested in or is a director, member or officer of such other
corporation or of such firm, association or partnership or is a party to or is
pecuniarily or otherwise interested in such contract or other transaction or is
in any way connected with any person or persons, firm, association, partnership,
or corporation pecuniarily or otherwise interested therein; provided that the
fact that he individually or as a director, member or officer of such
corporation, firm, association or partnership is such a party or is so
interested shall be disclosed to or shall have been known by the Board of
Directors or a majority of such members thereof as shall be present at a meeting
of the Board of Directors at which action upon any such contract or transaction
shall be taken; any Director may be counted in determining the existence of a
quorum and may vote at any meeting of the Board of Directors of this Corporation
for the purpose of authorizing any such contract or transaction with like force
and effect as if he were not so interested, or were not a director, member or
officer of such other corporation, firm, association or partnership, provided
that any vote with respect to such contract or transaction must be adopted by a
majority of the Directors then in office who have no interest in such contract
or transaction.
15
<PAGE>
9. Indemnification. The Corporation shall indemnify each person (and his
---------------
heirs, executors, administrators, or other legal representatives) who is, or
shall have been, a Director, officer, employee or agent of the Corporation or
any person who is serving, or shall serve as a Director, officer, employee or
agent of another organization in which the Corporation owns shares or of which
it is a creditor, against all liabilities and expenses (including judgments,
fines, penalties and attorneys' fees and all amounts paid, other than to the
Corporation or such other organization, in compromise or settlement) reasonably
incurred by any such Director, officer, or person in connection with, or arising
out of, any action, suit or proceeding in which any such Director, officer, or
person may be a party defendant or with which he may be threatened or otherwise
involved, directly or indirectly, by reason of his being or having been a
Director or officer of the Corporation or such other organization, except in
relation to matters as to which any such Director, officer, or person shall be
finally adjudged (other than by consent) in such action, suit or proceeding not
to have acted in good-faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation or such other organization,
and, with respect to any criminal action or proceeding he had no reasonable
cause to believe his conduct was unlawful; provided, however, that indemnity
shall not be made with respect to any such amounts paid in compromise or
settlement or by consent, unless the Board of Directors shall have determined in
good faith that the Director officer or person making such compromise,
settlement, or consent acted, in connection with the matter or matters out of
which such compromise, settlement or consent arose, in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation or such other organization, and, with respect to any criminal
action or proceeding that he had no reasonable cause to believe his conduct was
unlawful. Such indemnification may include payment by the Corporation of
expenses in defending a civil or criminal action or proceeding in advance of the
final disposition of such action or proceeding upon receipt of any undertaking
by the person indemnified to repay such payment if he shall be adjudicated to be
not entitled to indemnification under this section.
The foregoing right to indemnification shall not be exclusive of any other
rights to which any such Director, officer or person is entitled under any
agreement, vote of stockholders, statute, or as a matter of law, or otherwise.
The provisions of this section are separable, and if any provision or portion
hereof shall for any reason be held inapplicable, illegal or ineffective, this
shall not affect any right of indemnification existing otherwise than under this
section.
10. Stock in Other Corporations. Except as the Directors may otherwise
---------------------------
designate, the President or Treasurer may waive notice of, and appoint any
person or persons to act as proxy or attorney in fact for the Corporation (with
or without power of substitution) at any meeting of stockholders or shareholders
of any other corporation or organization, the securities of which may be held
by this Corporation.
11. Severability. If any term or provision of these Bylaws, or the
------------
application thereof to any person or circumstance or period of time, shall to
any extent be invalid or unenforceable, the remainder of the Bylaws shall be
valid and enforceable to the fullest extent permitted by law.
16
<PAGE>
ARTICLE VI - AMENDMENTS
-----------------------
1. Amendment by Directors. Except with respect to any provisions of these
----------------------
Bylaws which by law, the Articles of Organization or these Bylaws require action
by the stockholders, these Bylaws may be amended or repealed by the affirmative
vote of a majority of the Directors then in office. Not later than the time of
giving notice of the annual meeting of stockholders next following the amending
or repealing by the Directors of any Bylaw, notice thereof stating the substance
of such change shall be given to all stockholders entitled to vote on amending
the Bylaws.
2. Amendment by Stockholders. These Bylaws may be amended or repealed at any
-------------------------
annual meeting of stockholders, or special meeting of stockholders called for
such purpose, by the affirmative vote of at least two-thirds of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class. Notwithstanding the foregoing, no shareholder approval shall be required
unless mandated by the Articles of Organization, these Bylaws, or other
applicable law.
17
<PAGE>
EXHIBIT 4
NUMBER
________
SHARES COMMON STOCK
ROCKPORT NATIONAL BANCORP, INC.
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT
SPECIMEN
IS THE OWNER OF
- --------------------------------------------------------------------------------
FULLY PAID AND NONASSESSABLE COMMON SHARES, $.01 PAR VALUE, OF ROCKPORT NATIONAL
BANCORP, INC.
(hereinafter called the "Corporation"), transferable on the books of the
Corporation by the Corporation by the holder hereof in person or by
duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signature of its
duly authorized officers.
CERTIFICATE OF STOCK
Dated:
<TABLE>
<S> <C> <C>
(Seal)
Rockport National Bancorp, Inc. Peter A. Anderson
organized 1999 PRESIDENT AND
COUNTERSIGNED AND REGISTERED: Rockport, Massachusetts CHIEF EXECUTIVE OFFICER
ROCKPORT NATIONAL BANK
TRANSFER AGENT
AND REGISTRAR
BY:
Margaret A. Murphy
AUTHORIZED SIGNATURE CLERK
</TABLE>
<PAGE>
Exhibit 5
April 19, 1999
The Board of Directors
Rockport National Bancorp, Inc.
16 Main Street
Rockport, MA 01966
Re: Rockport National Bancorp, Inc.
Registration Statement of Form S-4
Gentlemen:
We are counsel to Rockport National Bancorp, Inc., a Massachusetts
Corporation with its principal office in Rockport, Massachusetts (the
"Company"), and have acted as such in connection with the proposed merger
("Merger") of Rockport National Bank with the Interim National Bank of Rockport
under the Charter of Rockport National Bank and the proposed reorganization (the
"Reorganization") of the Company pursuant to a Plan and Agreement of
Reorganization, dated April 13, 1999, which provides, among other things, for
the acquisition of all of the outstanding common stock of the Bank (the "Bank
Common Stock") by the Company, and the issuance of 1 share of the Company's
common stock ("Company Common Stock") for each share of the Bank's common stock
acquired.
During the course of our representation, and in rendering our opinion, we
have reviewed such documents as we have deemed necessary or advisable to render
the opinions stated herein, and, in connection therewith, we have examined
originals or copies, authenticated to our satisfaction, of the following: (i)
the Articles of Organization of the Company; (ii) the Bylaws of the Company;
(iii) the Plan and Agreement of Reorganization; (iv) Resolutions of the Board
of Directors of the Company; (v) the Registration Statement on Form S-4 of the
Company registering shares of common stock, par value $.01 per share (the
"Common Stock"), of the Company to be issued in connection with the
Reorganization; and (vi) such other documents and instruments as we have deemed
necessary for purposes of this opinion. In our examination, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, the authenticity of the originals of such latter documents, the validity
of all applicable statutes and regulations, the legal authority and the capacity
of all persons executing documents and proper indexing and accuracy of all
public records and documents. As to any facts material to this opinion
<PAGE>
The Board of Directors
April 19, 1999
Page 2
which we did not independently establish or verify, we have relied upon
statements and representations of officers and other representatives of the
Company, the Bank and others. The opinions set forth herein are based on the
laws of the Commonwealth of Massachusetts and the corporate laws of the
Commonwealth of Massachusetts as the same exist on the date hereof, and no
opinion is expressed as to the laws of any other jurisdiction.
Based upon the foregoing, we are of the opinion that upon consummation of
the Reorganization, the shares of Common Stock of the Company that will be
issued to the shareholders of the Bank pursuant to the terms of the
Reorganization will be duly and validly authorized, legally issued, fully paid
and non-assessable.
The opinions expressed herein are made as of the date hereof pursuant to
the requirements of Regulation S-K, Item 601, of the SEC in regard to the shares
being registered pursuant to the Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the caption "Legal
Matters" in the Registration Statement and Proxy Statement and Prospectus.
Sincerely,
/s/ Cranmore, FitzGerald & Meaney
CRANMORE, FITZGERALD & MEANEY
<PAGE>
Exhibit 8
April 19, 1999
Rockport National Bancorp, Inc.
16 Main Street
Rockport, MA 01966
Gentlemen:
We have acted as special counsel to Rockport National Bancorp, Inc. (the
"Company") in connection with a Registration Statement on Form S-4 currently
being filed with the Securities and Exchange Commission by the Company relating
to the proposed merger ("Merger") of Rockport National Bank with the Interim
National Bank of Rockport under the charter of Rockport National Bank and the
issuance of one share of the Company's common stock for each share of the common
stock of Rockport National Bank (the "Reorganization").
We refer to the combined Proxy Statement and Prospectus included in the
Registration Statement and the caption "Federal Tax Consequences of the
Reorganization" therein. The description of certain federal income tax
consequences of the Reorganization as set forth under such caption states our
opinion as to certain federal income tax consequences of the Reorganization and
other federal income tax matters, as described in such caption and subject to
the conditions and qualifications therein set forth.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the references to us and to the use of our tax
opinion stated under the caption "Federal Tax Consequences of the
Reorganization" in the Registration Statement and Proxy Statement and
Prospectus.
Sincerely,
/s/ Cranmore, FitzGerald & Meaney
CRANMORE, FITZGERALD & MEANEY
<PAGE>
Exhibit 10.1
INDEXED EXECUTIVE SALARY
CONTINUATION PLAN
AGREEMENT
---------
THIS AGREEMENT made and entered into this 14th day of April, 1998, by and
between the ROCKPORT NATIONAL BANK, a national banking association organized and
existing under the laws of the United States of America, hereinafter referred to
as the "Bank", and PETER A. ANDERSON the Chief Executive Officer of the Bank,
hereinafter referred to as the "CEO".
It is the consensus of the Board of Directors of the Bank (the Board) that
the CEO's services have been of exceptional merit and a valuable contribution to
the performance of the Bank. The Board further believes that the CEO's
experience, knowledge of corporate affairs, reputation and industry contacts are
likely to be of value in the future and his continued services are of sufficient
importance to the Bank's future growth and profits that it could suffer
financial loss should the CEO terminate his services.
Further, the Bank has conducted a survey of executive compensation paid by
similarly situated financial institutions and has determined that the
compensation paid to its executives is reasonable in relation to the services
rendered.
Accordingly, it is the desire of the Bank and the CEO to enter into this
Agreement under which the Bank agrees to make certain payments to the CEO upon
his retirement or termination and, alternatively, to his beneficiary(ies) in the
event of his death while employed by the Bank.
It is the intent of the parties hereto that this Agreement be considered an
arrangement maintained primarily to provide supplemental retirement benefits for
the CEO, as a member of a select group of management of highly compensated
employees of the Bank for purposes of the Employee Retirement Security Act of
1974 (ERISA). The CEO is fully advised of the Bank's financial status and has
had substantial input in the design and operation of this benefit plan.
Therefore, in consideration of the CEO's services performed in the past and
those to be performed in the future, and based upon mutual promises and
covenants herein contained, the Bank and CEO agree as follows:
I. DEFINITIONS.
------------
A. Effective Date.
---------------
The "Effective Date" of the Agreement shall be April 14, 1998.
<PAGE>
2
B. Plan Year.
----------
Any reference to "Plan Year" shall mean a calendar year from January 1
to December 31. In the year of implementation, the term "Plan Year"
shall mean the period from the Effective Date to December 31 of the
year of the Effective Date.
C. Termination of Service.
-----------------------
"Termination of Service" shall mean death, resignation due to physical
disability, voluntary resignation of the services by the CEO or
dismissal of the CEO other than "For Cause" as defined in subparagraph
II(D) hereof, by the Bank.
D. Normal Retirement Age.
----------------------
"Normal Retirement Age" shall mean the date on which the CEO attains
age sixty-five (65).
E. Pre-retirement Account.
-----------------------
A "Pre-retirement Account" shall be established as a liability reserve
account on the books of the Bank for the benefit of the CEO. The
initial balance in the Pre-retirement Account is zero (0). Prior to
Termination of Service, such liability reserve account shall be
increased or decreased each Plan Year by an amount equal to the annual
earnings or loss for the Plan Year determined by the Index (described
in subparagraph I(G) hereinafter), less the Opportunity Cost for that
year (described in subparagraph I(H) hereinafter).
F. Index Retirement Benefit.
-------------------------
The Index Retirement Benefit for the CEO for any year shall be equal
to the excess of the annual earnings (if any) determined by the Index
(subparagraph I(G)) for the Plan Year over the Opportunity Cost
(subparagraph I(H)) for that Plan Year.
G. Index.
------
The Index for any year shall be the aggregate annual income from the
life insurance contracts described hereinafter as defined by FASB
Bulletin 85-4 as in effect on the date of this Agreement. This Index
shall be applied as if such insurance contracts were purchased on the
Effective Date hereof.
<PAGE>
3
Insurance Company: Alexander Hamilton
Policy Form: TBD
Policy Name: TBD
Insured's Age, Sex: Male, 53
Riders: None
Ratings: None
Face Amount: $250,000
Premiums Paid: TBD
No. of Premium Payments: One
Assumed Purchase Date: TBD
If such contracts of life insurance are actually purchased by the
Bank, then the actual policies as of the dates they were purchased
shall be used in the calculations under this Agreement. If such
contracts of life insurance are not purchased or are subsequently
surrendered or lapse, then the Bank shall receive annual policy
illustrations that assume the above described policies were purchased
from the above name insurance company(ies) on the Effective Date from
which the increase in policy value will be used to calculate the
amount of the Index.
In either case, references to the life insurance contract are merely
for purposes of calculating a benefit. The Bank has no obligation to
purchase such life insurance and, if purchased, the CEO and his
beneficiary(ies) shall have no ownership interest in such policy and
shall always have no greater interest in the benefits under this
Agreement than that of an unsecured general creditor of the Bank.
H. Opportunity Cost.
-----------------
The "Opportunity Cost" for any year shall be calculated by taking the
sum of the amount of premiums set forth in the Index policies
described above plus the amount of any benefits paid to the CEO
pursuant to this Agreement (Paragraph II hereinafter) plus the amount
of all previous years Opportunity Cost, and multiplying that sum by
the interest expense of the Bank expressed as a percentage as reported
in the Uniform Bank Performance Report (UBPR) for the quarter ended
9/30 for that year plus 50 basis points (.50).
I. Change in Control.
------------------
A "Change in Control" shall be deemed to have occurred in either of
the following events:
1. When any "person" (as such terms is used in Sections 13(d) and
14(d)(2) of
<PAGE>
4
the Securities and Exchange Act of 1934 as amended (the "1934
Act") becomes a beneficial owner (as such term is defined in Rule
13(d)(3) promulgated under the 1934 Act), directly or indirectly,
of the securities of the Bank (or of any entity which directly or
indirectly, through one or more directly owned subsidiaries, owns
at least fifty (50%) of the outstanding common stock of the Bank)
or representing twenty-five percent (25%) or more of the total
number of votes that may be cast for election of directors of the
Bank and other such entity after the Effective Date hereof; or
2. If, as a result of, or in connection with, any tender or exchange
offer, merger, or other business combination, sale of assets or
contested election, or any combination of the foregoing
transactions, the persons who were directors of the Bank, or any
such entity as defined in (1) above, immediately before such
transaction shall cease to constitute a majority of the Board of
Directors of the Bank or such entity or of any successor
institution immediately after such transaction.
J. Vesting.
--------
Any reference to vesting or a vesting schedule percentage shall mean
the following percentage for the following full years of service with
the Bank subsequent to his first day of full employment. Any full
years of service existing on the Effective Date shall be credited to
CEO for purposes of this Agreement and the following schedule.
Full Years of Service
With the Bank Vested
------------- ------
0-5 0%
6 20%
7 30%
8 40%
9 50%
10 60%
11 70%
12 80%
13 100%
II. INDEX BENEFITS.
--------------
A. Retirement Benefits.
-------------------
Should the CEO continue to be employed by the Bank until his "Normal
Retirement Age" defined in subparagraph I(D), he shall be entitled to
receive the balance in his Pre-retirement Account (as defined in the
subparagraph I(E)). The CEO shall elect,
<PAGE>
5
at least one year prior to his right to receive the balance in the
Pre-retirement Account, one of the following methods of payment:
1. Lump sum
2. Equal installment for five (5) years
3. Equal installment for ten (10) years
4. Equal installments for fifteen (15) years
5. Equal installments for twenty (20) years
In addition to these payments, commencing within thirty (30) days of
his retirement, the Index Retirement Benefit (subparagraph I(F)) for
each Plan Year shall be paid to the CEO until his death.
B. Termination of Service.
----------------------
Upon Termination of Service (subparagraph I (C)), the CEO shall be
entitled to the amount in his Pre-retirement Account, according to the
Vesting Schedule, paid in a lump sum within one year of the date of
such termination. In addition, he shall be entitled to receive a
percentage of the Index Retirement Benefit (subparagraph I(F))
according to the Vesting Index Retirement Benefit (subparagraph I(J))
for each Plan Year until his death.
C. Change of Control.
-----------------
At any time, in the event of a Change of Control as addressed in
(subparagraph I(1)), the CEO shall receive the benefits promised in
this Agreement upon attaining Normal Retirement Age, as if he had been
continuously employed by the Bank until that time. The CEO will also
remain eligible for any promised death benefits in this Agreement. In
addition, no sale, merger, or consolidation of the Bank shall take
place unless the new or surviving entity expressly acknowledges the
obligations under this Agreement and agrees to abide by its terms.
Specifically, upon said Change of Control the Pre-retirement Account
Benefit and the Index Retirement Benefit and the death benefit shall
be 100% vested to the CEO or his beneficiary(ies).
D. Death.
------
Should the CEO die prior to having received that portion of his Pre-
retirement Account he was entitled to pursuant to subparagraph II(A)
or (B) hereinabove, the unpaid balance of the Pre-retirement Account
shall be paid in a lump sum to the beneficiary selected by the CEO and
filed with the Bank. In the absence of or a failure to designate a
beneficiary, the unpaid balance shall be paid in a lump sum to the
personal representative of the CEO's estate.
<PAGE>
6
E. Involuntary Resignation or Termination for Cause.
-------------------------------------------------
Upon CEO's discharge for cause, this Agreement shall terminate and no
further benefits shall be due or payable. "For Cause" shall be deemed
to be the conviction of the CEO of a felony or the failure to follow a
reasonable lawful order of the Board of Directors consistent with safe
and sound banking practices or some deliberate act of dishonesty with
respect to the Bank or any subsidiary or affiliate, or conviction of a
crime involving moral turpitude.
F. Death Benefit.
--------------
Except as set forth above there is no death benefit provided under
this Agreement.
III. RESTRICTIONS UPON FUNDING.
--------------------------
The Bank shall have no obligation to set aside, earmark, or entrust any
fund or money with which to pay its obligations under this Agreement. The CEO,
his beneficiary(ies) or any successor in interest to his shall be and remain
simply a general creditor of the Bank in the same manner as any other creditor
having a general claim for matured and unpaid compensation.
The Bank reserves the absolute right at its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and to determine the exact nature and method of such funding. Should the Bank
elect to fund this Agreement, in whole or in part, through the purchase of life
insurance, mutual funds, disability policies, or annuities, the Bank reserves
the absolute right, in its sole discretion, to terminate such funding at any
time, in whole or in part. At no time shall the CEO be deemed to have any lien
or right, title or interest in or to any specific funding investments or to any
assets of the Bank.
IV. MISCELLANEOUS.
--------------
A. Alienability and Assignment Prohibition.
----------------------------------------
Neither the CEO nor any beneficiary under this Agreement shall have
any power or right to transfer, assign, anticipate, hypothecate,
mortgage, commute, modify or otherwise encumber in advance any of the
benefits payable hereunder nor shall any of said benefits be subject
to seizure for the payment of any debts, judgements, alimony or
separate maintenance owed by the CEO or his beneficiary, nor be
transferable by operation of law in the event of bankruptcy,
insolvency, or otherwise. In the event the CEO or any beneficiary
attempts assignment, commutation, hypothecation, transfer or disposal
of the benefits hereunder, the Bank's liabilities shall forthwith
cease and terminate.
<PAGE>
7
B. Bank Regulatory Status.
-----------------------
The Bank shall not be obligated to make payments hereunder to the
extent such payments are prohibited by applicable banking laws,
regulations or directives.
C. Revocation.
-----------
It is agreed by and between the parties hereto that, during the
lifetime of the CEO, this Agreement may be amended or revoked at any
time or times, in whole or in part, by the mutual written assent of
the CEO and the Bank.
D. Gender.
-------
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine,
feminine, or neuter gender, whenever they should so apply.
E. Effect on Other Bank Benefit Plans.
-----------------------------------
Nothing contained in this Agreement shall affect the right of the CEO
to participate in or be covered by any qualified or non-qualified or
non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part
of the Bank or its successors, affiliates or subsidiaries existing or
future compensation structure.
F. Headings.
---------
Headings and subheadings in this Agreement are inserted for reference
and convenience only and shall not be deemed a part of this Agreement.
G. Applicable Law.
---------------
The validity and interpretation of this Agreement shall be governed by
the laws of the United States of America and the Commonwealth of
Massachusetts.
V. ADMINISTRATION.
---------------
A. Plan Administrator.
-------------------
The Plan Administrator (the "Administrator") of this plan shall be the
Salary Committee of the Board. As Administrator, the Salary Committee
shall be responsible for the management, control and administration of
the Indexed CEO Salary Continuation Plan as established herein (the
"Plan"). It may delegate to others
<PAGE>
8
certain aspects of the management and operation responsibilities of
the Plan including the employment of advisors and the delegation of
ministerial duties to qualified individuals.
B. Claims Procedure and Arbitration.
---------------------------------
In the event a dispute arises over benefits under this Agreement and
benefits are not paid to the CEO (or to his beneficiary in the case of
the CEO's death) and such claimants feel they are entitled to received
such benefits, then a written claim must be made to the Administrator
named above within ninety (90) days from the date payments are
refused. The Administrator and the Bank shall review the written
claim and if the claim is denied, in whole or in part, they shall
provide in writing within ninety (90) days of receipt of such claim
their specific reasons for such denial, reference to the provisions of
this Agreement upon which the denial is based and any additional
material or information necessary to perfect the claim. Such written
notice shall further indicate the additional steps to be taken by
claimants if a further review of the claim denial is desired. A claim
shall be deemed approved if the Administrator fails to take any action
within the aforesaid ninety day period.
If claimants desire a second review, they shall notify the
Administrator within ninety (90) days of the first claim denial.
Claimants may review this Agreement or any documents relating thereto
and submit any written issues and comments they may feel appropriate.
In its discretion, the Administrator shall then review the second
claim and provide a written decision within ninety (90) days of the
receipt of such claim. This decision shall likewise state the
specific reasons for the decision and shall include reference to
specific provisions of this Agreement upon which the decision is
based.
If claimants continue to dispute the benefit denial based upon
completed performance of this Agreement or the meaning and effect of
the terms and conditions thereof, then claimants may submit the
dispute to a Board of Arbitration of final arbitration. Said Board of
Arbitration shall consist of one member selected by the claimant, one
member selected by the Bank, and the third member selected by the
first two members. The Board of Arbitration shall operate under any
generally recognized set of arbitration rules. The parties hereto
agree that they and their heirs, personal representatives, successors,
and assigns shall be bound by the decision of such Board of
Arbitration with respect to any controversy properly submitted to it
for determination.
Where a dispute arises as to the Bank's discharge of the CEO "For
Cause", then solely for the purpose of determining the CEO's rights
under this Agreement, such a dispute shall be likewise submitted to
arbitration as above described and the parties hereto agree to be
bound by the decision thereunder.
<PAGE>
9
VI. EMPLOYMENT.
-----------
This Agreement is not an employment agreement and shall not be construed as
such. Nothing in this Agreement shall be construed to constitute or to be
evidence of any agreement or understanding, express or implied, on the part of
the Bank to employ or retain the CEO as an employee for any specific period of
time, or on the part of the CEO to remain as an employee of the Bank for any
specific period of time.
IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on this 14th day of April,
1998, and that upon execution, each has received a conforming copy.
FOR THE BANK,
/s/ T. A. Scharfenstein 4/14/98
----------------------- ---------
T. A. Scharfenstein Date
Chairman, Board of Directors
/s/ Peter A. Anderson 4/14/98
---------------------- ---------
Peter A. Anderson Date
<PAGE>
ENDORSEMENT METHOD
SPLIT DOLLAR PLAN AGREEMENT
---------------------------
Insurer:
Policy No.:
Bank: Rockport National Bank
Insured: Peter A. Anderson
Relationship of
Bank to Insured: Employer
The respective rights and duties of the Bank and the Insured in the subject
policy shall be as defined in the following:
I. DEFINITIONS
-----------
Refer to the policy contract for the definition of the terms in the
Agreement.
II. POLICY TITLE AND OWNERSHIP
--------------------------
The parties shall cooperate in applying for and obtaining the policy.
Title and ownership shall reside in the Bank for its use and for the use of
the Insured all in accordance with this Agreement. The Bank alone may, to
the extent of its interest, exercise the right to borrow or withdraw on the
policy cash values. Where the Bank and the Insured (or assignee, with the
written consent of the Insured) mutually agree to exercise the right to
increase the coverage under the subject split dollar policy, then, in such
event, the rights, duties, and benefits of the parties to such increased
coverage shall continue to be subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
------------------------------
The Insured (or assignee) shall have the right and power to designate a
beneficiary or beneficiaries to receive his share of the proceeds payable
upon the death of the Insured and to elect and change a payment option for
such beneficiary, subject to any right or interest the Bank may have in
such proceeds, as provided in this Agreement.
IV. PREMIUM PAYMENT METHOD
----------------------
The Bank shall pay an amount equal to the planned premiums and any other
premium payments that might become necessary to keep the policy in force.
<PAGE>
V. TAXABLE BENEFIT
---------------
Annually the Insured will receive a taxable benefit equal to the assumed
cost of insurance as required by the Internal Revenue Service. The Bank
(or its administrator) will report to the Employee the amount of imputed
income received each year on Form W-2 or its equivalent. The split-dollar
arrangement provided for in this Agreement, which the parties intend to
satisfy the requirement of Rev. Ruling 64-328, 1964-2 C.B. 11, relates to a
life insurance policy with an initial face amount of $250,000 to be issued
on the life of the Insured to be owned by the Bank subject to an
endorsement in favor of the Insured.
VI. DIVISION OF DEATH PROCEEDS
--------------------------
Subject to Paragraph VII herein, the division of the death proceeds of the
policy is as follows:
A. Should the Insured be employed by the Bank at the time of his or her
death, the Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to an amount equal to eighty percent
(80%) of the net at risk insurance portion of the proceeds. The net
at risk insurance portion is the total proceeds less the cash value of
the policy.
B. Should the Insured not be employed by the Bank at the time of his or
her death, the Insured's beneficiary(ies) designated in accordance
with Paragraph III, shall be entitled to the following percentage of
the proceeds described in subparagraph VI(A) hereinabove that
corresponds to the year of service the Insured served with the Bank:
Full Years of Service
With the Bank Percentage
------------- ----------
0-5 0 %
6 20%
7 30%
8 40%
9 50%
10 60%
11 70%
12 80%
13 100%
At any time in the event of a Change of Control, the Insured's portion
of the death proceeds shall be 100% vested to his beneficiaries.
2
<PAGE>
C. The Bank shall be entitled to the remainder of such proceeds.
The Bank and the Insured (or assignees) shall share in any interest due on
the death proceeds on a pro rata basis as the proceeds due each
respectively bears to the total proceeds, excluding any such interest.
VII. DIVISION OF THE CASH SURRENDER
------------------------------
The Bank shall at all times be entitled to an amount equal to the policy's
cash value, as that term is defined in the policy contract, less any policy
loans and unpaid interest or cash withdrawals previously incurred by the
Bank and any applicable surrender charges. Such cash value shall be
determined as of the date of surrender. In the event of death, the Bank
shall be entitled to the greater of the premiums paid or the cash surrender
value.
VIII. PREMIUM WAIVER
--------------
If the policy contains a premium waiver provision, such waived amounts
shall be considered for all purposes of this Agreement as having been paid
by the Bank.
IX. TERMINATION OF AGREEMENT
------------------------
This Agreement shall terminate at the option of the Bank following thirty
(30) days written notice to the Insured upon the happening of any one of
the following:
1. The Insured shall leave the service of the Bank and accepts any
position at any other bank office in Essex County within one year of
his resignation.
2. The Insured shall be discharged from service with the Bank for cause.
The term "for cause" shall mean gross negligence or gross neglect or
the commission of a felony or gross-misdemeanor involving moral
turpitude, fraud, dishonesty or willful violation of any law that
results in any adverse effect on the Bank.
Upon such termination, the Insured (or assignee) shall have a ninety (90)
day option to receive from the Bank an absolute assignment of the policy in
consideration of a cash payment to the Bank, whereupon this Agreement shall
terminate. Such cash payment shall be the greater of:
1. The Bank's share of the cash value of the policy on the date of such
assignment, as defined in this Agreement.
3
<PAGE>
X. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
-------------------------------------------------------------------
In the event the policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits, on
expiration of the deferment period, shall be determined under the
provisions of this Agreement by regarding such endowment proceeds or the
commuted value of such annuity benefits as the policy's cash value.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
-----------------------------------------
The Insured may not, without the written consent of the Bank, assign to any
individual, trust, or other organization, any right, title or interest in
the subject policy nor any rights, options, privileges or duties created
under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
----------------------------------
This Agreement shall bind the Insured and the Bank, their heirs,
successors, personal representatives and assigns.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
--------------------------------------
The Salary Committee of the Board of Directors of the Bank is hereby
designated the Plan Administrator until resignation or removal by the Board
of Directors. As Plan Administrator, the Salary Committee of the Board of
Directors of the Bank shall be responsible for the management, control, and
administration of this Split Dollar Plan as established herein. The Plan
Administrator may allocate to others certain aspects of the management and
operation responsibilities of the Plan, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
XIV. FUNDING POLICY
--------------
The funding policy for this Split Dollar Plan shall be to maintain the
subject policy in force by paying, when due, all premiums required;
provided, however, that the Bank may, in its sole and absolute discretion,
cancel the policy or policies referred to herein, subject to the Insured's
right to purchase the policy for an amount equal to the greater of the
aggregate amount of premiums paid or the cash surrender value determined in
accordance with Paragraph VII hereof.
4
<PAGE>
XV. CLAIMS PROCEDURE FOR LIFE INSURANCE POLICY AND SPLIT DOLLAR PLAN
----------------------------------------------------------------
Promptly following the Insured's death, the parties shall cooperate in the
filing of a death claim in accordance with the Insurer's claims procedures.
Claims forms or claim information as to the subject policy can be obtained
by contacting Kaeding, Ernst & Company. When the Plan Administrator has a
claim which may be covered under the provisions described in the insurance
policy, he should contact the office named above and they will either
complete a claim form and forward it to an authorized representative of the
Insured or advise the named Plan Administrator what further requirements
are necessary. The Insured will evaluate and make a decision as to
payment. If the claim is payable, a benefit check will be issued to the
Plan Administrator.
In the event that a claim is not eligible under the policy, the Insurer
will notify the Plan Administrator of the denial pursuant to the
requirements under the terms of the policy. If the Plan Administrator is
dissatisfied with the denial of the claim and wishes to contest such claim
denial, he should contact the office named above and they will assist in
making inquiry to the Insurer. All objections to the Insurer's actions
should be in writing and submitted to the office named above for
transmittal to the Insured.
XVI. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
-----------------------------------------------
The Insurer shall not be deemed a party to this Agreement, but will respect
the rights of the parties as herein developed upon receiving an executed
copy of this Agreement. Payment or other performance in accordance with
the policy provisions shall fully discharge the Insurer for any and all
liability.
XVII. EMPLOYMENT OF INSURED
---------------------
This Agreement is not an employment agreement and shall not be construed as
such. Northing in this Agreement shall be construed to constitute or to be
evidence of any agreement or understanding, express or implied, on the part
of the Bank to employ or retain the Insured as an employee for any specific
period of time, or on the part of the Insured to remain as an employee of
the Bank for any specific period of time.
XVIII. AMENDMENT
---------
This Agreement may be altered, amended or modified, including the addition
of any extra policy provisions, but only by written instrument signed by
all of the parties.
5
<PAGE>
XIX. GOVERNING LAW
-------------
This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the parties have signed and sealed this Agreement as of
the day and year first above written.
ROCKPORT NATIONAL BANK
BY: /s/ T. A. Scharfenstein
---------------------------------------
T. A. Scharfenstein
Chairman, Board of Directors
/s/ Peter A. Anderson
-------------------------------------
Peter A. Anderson
6
<PAGE>
BENEFICIARY DESIGNATION FORM
PRIMARY DESIGNATION:
Name Relationship
- ---- ------------
Deborah R. Anderson Wife
- ------------------------------- -----------------------------
- ------------------------------- -----------------------------
- ------------------------------- -----------------------------
CONTINGENT DESIGNATION:
Matthew Gates Anderson Son (50%)
- ------------------------------- -----------------------------
Eric Allan Anderson Son (50%)
- ------------------------------- -----------------------------
- ------------------------------- -----------------------------
/s/ Peter A. Anderson 4/29/1998
- ------------------------------- -----------------------------
Signature of Insured Date
7
<PAGE>
AMENDMENT
TO THE EXECUTIVE SALARY
CONTINUATION PLAN AGREEMENT
DATED APRIL 14, 1998
This Amendment, made and entered into this 24 day of June, 1998, by and
between Rockport National Bank, a Bank organized and existing under the laws of
the Commonwealth of Massachusetts, hereinafter referred to as "the Bank", and
Peter A. Anderson, the Chief Executive Officer of the Bank, hereinafter referred
to as "the CEO", shall effectively amend the Executive Salary Continuation Plan
Agreement dated April 14, 1998, as specifically set forth herein pursuant to
Subparagraph IV (C) of said Agreement.
1.) Subparagraph I (G), Index, shall be amended to include the following policy
-----
information:
Insurance Company: Alexander Hamilton
Policy Form: Flexible Premium Adjustable Life
Policy Name: Executive Security Plan IV
Insured's Age, Sex: Male, 52
Riders: None
Ratings: None
Face Amount: $586,000
Premiums Paid: $250,000
No. of Premium Payments: Single Premium
Assumed Purchase Date: March 26, 1998
This Amendment shall be effective on the date set forth herein above. To
the extent that any paragraph of the Executive Salary Continuation Plan
Agreement is not specifically amended herein, or in any other amendment thereto,
said paragraph shall remain in full force and effect as set forth in said
Agreement.
IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the 24 day of June,
1998, and that, upon execution, each has received a conforming copy.
ROCKPORT NATIONAL BANK
/s/ Maria C. Barkhouse By: /s/ Peter A. Anderson, President
-------------------------------- --------------------------------
Witness Title
/s/ Margot Doyle
--------------------------------
Witness
<PAGE>
Exhibit 10.2
INDEXED EXECUTIVE SALARY
CONTINUATION PLAN
AGREEMENT
---------
THIS AGREEMENT made and entered into this 14th day of April 1998, by and
between the ROCKPORT NATIONAL BANK, a national banking association organized and
existing under the laws of the United States of America, hereinafter referred to
as the "Bank", and MARGARET A. MURPHY, the Chief Financial Officer of the Bank,
hereinafter referred to as the "CFO".
It is the consensus of the Board of Directors of the Bank (the Board) that
the CFO's services have been of exceptional merit and a valuable contribution to
the performance of the Bank. The Board further believes that the CFO's
experience, knowledge of corporate affairs, reputation and industry contacts are
likely to be of value in the future and her continued services are of sufficient
importance to the Bank's future growth and profits that it could suffer
financial loss should the CFO terminate her services.
Further, the Bank has conducted a survey of executive compensation paid by
similarly situated financial institutions and has determined that the
compensation paid to its executives is reasonable in relation to the services
rendered.
Accordingly, it is the desire of the Bank and the CFO to enter into this
Agreement under which the Bank agrees to make certain payments to the CFO upon
her retirement or termination and, alternatively, to her beneficiary(ies) in the
event of her death while employed by the Bank.
It is the intent of the parties hereto that this Agreement be considered an
arrangement maintained primarily to provide supplemental retirement benefits for
the CFO, as a member of a select group of management of highly compensated
employees of the Bank for purposes of the Employee Retirement Security Act of
1974 (ERISA). The CFO is fully advised of the Bank's financial status and has
had substantial input in the design and operation of this benefit plan.
Therefore, in consideration of the CFO's services performed in the past and
those to be performed in the future, and based upon mutual promises and
covenants herein contained, the Bank and CFO agrees as follows:
I. DEFINITIONS.
------------
A. Effective Date.
---------------
The "Effective Date" of this Agreement shall be April 14, 1998.
<PAGE>
2
B. Plan Year.
----------
Any reference to "Plan Year" shall mean a calendar year from January 1
to December 31. In the year of implementation, the term "Plan Year"
shall mean the period from the Effective Date to December 31 of the
year of the Effective Date.
C. Termination of Service.
-----------------------
"Termination of Service" shall mean death, resignation due to physical
disability, voluntary resignation of the services by the CFO or
dismissal of the CFO other than "For Cause" as defined in subparagraph
II(D) hereof, by the Bank.
D. Normal Retirement Age.
----------------------
"Normal Retirement Age" shall mean the date on which the CFO attains
age sixty-five (65).
E. Pre-retirement Account.
-----------------------
A "Pre-retirement Account" shall be established as a liability reserve
account on the books of the Bank for the benefit of the CFO. The
initial balance in the Pre-retirement Account is zero (0). Prior to
Termination of Service, such liability reserve account shall be
increased or decreased each Plan Year by an amount equal to the annual
earnings or loss for the Plan Year determined by the Index (described
in subparagraph I(G) hereinafter), less the Opportunity Cost for that
year (described in subparagraph I(H) hereinafter).
F. Index Retirement Benefit.
-------------------------
The Index Retirement Benefit for the CFO for any year shall be equal
to the excess of the annual earnings (if any) determined by the Index
(subparagraph I(G)) for the Plan Year over the Opportunity Cost
(subparagraph I(H)) for that Plan Year.
G. Index.
------
The Index for any year shall be the aggregate annual income from the
life insurance contracts described hereinafter as defined by FASB
Bulletin 85-4 as in effect on the date of this Agreement. This Index
shall be applied as if such insurance contracts were purchased on the
Effective Date hereof.
<PAGE>
3
Insurance Company: Alexander Hamilton
Policy Form: TBD
Policy Name: TBD
Insured's Age, Sex: Female, 43
Riders: None
Ratings: None
Face Amount: $100,000
Premiums Paid: TBD
No. of Premium Payments: One
Assumed Purchase Date: TBD
If such contracts of life insurance are actually purchased by the
Bank, then the actual policies as of the dates they were purchased
shall be used in the calculations under this Agreement. If such
contracts of life insurance are not purchased or are subsequently
surrendered or lapse, then the Bank shall receive annual policy
illustrations that assume the above described policies were purchased
from the above name insurance company(ies) on the Effective Date from
which the increase in policy value will be used to calculate the
amount of the Index.
In either case, references to the life insurance contract are merely
for purposes of calculating a benefit. The Bank has no obligation to
purchase such life insurance and, if purchased, the CFO and her
beneficiary(ies) shall have no ownership interest in such policy and
shall always have no greater interest in the benefits under this
Agreement than that of an unsecured general creditor of the Bank.
H. Opportunity Cost.
-----------------
The "Opportunity Cost" for any year shall be calculated by taking the
sum of the amount of premiums set forth in the Index policies
described above plus the amount of any benefits paid to the CFO
pursuant to this Agreement (Paragraph II hereinafter) plus the amount
of all previous years Opportunity Cost, and multiplying that sum by
the interest expense of the Bank expressed as a percentage as reported
in the Uniform Bank Performance Report (UBPR) for the quarter ended
9/30 for that year plus 50 basis points (.50).
I. Change in Control.
------------------
A "Change In Control" shall be deemed to have occurred in either of
the following events:
<PAGE>
4
1. When any "person" (as such terms is used in Sections 13(d) and 14
(d)(2) of the Securities and Exchange Act of 1934 as amended (the
"1934 Act") becomes a beneficial owner (as such term is defined
in Rule 13(d)(3) promulgated under the 1934 Act), directly or
indirectly, of the securities of the Bank (or of any entity which
directly or indirectly, through one or more directly owned
subsidiaries, owns at least fifty (50%) of the outstanding common
stock of the Bank) or representing twenty-five percent (25%) or
more of the total number of votes that may be cast for election
of directors of the Bank and other such entity after the
Effective Date hereof; or
2. If, as a result of, or in connection with, any tender or exchange
offer, merger, or other business combination, sale of assets or
contested election, or any combination of the foregoing
transactions, the persons who were directors of the Bank, or any
such entity as defined in (1) above, immediately before such
transaction shall cease to constitute a majority of the Board of
Directors of the Bank or such entity or of any successor
institution immediately after such transaction.
J. Vesting.
--------
Any reference to vesting or a vesting schedule percentage shall mean
the following percentage for the following full years of service with
the Bank subsequent to her first day of full employment. Any full
years of service existing on the Effective Date shall be credited to
CFO for purposes of the Agreement and the following schedule.
Full Years of Service
With the Bank Percentage
------------- ----------
0-4 10%
5 20%
6 30%
7 40%
8 50%
9 60%
10 70%
11 80%
12 90%
13 90%
14 90%
15 100%
<PAGE>
5
II. INDEX BENEFITS.
--------------
A. Retirement Benefits.
-------------------
Should the CFO continue to be employed by the Bank until her "Normal
Retirement Age" defined in subparagraph I(D), she shall be entitled to
receive the balance in her Pre-retirement Account (as defined in the
subparagraph I(E)). The CFO shall elect, at least one year prior to
her right to receive the balance in the Pre-retirement Account, one of
the following methods of payment:
1. Lump sum
2. Equal installment for five (5) years
3. Equal installment for ten (10) years
4. Equal installments for fifteen (15) years
5. Equal installments for twenty (20) years
In addition to these payments, commencing within thirty (30) days of
her retirement, the Index Retirement Benefit (subparagraph I(F)) for
each Plan Year shall be paid to the CFO until her death.
B. Termination of Service.
----------------------
Upon Termination of Service (subparagraph I (C)), the CFO shall be
entitled to the amount in her Pre-retirement Account, according to the
Vesting Schedule, paid in a lump sum within one year of the date of
such termination. In addition, she shall be entitled to receive a
percentage of the Index Retirement Benefit (subparagraph I(F))
according to the Vesting Index Retirement Benefit (subparagraph I(J))
for each Plan Year until her death.
C. Change of Control.
-----------------
At any time, in the event of a Change of Control as addressed in
(subparagraph I(1)), the CFO shall receive the benefits promised in
this Agreement upon attaining Normal Retirement Age, as if she had
been continuously employed by the Bank until that time. The CFO will
also remain eligible for any promised death benefits in this
Agreement. In addition, no sale, merger, or consolidation of the Bank
shall take place unless the new or surviving entity expressly
acknowledges the obligations under this Agreement and agrees to abide
by its terms. Specifically, upon said Change of Control the Pre-
retirement Account benefit and the Index Retirement Benefit and the
death benefit shall be 100% vested to the CFO or her beneficiary(ies).
<PAGE>
6
D. Death.
------
Should the CFO die prior to having received that portion of her Pre-
retirement Account she was entitled to pursuant to subparagraph II(A)
or (B) hereinabove, the unpaid balance of the Pre-retirement Account
shall be paid in a lump sum to the beneficiary selected by the CFO and
filed with the Bank. In the absence of or a failure to designate a
beneficiary, the unpaid balance shall be paid in a lump sum to the
personal representative of the CFO's estate.
E. Involuntary Resignation or Termination for Cause.
-------------------------------------------------
Upon CFO's discharge for cause, this Agreement shall terminate and no
further benefits shall be due or payable. "For Cause" shall be deemed
to be the conviction of the CFO of a felony or the failure to follow a
reasonable lawful order of the Board of Directors consistent with safe
and sound banking practices or some deliberate act of dishonesty with
respect to the Bank or any subsidiary or affiliate, or conviction of a
crime involving moral turpitude.
F. Death Benefit.
--------------
Except as set forth above there is no death benefit provided under
this Agreement.
III. RESTRICTIONS UPON FUNDING.
--------------------------
The Bank shall have no obligation to set aside, earmark, or entrust any
fund or money with which to pay its obligations under this Agreement. The CFO,
her beneficiary(ies) or any successor in interest to her shall be and remain
simply a general creditor of the Bank in the same manner as any other creditor
having a general claim for matured and unpaid compensation.
The Bank reserves the absolute right at its sole discretion to either fund
the obligations undertaken by this Agreement or to refrain from funding the same
and to determine the exact nature and method of such funding. Should the Bank
elect to fund this Agreement, in whole or in part, through the purchase of life
insurance, mutual funds, disability policies, or annuities, the Bank reserves
the absolute right, in its sole discretion, to terminate such funding at any
time, in whole or in part. At no time shall the CFO be deemed to have any lien
or right, title or interest in or to any specific funding investments or to any
assets of the Bank.
IV. MISCELLANEOUS.
--------------
A. Alienability and Assignment Prohibition.
----------------------------------------
<PAGE>
7
Neither the CFO nor any beneficiary under this Agreement shall have
any power or right to transfer, assign, anticipate, hypothecate,
mortgage, commute, modify or otherwise encumber in advance any of the
benefits payable hereunder nor shall any of said benefits be subject
to seizure for the payment of any debts, judgements, alimony or
separate maintenance owed by the CFO or her beneficiary, nor be
transferable by operation of law in the event of bankruptcy,
insolvency, or otherwise. In the event the CFO or any beneficiary
attempts assignment, commutation, hypothecation, transfer or disposal
of the benefits hereunder, the Bank's liabilities shall forthwith
cease and terminate.
B. Bank Regulatory Status.
-----------------------
The Bank shall not be obligated to make payments hereunder to the
extent such payments are prohibited by applicable banking laws,
regulations or directives.
C. Revocation.
-----------
It is agreed by and between the parties hereto that, during the
lifetime of the CFO, this Agreement may be amended or revoked at any
time or times, in whole or in part, by the mutual written assent of
the CFO and the Bank.
D. Gender.
-------
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine,
feminine, or neuter gender, whenever they should so apply.
E. Effect on Other Bank Benefit Plans.
-----------------------------------
Nothing contained in this Agreement shall affect the right of the CFO
to participate in or be covered by any qualified or non-qualified or
non-qualified pension, profit-sharing, group, bonus or other
supplemental compensation or fringe benefit plan constituting a part
of the Bank or its successors, affiliates or subsidiaries existing or
future compensation structure.
F. Headings.
---------
Headings and subheadings in this Agreement are inserted for reference
and convenience only and shall not be deemed a part of this Agreement.
<PAGE>
8
G. Applicable Law.
---------------
The validity and interpretation of this Agreement shall be government
by the laws of the United States of America and the Commonwealth of
Massachusetts.
V. ADMINISTRATION.
---------------
A. Plan Administrator.
-------------------
The Plan Administrator (the "Administrator") of this plan shall be the
Salary Committee of the Board. As Administrator, the Salary Committee
shall be responsible for the management, control and administration of
the Indexed CFO Salary Continuation Plan as established herein (the
"Plan"). It may delegate to others certain aspects of the management
and operation responsibilities of the Plan including the employment of
advisors and the delegation of ministerial duties to qualified
individuals.
B. Claims Procedure and Arbitration.
---------------------------------
In the event a dispute arises over benefits under this Agreement and
benefits are not paid to the CFO (or to her beneficiary in the case of
the CFO's death) and such claimants feel they are entitled to received
such benefits, then a written claim must be made to the Administrator
named above within ninety (90) days from the date payments are
refused. The Administrator and the Bank shall review the written
claim and if the claim is denied, in whole or in part, they shall
provide in writing within ninety (90) days of receipt of such claim
their specific reasons for such denial, reference to the provisions of
this Agreement upon which the denial is based and any additional
material or information necessary to perfect the claim. Such written
notice shall further indicate the additional steps to be taken by
claimants if a further review of the claim denial is desired. A claim
shall be deemed approved if the Administrator fails to take any action
within the aforesaid ninety day period.
If claimants desire a second review, they shall notify the
Administrator within ninety (90) days of the first claim denial.
Claimants may review this Agreement or any documents relating thereto
and submit any written issues and comments they may feel appropriate.
In its discretion, the Administrator shall then review the second
claim and provide a written decision within ninety (90) days of the
receipt of such claim. This decision shall likewise state the
specific reasons for the decision and shall include reference to
specific provisions of this Agreement upon which the decision is
based.
<PAGE>
9
If claimants continue to dispute the benefit denial based upon
completed performance of this Agreement or the meaning and effect of
the terms and conditions thereof, then claimants may submit the
dispute to a Board of Arbitration of final arbitration. Said Board of
Arbitration shall consist of one member selected by the claimant, one
member selected by the Bank, and the third member selected by the
first two members. The Board of Arbitration shall operate under any
generally recognized set of arbitration rules. The parties hereto
agree that they and their heirs, personal representatives, successors,
and assigns shall be bound by the decision of such Board of
Arbitration with respect to any controversy properly submitted to it
for determination.
Where a dispute arises as to the Bank's discharge of the CFO "For
Cause", then solely for the purpose of determining the CFO's rights
under this Agreement, such a dispute shall be likewise submitted to
arbitration as above described and the parties hereto agree to be
bound by the decision thereunder.
VI. EMPLOYMENT.
-----------
This Agreement is not an employment agreement and shall not be construed as
such. Nothing in this Agreement shall be construed to constitute or to be
evidence of any agreement or understanding, express or implied, on the part of
the Bank to employ or retain the CFO as an employee for any specific period of
time, or on the part of the CFO to remain as an employee of the Bank for any
specific period of time.
IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on this 14th day of
-------
April, 1998, and that upon execution, each has received a conforming copy.
FOR THE BANK,
/s/T. A. Scharfenstein 4/14/98
---------------------------- -------
T. A. Scharfenstein Date
Chairman, Board of Directors
/s/Margaret A. Murphy 4/14/98
---------------------------- -------
Margaret A. Murphy Date
<PAGE>
ENDORSEMENT METHOD
SPLIT DOLLAR PLAN AGREEMENT
---------------------------
Insurer:
Policy No.:
Bank: Rockport National Bank
Insured: Margaret A. Murphy
Relationship of
Bank to Insured: Employer
The respective rights and duties of the Bank and the Insured in the subject
policy shall be as defined in the following:
I. DEFINITIONS
-----------
Refer to the policy contract for the definition of the terms in the
Agreement.
II. POLICY TITLE AND OWNERSHIP
--------------------------
The parties shall cooperate in applying for and obtaining the policy.
Title and ownership shall reside in the Bank for its use and for the use of
the Insured all in accordance with this Agreement. The Bank alone may, to
the extent of its interest, exercise the right to borrow or withdraw on the
policy cash values. Where the Bank and the Insured (or assignee, with the
written consent of the Insured) mutually agree to exercise the right to
increase the coverage under the subject split dollar policy, then, in such
event, the rights, duties, and benefits of the parties to such increased
coverage shall continue to be subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
------------------------------
The Insured (or assignee) shall have the right and power to designate a
beneficiary or beneficiaries to receive her share of the proceeds payable
upon the death of the Insured and to elect and change a payment option for
such beneficiary, subject to any right or interest the Bank may have in
such proceeds, as provided in this Agreement.
IV. PREMIUM PAYMENT METHOD
----------------------
The Bank shall pay an amount equal to the planned premiums and any other
premium payments that might become necessary to keep the policy in force.
<PAGE>
2
V. TAXABLE BENEFIT
---------------
Annually the Insured will receive a taxable benefit equal to the assumed
cost of insurance as required by the Internal Revenue Service. The Bank
(or its administrator) will report to the Employee the amount of imputed
income received each year on Form W-2 or its equivalent. The split-dollar
arrangement provided for in this Agreement, which the parties intend to
satisfy the requirement of Rev. Ruling 64-328, 1964-2 C.B. 11, relates to a
life insurance policy with an initial face amount of $100,000 to be issued
on the life of the Insured to be owned by the Bank subject to an
endorsement in favor of the Insured.
VI. DIVISION OF DEATH PROCEEDS
--------------------------
Subject to Paragraph VII herein, the division of the death proceeds of the
policy is as follows:
A. Should the Insured be employed by the Bank at the time of his or her
death, the Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to an amount equal to eighty percent
(80%) of the net at risk insurance portion of the proceeds. The net
at risk insurance portion is the total proceeds less the cash value of
the policy.
B. Should the Insured not be employed by the Bank at the time of his or
her death, the Insured's beneficiary(ies) designated in accordance
with Paragraph III, shall be entitled to the following percentage of
the proceeds described in subparagraph VI(A) hereinabove that
corresponds to the year of service the Insured served with the Bank:
Full Years of Service
With the Bank Vested
------------- ------
0-4 10%
5 20%
6 30%
7 40%
8 50%
9 60%
10 70%
11 80%
12 90%
13 90%
14 90%
15 100%
<PAGE>
3
At any time in the event of a Change of Control, the Insured's portion
of the death proceeds shall be 100% vested to her beneficiaries.
C. The Bank shall be entitled to the remainder of such proceeds.
The Bank and the Insured (or assignees) shall share in any interest due on
the death proceeds on a pro rata basis as the proceeds due each
respectively bears to the total proceeds, excluding any such interest.
VII. DIVISION OF THE CASH SURRENDER
------------------------------
The Bank shall at all times be entitled to an amount equal to the policy's
cash value, as that term is defined in the policy contract, less any policy
loans and unpaid interest or cash withdrawals previously incurred by the
Bank and any applicable surrender charges. Such cash value shall be
determined as of the date of surrender. In the event of death, the Bank
shall be entitled to the greater of the premiums paid or the cash surrender
value.
VIII. PREMIUM WAIVER
--------------
If the policy contains a premium waiver provision, such waived amounts
shall be considered for all purposes of this Agreement as having been paid
by the Bank.
IX. TERMINATION OF AGREEMENT
------------------------
This Agreement shall terminate at the option of the Bank following thirty
(30) days written notice to the Insured upon the happening of any one of
the following:
1. The Insured shall leave the service of the Bank and accepts any
position at any other bank office in Essex County within one year of
her resignation.
2. The Insured shall be discharged from service with the Bank for cause.
The term "for cause" shall mean gross negligence or gross neglect or
the commission of a felony or gross-misdemeanor involving moral
turpitude, fraud, dishonesty or willful violation of any law that
results in any adverse effect on the Bank.
Upon such termination, the Insured (or assignee) shall have a ninety (90)
day option to receive from the Bank an absolute assignment of the policy in
consideration of a cash payment to the Bank, whereupon this Agreement shall
terminate. Such cash payment shall be the greater of:
1. The Bank's share of the cash value of the policy on the date of such
assignment, as defined in this Agreement.
<PAGE>
4
X. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
-------------------------------------------------------------------
In the event the policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits, on
expiration of the deferment period, shall be determined under the
provisions of this Agreement by regarding such endowment proceeds or the
commuted value of such annuity benefits as the policy's cash value.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
-----------------------------------------
The Insured may not, without the written consent of the Bank, assign to any
individual, trust, or other organization, any right, title or interest in
the subject policy nor any rights, options, privileges or duties created
under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
----------------------------------
This Agreement shall bind the Insured and the Bank, their heirs,
successors, personal representatives and assigns.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
--------------------------------------
The Salary Committee of the Board of Directors of the Bank is hereby
designated the Plan Administrator until resignation or removal by the Board
of Directors. As Plan Administrator, the Salary Committee of the Board of
Directors of the Bank shall be responsible for the management, control, and
administration of this Split Dollar Plan as established herein. The Plan
Administrator may allocate to others certain aspects of the management and
operation responsibilities of the Plan, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
XIV. FUNDING POLICY
--------------
The funding policy for this Split Dollar Plan shall be to maintain the
subject policy in force by paying, when due, all premiums required;
provided, however, that the Bank may, in its sole and absolute discretion,
cancel the policy or policies referred to herein, subject to the Insured's
right to purchase the policy for an amount equal to the greater of the
aggregate amount of premiums paid or the cash surrender value determined in
accordance with Paragraph VII hereof.
<PAGE>
5
XV. CLAIMS PROCEDURE FOR LIFE INSURANCE POLICY AND SPLIT DOLLAR PLAN
----------------------------------------------------------------
Promptly following the Insured's death, the parties shall cooperate in the
filing of a death claim in accordance with the Insurer's claims procedures.
Claims forms or claim information as to the subject policy can be obtained
by contacting Kaeding, Ernst & Company. When the Plan Administrator has a
claim which may be covered under the provisions described in the insurance
policy, he should contact the office named above and they will either
complete a claim form and forward it to an authorized representative of the
Insured or advise the named Plan Administrator what further requirements
are necessary. The Insured will evaluate and make a decision as to
payment. If the claim is payable, a benefit check will be issued to the
Plan Administrator.
In the event that a claim is not eligible under the policy, the Insurer
will notify the Plan Administrator of the denial pursuant to the
requirements under the terms of the policy. If the Plan Administrator is
dissatisfied with the denial of the claim and wishes to contest such claim,
denial, he should contact the office named above and they will assist in
making inquiry to the Insurer. All objections to the Insurer's actions
should be in writing and submitted to the office named above for
transmittal to the Insured.
XVI. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
-----------------------------------------------
The Insurer shall not be deemed a party to this Agreement, but will respect
the rights of the parties as herein developed upon receiving an executed
copy of this Agreement. Payment or other performance in accordance with
the policy provisions shall fully discharge the Insurer for any and all
liability.
XVII. EMPLOYMENT OF INSURED
---------------------
This Agreement is not an employment agreement and shall not be construed as
such. Northing in this Agreement shall be construed to constitute or to be
evidence of any agreement or understanding, express or implied, on the part
of the Bank to employ or retain the Insured as an employee for any specific
period of time, or on the part of the Insured to remain as an employee of
the Bank for any specific period of time.
XVIII. AMENDMENT
---------
This Agreement may be altered, amended or modified, including the addition
of any extra policy provisions, but only by written instrument signed by
all of the parties.
<PAGE>
6
XIX. GOVERNING LAW
-------------
This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the parties have signed and sealed this Agreement as of
the day and year first above written.
ROCKPORT NATIONAL BANK
BY: /s/ T.A. Scharfentstein
----------------------------------
T.A. Scharfenstein
Chairman, Board of Directors
/s/ Margaret A. Murphy
----------------------------------
Margaret A. Murphy
<PAGE>
7
BENEFICIARY DESIGNATION FORM
PRIMARY DESIGNATION:
Name Relationship
- ---- ------------
Christopher P. Murphy Spouse
- --------------------------------- ------------------------------
- --------------------------------- ------------------------------
- --------------------------------- ------------------------------
CONTINGENT DESIGNATION:
Kathryn J. Murphy Daughter (50%)
- --------------------------------- -----------------------------
Tess T. Murphy Daughter (50%)
- --------------------------------- -----------------------------
- --------------------------------- ------------------------------
/s/ Margaret A. Murphy April 23, 1998
- --------------------------------- ------------------------------
Signature of Insured Date
<PAGE>
AMENDMENT
TO THE EXECUTIVE SALARY
CONTINUATION PLAN AGREEMENT
DATED APRIL 14, 1998
This Amendment, made and entered into this 24 day of June, 1998, by and
between Rockport National Bank, a Bank organized and existing under the laws of
the Commonwealth of Massachusetts, hereinafter referred to as "the Bank", and
Margaret A. Murphy, the Chief Financial Officer of the Bank, hereinafter
referred to as "the CFO", shall effectively amend the Executive Salary
Continuation Plan Agreement dated April 14, 1998, as specifically set forth
herein pursuant to Subparagraph IV (C) of said Agreement.
1.) Subparagraph I (G), Index, shall be amended to include the following policy
-----
information:
Insurance Company: Alexander Hamilton
Policy Form: Flexible Premium Adjustable Life
Policy Name: Executive Security Plan IV
Insured's Age, Sex: Female, 43
Riders: None
Ratings: None
Face Amount: $360,000
Premiums Paid: $100,000
No. of Premium Payments: Single Premium
Assumed Purchase Date: April 14, 1998
This Amendment shall be effective on the date set forth herein above. To
the extent that any paragraph of the Executive Salary Continuation Plan
Agreement is not specifically amended herein, or in any other amendment thereto,
said paragraph shall remain in full force and effect as set forth in said
Agreement.
IN WITNESS WHEREOF, the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the 24 day of June,
1998, and that, upon execution, each has received a conforming copy.
ROCKPORT NATIONAL BANK
/s/ Maria C. Barkhouse By: /s/ Margaret A. Murphy, Sr. VP
--------------------------------- ------------------------------
Witness Title
/s/ Margot Doyle
--------------------------------- ------------------------------
Witness Margaret A. Murphy
<PAGE>
Exhibit 23.1
Consent of Cranmore, FitzGerald & Meaney
We hereby consent to the reference to this firm under the caption "Legal
Matters" in the Registration Statement on Form S-4, of Rockport National
Bancorp, Inc.
/s/ Cranmore, FitzGerald & Meaney
CRANMORE, FITZGERALD & MEANEY
April 19, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in this Registration Statement on Form S-4EF and
Proxy Statement and Prospectus of Rockport National Bancorp, Inc. (proposed
holding company for Rockport National Bank) of our report dated February
10, 1999, except note 12 which is as of February 23, 1999, on the
consolidated balance sheets of Rockport National Bank and subsidiaries as
of December 31, 1998 and 1997, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for each of the
years then ended and to the use of our name and the statements with respect
to us, as appearing under the heading "Independent Accountants" in the
Proxy Statement and Prospectus.
/s/ Wolf & Company, P.C.
Wolf & Company, P.C.
Boston, Massachusetts
April 14, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS OF ROCKPORT NATIONAL BANK AND SUBSIDIARIES AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,791,720
<INT-BEARING-DEPOSITS> 46,140
<FED-FUNDS-SOLD> 1,150,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 16,265,191
<INVESTMENTS-MARKET> 1,032,499
<LOANS> 37,947,654
<ALLOWANCE> 661,903
<TOTAL-ASSETS> 59,603,428
<DEPOSITS> 54,021,426
<SHORT-TERM> 0
<LIABILITIES-OTHER> 663,000
<LONG-TERM> 0
0
0
<COMMON> 209,775
<OTHER-SE> 4,709,227
<TOTAL-LIABILITIES-AND-EQUITY> 59,603,428
<INTEREST-LOAN> 2,859,581
<INTEREST-INVEST> 1,031,836
<INTEREST-OTHER> 86,441
<INTEREST-TOTAL> 3,977,858
<INTEREST-DEPOSIT> 1,200,417
<INTEREST-EXPENSE> 1,209,035
<INTEREST-INCOME-NET> 2,768,823
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,377,962
<INCOME-PRETAX> 889,168
<INCOME-PRE-EXTRAORDINARY> 889,168
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 561,993
<EPS-PRIMARY> 2.68
<EPS-DILUTED> 2.68
<YIELD-ACTUAL> 7.66
<LOANS-NON> 261,671
<LOANS-PAST> 260,542
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 673,564
<CHARGE-OFFS> 44,095
<RECOVERIES> 32,434
<ALLOWANCE-CLOSE> 661,903
<ALLOWANCE-DOMESTIC> 404,703
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 257,200
</TABLE>
<PAGE>
Exhibit 99.1
May 13, 1999
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Rockport National Bank to be held on June 15, 1999 at 10:00 a.m. at the Main
Office of the Bank, which is located at 16 Main Street, Rockport, Massachusetts.
Shareholders will vote upon the election of directors, ratification of
accountants, as well as upon the Reorganization of the Bank into a bank holding
company form of ownership. It is the unanimous opinion of the Bank's Board of
Directors that this Reorganization will provide certain competitive advantages
and alternatives not currently available to the Bank, will enable the Bank to
continue to meet the changing financial needs of its customers and the community
it serves as an independent community based institution and will provide
enhanced flexibility should the holding company decide to provide additional
banking related products and services.
During the Meeting, we will also report on the condition of the Bank.
Directors and officers of the Bank, as well as a representative of Wolf &
Company, P.C., the Bank's independent auditors, will be present to respond to
any questions you may have.
Your vote is very important, regardless of the number of shares you own.
On behalf of the Board of Directors, I urge you to sign, date and return the
enclosed proxy as soon as possible, even if you currently plan to attend the
Annual Meeting. This will not prevent you from voting in person, but will
assure that your vote is counted if you are unable to attend the Annual Meeting.
Your continued interest and support of Rockport National Bank are
appreciated.
Very truly yours,
Rockport National Bank
By: /s/ Peter A. Anderson
-----------------------------------
Peter A. Anderson
President and
Chief Executive Officer
<PAGE>
Exhibit 99.2
ROCKPORT NATIONAL BANK
16 Main Street
Rockport, MA 01966
(978) 546-3411
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DATE: June 15, 1999
TIME: 10:00 a.m.
PLACE: Main Office of the Bank
16 Main Street
Rockport, MA 01966
MATTERS TO BE VOTED ON:
. Election of eight directors.
. Ratification of the appointment of Wolf & Company, P.C. as our independent
accountants for December 31, 1999.
. Approval of the Plan and Agreement of Reorganization pursuant to which
Rockport National Bancorp, Inc., a proposed bank holding company will
acquire all of the outstanding shares of common stock of the Rockport
National Bank for shares of common stock of the bank holding company. Upon
consummation of the Reorganization, each share of Bank Common Stock will be
converted into one share of Company Common Stock.
. Any other matters properly brought before the meeting.
Your vote is important. Whether you plan to attend or not, please sign,
date, and return the enclosed proxy card in the envelope provided. If you
attend the meeting and prefer to vote in person, you may do so.
By Order of the Board of Directors,
By: /s/ Peter A. Anderson
-------------------------------------
Peter A. Anderson, President
and Chief Executive Officer
Rockport, Massachusetts
May 13, 1999
<PAGE>
Exhibit 99.3
PROXY FOR ANNUAL MEETING OF ROCKPORT NATIONAL BANK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ROCKPORT NATIONAL BANK
The undersigned holder(s) of the Common Stock of Rockport National Bank
(the "Bank") do hereby nominate, constitute and appoint Harold F. Beaton and
Frederick C. Frithsen, jointly and severally, proxies with full power of
substitution, for us and in our name, place and stead to vote all the Common
Stock of the Bank, standing in our name on its books on May 10, 1999 at the
Annual Meeting of its Shareholders to be held at the Main Office of the Bank, 16
Main Street, Rockport, Massachusetts on June 15, 1999 at 10:00 a.m. or at any
adjournment thereof with all the powers the undersigned would possess if
personally present, as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS (1) THROUGH (4)
(1) ELECT THE FOLLOWING EIGHT (8) PERSONS TO SERVE AS DIRECTORS OF THE BANK:
To elect: Peter A. Anderson; Wendel W. Cook; James W. Curtis, Jr.; Herbert
L. Elwell; Richard J. Meringer; Theodore A. Scharfenstein; Michael C. Shea;
and Robert H. Welcome, to serve for a one (1) year term, until their
successors have been elected and qualified. (except as marked to the
contrary below). This proxy confers upon the proxy holder the
discretionary authority to cumulate votes among the nominees in order to
elect all or as many nominees as possible.
<TABLE>
<S> <C> <C>
[ ] For all nominees [ ] Vote withheld from all nominees [ ] Vote withheld from nominees listed below
_______________________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________________
</TABLE>
(2) APPOINTMENT OF AUDITORS:
Proposal to ratify the resolution adopted by the Board of Directors
appointing the independent public accounting firm of Wolf & Company, P.C.
as independent auditors of the Bank for the fiscal year ending December 31,
1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) APPROVAL OF THE PLAN AND AGREEMENT OF REORGANIZATION:
To vote on the Plan and Agreement of Reorganization providing for the
merger of Rockport National Bank with and into The Interim National Bank of
Rockport, an interim national bank subsidiary of Rockport National Bancorp,
Inc., a proposed bank holding company, whereby Rockport National Bancorp,
Inc. will become a bank holding company for 100 percent of the outstanding
common stock of Rockport National Bank and whereby the shareholders of
Rockport National Bank will receive one share of the common stock of
Rockport National Bancorp, Inc. in exchange for each share of common stock
which they currently own in Rockport National Bank
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) Proposal to conduct whatever other business may properly be brought before
the meeting or any adjournment thereof. Management at present knows of no
other business to be presented by or on behalf of the Bank or its
Management at the meeting. However, if any other matters are properly
brought before the meeting, the persons named in this proxy or their
substitutes will vote in accordance with their best judgment.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATION INDICATED. IF NO
SPECIFICATION IS INDICATED, THIS PROXY WILL BE VOTED "FOR" PROPOSALS (1) THROUGH
(4 ).
Dated Dated
______________________________ _____ ______________________________ ______
(Signature) (Signature)
______________________________ _____ ______________________________ ______
(Please print your name here) (Please print your name here)
All joint owners must sign. When signing as attorney, executor, administrator,
- ---
trustee or guardian, please give full title. If more than one trustee,
----------
all must sign.
---
THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE MEETING BY WRITTEN
NOTICE TO THE COMPANY OR MAY BE WITHDRAWN AND YOU MAY VOTE IN
PERSON SHOULD YOU ATTEND THE ANNUAL MEETING
Please check below if you plan to attend the Annual Meeting.
[ ] I plan to attend the Annual Meeting
<PAGE>
EXHIBIT 99.4
_______________________________
REORGANIZATION
QUESTIONS AND
ANSWERS
_______________________________
ROCKPORT NATIONAL
BANCORP, INC.
(Proposed Bank Holding Company
for Rockport National Bank)
_______________________________
Rockport National Bank
16 Main Street
Rockport, MA 01966
<PAGE>
FACTS ABOUT THE REORGANIZATION
- ------------------------------
The following information is a brief summary and is subject to and qualified by
the more detailed information set forth in the attached Proxy Statement-
Prospectus dated May 13, 1999.
The Board of Directors of Rockport National Bank unanimously adopted a Plan and
Agreement of Reorganization (the "Reorganization) to create a bank holding
company for Rockport National Bank and operate the Bank through a bank holding
company structure. Rockport National Bank has filed applications to receive
approval of the transaction from the Office of the Comptroller of the Currency
and the Federal Reserve Board. Two-thirds of the Bank's outstanding shares must
vote in favor for the Reorganization, so YOUR VOTE IS VERY IMPORTANT. Please
return your proxy today in the enclosed postage-paid envelope. THE BOARD OF
DIRECTORS URGES YOU TO VOTE "FOR" THE REORGANIZATION.
This brochure answers some of the most frequently asked questions about the
Reorganization.
WHY IS ROCKPORT NATIONAL BANK CONVERTING TO A BANK HOLDING COMPANY STRUCTURE?
- ----------------------------------------------------------------------------
Rockport National Bank is committed to being an independent community based
institution and the Board of Directors believes that the bank holding company
structure is best suited for this purpose. As discussed in the Proxy Statement-
Prospectus, the Reorganization should provide the Bank greater flexibility to
provide products, services and alternatives not currently available to the Bank
and should enable the Bank to continue to meet the changing financial
requirements of its customers and the community it serves and will give
flexibility in the future if the holding company decides to enter into
additional banking related activities.
WHAT IS THE EFFECT OF THE REORGANIZATION?
- ----------------------------------------
As a result of the Reorganization, your ownership interest in the Holding
Company will be the same as your present ownership in the Bank. Moreover, your
interest in the Bank would be essentially the same as it presently is except
that it would be indirect ownership rather than direct ownership.
WILL THE REORGANIZATION AFFECT ANY OF MY DEPOSIT ACCOUNTS OR LOANS?
- ------------------------------------------------------------------
No. The Reorganization will have no effect on the balance of terms of any
deposit account or loan, and your deposits will continue to be federally insured
by the Federal Deposit Insurance Corporation ("FDIC") up to the maximum legal
limit.
SHOULD I VOTE?
- -------------
Yes. Your, "FOR" vote is very important!
PLEASE VOTE, SIGN, DATE AND RETURN YOUR PROXY CARD!
HOW MANY VOTES DO I HAVE?
- ------------------------
Your proxy card shows the number of votes you have.
MAY I VOTE IN PERSON AT THE ANNUAL MEETING?
- ------------------------------------------
Yes, but we would still like you to sign, date and mail your proxy today. If you
then attend the Annual Meeting in person and wish to change your vote, your
proxy may be revoked.
WHEN IS THE ANNUAL MEETING?
- --------------------------
The Annual Meeting will be held on June 15, 1999, at 10:00 a.m. at the Bank's
Main Office, 16 Main Street, Rockport, Massachusetts.
WILL THE BANK'S NAME CHANGE?
- ----------------------------
No. Rockport National Bank will continue to serve the banking needs of Cape Ann.
WILL THE BANK CLOSE ANY OF ITS OFFICES?
- --------------------------------------
No. Rockport National Bank will continue to operate its offices located at 16
Main Street and 37 King Street in Rockport, Massachusetts and at the Star Market
on Eastern Avenue in Gloucester, Massachusetts.
