FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Annual Report
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: December 31,1996
-----------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_______________to_______________
Commission file number 33-22224-B
-----------
Beverly National Corporation
- ------------------------------------------------------------------------------
(Name of small business in its charter)
A Massachusetts Corporation 04-2832201
(State or other jurisdiction of ----------------
incorporation or organization) (I.R.S. Employer
Identification No.)
240 Cabot Street Beverly, Massachusetts 0l9l5
- ---------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Issuers telephone number, including area code (508) 922-2100
---------------
Securities registered pursuant to Section l2 (b) of the Act:
Title of each class Name of each exchange on which registered
None
- ------------------- -----------------------------------------
Securities registered pursuant to l2(g) of the Act:
None
- ------------------- ------------------------------------------
(Title of class)
<PAGE>
Check whether the issuer (l) filed all reports required to be filed by Section
l3 or l5 (d) of the Securities Exchange Act during the past l2 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
-------- --------
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.[ ].
State issuer's revenues for its most recent fiscal year. $15,061,529
-----------
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. (See definition of affiliate in Rule 12b-2 of the Exchange Act).
$11,726,925
- -----------
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated. State the number of shares
outstanding of each of the issuer's classes of common equity, as of the
latest practicable date. 754,382
-------
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
PART l
ITEM l. BUSINESS
Beverly National Corporation, a Massachusetts corporation ("Corporation or
Holding Company"), is a registered bank holding company under the Bank Holding
Company Act of l956, as amended. The Holding Company has one banking
subsidiary, Beverly National Bank ("Bank"), and also owns l00% of a
Massachusetts Business Trust; Cabot Street Realty Trust. The principal
executive office of the Corporation is located at 240 Cabot Street, Beverly,
Massachusetts 0l9l5, and telephone number is (508) 922-2100. The Holding
Company owns all outstanding shares of the Bank and Cabot Street Realty Trust.
The Bank is engaged in substantially all of the business operations customarily
conducted by an independent commercial bank in Massachusetts. Banking services
offered include acceptance of checking, savings and time deposits and the
making of commercial, real estate, installment and other loans. The Bank also
offers a full range of trust services, official checks, traveler's checks, safe
deposit boxes, automatic teller machines and customary banking services to its
customers.
The business of the Bank is not significantly effected by seasonal factors.
In the last five years the Bank derived its operating income from the following
sources:
% of Operating Income
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Interest and fees on loans 68% 63% 58% 60% 62%
Interest and dividends on
Securities and Fed. Funds
Sold and Certificate of Deposit 18 23 28 26 25
Charges, fees and other
sources 14 14 14 14 13
---- ---- ---- ---- ----
100% 100% 100% 100% 100%
Competition
- -----------
In Massachusetts generally, and in the Bank's primary service area, there is
intense competition in the commercial banking industry. In addition to
commercial banks, the Bank competes with other financial institutions such as
savings banks, savings and loan associations and credit unions, in obtaining
lendable funds and in making loans. In the Bank's primary service area there
are two national banks, one Massachusetts trust company, five savings banks,
two co-operative banks and one finance company. Included among those financial
institutions are regional banks such as Bank Boston and Fleet Bank
Massachusetts.
<PAGE>
Regulation of the Corporation
- -----------------------------
The Corporation is a registered bank holding company under the Bank Holding
Company Act of l956, as amended. It is subject to the supervision and
examination of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") and files with the Federal Reserve Board the reports
as required under the Bank Holding Company Act.
The Bank Holding Company Act generally requires prior approval by the Federal
Reserve Board of the acquisition by the Corporation of substantially all the
assets or more than five percent of the voting stock of any bank. The Bank
Holding Company Act also allows the Federal Reserve Board to determine (by
order or by regulation) what activities are so closely related to banking as to
be a proper incident of banking, and thus, whether the Corporation can engage
in such activities. The Bank Holding Company Act prohibits the Corporation and
the Bank from engaging in certain tie-in arrangements in connection with any
extension of credit, sale of property or furnishing of services.
Federal laws now permit adequately capitalized bank holding companies to
venture across state lines to offer banking services through bank subsidiaries
to a wider geographic market. In light of this change in the law, it will be
possible for large super-regional organizations to enter many new markets
including the market served by the Bank. It is not possible to assess what
impact these changes in the regulatory scheme will have on the Corporation or
the Bank.
The Corporation is subject to examination by the Board of Governors of the
Federal Reserve System. The Federal Reserve Act also imposes certain
restrictions on loans by the Bank to the Corporation and certain other
activities, on investments, in their stock or securities, and on the taking by
the Bank of such stock or securities as collateral security for loans to any
borrower. In addition, the Corporation is subject to examination.
Under the Bank Holding Company Act of l956, as amended and the regulations of
the Federal Reserve System promulgated thereunder, no corporation may become a
bank holding company as defined therein, without prior approval of the Board of
Governors of the Federal Reserve System. The Corporation received the approval
of the Board of Governors to become a bank holding company on May 29, l984.
The Corporation will also have to secure prior approval of the Board of
Governors of the Federal Reserve System if it wishes to acquire voting shares
of any other bank, if after such acquisition it would own or control more than
5% of the voting shares of such bank. The Corporation is also limited under
the Bank Holding Company Act of l956, as amended, as to the types of business
in which it may engage.
The Corporation, as a bank holding company, is subject to the Massachusetts
Bank Holding Company laws.
<PAGE>
The regulations of the Federal Reserve System, promulgated pursuant to Bank
Holding Company Act require bank holding companies to provide the Federal
Reserve Board with written notice before purchasing or redeeming equity
securities if the gross consideration for the purchase or redemption, when
aggregated with the net consideration paid by the Company for all such
purchases or redemptions during the preceding twelve months, is equal to 10% or
more of the company's consolidated net worth. For purposes of Regulation Y,
"net consideration" is the gross consideration paid by the company for all of
its equity securities purchased or redeemed during the period, minus the gross
consideration received for all of its equity securities sold during the period
other than as part of a new issue.
Regulation of the Bank
- ----------------------
The Bank is subject to regulation by the Comptroller of the Currency, the Board
of Governors of the Federal Reserve System and the Federal Deposit Insurance
Corporation. The business of the Bank is subject in certain areas to state
laws applicable to banks.
Employees
- ---------
The Corporation and the Bank employ 94 officers and employees.
<PAGE>
Distribution of Assets, Liabilities and Stockholders' Equity:
- -------------------------------------------------------------
Interest Rates and Interest Differential
- ----------------------------------------
The following tables present the condensed average balance sheets and the
components of net interest differential for the two years ended December 31,
l996 and l995. The total dollar amount of interest income from earning assets
and the resultant yields are calculated on a tax equivalent basis.
1996
------------------------------------
Average Interest Yield/
Balance Inc./Exp. Rate
------------------------------------
ASSETS
Federal funds sold $ 9,530,601 $ 497,253 5.22%
Investment securities(1) 27,728,937 1,572,490 5.67%
Securities available for sale 12,435,572 706,134 5.68%
Loans, net of unearned income (1,2,3) 110,537,761 10,204,645 9.23%
------------ ----------- -----
Total earning assets 160,232,871 12,980,522 8.10%
------------ ----------- -----
Other non interest- earning assets 13,148,160
------------
Total average assets $173,381,031
============
LIABILITIES
Savings deposits $ 36,518,157 $ 1,102,811 3.02%
NOW accounts 28,586,728 468,296 1.64%
Money market accounts 21,302,347 670,187 3.15%
Time deposits $100,000 and over 4,198,562 235,271 5.60%
Other time deposits 35,359,559 1,967,671 5.56%
Short-term borrowings 0 0 0%
Notes payable 660,227 59,338 8.99%
------------ ----------- -----
Total interest-bearing liabilities 126,625,580 4,503,574 3.56%
------------ ----------- -----
Non interest-bearing deposits 31,040,004
0ther non interest- bearing liabilities 1,517,702
Stockholders' equity 14,197,745
------------
Total average liabilities and
stockholders' equity $173,381,031
============
Net interest income $ 8,476,948
===========
Net yield on interest earning assets 5.29%
=====
<PAGE>
(1) Interest income and yield are stated on a fully tax-equivalent basis. The
total amount of adjustment is $14,197. A federal tax rate of 34% was used in
performing this calculation.
(2) Includes loan fees of $215,954.
(3) Includes non-accruing loan balances and interest received on non-accruing
loans.
<PAGE>
Distribution of Assets, Liabilities and Stockholders' Equity:
- -------------------------------------------------------------
Interest Rates and Interest Differential(Continued)
- ---------------------------------------------------
1995
----------------------------------------
Average Interest Yield/
Balance Inc./Exp. Rate
----------------------------------------
ASSETS
Federal Funds sold $ 5,439,178 $ 317,032 5.83%
Investment securities (l) 41,431,251 2,238,402 5.40%
Securities available for sale 10,392,725 590,956 5.69%
Loans, net of unearned income (1,2,3) 93,226,841 8,504,806 9.12%
------------ ----------- -----
Total earning assets 150,489,995 11,651,196 7.74%
------------ ----------- -----
Other non interest-earning assets 13,719,694
------------
Total average assets $164,209,689
============
LIABILITIES
Savings deposits $ 36,070,516 $ 1,112,693 3.08%
NOW accounts 29,631,193 407,670 1.38%
Money market accounts 21,560,428 714,734 3.32%
Time deposits $100,000 and over 3,287,467 178,170 5.42%
Other time deposits 29,491,197 1,644,838 5.58%
Short-term borrowings 15,068 923 6.13%
Notes payable 1,033,544 96,134 9.30%
------------ ----------- -----
Total interest-bearing liabilities 121,089,413 4,155,162 3.43%
------------ ----------- -----
Non interest-bearing deposits 28,985,310
Other non interest-bearing liabilities 1,162,614
Stockholders' equity 12,972,352
--------------
Total average liabilities and
stockholders' equity $ 164,209,689
==============
Net interest income $ 7,496,034
===========
Net yield on interest earning assets 4.98%
-----
<PAGE>
(1) Interest income and yield are stated on a fully tax-equivalent basis. The
total amount of adjustment is $14,537. A federal tax rate of 34% was used in
performing this calculation.
(2) Includes loan fees of $151,962.
(3) Includes non-accruing loan balances and interest received on non-accruing
loans.
The following table shows, for the periods indicated, the dollar amount of
changes in interest income and interest expense resulting from changes in
volume and interest rates.
1996 as compared to l995
---------------------------------------
Due to a change in:
Volume(1) Rate(1) Total
---------------------------------------
Interest income from:
Federal funds sold $ 216,416 $ (36,195) $ 180,221
Investment securities (772,855) 106,943 (665,912)
Securities available for sale 116,217 (1,039) 115,178
Loans, net of unearned interest 1,597,849 101,990 1,699,839
----------- --------- -----------
Total $ 1,157,627 $ 171,699 $ 1,329,326
----------- --------- -----------
Interest expense on:
Savings deposits $ 12,996 $ (22,878) $ (9,882)
NOW accounts (14,734) 75,360 60,626
Money market accounts (8,909) (35,638) (44,547)
Time deposits $100,000 and over 50,820 6,281 57,101
Other time 328,705 (5,872) 322,833
Short term borrowings (923) 0 (923)
Notes payable (33,852) (2,944) (36,796)
----------- ---------- -----------
Total 334,103 14,309 348,412
------------ ---------- -----------
Net interest income $ 823,524 $ 157,390 $ 980,914
=========== ========== ===========
<PAGE>
1995 as compared to l994
---------------------------------------
Due to a change in:
Volume(1) Rate(1) Total
---------------------------------------
Interest income from:
Certificate of deposit $ (1,046) $ 0 $ (1,046)
Federal funds sold 33,642 95,763 129,405
Investment securities (704,366) 125,954 (578,412)
Securities available for sale 87,219 (29,869) 57,350
Loans, net of unearned interest 1,052,790 3,904 1,056,694
---------- ---------- ----------
Total $ 468,239 $ 195,752 $ 663,991
---------- ---------- ----------
Interest expense on:
Savings deposits $ (190,161) $ 206,887 $ 16,726
NOW accounts (40,852) (70,268) (111,120)
Money market accounts (36,084) 255,506 219,422
Time deposits $100,000 and over 27,560 44,832 72,392
Other time 135,518 430,600 566,118
Short term borrowings (44,246) (14,124) (58,370)
Notes payable 45,258 (14,579) 30,679
---------- --------- ----------
Total (103,007) 838,854 735,847
---------- --------- ----------
Net interest income $ 571,246 $(643,102) $ (71,856)
========== ========= ==========
(1) The change in interest attributed to both rate and volume has been
allocated to the changes in the rate and the volume ona pro rated basis.
<PAGE>
Investment Portfolio
The following table indicates the carrying value of the Corporation's
consolidated investment portfolio at December 31, l996 and 1995:
1996 Carrying Value 1995 Carrying Value
------------------- -------------------
Investments Held to Maturity:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $22,407,095 $32,402,473
Investments Held to Maturity:
Obligations of states and
political subdivisions 227,373 481,245
Investments Held to Maturity:
Other debt securities 300,000 300,000
----------- -----------
$22,934,468 $33,183,718
=========== ===========
Federal Reserve Bank Stock 97,500 97,500
=========== ===========
Investments Available for sale $17,608,128 $11,153,903
=========== ===========
As of January 1, 1994, the Corporation adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". The adoption of SFAS No. 115 had the following effect on
the consolidated financial statements for the year ended December 31, 1994:
Addition to stockholder's equity:
Net unrealized holding gain on
available-for-sale securities............ $57,161
Less tax effect........................... 24,166
-------
$32,995
=======
<PAGE>
The following table shows the maturities, amortized cost basis and weighted
average yields of the Corporation's consolidated investment in held to maturity
and available for sale securities at December 31, l996. The yields on state
and municipal securities are presented on a tax equivalent basis. A federal
tax rate of 34% was used in performing this calculation.*
(In thousands)
After one After five
Within but within but within After
one year five years ten years ten years
Maturing: Amount Yield Amount Yield Amount Yield Amount Yield
- -------- ------ ----- ------ ----- ------ ----- ------ -----
U.S. Govt.
& Agency
obligations $7,499 5.60% $31,383 6.00% $1,001 7.00%
State and
Political
subdivisions 42 5.16% 185 6.44% $100 4.69%
Other
securities 300 8.10%
------ ----- ------- ----- ------ ----- ---- -----
$7,541 5.60% $31,568 6.00% $1,301 7.25% $100 4.69%
====== ===== ======= ===== ====== ===== ==== =====
* Federal Reserve Stock not included.
Non-Accrual, Past Due and Restructured Loans
- --------------------------------------------
It is the policy of the Bank to discontinue the accrual of interest on loans
when, in management's judgment, 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:
(In thousands) 1996 1995
---- ------
Loans, non-accrual $346 $2,374
Loans past due 90 days or
more and still accruing 0 737
---- -----
Total $346 $3,111
==== ======
<PAGE>
The amount of interest income recorded during 1996 and 1995 on non-accrual
loans and restructured loans outstanding at December 31, 1996 and 1995 amounted
to $1,737 and $16,593, respectively. Had these loans performed in accordance
with their original terms, the amount recorded would have been $37,617 in 1996
and $190,312 in 1995.
As of December 31, 1996, there were no loans which are not now included above
but 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.
There are no industry concentrations in the Bank's Loan Portfolio, however
there is a geographical concentration as the Bank's market area is northeastern
Massachusetts.
<PAGE>
Loan Portfolio
The following table summarizes the distribution of the Bank's loan portfolio
and mortgages held for sale as of December 31 the years indicated:
(In thousands) 1996 1995 1994 1993 1992
------- -------- -------- ------- -------
Commercial, financial
& agricultural $16,947 $ 16,486 $ 16,323 $16,689 $21,154
Real estate-
construction
and land development 5,847 4,649 3,807 1,622 960
Real estate-
residential 40,983 34,217 26,037 27,345 26,580
Real estate-
commercial 46,150 42,588 35,702 32,591 29,002
Consumer 6,538 5,594 6,481 7,028 10,228
Municipal tax-exempt
obligations 452 465 146 0 0
Loans to depository
institutions 0 0 0 0 0
Other 583 787 176 166 241
-------- -------- ------- ------- -------
$117,500 $104,786 $88,672 $85,441 $88,165
Allowance for possible
loan losses (2,197) (2,073) (2,075) (2,764) (2,555)
Deferred loan fees net (86) (97) (40) (13) (62)
Unearned income 0 0 (1) (8) (50)
-------- -------- ------- ------- -------
Net loans $115,217 $102,616 $86,556 $82,656 $85,498
======== ======== ======= ======= =======
Loan maturities for commercial, financial and agricultural at December 31, l996
were as follows: $11,906,766 due in one year or less; $4,611,215 due after one
year through five years; $429,407 due after five years. Of the Bank's
commercial, financial and agricultural loans due after one year, $4,403,495
have floating or adjustable rates and $637,127 have fixed rates.
Loan maturities for real estate construction and land development at December
31, 1996 were as follows: $2,136,966 due in one year or less, $1,233,862 due
after one year through five years and $2,476,664 due after five years.
<PAGE>
Summary of Loan Loss Experience
The following table summarizes historical data with respect to loans
outstanding, loan losses and recoveries, and the allowance for possible loan
losses at December 31 for each of the years indicated:
(In thousands) 1996 1995 1994 1993 1992
-------- ------- ------- ------- ------
Average loans outstanding,
net of unearned income $110,538 $93,227 $82,154 $84,721 $91,435
======== ======= ======= ======= ======
Allowance for possible loan losses
Balance at beginning
of period 2,073 2,075 2,764 2,555 1,270
------ ------ ------ ------ ------
Charge-offs:
Real Estate-
Construction 0 0 0 0 0
Real Estate-
Residential 0 0 (64) 0 (205)
Real Estate-
Commercial (670) (28) (322) (5) (403)
Commercial,
Financial & Agric. (76) (20) (741) (591) (356)
Consumer (9) (30) (22) (35) (89)
Municipal Tax Exempt Loans 0 0 0 0 0
Loans to Depository Inst. 0 0 0 0 0
Other Loans 0 0 0 0 0
Recoveries:
Real Estate-Construction 0 0 0 0 0
Real Estate-Residential 209 50 0 0 4
Real Estate-Commercial 265 10 0 6 0
Commercial, Financial
& Agric. 385 10 234 156 26
Consumer 21 6 11 28 28
Municipal Tax Exempt Loans 0 0 0 0 0
Loans to Depository Inst. 0 0 0 0 0
Other loans 0 0 0 0 0
---- ---- ---- ---- ----
Net charge-offs 125 (2) (904) (441) (995)
---- ---- ---- ---- ----
Provision for loan losses 0 0 215 650 2,280
------ ----- ------ ------ ------
Balance at period end $2,198 $2,073 $2,075 $2,764 $2,555
====== ====== ====== ====== ======
Ratio of net charge-offs
to average loans 0.11% 0.00% 1.10% .52% 1.09%
====== ===== ===== ===== =====
<PAGE>
ALLOWANCE FOR POSSIBLE LOAN LOSSES:
- ----------------------------------
An allowance is available for losses which may be incurred in the future on
loans in the current portfolio. The allowance is increased by provisions
charged to current operations and is decreased by loan losses, net of
recoveries. The provision for loan losses is based on management's evaluation
of current and anticipated economic conditions, changes in the character and
size of the loan portfolio, and other indicators. The balance in the allowance
for possible loan losses is considered adequate by management to absorb any
reasonably foreseeable loan losses.
The following table reflects the allocation of the allowance for possible loan
losses and the percentage of loans in each category to total outstanding loans
as of December 31 for each of the years indicated:
1996 1995
Percent of Percent of
loans in loans in
category to category to
Amount total loans Amount total loans
--------- ----------- -------- ------------
Commercial
Financial &
Agricultural $ 397,064 14.6% $ 649,208 15.7%
Real Estate-
Construction 40,968 5.0% 72,056 4.4%
Real Estate-
Residential 309,374 34.3% 102,302 32.7%
Real Estate-
Commercial 606,220 39.6% 698,032 40.6%
Consumer 9,208 5.6% 19,937 5.4%
Municipal Tax
Exempt Loans 0 .4% 0 .4%
Other 0 .5% 0 .8%
Unallocated 834,860 0% 530,988 0%
---------- ------ ---------- ------
Total $2,197,694 100.0% $2,072,523 100.0%
========== ====== ========== ======
<PAGE>
Deposits
- --------
The following table shows the average deposits and average interest rate paid
for the last two years:
1996 1995
------------------------ ------------------------
Average Average Average Average
Balance Rate Balance Rate
------------- -------- ------------- --------
Demand Deposits $ 31,040,004 0.00% $ 28,985,310 0.00%
NOW Accounts 28,586,728 1.64% 29,631,193 1.38%
Money Market Accounts 21,302,347 3.15% 21,560,428 3.32%
Savings Deposits 36,518,157 3.02% 36,070,516 3.08%
Time Deposits $100,000
and over 4,198,562 5.60% 3,287,467 5.42%
Other Time Deposits 35,359,559 5.56% 29,491,197 5.58%
------------- ----- ------------ -----
Total $ 157,005,357 2.83% $149,026,111 2.72%
============= ===== ============ =====
As of December 31, 1996, the Bank had certificates of deposit in amounts of
$100,000 and over aggregating $4,434,744. These certificates of deposit mature
as follows:
Maturity Amount
-------- ----------
3 months or less $1,312,207
Over 3 months through 6 months 857,012
Over 6 months through 12 months 501,622
Over 12 months 1,763,903
----------
Total $4,434,744
==========
<PAGE>
Return on Equity and Assets
- ---------------------------
The following table summarizes various financial ratios of the Corporation for
each of the last two years:
Year ended December 31,
------------------------
1996 1995
-------- --------
Return on average total
assets (net income divided
by average total assets) 1.16% .87%
Return on average
stockholders' equity
(net income divided by
average stockholders' equity) 14.22% 11.04%
Dividend payout ratio
(total declared dividends
divided by net income) 21.66% 29.43%
Equity to assets ratio
(average stockholders' equity
as a percentage of average
total assets) 8.19% 7.90%
Short-term Borrowings
- ---------------------
The Bank engages in certain borrowing agreements throughout the year. These
are in the ordinary course of the Bank's business and are composed of three
types. Federal funds purchased represent daily transactions which the Bank
uses to manage its funds and liquidity position to comply with regulatory
requirements. Interest rates fluctuate daily reflecting existing market
conditions. Other borrowings in 1994 consisted of a term loan from Warren Five
Cents Savings Bank to Beverly National Corporation. There were no short-term
borrowings during 1996. The following table summarizes such short-term
borrowings at December 31 for each of the years indicated:
Maximum Weighted
amount average
out- Average interest
Balance, standing amount rate
end of at any out- during
Year Ended period month-end standing period
- ---------- ------ ---------- --------- ---------
1996 -0- -0- -0- -0-
1995 -0- -0- $ 15,068 6.13%
1994 -0- $1,250,000 $665,753 8.91%
<PAGE>
ITEM 2. PROPERTIES
The Bank's main office (15,000 square feet) at 240 Cabot Street, Beverly,
Massachusetts is owned by the Bank. The Bank completed renovations in 1988
which has enhanced the Bank's ability to effectively serve its customer base.
The Bank's Operation Center (12,000 square feet) is located at 246 Cabot
Street, immediately adjacent to the Bank's main office, and is owned by Cabot
Street Realty Trust. The Operations Center provides a loan center and an on-
site item processing facility for the Bank. It is encumbered by a mortgage
securing an industrial revenue bond with an outstanding balance as of December
31, 1996 of $385,627.
The Bank's South Hamilton office, built in 1991 (2,388 square feet) at 25
Railroad Avenue, South Hamilton, Massachusetts is owned by the Corporation.
The office is part of a four-unit condominium. The three other units are owned
by third parties.
The Bank's Topsfield office (2,109 square feet) at 15 Main Street, Topsfield,
Massachusetts is leased by the Bank from a third party with a term that expires
February 2000 and a current annual rent of $39,280.
The Bank's North Beverly Plaza office (5,127 square feet) at 63 Dodge Street,
Beverly, Massachusetts is leased by the Bank from a third party with a term
that expires October 2001 and a current annual rent of $40,500.
The Bank has two stand-alone, automatic teller machines which are located at
Beverly Hospital, Herrick Street, Beverly, Massachusetts and Crosby's Market,
Manchester by the Sea.
Listed below are additions to property in 1997:
The Bank has established a High School Branch located at Hamilton-Wenham
Regional High School (340 square feet) at Bay Road, Hamilton, Massachusetts.
The Bank has established a High School Branch at Beverly High School (491
square feet) at Sohier Road, Beverly, Massachusetts.
The Bank has established a stand-alone ATM which is located at Cummings Center
Parking Lot, 100 Cummings Center, Beverly, Massachusetts.
The Bank established a full-service Branch Office, at Cummings Center (3,502
square feet), Cummings Center, 100 Cummings Center-Suites 101M and 101N,
Beverly, Massachusetts. The current annual rent for Cummings is $61,850.55
In Management's opinion, all properties occupied by the Bank are in good
condition, and are adequate at present and for the foreseeable future for the
purposes for which they are being used and are properly insured.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
There are no pending material legal proceedings other than ordinary routine
litigation incidental to normal business to which the Corporation or the Bank
is a party or to which any of their properties are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1996.
<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Corporation's common
stock which is not actively traded and is not listed on any public exchange or
the National Association of Securities Dealer's Automatic Quotation System
("NASDAQ"). Shares are traded on a sporadic workout basis between individuals.
The following table sets forth, to the best knowledge of Management the
representative prices, for each quarterly period during the last two years.
These prices are based on private transactions that management is aware of and
transactions brokered through Advest.
1996 1995
----- ------
Quarter ended March 31, $18.50 $15.00
Quarter ended June 30, 19.75 17.00
Quarter ended Sept. 30, 20.25 17.50
Quarter ended Dec. 31, 20.30 18.50
Capital
- -------
The Beverly National Corporation Employee Stock Ownership Plan (ESOP)
established a $400,000 line with Andover Bank for the purpose of purchasing
Beverly National Corporation Stock. As of December 31, 1996 the ESOP purchased
$360,000 of Beverly National Corporation stock.
For restrictions on the ability of the Bank to pay dividends to the Corporation
(see Note 15).
The number of record holders of the Corporation's common stock was 383 as of
March 1, 1997. The Corporation declared quarterly cash dividends and one
special dividend on its outstanding common stock, which amounted to an
aggregate regular dividend per share of $.46 for the year, $.12 special
dividends per share during 1996 and a $.44 regular dividend per share; $.12
special dividend per share during 1995.
<PAGE>
ITEM 6.
MANAGEMENT'S DISCUSSIONS AND ANALYSIS 1996 AS COMPARED TO 1995
- ---------------------------------------------------------------
The total assets of the Corporation as of December 31, 1996 amounted to
$188,017,011 as compared to $169,120,694 in 1995. This increase amounted to
$18,896,317 or 11.2%.
The economy of the Corporation's market area is considered stable.
Investment Portfolio
- --------------------
As of January 1, 1994, the Corporation adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." This resulted in new classifications of investment
securities; Investments-Held-to-Maturity, and Investments Available-for-Sale.
The securities reported in available for sale are carried at fair value on the
balance sheet. Unrealized holding gains and losses are not included in
earnings, but are reported as a net amount (less expected tax) in a separate
component of capital until realized. The securities reported in Securities-
Held-to-Maturity are carried at amortized cost.
Securities-Held-to-Maturity
- ---------------------------
The investments in Securities-Held-to-Maturity totaled $22,934,468 at December
31, 1996 as compared to $33,183,718 at December 31, 1995. This is a decrease
of $10,249,250 or 30.9%. U.S. Treasury and U.S. Agency obligations totaled
$22,407,095 at December 31, 1996 as compared to $32,402,473 at December 31,
1995 a decrease of $9,995,378 or 30.8%. The decrease in U.S. Treasury and
Agency securities funded loan growth. The majority of investment purchases
were made in the 24 to 60-month maturity range. State and municipal
obligations held to maturity totaled $227,373 at December 31, 1996 as compared
to $481,245 at December 31, 1995. This decrease totaled $253,872 or 52.7%. The
decrease in the state and municipal portfolio is attributed to maturing issues.
Management continues the investment focus on short to medium term U.S. Treasury
notes and Government agencies.
It is management's intent to hold those securities designated as held-to-
maturity in the Investment Securities Portfolio until maturity. The strategic
maturity spread of the portfolio includes consideration for foreseeable events
and liquidity conditions.
Securities-Available-for-Sale
- -----------------------------
The balance of Investments in Available-for-Sale totaled $17,608,128 as of
December 31, 1996 as compared to the balance of Securities- Available-for-Sale
which totaled $11,153,903 as of December 31, 1995, an increase of $6,454,225 or
57.9%. These investments are primarily comprised of short to medium term U.S.
Treasury and U.S. Government Agency Securities. These securities may be used
to meet the liquidity needs of the Bank or Corporation. This increase is
designed to give the Bank additional flexibility in managing liquidity needs.
<PAGE>
Federal Funds Sold
- ------------------
These short-term Liquidity Loans to other commercial banks totaled $14,100,000
at December 31, 1996 in comparison to $5,800,000 at December 31, 1995. The
Bank's liquidity position is adequate to cover the increased loan demand or
reduction of deposits. The increase of Federal Funds Sold can be attributed
to an increased volume of deposit customers, at year end.
Loans
- -----
Net Loans at December 31, 1996 totaled $114,252,890 as compared to
$102,491,814 at December 31, 1995. This increase was $11,761,076 or 11.5%.
Commercial Loans totaled $16,946,508 at December 31, 1996 as compared to
$16,485,532 at December 31, 1995. This is an increase of $460,976 or 2.8%.
This is attributed to increased competition for small business credit. The
growth in the Bank's loan portfolio has been primarily in the Real Estate
Portfolio. Real estate construction loans totaled $5,847,491 at December 31,
1996 as compared to $4,648,818 at December 31, 1995. This is an increase of
$1,198,673 or 25.8%, which can be attributed to both increased commercial and
residential real estate construction activity. Real estate residential loans
totaled $40,019,022 at December 31, 1996 as compared to $34,092,682 at
December 31, 1995. This is an increase of $5,926,340 or 17.4%. The increased
residential loan balances can be attributed to a successful variable rate
program. Real estate commercial loans totaled $46,150,365 at December 31, 1996
as compared to $42,587,993 at December 31, 1995, representing an increase of
$3,562,372 or 8.4%. The strong local reputation of the Bank's commercial
lending team has allowed the Bank's portfolio to grow as the local economy has
strengthened. This increase is attributable to the Bank's marketing campaign
to raise the level of awareness of the Bank in the community. Consumer loans
totaled $6,538,122 at December 31, 1996 as compared to $5,593,914 at December
31, 1995. This is an increase of $944,208 or 16.9%.
There are no industry concentrations in the Bank's loan portfolio. The
Corporation is however exposed to geographic concentrations as the majority of
the Bank's loan portfolio is compiled of loans collateralized by real estate
located in the Commonwealth of Massachusetts.
Premises and Equipment
- ----------------------
Premises and equipment increased $56,494 or 1.3% from $4,377,035 at December
31, 1995 to $4,433,529 December 31, 1996. This increase can be attributed to
the establishment of a new ATM located at Crosby's Market, Manchester by the
Sea and construction in progress at the following locations: Beverly High
School Branch, Hamilton-Wenham Regional High School Branch, Cummings Center
Branch and Cummings Center ATM kyosk.
<PAGE>
Deposits
- --------
Deposits totaled $170,738,228 at December 31, 1996 as compared to $153,498,225
at December 31, 1995. The increase of $17,240,003 or 11.2% can be attributed
to deposit products being priced competitively to increase market share.
Deposit growth can be attributed to the continued growth of core deposits along
with two successful certificate of deposit programs that attracted
approximately $10,000,000 in deposits during the third quarter 1996. The
increased NOW account balance can be attributed to a successful municipal
deposit program.
Notes Payable
- -------------
Notes Payable totaled $385,627 at December 31, 1996 as compared to $685,627 at
December 31, 1995, a decrease which reflects the payment of a loan from First
and Ocean National Bank in the amount of $300,000. The principal balance of
the loan was reduced $300,000 in the fourth quarter, which paid off the loan
(see Note 7 of the financial statements). The balance outstanding of Notes
Payable reflects the $385,627 balance of an industrial revenue bond issued for
Cabot Street Realty Trust. The Corporation expects cash flow from Cabot Street
Realty Trust and dividends from the Bank to fund the repayment of the loan.
Other Liabilities
- -----------------
Other Liabilities increased $318,859 or 29.8% from $1,071,736 at December 31,
1995 to $1,390,595 at December 31, 1996. This increase is due to higher
interest payable, taxes payable and accrued benefits.
Capital
- -------
The primary increase in capital of $1,671,809 can be attributed to internal
capital growth of $1,582,070, a net reduction of the leveraged ESOP of $34,354
and exercised stock options from Treasury stock.
Consolidated Statements of Income
- ---------------------------------
Net interest and dividend income totaled $8,462,751 for the year ended December
31, 1996 as compared to $7,481,497 for the year ended December 31, 1995. This
increase was $981,254 or 13.1%. The interest income and interest expense
described below created this occurrence.
Loan Income
- -----------
Interest and fee's on loans totaled $10,198,532 for the year ended December 31,
1996 as compared to $8,504,806 for 1995. This is an increase of $1,693,726 or
19.9%. The loan portfolio continued to change in composition during the year.
Unsecured consumer loans continued to decline. There was a significant
increase in residential and commercial real estate loans in 1996. The growth
of residential mortgages can be primarily attributed to the growth of variable
rate mortgage loans. The growth of loan income can be based on the increased
real estate production along with a continued reduction of non-accrual loans
throughout the year.
<PAGE>
Investment Securities Income
- ----------------------------
Taxable investment securities income for 1996 totaled $2,246,765 as compared
$2,772,065 in 1995. This is a decrease of $525,300 or 19.0%. The average
balance of taxable investments of U.S. Treasury notes and Government agencies
decreased in 1996.
Other Interest Income
- ---------------------
Other interest income increased $180,221 or 56.8% from $317,032 during 1995 to
$497,253 during 1996. The increase is attributed to higher volumes of federal
funds sold, where proceeds from successful certificate of deposit programs were
invested in the short term, prior to funding loan growth.
Interest Expense
- ----------------
Interest expense on deposits totaled $4,444,236 for the year ended December 31,
1996 as compared to $4,058,105 for the year ended December 31, 1995. This is
an increase of $386,131 or 9.5%. The increase of certificates of deposit along
with other core deposit growth created this additional expense. There were
no short-term borrowings for the 12 months ending December 31, 1996. Interest
on Notes Payable totaled $59,338 for the year ended December 31, 1996 as
compared to $96,134 for the year ended December 31, 1995, a decrease of $36,796
or 38.3%. This situation was created by a lower average balance outstanding in
1996 as compared to 1995 for borrowings of the parent company.
Loan Loss Provision
- -------------------
There were no provisions to the allowance for possible loan losses ("ALLL")
during 1996 and 1995. No provisions were warranted because of improved
collateral values and improved quality throughout most of the loan portfolio.
At December 31, 1996, the Corporation's allowance for possible loan losses was
$2,197,694 representing 1.9% of gross loans at December 31, 1996 as compared to
$2,072,523, representing a ratio of 2.0% of total loans at December 31, 1995.
The decrease in this ratio reflects the continued growth in the loan portfolio
during 1996. However, such growth was primarily in well collateralized loans,
which do not warrant substantial allocations within the ALLL.
Additional factors warranting the reduced provisions during 1996, included
management's evaluation of economic conditions including the stabilization and
improvement of the local economy. The Corporation's non-accrual loans
decreased to $345,755 at December 31, 1996 as compared to $2,374,226 at
December 31, 1995. Similarly, accruing loans past due 90 days or more and
still accruing decreased $736,754 to -0- at December 31, 1996. As a result,
combined non-accrual loans and past due loans 90 days or more decreased to
$345,755 at December 31, 1996 as compared to $3,110,980 at December 31, 1995.
The ratio of non-performing assets to total loans, mortgages held for sale and
OREO was 0.29% for December 31, 1996 as compared to 2.97% as of December 31,
1995. This decrease of non-accrual loans amounted to $2,028,471. The ratio of
allowance for loan losses to non-performing assets equaled 635.6% at December
31, 1996 as compared to 66.6% at December 31, 1995.
A total of $754,032 loans were charged off by the Corporation during 1996 as
compared to $78,497 charged off during the corresponding period in 1995. These
charge-offs consisted primarily of loans to small businesses. Recoveries of
loans previously charged off totaled $879,203 during 1996 as compared to
$75,704 during the corresponding period in 1995.
<PAGE>
Non-Interest Income
- -------------------
Non-interest income totaled $2,095,204 in 1996 as compared to $1,959,327 in
1995. This increase of other income is attributed to a settlement with the
Commonwealth of Massachusetts in the amount of $208,991, relating to tax
treatment of municipal amortization. Income from fiduciary activities declined
in 1996 by $44,086 or 4.8%. This is due to a reduction of non-recurring
income. However core earnings from recurring fiduciary income increased.
Service charges and other deposit fees remained stable. Net gains on sales of
OREO of -0- posted in 1996 as compared to net gains on sales of OREO of $58,155
in 1995; as there were no OREO sales in 1996.
Other Expense
- -------------
The total non-interest expense totaled $7,128,039 for 1996 as compared to
$6,981,852 in 1995. This is an increase of $146,187 or 2.1%. Salaries and
benefits expense increased $237,268, because of additional personnel and
increased benefits. Occupancy expense increased $23,766 or 3.9%. This
increase represents the development of a stand-alone ATM facility at Crosby's
Market in Manchester by the Sea and the establishment of a loan production
office at the Cummings Center. Equipment costs totaled $401,660 for the 12
months ending December 31, 1996 as compared to $374,483 for the same period in
1995. This increase of $27,177 or 7.3% can be attributed to the continued
upgrades of computer equipment to support the technology upgrades of both the
Bank and Trust Department operating systems. The FDIC premium decreased
$192,495. The variance of increased other expenses in the amount of $137,203
or 10.3% can be attributed to increased advertising and marketing.
Income Taxes
- ------------
Income tax expense totaled $1,410,305 for the year ended December 31, 1996 as
compared to $1,026,700 in 1995. This increase reflects the increase of taxable
income.
Net Income
- ----------
Net income was $2,019,611 for 1996 as compared to $1,432,272 for 1995, which is
an increase of $587,339 or 41.0%.
<PAGE>
Capital Resources
- -----------------
As of December 31, 1996, the Corporation had total capital in the amount of
$15,142,561 as compared with $13,470,752 at December 31, 1995, which represents
an increase of $1,671,809 or 12.4% (see Note 15). The capital ratios of the
Corporation and the Bank exceed applicable regulatory requirements.
Banks are generally required to maintain a Tier 1 capital at a level equal to
or greater than 4.0% to their adjusted total assets. As of December 31, 1996,
the Bank's Tier 1 capital amounted to 7.34% as compared to 7.23% of total
assets as compared to December 31, 1995 (see Note 15). Banks and holding
companies must maintain minimum levels of risk-based capital equal to risk
weighted assets of 8.00%. At December 31, 1996, the Bank's ratio of risk based
capital to risk weighted assets amounted to 11.38% for Tier 1 and 12.71% for
total capital, which satisfies the applicable risk-based capital requirements.
At December 31, 1995, the Bank's ratio of risk-based capital to risk-weighted
assets amounted to 11.24% for Tier 1 and 12.59% for total capital.
Liquidity
- ---------
The primary function of asset/liability management is to assure adequate
liquidity and maintain an appropriate balance between interest-sensitive
earning assets and interest-bearing liabilities. Liquidity management involves
the ability to meet the cash flow requirements of customers who may be either
depositors wanting to withdraw funds or borrowers needing assurance that
sufficient funds will be available to meet their credit needs. Interest rate
sensitivity management seeks to avoid fluctuating net interest margins and to
enhance consistent growth of net interest income through periods of changing
interest rates.
Marketable investment securities, particularly those of shorter maturities, are
the principal source of asset liquidity. The Corporation maintains a
Securities-Available-for-Sale account as a liquidity resource. Total
securities maturing in one year or less amounted to approximately $7,534,983 or
18.6% at December 31, 1996 of the investment securities portfolio, and
$16,843,430 at December 31, 1995, representing 37.9% of the investment
securities portfolio. Assets such as federal funds sold, mortgages held for
sale, as well as maturing loans are also sources of liquidity.
The Corporation's goal is to be interest rate sensitive neutral, and maintain a
net cumulative gap at one year, of less than 10% of Total Earning Assets. The
Corporation believes that it is successfully managing its interest rate risk.
Listed below is a gap analysis by repricing date or maturity.
<PAGE>
Gap Analysis
- ------------
(In thousands) 0-31 1-3 3-6 6-12 1-5 Over 5
Days Months Months Months Years Years
------- ------- ------- ------ ------ -------
ASSETS
Investments $ 8,597 $ 4,033 $ 4,495 $ 6,007 $ 653 $ 298
Investments-
Available
for Sale 1,048 0 1,000 1,996 12,477 100
Fed Funds Sold 14,100 0 0 0 0 0
Total Loans 14,603 3,224 8,081 7,185 40,884 42,560
Mortgages Held
for Sale 964 0 0 0 0 0
------- ------- ------- ------- ------- -------
Total Earning
Assets 39,312 7,257 13,576 15,188 54,014 42,958
------- ------- ------- ------- ------- -------
LIABILITIES
Non-interest bearing
Deposits 0 0 0 0 0 34,905
Savings 0 0 23,887 0 11,736 0
NOW Accounts 0 0 11,225 0 22,791 0
Money Market
Accounts 18,749 0 0 0 0 0
Time Deposits
$100,000
and over 872 324 857 502 1,488 0
Other time
deposits 3,530 6,168 6,670 6,911 20,134 6
------- ------ ------- ------ ------- ------
Total Deposits 23,151 6,492 42,639 7,413 56,149 34,911
Borrowings 0 0 0 0 386 360
------- ------ ------ ----- ------ ------
Total Deposits &
Borrowing 23,151 6,492 42,639 7,413 56,535 35,271
------- ------ ------ ----- ------ ------
Net Asset
(Liability)
Gap 16,161 765 (29,063) 7,775 (2,521) 7,687
Cumulative Gap $ 16,161 $16,926 $(12,137) $(4,362) $(6,883) 804
% Cumulative Gap 9.38% 9.82% (7.04%) (2.53%) (4.00%) .47%
<PAGE>
The assumptions used to develop this analysis include the following:
- Investments were accumulated by maturity or call dates.
- Loans were accumulated by earliest repricing date or maturity.
- Deposits or borrowings were accumulated by earliest repricing date or
maturity.
Historically, the overall liquidity of the Corporation has been enhanced by a
high-level of core deposits. Maintaining an ability to acquire time deposits,
money market certificates, and money market fund accounts are a key to assuring
liquidity. This involves maintenance of an appropriate maturity distribution
of purchased funds as well as diversification of sources through various money
markets. Management believes that the liquidity of the Bank is sufficient to
meet future needs. In addition, the Bank is subject to Regulation D of the
Federal Reserve Board which requires depository institutions to maintain
reserve balances on deposit with the Federal Reserve Bank based on certain
average depositor balances. The Bank is in compliance with such requirement.
<PAGE>
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Corporation's consolidated financial statements are included on pages 1
through 28 of the Annual Report to Shareholders for the year ended December 31,
1996 and are hereby incorporated by reference.
Index to Consolidated Financial Statement Schedules
The following consolidated financial statement schedules for the year ended
December 31, 1996 are hereby incorporated by reference.
Description Page Reference
----------- --------------
Consolidated Balance Sheets at December 31, 1996 and 1995 FS 2-3
Consolidated Statements of Income for the years
ended December 31, 1996, 1995 and 1994 FS 4-5
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1996, 1995 and 1994 FS 6
Consolidated Statements of Cash Flow for the years ended
December 31, 1996, 1995 and 1994 FS 7-9
Notes to Consolidated Financial Statements for the years
ended 1996, 1995 and 1994 including: FS 10-32
Parent Company only Balance Sheets at December 31, 1996 and 1995 FS 33
Parent Company only Statements of Income for the years ended
December 31, 1996, 1995 and 1994 FS 34
Parent Company only Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 FS 35-36
<PAGE>
The Board of Directors and Stockholders
Beverly National Corporation
Beverly, Massachusetts
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Beverly
National Corporation and Subsidiaries as of December 31, 1996 and 1995 and
the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Corporation'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 consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall consolidated 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 consolidated financial position
of Beverly National Corporation and Subsidiaries as of December 31, 1996
and 1995, and the consolidated results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1996,
in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the
Corporation adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 115 "Accounting for
Certain Investments in Debt and Equity Securities" as of January 1, 1994.
As discussed in Note 2 to the consolidated financial statements, the
Corporation adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation," effective January 1, 1996.
SHATSWELL, MacLEOD & COMPANY P.C.
West Peabody, Massachusetts
January 10, 1997
FS1
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
1996 1995
ASSETS
Cash and due from banks $ 11,263,278 $ 9,294,959
Federal funds sold 14,100,000 5,800,000
--------------- --------------
Cash and cash equivalents 25,363,278 15,094,959
Investments in available-for-sale
securities (at fair value) 17,608,128 11,153,903
Investments in held-to-maturity
securities (fair values of $22,990,284
as of December 31, 1996 and $33,232,340
as of December 31, 1995) 22,934,468 33,183,718
Federal Reserve Bank stock, at cost 97,500 97,500
Loans net of the allowance for possible
loan losses of $2,197,694 and $2,072,523,
respectively 114,252,890 102,491,814
Mortgages held-for-sale 964,377 123,663
Premises and equipment 4,433,529 4,377,035
Accrued interest receivable 1,081,467 1,204,582
Other assets 1,281,374 1,393,520
-------------- --------------
$ 188,017,011 $ 169,120,694
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $ 34,897,850 $ 34,500,825
Savings and NOW deposits 88,411,447 83,888,473
Time deposits 47,428,931 35,108,927
-------------- --------------
Total deposits 170,738,228 153,498,225
Notes payable 385,627 685,627
Employee Stock Ownership Plan loans 360,000 394,354
Other liabilities 1,390,595 1,071,736
-------------- --------------
Total liabilities 172,874,450 155,649,942
FS2
<PAGE>
Stockholders' equity:
Preferred stock, $2.50 par value per share;
300,000 shares authorized; issued
and outstanding none
Common stock, par value $2.50 per share;
authorize 2,500,000 shares; issued
791,349 shares as of December 31, 1996
and 1995; outstanding, 754,382 shares as of
December 31, 1996 and 751,172 shares as of
December 31, 1995 1,978,373 1,978,373
Paid-in capital 4,358,926 4,380,219
Retained earnings 9,886,901 8,304,831
Treasury stock, at cost (36,967 shares as of
December 31, 1996 and 40,177 shares as of
December 31, 1995) (685,127) (744,619)
Unearned Compensation - Employee Stock
Ownership Plan (360,000) (394,354)
Net unrealized holding loss on
available-for-sale securities (36,512) (53,698)
--------------- ---------------
Total stockholders' equity 15,142,561 13,470,752
--------------- ---------------
$ 188,017,011 $ 169,120,694
=============== ===============
The accompanying notes are an integral part of these consolidated financial
statements.
FS3
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Interest and dividend income:
Interest and fees on loans $10,198,532 $ 8,504,806 $ 7,447,170
Interest and dividends on
investment securities:
Taxable 2,246,765 2,772,065 3,287,288
Tax-exempt 23,775 42,756 47,114
Other interest 497,253 317,032 188,672
Total interest and dividend ----------- ------------ ----------
income 12,966,325 11,636,659 10,970,244
----------- ------------ ----------
Interest expense:
Interest on deposits 4,444,236 4,058,105 3,294,567
Interest on notes payable 59,338 96,134 65,455
Interest on other borrowed funds 923 59,293
----------- ----------- ---------
Total interest expense 4,503,574 4,155,162 3,419,315
----------- ----------- ---------
Net interest and dividend income 8,462,751 7,481,497 7,550,929
Provision for loan losses 215,000
----------- ------------ ----------
Net interest and dividend income
after provision for loan losse 8,462,751 7,481,497 7,335,929
----------- ------------ ----------
Other income:
Income from fiduciary activities 874,385 918,471 788,729
Service charges on deposit accounts 427,309 416,149 418,488
Other deposit fees 226,202 242,489 247,740
Gain on sales of other real estate
owned, net 58,155 1,642
Other income 567,308 324,063 294,738
----------- ------------ ----------
Total other income 2,095,204 1,959,327 1,751,337
----------- ------------ ----------
FS4
<PAGE>
Other expense:
Salaries and employee benefits 4,242,142 4,004,874 4,033,733
Occupancy expense 630,606 606,840 573,366
Equipment expense 401,660 374,483 340,298
Data processing fees 214,597 320,409 263,916
Investment securities losses, net 6,811 2,648
F.D.I.C. insurance premium 2,000 194,495 381,643
Stationery and supplies 167,834 141,943 130,938
Other expense 1,469,200 1,331,997 1,444,190
----------- ------------ -----------
Total other expense 7,128,039 6,981,852 7,170,732
----------- ------------ -----------
Income before income taxes 3,429,916 2,458,972 1,916,534
Income taxes 1,410,305 1,026,700 819,963
----------- ------------ -----------
Net Income $ 2,019,611 $ 1,432,272 $ 1,096,571
=========== ============ ===========
Earnings per share:
Primary shares outstanding 781,076 757,884 738,584
=========== ============ ===========
Net income per share $ 2.59 $ 1.89 $ 1.48
=========== ============ ============
Fully diluted shares outstanding 788,627 767,762 762,663
=========== ============ ===========
Net income per share $ 2.56 $ 1.87 $ 1.44
=========== ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
FS5
<PAGE>
<TABLE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
Net Unrealized
Holding Gain
Unearned (Loss) On
Common Paid in Retained Treasury Compensation Available-for
Stock Capital Earnings Stock ESOP Sale Securities Total
------- -------- ---------- ---------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 659,458 $5,759,415 $6,490,695 $ (88,155) $(120,000) $ $12,701,413
Net income 1,096,571 1,096,571
Unearned compensation payment 60,000 60,000
Unearned compensation increase (65,000) (65,000)
Dividends declared ($.39 per share) (293,210) (293,210)
Purchase of treasury stock (1,250,000) (1,250,000)
Stock split (3 for 1) 1,318,915 (1,318,915)
Sale of treasury stock (60,281) 643,036 582,755
Net unrealized holding gain
on adoption of SFAS No. 115
as of January 1, 1994 32,995 32,995
Net change in unrealized
holding gain on available-
for-sale securities (364,708) (364,708)
---------- ---------- ------------ --------- --------------- ----------- ----------
Balance, December 31, 1994 1,978,373 4,380,219 7,294,056 (695,119) (125,000) (331,713) 12,500,816
Net income 1,432,272 1,432,272
Unearned compensation payment 40,000 40,000
Unearned compensation increase (309,354) (309,354)
Dividends declared ($.56 per share) (421,497) (421,497)
Purchase of treasury stock (49,500) (49,500)
Net change in unrealized
holding loss on available-
for-sale securities 278,015 278,015
---------- ---------- ------------ ----------- -------------- ------------ -----------
Balance, December 31, 1995 1,978,373 4,380,219 8,304,831 (744,619) (394,354) (53,698) 13,470,752
Net income 2,019,611 2,019,611
Unearned compensation payment 60,000 60,000
Unearned compensation increase (25,646) (25,646)
Dividends declared ($.58 per share) (437,541) (437,541)
Sale of treasury stock on
exercise of stock options (21,293) 59,492 38,199
Net change in unrealized
holding loss on available-
for-sale securities 17,186 17,186
----------- ---------- ------------- ----------- -------------- ------------ -----------
Balance, December 31, 1996 $ 1,978,373 $ 4,358,926 $ 9,886,901 $(685,127) $(360,000) $ (36,512) $15,142,561
============ =========== ============= =========== ============== =========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
FS6
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Cash flows from operating activities:
Net income $ 2,019,611 $ 1,432,272 $ 1,096,571
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Net (increase) decrease in
mortgages held-for-sale (847,000) 3,776 576,290
Provision for mortgages held-
for-sale 6,286
Gain on sales of other real
estate owned, net (58,155) (1,642)
Write down of other real estate
owned 17,808
Write down of fixed assets 7,404 74,500
Disposal of fixed asset 285
Change in prepaid interest 3,933 3,933 3,933
Depreciation and amortization 381,784 394,450 382,813
Provision for loan losses 215,000
Deferred tax expense (benefit) 15,983 (35,081) 292,372
Increase (decrease) in taxes
payable 74,773 149,637 (360,472)
Decrease in interest receivable 123,115 183,414 159,141
Increase (decrease) in interest
payable 66,590 126,244 (9,150)
Increase in accrued expenses 236,132 135,417 69,054
(Increase) decrease in prepaid
expenses 118,935 (208,453) (78,038)
Increase in other liabilities 7,692 24,466 3,638
Increase in other assets (32,885) (34,192) (86,229)
Amortization (accretion) of
investment securities, net (48,035) (104,077) 248,697
(Gain) loss on sales of assets, net (400) 6,621
Investment securities losses, net 6,811 2,648
Change in deferred loan costs (10,950) 56,853 27,017
Change in unearned income (4) (245) (7,545)
Net cash provided by operating ----------- ---------- ----------
activities 2,116,245 2,101,882 2,615,219
----------- ---------- ----------
FS7
<PAGE>
Cash flows from investing activities:
Purchases of available-for-sale
securities (10,643,436) (5,283,781) (4,121,719)
Proceeds from sales of available
-for-sale securities 199,000 5,204,906 175,000
Proceeds from maturities of available
-for-sale securities 4,000,000 1,000,000 2,000,000
Purchases of held-to-maturity
securities (8,462,589) (8,009,063) (17,863,887)
Proceeds from maturities of held
-to-maturity securities 18,752,000 22,368,720 24,319,375
Proceeds from sales of other real
estate owned 329,157 89,100
Net increase in loans (12,629,325) (16,252,244) (4,785,009)
Capital expenditures (438,563) (379,225) (76,306)
Recoveries of previously charged
-off loans 879,203 75,704 244,212
Proceeds from sales of fixed assets 440 189,328
Net cash provided by (used in) ------------ ----------- -----------
investing activities (8,343,710) (945,386) 170,094
------------ ----------- -----------
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994 (continued)
1996 1995 1994
Cash flows from financing activities:
Proceeds from sales of treasury stock 38,199 582,755
Purchases of treasury stock (49,500) (1,250,000)
Net increase (decrease) in demand
deposits, NOW and savings accounts 4,919,999 (2,811,633) 287,770
Net increase (decrease) in time
deposits 12,320,004 7,449,115 (2,020,920)
Repayment of notes payable (300,000) (450,000) (100,000)
Proceeds from notes payable 100,000 550,000
Dividends paid (482,418) (331,356) (293,210)
Net cash provided by (used in) ------------ ----------- ----------
financing activities 16,495,784 3,906,626 (2,243,605)
----------- ----------- ----------
Net increase in cash and cash
equivalents 10,268,319 5,063,122 541,708
Cash and cash equivalents at
beginning of year 15,094,959 10,031,837 9,490,129
Cash and cash equivalents at end ----------- ------------ ----------
of year $25,363,278 $15,094,959 $10,031,837
=========== ============ ===========
FS8
<PAGE>
Supplemental disclosures:
Loans transferred to other real
estate owned $ $ 616,810 $ 417,000
Loans originated for sales of
other real estate owned 560,000 554,400
Mortgages held-for-sale
transferred to loans 50,380 2,842,732
Available-for-sale securities
transferred to held-to-maturity
securities 1,998,275
Held-to-maturity securities
transferred to available-for-sale 100,000
Interest paid 4,436,984 4,028,918 3,428,465
Income taxes paid 1,319,549 912,144 888,063
The accompanying notes are an integral part of these consolidated financial
statements.
FS9
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1996, 1995 and 1994
NOTE 1 - NATURE OF OPERATIONS
Beverly National Corporation (Corporation) is a state chartered corporation
that was organized in 1984 to become the holding company of Beverly National
Bank (Bank). The Corporation's primary activity is to act as the holding
company for the Bank. The Bank is a federally chartered bank, which was
incorporated in 1802 and is headquartered in Beverly, Massachusetts. The
Bank operates its business from four banking offices located in Massachusetts.
The Bank is engaged principally in the business of attracting deposits from
the general public and investing those deposits in residential and real
estate loans, and in consumer and small business loans.
NOTE 2 - ACCOUNTING POLICIES
The accounting and reporting policies of the Corporation and its subsidiaries
conform to generally accepted accounting principles and predominant practices
within the banking industry. The consolidated financial statements of the
Corporation were prepared using the accrual basis of accounting with the
exception of fiduciary activities and certain minor sources of income which
are reflected on a cash basis. The results of these activities do not differ
materially from those which would result using the accrual method. The
significant accounting policies of the Corporation and its subsidiaries are
summarized below to assist the reader in better understanding the
consolidated financial statements and other data contained herein.
PERVASIVENESS OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from the estimates.
BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of the Corporation
and its wholly-owned subsidiaries, the Bank, Cabot Street Realty Trust and
86 Bay Road Realty Trust. On December 30, 1996, 86 Bay Road Realty Trust was
merged with and into Beverly National Corporation. All significant
intercompany accounts and transactions have been eliminated in the
consolidation.
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.
INVESTMENT SECURITIES, IN GENERAL:
Investments in debt securities are adjusted for amortization of premiums and
accretion of discounts computed on the straight-line method which has
substantially the same effect as using the interest method. Gains or losses
on sales of investment securities are computed on a specific identification
basis.
FS10
<PAGE>
INVESTMENT SECURITIES, AFTER THE ADOPTION OF SFAS NO. 115:
As of January 1, 1994, the Corporation adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS No. 115). The Statement establishes standards of
financial accounting and reporting for investments in equity securities that
have readily determinable fair values and all investments in debt securities.
SFAS No. 115 requires that the Corporation classify debt and equity
securities into one of three categories: held-to-maturity, available-for-sale,
or trading. This security classification may be modified after acquisition
only under certain specified conditions. In general, securities may be
classified as held-to-maturity only if the Corporation has the positive
intent and ability to hold them to maturity. Trading securities are defined
as those bought and held principally for the purpose of selling them in the
near term. All other securities must be classified as available-for-sale.
--- Held-to-maturity securities are measured at amortized cost in the
balance sheet. Unrealized holding gains and losses are not included
in earnings or in a separate component of capital. They are merely
disclosed in the notes to the consolidated financial statements.
--- Available-for-sale securities are carried at fair value on the
balance sheet. Unrealized holding gains and losses are not included
in earnings, but are reported as a net amount (less expected tax) in
a separate component of capital until realized.
--- Trading securities are carried at fair value on the balance sheet.
Unrealized holding gains and losses for trading securities are
included in earnings. As the Corporation had no trading securities as
of January 1, 1994, there was no impact to the Corporation's earnings
upon the adoption of the statement.
INVESTMENT SECURITIES, PRIOR TO THE ADOPTION OF SFAS NO. 115:
Investments in debt securities are those securities which the Corporation has
the ability to hold to maturity and the intent to hold on a long-term basis
or until maturity. Investments in debt securities to be held for indefinite
periods of time, including securities that management intends to use as part
of its asset/liability strategy, or that may be sold in response to changes
in interest rates, changes in prepayment risk, the need to increase
regulatory capital or other similar factors, are classified as held for sale
and are carried at the lower of cost or market value.
LOANS:
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their
outstanding principal balances reduced by amounts due to borrowers on
unadvanced loans, any charge-offs, the allowance for loan losses, and any
deferred fees or costs on originated loans, or unamortized premiums or
discounts on purchased loans.
Interest on loans is generally recognized on a simple interest basis.
Loan origination and commitment fees and certain direct origination costs
are deferred, and the net amount amortized as an adjustment of the related
loan's yield. The Corporation is generally amortizing these amounts over
the contractual life of the related loans.
FS11
<PAGE>
Cash receipts of interest income on impaired loans is credited to principal
to the extent necessary to eliminate doubt as to the collectibility of the
net carrying amount of the loan. Some or all of the cash receipts of
interest income on impaired loans is recognized as interest income if the
remaining net carrying amount of the loan is deemed to be fully collectible.
When recognition of interest income on an impaired loan on a cash basis is
appropriate, the amount of income that is recognized is limited to that which
would have been accrued on the net carrying amount of the loan at the
contractual interest rate. Any cash interest payments received in excess of
the limit and not applied to reduce the net carrying amount of the loan are
recorded as recoveries of charge-offs until the charge-offs are fully
recovered.
ALLOWANCE FOR POSSIBLE LOAN LOSSES:
An allowance is available for losses which may be incurred in the future on
loans in the current portfolio. The allowance is increased by provisions
charged to current operations and is decreased by loan losses, net of
recoveries. The provision for loan losses is based on management's
evaluation of current and anticipated economic conditions, changes in the
character and size of the loan portfolio, and other indicators. The balance
in the allowance for possible loan losses is considered adequate by
management to absorb any reasonably foreseeable loan losses.
As of January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended by SFAS No. 118. According to SFAS No. 114, a loan is
impaired when, based on current information and events, it is probable that
a creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. The Statement requires that
impaired loans be 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 observable market price, or the fair value of the
collateral if the loan is collateral dependent.
The Statement is applicable to all loans, except large groups of smaller
balance homogeneous loans that are collectively evaluated for impairment,
loans that are measured at fair value or at the lower of cost or fair value,
leases, and convertible or nonconvertible debentures and bonds and other
debt securities. The Corporation considers its residential real estate loans
and consumer loans that are not individually significant to be large groups
of smaller balance homogeneous loans.
Factors considered by management in determining impairment include payment
status, net worth and collateral value. An insignificant payment delay or
an insignificant shortfall in payment does not in itself result in the review
of a loan for impairment. The Corporation applies SFAS No. 114 on a loan-by-
loan basis. The Corporation does not apply SFAS No. 114 to aggregations of
loans that have risk characteristics in common with other impaired loans.
Interest on a loan is not generally accrued when the loan becomes ninety or
more days overdue. The Corporation may place a loan on nonaccrual status
but not classify it as impaired, if (i) it is probable that the Corporation
will collect all amounts due in accordance with the contractual terms of the
loan or (ii) the loan is an individually insignificant residential mortgage
loan or consumer loan. Impaired loans are charged-off when management
believes that the collectibility of the loan's principal is remote.
Substantially all of the Corporation's loans that have been identified as
impaired have been measured by the fair value of existing collateral.
FS12
<PAGE>
The financial statement impact of adopting the provisions of this Statement
was not material.
PREMISES AND EQUIPMENT:
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Cost and related allowances for depreciation and amortization
of premises and equipment retired or otherwise disposed of are removed from
the respective accounts with any gain or loss included in income or expense.
Depreciation and amortization are calculated principally on the straight-line
method over the estimated useful lives of the assets.
MORTGAGES:
Mortgages held-for-sale in the secondary market are carried at the lower of
cost or estimated fair value in the aggregate. Fair value is estimated based
on outstanding investor commitments or, in the absence of such commitments,
based on current investor yield requirements. Net unrealized losses are
provided for in a valuation allowance by charges to operations.
Interest income on mortgages held-for-sale is accrued currently and
classified as interest on loans.
OTHER REAL ESTATE OWNED AND IN-SUBSTANCE FORECLOSURES:
Other real estate owned includes properties acquired through foreclosure and
properties classified as in-substance foreclosures in accordance with
Financial Accounting Standards Board Statement No. 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructuring." These properties
are carried at the lower of cost or fair value less estimated costs to sell.
Any write down from cost to fair value required at the time of foreclosure
or classification as in-substance foreclosure is charged to the allowance
for possible loan losses. Expenses incurred in connection with maintaining
these assets, subsequent write downs and gains or losses recognized upon
sale are included in other expense.
Beginning in 1995, in accordance with Statement of Financial Accounting
Standards No. 114 "Accounting by Creditors for Impairment of a Loan", the
Corporation classifies loans as in-substance repossessed or foreclosed if the
Corporation receives physical possession of the debtor's assets regardless
of whether formal foreclosure proceedings take place.
FAIR VALUES OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires that the Corporation disclose
estimated fair values for its financial instruments. Fair value methods and
assumptions used by the Corporation in estimating its fair value disclosures
are as follows:
Cash and cash equivalents: The carrying amounts reported in the balance
sheet for cash and federal funds sold approximate those assets' fair values.
Securities: Fair values for securities are based on quoted market prices,
where available. If quoted market prices are not available, fair values are
based on quoted market prices of comparable instruments.
Loans receivable: For variable-rate loans that reprice frequently and with
no significant change in credit risk, fair values are based on carrying
values. The fair values for other loans are estimated by discounting the
FS13
<PAGE>
future cash flows, using interest rates currently being offered for loans
with similar terms to borrowers of similar credit quality. The carrying
amount of accrued interest approximates its fair value.
Deposit liabilities: The fair values disclosed for demand deposits, regular
savings, NOW accounts, and money market accounts are equal to the amount
payable on demand at the reporting date (i.e., their carrying amounts). Fair
values for certificates of deposit 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.
Off-balance sheet instruments: The fair value of commitments to originate
loans is estimated using the fees currently charged to enter similar
agreements, taking into account the remaining terms of the agreements and the
present creditworthiness of the counterparties. For fixed-rate loan
commitments and the unadvanced portion of loans, fair value also considers
the difference between current levels of interest rates and the committed
rates. The fair value of letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate them or
otherwise settle the obligation with the counterparties at the reporting date.
INCOME TAXES:
The Corporation recognizes income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are established for
the temporary differences between the accounting basis and the tax basis of
the Corporation's assets and liabilities at enacted tax rates expected to be
in effect when the amounts related to such temporary differences are realized
or settled.
STOCK BASED COMPENSATION:
SFAS No. 123, "Accounting for Stock-Based Compensation", was issued in
October 1995 and introduces a fair value method of accounting for employee
stock options, restricted stock grants, stock appreciation rights or similar
equity instruments. In accordance with SFAS No. 123, entities can recognize
stock-based compensation expense in the basic financial statements using
either (i) the intrinsic value approach set forth in APB Opinion No. 25 or
(ii) the fair value method introduced in SFAS No. 123. Entities electing to
continue to follow the provisions of APB Opinion No. 25 must make pro forma
disclosure of net income and earnings per share, as if the fair value method
of accounting defined in SFAS No. 123 had been applied. Management will
continue to measure stock-based compensation costs in accordance with APB
Opinion No. 25 and has made the pro forma disclosure requirements of SFAS
No. 123 for 1996.
FS14
<PAGE>
NOTE 3 INVESTMENTS IN SECURITIES
Debt and equity securities have been classified in the consolidated balance
sheets according to management's intent. The carrying amount of securities
and their approximate fair values are as follows as of December 31:
Gross Gross
Amortized Unrealized Unrealized
Cost Holding Holding Fair
Basis Gains Losses Value
Available-for-sale
securities:
December 31, 1996:
Debt securities issued by the
U.S. Treasury and other U.S.
government corporations
and agencies $17,475,622 $58,444 $73,438 $17,460,628
Debt securities issued by
states of the United States
and political subdivisions
of the states 100,000 100,000
Marketable equity securities 47,500 47,500
---------- ---------- --------- ----------
$17,623,122 $58,444 $73,438 $17,608,128
=========== ========== ========= ===========
December 31, 1995:
Debt securities issued by
the U.S. Treasury and other
U.S. government corporations
and agencies $11,070,812 $41,617 $58,526 $11,053,903
Debt securities issued by
states of the United States
and political subdivisions
of the states 100,000 100,000
----------- ---------- -------- -----------
$11,170,812 $41,617 $58,526 $11,153,903
=========== ========== ======== ===========
FS15
<PAGE>
Gross Gross
Amortized Unrealized Unrealized
Cost Holding Holding Fair
Basis Gains Losses Value
Held-to-maturity securities:
December 31, 1996:
Debt securities issued by
the U.S. Treasury and other
U.S. government corporations
and agencies $ 22,407,095 $ 96,704 $65,515 $22,438,284
Debt securities issued by
states of the United States
and political subdivisions
of the states 227,373 2,127 229,500
Debt securities issued by
foreign governments 300,000 22,500 322,500
----------- --------- --------- ----------
$22,934,468 $121,331 $65,515 $22,990,284
=========== ========= ========= ==========
December 31, 1995:
Debt securities issued by
the U.S. Treasury and other
U.S. government corporations
and agencies $32,402,473 $ 95,704 $93,340 $32,404,837
Debt securities issued by
states of the United States
and political subdivisions
of the states 481,245 5,749 486,994
Debt securities issued by
foreign governments 300,000 40,509 340,509
----------- --------- -------- -----------
$33,183,718 $141,962 $93,340 $33,232,340
=========== ========= ======== ============
The scheduled maturities of held-to-maturity securities and available-for-sale
securities (other than equity securities) were as follows as of December 31,
1996:
Held-to-maturity Available-for-sale
Securities Securities
------------------------ --------------------------
Amortized Amortized
Cost Fair Cost Fair
Basis Value Basis Value
----------- ---------- ------------ -----------
Due within one year $ 2,542,481 $ 2,569,656 $ 4,998,310 $ 4,992,502
Due after one year
through five years 19,091,178 19,103,128 12,477,312 12,468,126
Due after five years
through ten years 1,300,809 1,317,500
Due after ten years 100,000 100,000
----------- ----------- ---------- -----------
$22,934,468 $22,990,284 $17,575,622 $17,560,628
=========== =========== ========== ===========
FS16
<PAGE>
During 1996, proceeds from sales of available-for-sale securities amounted
to $199,000. There was no gain or loss realized from those sales. During
1995, proceeds from sales of available-for-sale securities amounted to
$5,204,906. Gross realized gains and gross realized losses on those sales
amounted to $5,358 and $8,927, respectively. During 1994, proceeds from
sales of available-for-sale securities amounted to $175,000. There were no
gross realized gains or gross realized losses on those sales.
In 1995, the Corporation transferred at fair value a municipal debt security
classified as held-to-maturity to a security classified as available-for-sale.
There was no unrealized holding gain or loss at the date of transfer. The
transfer was a result of a reassessment of the appropriateness of the
classification of all securities held as of December 31, 1995. In accordance
with a special report of the Financial Accounting Standards Board regarding
SFAS No. 115 this transfer will not call into question the intent of the
orporation to hold other debt securities to maturity in the future.
The adoption of SFAS No. 115 as of January 1, 1994 had the following effect
on the consolidated financial statements for the year ended December 31, 1994:
Addition to stockholders' equity:
Net unrealized holding gain on available-for-sale
securities $57,161
Less tax effect 24,166
-------
Net effect $32,995
=======
In 1994, subsequent to the adoption of SFAS No. 115 as of January 1, 1994,
certain available-for-sale securities were transferred at fair value from
the category available-for-sale to the category held-to-maturity. The net
unrealized holding losses on such securities are $104,565 and that amount
less the tax effect of $44,206 is included in the separate component of
stockholders' equity as of December 31, 1994.
There were no securities of issuers whose aggregate carrying amount exceeded
10% of stockholders' equity as of December 31, 1996.
A total par value of $15,860,000 and $16,100,000 was pledged to secure
treasury tax and loan, trust funds and public funds on deposit as of
December 31, 1996 and 1995, respectively.
FS17
<PAGE>
NOTE 4 - LOANS
Loans consisted of the following as of December 31:
1996 1995
Commercial, financial and agricultural $ 16,946,508 $ 16,485,532
Real estate - construction and land development 5,847,491 4,648,818
Real estate - residential 40,019,022 34,092,682
Real estate - commercial 46,150,365 42,587,993
Consumer 6,538,122 5,593,914
Other 1,035,066 1,252,342
------------- ------------
116,536,574 104,661,281
Allowance for possible loan losses (2,197,694) (2,072,523)
Deferred loan fees, net (85,990) (96,940)
Unearned income (4)
------------ ------------
Net loans $114,252,890 $102,491,814
============ ============
Certain directors and executive officers of the Corporation and companies in
which they have significant ownership interest were customers of the
Corporation during 1996. Total loans to such persons and their companies
amounted to $1,358,137 as of December 31, 1996. During 1996 principal
payments and advances totaled $374,814 and $596,438, respectively.
Changes in the allowance for possible loan losses were as follows for the
years ended December 31:
1996 1995 1994
Balance at beginning of period $2,072,523 $2,075,316 $2,764,529
Loans charged off (754,032) (78,497) (1,148,425)
Provision for loan losses 215,000
Recoveries of loans previously
charged off 879,203 75,704 244,212
----------- ----------- -----------
Balance at end of period $2,197,694 $2,072,523 $2,075,316
=========== =========== ===========
FS18
<PAGE>
Information about loans that meet the definition of an impaired loan in
Statement of Financial Accounting Standards No. 114 is as follows as of
December 31:
1996 1995
---------------------- -----------------------
Recorded Related Recorded Related
Investment Allowance Investment Allowance
In Impaired For Credit In Impaired For Credit
----------- ---------- ----------- ----------
Loans for which there is a
related allowance for credit
losses $ 38,743 $ 19,371 $ 1,945,167 $ 400,000
Loans for which there is no
related allowance for credit
losses 18,026 24,819
---------- --------- ----------- ---------
Totals $ 56,769 $ 19,371 $ 1,969,986 $ 400,000
========== ========= =========== =========
Average recorded investment in
impaired loans during the year
ended December 31 $1,448,955 $1,118,454
========== ==========
Related amount of interest income recognized during the time, in the year
ended December 31, that the loans were impaired
Total recognized $ 16,235 $ 20,539
============ ============
Amount recognized using a
cash-basis method of accounting $ 0 $ 0
============ ============
NOTE 5 - PREMISES AND EQUIPMENT
The following is a summary of premises and equipment as of December 31:
1996 1995
Land $ 421,077 $ 421,077
Land improvements 4,550
Buildings 4,358,091 4,403,652
Furniture and equipment 1,573,120 1,622,289
Leasehold improvements 526,039 507,258
Construction in progress 265,426
---------- ----------
7,148,303 6,954,276
Accumulated depreciation and amortization (2,714,774) (2,577,241)
---------- ----------
$4,433,529 $4,377,035
========== ==========
FS19
<PAGE>
NOTE 6 - DEPOSITS
The aggregate amount of time deposit accounts (including CDs), each with a
minimum denomination of $100,000, was approximately $4,434,744 and $3,716,289
as of December 31, 1996 and 1995, respectively.
For time deposits as of December 31, 1996, the aggregate amount of maturities
for each of the following five years ended December 31, are:
1997 $25,984,494
1998 15,113,919
1999 5,600,513
2000 705,005
2001 25,000
-----------
$47,428,931
===========
NOTE 7 - NOTES PAYABLE
Notes payable consisted of the following as of December 31:
1996 1995
Term loan, maturing on January 1, 1999.
Interest payable at the First & Ocean
National Bank's base rate $ $300,000
Industrial Revenue Bond, due in equal
annual payments until June 30,1995 and
a balloon payment due June 30, 2000.
Interest payable at 94.11% of the Bank
of Boston prime rate 385,627 385,627
---------- ---------
$385,627 $685,627
========== =========
The term loan was issued to Beverly National Corporation on December 29,
1994. The loan was granted by First & Ocean National Bank. The balance as
of December 31, 1995 was due and payable in three consecutive annual
installments of principal, each in the amount of $100,000, beginning
January 1, 1997 and continuing on the same day of each of the next two
succeeding years. The loan was paid in full during 1996.
The Industrial Revenue Bond was issued to Cabot Street Realty Trust on August
1, 1985 in order to purchase property and finance renovations. The Bond was
issued by the Bank of Boston and was reduced by annual payments of $100,000.
Annual payments continued until June 30, 1995. The Corporation will continue
to pay interest quarterly on the outstanding principal balance until June 30,
2000 when the remaining $385,627 in principal will be due.
FS20
<PAGE>
NOTE 8 - INCOME TAXES
The components of the income tax expense are as follows for the years ended
December 31:
1996 1995 1994
Current:
Federal $ 991,183 $ 731,021 $ 328,931
State 403,139 330,760 198,660
----------- ---------- -----------
1,394,322 1,061,781 527,591
----------- ---------- -----------
Deferred:
Federal 13,317 (14,160) 214,032
State 2,666 (20,921) 78,340
----------- ---------- ----------
15,983 (35,081) 292,372
----------- ---------- ----------
Total income tax expense $1,410,305 $1,026,700 $819,963
=========== ========== ==========
The reasons for the differences between the statutory federal income tax
rates and the effective tax rates are summarized as follows for the years
ended December 31:
1996 1995 1994
% of Income % of Income % of Income
Federal income tax at statutory rate 34.0% 34.0% 34.0%
Increase (decrease) in tax resulting from:
Tax-exempt income (.4) (.8) (.9)
Dividends paid to ESOP (.3) (.3) (.1)
Exercise on nonqualified stock options (.2)
Unallowable expenses .2 .3 .3
State tax, net of federal tax benefit 7.8 8.5 9.5
-------- -------- --------
41.1% 41.7% 42.8%
======== ======== ========
The Corporation had gross deferred tax assets and gross deferred tax
liabilities as follows as of December 31:
1996 1995
Deferred tax assets:
Allowance for loan losses $607,419 $607,419
Loan origination fees and cost, net 39,670 44,004
Accrued retirement benefits 66,354 65,825
Accrued interest on nonperforming loans 7,965 69,026
Unrealized loss on mortgages held-for-sale 2,657
Accrued pension expense 23,640
Net unrealized holding loss on securities 26,153 39,206
-------- --------
Gross deferred tax assets 773,858 825,480
-------- --------
FS21
<PAGE>
Deferred tax liabilities:
Accelerated depreciation 240,162 228,977
Prepaid pension expense 35,971
Other adjustments 26,265 24,061
-------- --------
Gross deferred tax liabilities 266,427 289,009
-------- --------
Net deferred tax assets $507,431 $536,471
======== ========
Deferred tax assets as of December 31, 1996 and 1995 have not been reduced
by a valuation allowance because management believes that it is more likely
than not that the full amount of deferred tax assets will be realized. As of
December 31, 1996, the Corporation had no operating loss and tax credit
carryovers for tax purposes.
NOTE 9 - STOCK COMPENSATION PLANS
As of December 31, 1996, the Corporation has three fixed option, stock-based
compensation plans, which are described below. The Corporation applies APB
Opinion 25 and related Interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized for its fixed stock
option plans. Had compensation cost for the Corporation's stock-based
compensation plans been determined based on the fair value at the grant dates
for awards under those plans consistent with the method of FASB Statement
123, the Corporation's net income and earnings per share for 1996 would have
been reduced to the pro forma amounts indicated below:
Net income
As reported $2,019,611
Pro forma $1,989,469
Primary earnings per share
As reported $ 2.59
Pro forma $ 2.56
Fully diluted earnings per share
As reported $ 2.56
Pro forma $ 2.54
Fixed Stock Option Plans
The Corporation has three fixed option plans. Under the 1993 Incentive Stock
Option Plan, the Corporation may grant options to its key employees for up to
56,100 shares of common stock. Under the Directors' Stock Option Plan, the
Corporation may grant options to its present and future Directors for up to
108,000 shares of common stock. Under the Incentive plan, options are
granted at fair market value. Under the Directors' plan, stock options are
granted at no less than 85% of fair market value.
In 1996, the Corporation adopted the 1996 Incentive Stock Option Plan for key
employees. Under the 1996 plan, up to 35,900 shares of common stock may be
granted, at fair value, to one director and other participants who will be
selected from key employees. To date, no options have been granted under
this plan.
FS22
<PAGE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996: dividend yield of 3 percent, expected
volatility of 12 percent, risk-free interest rate of 5.65 percent and
expected lives of 8 years.
A summary of the status of the Corporation's fixed stock option plans as of
December 31, 1996 and 1995 and changes during the years ending on those dates
is presented below:
1996 1995
------------------------- -----------------------
Weighted-Average Weighted-Average
Fixed Options Shares Exercise Price Shares Exercise Price
- ------------- ------- --------------- ------ --------------
Outstanding at beginning
of year 100,500 $12.87 100,500 $12.87
Granted 60,600 15.78 0
Exercised (3,210) 11.90 0
Forfeited (2,940) 11.90 0
Outstanding at end ------- -------
of year 154,950 $14.05 100,500 $12.87
======= =======
Options exercisable at
year-end 79,110 59,737
Weighted-average fair
value of options granted
during the year $2.95 N/A
<TABLE>
The following table summarizes information about fixed stock options
outstanding as of December 31, 1996:
<CAPTION>
Options Outstanding Options Exercisable
----------------------------- -------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices as of 12/31/96 Contractual Life Exercise Price as of 12/31/96 Exercise Price
- --------------- -------------- ---------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
$11.90 47,850 6.6 years $11.90 26,370 $11.90
14.00 46,500 6.6 14.00 35,880 14.00
15.30 48,000 9.1 15.30 15,600 15.30
16.36 to 18.00 12,600 9.2 17.61 1,260 17.61
------------ ------------
11.90 to 18.00 154,950 7.6 14.05 79,110 13.61
============ ============
</TABLE>
FS23
<PAGE>
NOTE 10 EMPLOYEE BENEFITS OTHER THAN POSTRETIREMENT, MEDICAL AND LIFE
INSURANCE BENEFITS
The Bank has a defined benefit pension plan covering substantially all of its
full time employees who meet certain eligibility requirements. The benefits
paid are based on 2 1/2% of the final average salary for each of the first
20 years of service plus an additional 1% for each of the next 10 years of
service less 1 2/3% of the member's social security benefit for each year of
service (maximum 30 years), up to a maximum of 60% of the final average
salary less 50% of the member's social security benefit.
The following table sets forth the funded status of the plan and amounts
recognized in the Corporation's balance sheet as of December 31:
1996 1995
-------- --------
Actuarial present value of benefit obligations:
Accumulated benefit obligation (including
vested benefits of $3,151,235 and $2,885,273,
respectively) $ 3,229,528 $ 2,954,229
=========== ===========
Projected benefit obligation for services
rendered to date $(4,534,804) $(4,065,579)
Plan assets at fair value, primarily
invested in U.S. Treasury Notes, common
stocks and bonds 4,049,583 3,687,435
Plan assets less than projected benefit ----------- -----------
obligation (485,221) (378,144)
Prior service (cost) benefit not yet
recognized in net periodic pension cost 37,680 (29,594)
Unrecognized net gain from past experience
different from that assumed and effects of
changes in assumptions 567,782 696,048
Unrecognized net obligation at January 1, 1987,
being amortized over 16.631 years (176,005) (202,551)
----------- -----------
Prepaid (accrued) pension cost included in
the balance sheet $ (55,764) $ 85,759
=========== ===========
Net periodic pension cost included the following components for the years
ended December 31:
1996 1995 1994
-------- -------- --------
Service cost-benefits earned during the
period $207,837 $162,172 $168,491
Interest cost on projected benefit
obligation 282,903 251,055 235,878
Expected return on plan assets (484,920) (686,633) (3,101)
Net amortization and deferral 153,716 410,887 (281,847)
-------- -------- --------
Net periodic pension cost $159,536 $137,481 $119,421
======== ======== ========
FS24
<PAGE>
The weighted-average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected
benefit obligation were 7.0% and 5.0% for 1996 and 1995, respectively, and
8.0% and 5.0% for 1994, respectively. The expected long-term rate of return
on assets was 9.0%.
In addition to the defined benefit pension plan, the Corporation also offers
a number of benefit programs to its key officers and employees.
On December 24, 1996 the Corporation adopted a Supplemental Retirement Plan
for two executive officers. This plan provides nonfunded retirement benefits
designed to supplement benefits available through the Corporation's retirement
plan for employees. The amount charged to expense for these benefits was
$136,751 in 1996.
The Corporation has a defined contribution profit sharing plan. Contributions
by the Corporation were $0 in 1996, $13,447 in 1995 and $65,000 in 1994.
The Corporation contributed $73,969, $70,171 and $68,753 to a 401K plan in
1996, 1995 and 1994, respectively.
The Corporation established an Employee Stock Ownership Plan (ESOP) effective
January 1, 1988. This plan is offered to employees who have attained age 21
and who have been employed by the Corporation for at least one year full time
and have completed a minimum of 1,000 hours of employment. The plan entitles
Corporation employees to common stock or cash upon retirement, disability,
death or separation from service from the Corporation based on a vesting
schedule. Benefits become 25% vested after two years of vesting service and
increase to 100% vested after five years of vesting service.
The Corporation makes annual contributions to the ESOP in amounts determined
by the board of directors, subject to a limitation based on earnings and
capital of the Corporation. Such contributions are first made to permit
required payments of amounts due under acquisition loans. Dividends received
by the ESOP on shares of the Corporation owned by the ESOP are used to repay
acquisition loans or are credited to the accounts of allocated shares. The
ESOP borrows money to purchase shares of the Corporation. The shares are
pledged as collateral for its debt. As the debt is repaid, shares are
released from collateral and allocated to active employees, based on the
proportion of debt service paid in the year. The debt of the ESOP is
recorded as debt and the shares pledged as collateral are reported as unearned
ESOP shares in the statement of financial position. ESOP compensation
expense was $149,881 for 1996, $90,000 for 1995 and $68,853 for 1994. The
ESOP shares were as follows as of December 31:
1996 1995
Allocated shares 26,966 22,595
Shares released for allocation 2,823 815
Unreleased shares 19,863 24,832
--------- ---------
Total ESOP shares 49,652 48,242
========= =========
Estimated fair value of unreleased shares
as of December 31, $403,219 $459,392
========= =========
FS25
<PAGE>
Any shares of the Corporation purchased by the ESOP after December 31, 1992
are subject to the accounting specified by the American Institute of CPAs
Statement of Position 93-6. The only such shares were 1,410 shares purchased
on February 2, 1996 and 3,378 shares purchased on October 31, 1994. As of
December 31, 1996 none of these shares had been released from collateral. As
they are released, the Corporation will report compensation expense equal to
the current market price of the shares and the shares will become outstanding
for earnings-per-share computations. Also, as the shares are released, the
related dividends will be recorded as a reduction of retained earnings, and
dividends on the unallocated shares will be recorded as a reduction of debt
and accrued interest.
Loans payable by the ESOP, with repayment guaranteed by the Corporation,
consist of the following as of December 31, 1996:
1995 loan payable March 31, 2005 at Wall Street
Journal prime rate $360,000
==========
The Severance Compensation Plan was adopted for employees, in the event of a
Hostile Takeover, who have completed at least two years of continuous service
with the Corporation. A participant in this plan is entitled to payments
ranging from a lump sum payment equal to the employee's annual compensation
during the preceding twelve months to a lump sum payment equal to two-and-one-
half times such annual compensation if the employee is terminated for any
reason set forth in the plan within two years after the takeover.
NOTE 11 - POSTRETIREMENT BENEFITS OTHER THAN PENSION
The Corporation provides postretirement medical and life insurance benefits
for retired employees. During 1993 the Corporation adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pension." The
Corporation elected to amortize the cumulative effect of the change in
accounting for postretirement benefits of $859,500 which represents the
accumulated postretirement benefit obligation (APBO) existing as of January
1, 1993. The APBO is being amortized on a straight-line basis over a twenty
year period. The Corporation continues to fund medical and life insurance
benefit costs on a pay-as-you-go basis.
Summary information on the Corporation's plan is as follows as of December 31:
1996 1995
Financial status of plan:
APBO:
Retirees $479,215 $554,893
Fully eligible active employees 119,944 162,955
Other active employees 24,575 39,123
--------- ---------
623,734 756,971
Unrecognized transition obligation (687,900) (730,800)
Unrecognized net gain 214,621 107,082
--------- ---------
Accrued postretirement benefit cost
included in other liabilities on the
balance sheet $150,455 $133,253
========= =========
FS26
<PAGE>
The components of net periodic postretirement benefit cost are as follows for
the years ended December 31:
1996 1995 1994
Service Cost (benefits attributed to
employee services during the year) $ 2,348 $ 2,340 $ 2,400
Interest cost (on the APBO) 42,912 54,071 58,500
Amortization cost (of APBO over 20 years) 42,900 42,900 42,900
Amortization of net gain (14,775) (8,612)
--------- --------- ---------
Net periodic postretirement benefit cost $ 73,385 $ 90,699 $ 103,800
========= ========= =========
The discount rate used in determining the APBO as of December 31, 1996, 1995
and 1994 was 7.0%, 7.0% and 8.0%, respectively. Estimated pay increases were
5.0%. The assumed healthcare cost trend rate used in measuring the APBO was
8% for 1996 and 10% for 1995 and 1994, declining and freezing at 7% by 1997.
If the healthcare cost trend rate assumptions were increased by 1%, the APBO,
as of December 31, 1996, 1995 and 1994 would increase by approximately
$5,591, $15,624 and $20,500, respectively. The effect of this change on the
sum of the service cost and interest cost components of the net periodic
postretirement benefit cost for 1996, 1995 and 1994 would be increases of
approximately $368, $1,044 and $1,665, respectively. The pay-as-you-go
expenditures for postretirement benefits were $56,183 for 1996, $65,447 for
1995 and $54,471 for 1994.
Changes in the accrued postretirement benefit cost were as follows for the
years ended December 31:
1996 1995
Accrued postretirement benefit at beginning
of period $ 133,253 $ 108,001
Plus postretirement benefit expense 73,385 90,699
Less postretirement benefit cash expenditure (56,183) (65,447)
---------- ----------
Accrued postretirement benefit cost at end
of period $150,455 $133,253
========== ==========
NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES
The Corporation is obligated under various lease agreements covering branch
offices and equipment. These agreements are considered to be operating
leases. The terms expire between 1997 and 2001. Options to renew for
additional terms are included under the branch office lease agreements. The
total minimum rental due in future periods under these existing agreements is
as follows as of December 31, 1996:
1997 $142,989
1998 140,074
1999 135,699
2000 99,841
2001 69,971
---------
Total minimum lease payments $588,574
=========
FS27
<PAGE>
Certain leases contain provisions for escalation of minimum lease payments
contingent upon increases in real estate taxes and percentage increases in
the consumer price index. The total rental expense amounted to $93,893 for
1996, $83,497 for 1995 and $78,908 for 1994.
NOTE 13 - FINANCIAL INSTRUMENTS
The Corporation is 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 originate loans, standby
letters of credit and unadvanced funds on loans. The instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized
in the balance sheets. The contract amounts of those instruments reflect the
extent of involvement the Corporation has in particular classes of financial
instruments.
The Corporation's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for loan commitments and standby
letters of credit is represented by the contractual amounts of those
instruments. The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments.
Commitments to originate loans are agreements to lend to a customer provided
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. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Corporation
evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Corporation upon
extension of credit, is based on management's credit evaluation of the
borrower.
Standby letters of credit are conditional commitments issued by the
Corporation to guarantee the performance by a customer to a third party. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. Of the total standby
letters of credit outstanding as of December 31, 1996, $50,000 are secured
by deposit accounts held by the Bank.
FS28
<PAGE>
The estimated fair values of the Corporation's financial instruments, all of
which are held or issued for purposes other than trading, are as follows as
of December 31:
1996 1995
----------------------- ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ----------- ----------- -----------
Financial assets:
Cash and cash equivalents $25,363,278 $25,363,278 $15,094,959 $15,094,959
Available-for-sale
securities 17,608,128 17,608,128 11,153,903 11,153,903
Held-to-maturity securities 22,934,468 22,990,284 33,183,718 33,232,340
Federal Reserve Bank stock 97,500 97,500 97,500 97,500
Loans 114,252,890 113,866,162 102,491,814 103,113,242
Mortgages held-for-sale 964,377 964,377 123,663 123,663
Accrued interest receivable 1,081,467 1,081,467 1,204,582 1,204,582
Financial liabilities:
Deposits 170,738,228 170,972,510 153,498,225 153,657,661
Notes payable 385,627 385,627 685,627 685,627
Employee Stock Ownership
Plan loans 360,000 360,000 394,354 394,354
The carrying amounts of financial instruments shown in the above table are
included in the consolidated balance sheets under the indicated captions.
Accounting policies related to financial instruments are described in Note 2.
Off-balance-sheet liabilities:
1996 1995
------------ -----------
Notional Notional
Amount Amount
------------ -----------
Commitments to originate loans $ 1,682,000 $ 4,001,000
Standby letters of credit 2,230,370 1,397,646
Unadvanced portions of loans:
Consumer 654,709 776,218
Home equity 4,464,655 3,025,195
Commercial lines of credit 12,318,287 11,175,779
Commercial construction 1,606,254 484,486
Residential construction 145,310 777,363
----------- -----------
$23,101,585 $21,637,687
=========== ===========
There is no material difference between the notional amounts and the estimated
fair values of loan commitments and unadvanced portions of loans. The fair
value of letters of credit approximates the notional value.
The Company has no derivative financial instruments subject to the provisions
of SFAS No. 119 "Disclosure About Derivative Financial Instruments and Fair
Value of Financial Instruments."
FS29
<PAGE>
NOTE 14 - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
Most of the Bank's business activity is with customers located within the
state. There are no concentrations of credit to borrowers that have similar
economic characteristics. The majority of the Bank's loan portfolio is
comprised of loans collateralized by real estate located in the state of
Massachusetts.
NOTE 15 - REGULATORY MATTERS
The Bank, as a National Bank is subject to the dividend restrictions set
forth by the Comptroller of the Currency. Under such restrictions, the Bank
may not, without the prior approval of the Comptroller of the Currency,
declare dividends in excess of the sum of the current year's earnings
as defined) plus the retained earnings (as defined) from the prior two years.
As of December 31, 1996 the Bank could declare dividends up to $3,080,383,
without the approval of the Comptroller of the Currency.
The Corporation and its subsidiary the Bank are 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 Corporation's and the Bank's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Corporation and the Bank must
meet specific capital guidelines that involve quantitative measures of their
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. Their 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 Corporation and the Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December
31, 1996, that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject.
As of December 31, 1996, 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 I
isk-based and Tier I leverage ratios as set forth in the table. There are
no conditions or events since that notification that management believes have
changed the institution's category.
FS30
<PAGE>
The Corporation's and the Bank's actual capital amounts and ratios are also
presented in the table.
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
---------------- ------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- -------- ------- -------- ------
(Dollar Amounts in Thousands)
As of December 31, 1996:
Total Capital (to Risk
Weighted Assets):
Consolidated $16,691 13.92% $9,594 >8% N/A
Beverly National
Bank 14,773 12.71% 9,298 >8% $11,622 >10%
Tier 1 Capital (to Risk
Weighted Assets):
Consolidated 15,179 12.58% 4,825 >4% N/A
Beverly National
Bank 13,312 11.38% 4,678 >4% 7,017 >6%
Tier 1 Capital (to
Average Assets):
Consolidated 15,179 8.26% 7,354 >4% N/A
Beverly National
Bank 13,312 7.34% 7,253 >4% 9,067 >5 %
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------- -------
(Dollar Amounts in Thousands)
As of December 31, 1995:
Total Capital (to Risk
Weighted Assets):
Consolidated $14,878 13.84% $8,602 >8 N/A
Beverly National
Bank 13,161 12.59% 8,366 >8 $10,457 >10%
Tier 1 Capital (to Risk
Weighted Assets):
Consolidated 13,525 12.50% 4,330 >4 N/A
Beverly National
Bank 11,844 11.24% 4,213 >4 6,320 >6 %
Tier 1 Capital (to
Average Assets):
Consolidated 13,525 8.24% 6,568 >4 N/A
Beverly National
Bank 11,844 7.23% 6,550 >4 8,188 >5 %
FS31
<PAGE>
NOTE 16 - STOCK SPLIT AND EARNINGS PER SHARE
On August 15, 1994 the Corporation issued 527,566 shares of its common stock
to effect a three for one stock split, including 47,718 shares which were
added to treasury stock. In 1994, prior to the stock split, the Corporation
purchased 21,550 shares of treasury stock. In 1994, subsequent to the stock
split, the Corporation sold 34,400 shares of treasury stock.
In the earnings-per-share computations, the average number of shares
outstanding does not include 22,348 shares for 1996, 15,722 shares for 1995
and 6,591 shares for 1994 which was the average number of shares not
committed to be released under the Bank's ESOP plan for those years.
NOTE 17 - RECLASSIFICATION
Certain amounts in the prior years has been reclassified to be consistent
with the current year's statement presentation.
FS32
<PAGE>
NOTE 18 - PARENT COMPANY ONLY FINANCIAL STATEMENTS
The following financial statements presented are for the Beverly National
Corporation (Parent Company Only) and should be read in conjunction with the
consolidated financial statements.
BEVERLY NATIONAL CORPORATION (Parent Company Only)
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS 1996 1995
-------------- --------------
Cash $ 1,199 $ 104,753
Investment in Beverly National Bank 13,275,434 11,789,546
Investment in Cabot Street Realty Trust 574,624 604,617
Investment in 86 Bay Road Realty Trust 92,622
Investment in available-for-sale securities 47,500 4,000
Loans 35,000 35,000
Premises and equipment 587,407 574,269
Accounts receivable from subsidiaries 960,000 1,029,000
Interest receivable 936 3,745
Other assets 45,263 1,441
Prepaid and deferred taxes 32,829 34,648
------------ -------------
$15,560,192 $ 14,273,641
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ $ 300,000
Employee Stock Ownership Plan loans 360,000 394,354
Accrued audit expense 6,910 13,700
Other liabilities 50,721 94,835
------------ -------------
Total liabilities 417,631 802,889
------------ -------------
Stockholders' equity:
Preferred stock, $2.50 par value per
share; 300,000 shares authorized;
issued and outstanding none
Common stock, par value $2.50 per
share; authorized 2,500,000 shares;
issued 791,349 shares as of December 31,
1996 and 1995; outstanding,754,382
shares as of December 31, 1996 and
751,172 shares as of December 31, 1995 1,978,373 1,978,373
Paid-in capital 4,358,926 4,380,219
Retained earnings 9,886,901 8,304,831
Treasury stock, at cost (36,967 shares
as of December 31, 1996 and 40,177 shares
as of December 31, 1995) (685,127) (744,619)
Unearned Compensation Employee Stock
Ownership Plan (360,000) (394,354)
Net unrealized holding loss on available-
for-sale securities (36,512) (53,698)
------------ ------------
Total stockholders' equity 15,142,561 13,470,752
------------ ------------
$15,560,192 $14,273,641
============ ============
FS33
<PAGE>
BEVERLY NATIONAL CORPORATION (Parent Company Only)
STATEMENTS OF INCOME
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
-------- -------- --------
Interest and dividend income:
Interest on taxable investment
securities $ 6,577 $ 6,146 $ 2,278
Interest on loans and receivables
from subsidiaries 72,796 75,188 109,231
Dividends from Beverly National Bank 612,156 721,496 443,210
--------- --------- --------
Total interest and dividend income 691,529 802,830 554,719
--------- --------- --------
Other income:
Rental income 36,000 36,000 36,000
Other income 395 1,057
--------- --------- --------
Total other income 36,000 36,395 37,057
--------- --------- --------
Expenses:
Occupancy expense 16,912 16,927 18,840
Equipment expense 2,145 1,906
Interest on notes payable 24,887 59,532 25,390
Interest on other borrowed funds 57,188
Other expense 133,754 116,343 131,914
--------- --------- --------
Total expenses 177,698 194,708 233,332
--------- --------- --------
Income before income tax benefit and equity
in undistributed net income (loss) of
subsidiaries 549,831 644,517 358,444
--------- --------- ---------
Income tax benefit (31,071) (33,600) (30,965)
--------- --------- ---------
Income before equity in undistributed net
income (loss) of subsidiaries 580,902 678,117 389,409
--------- --------- ---------
Equity in undistributed net income (loss)
of subsidiaries:
Beverly National Bank 1,468,702 787,784 823,897
Cabot Street Realty Trust (29,993) (35,476) (66,045)
86 Bay Road Realty Trust 1,847 (50,690)
--------- --------- ---------
Total equity in undistributed net
income of subsidiaries 1,438,709 754,155 707,162
--------- --------- ---------
Net income $2,019,611 $1,432,272 $1,096,571
========= ========= =========
FS34
<PAGE>
BEVERLY NATIONAL CORPORATION (Parent Company Only)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Cash flows from operating activities:
Net income $2,019,611 $1,432,272 $1,096,571
Adjustments to reconcile net income
to net cash provided by operating
activities:
Loss on sale of fixed asset 6,621
Loss of merged subsidiary 196
Undistributed net income of
subsidiaries (1,438,709) (754,155) (707,162)
Increase (decrease) in accrued
expenses (7,738) 850 1,210
Depreciation expense 16,912 16,928 16,927
Increase (decrease) in taxes payable 950 82,696 (122,078)
Decrease in prepaid and deferred
taxes 1,758
(Increase) decrease in interest
receivable 3,053 13,608 (8,510)
Increase (decrease) in interest
payable (138) (252) 390
Transfer of fixed assets from 86 Bay
Road Realty Trust to Beverly National
Corporation (195,309)
Increase in other assets (43,822) (1,441)
Amortization of investment securities,
net 5
--------- --------- ---------
Net cash provided by operating
activities 552,073 790,506 88,665
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures (4,550) (640)
Proceeds from sales of fixed assets 189,328
Purchases of available-for-sale
securities (173,000) (230,000) (185,000)
Proceeds from sales of available-for-
sale securities 132,000 236,000 175,000
Increase in investment in subsidiaries (550,000)
Decrease in due from subsidiaries 69,000 9,000 621,700
Increase (decrease) in due to
subsidiaries 65,000 (86,886) 86,887
Cash received from merger of subsidiary 142
--------- --------- ---------
Net cash provided by (used in) investing
activities 88,592 (71,886) 337,275
--------- --------- ---------
FS35
<PAGE>
Cash flows from financing activities:
Repayment of notes payable (300,000) (350,000)
Proceeds from notes payable 100,000 550,000
Proceeds from sales of treasury stock 38,199 582,755
Purchases of treasury stock (49,500) (1,250,000)
Dividends paid (482,418) (331,356) (293,210)
--------- --------- ---------
Net cash used in financing activities (744,219) (630,856) (410,455)
--------- --------- ---------
BEVERLY NATIONAL CORPORATION (Parent Company Only)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994 (continued)
1996 1995 1994
Net increase (decrease) in cash and
cash equivalents (103,554) 87,764 15,485
Cash and cash equivalents at beginning
of year 104,753 16,989 1,504
Cash and cash equivalents at end ------------ ----------- -----------
of year $ 1,199 $ 104,753 $ 16,989
============ =========== ===========
Supplemental disclosure:
Income taxes paid (received) $ (33,779) $ (116,296) $ 91,113
The following transactions were a
result of the merger of 86 Bay
Road Realty Trust into Beverly
National Corporation:
Assets acquired, exclusive of
cash $ 28,244
Cash acquired in the merger 142
Liabilities assumed (960)
Elimination of due to subsidiary 65,000
Elimination of investment in
subsidiary (92,426)
-----------
Cash acquired in the merger $ 0
===========
The Parent Only Statements of Changes in Stockholders' Equity are identical
to the Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994, and therefore are not reprinted
here.
FS36
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
<PAGE>
PART III
--------
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth each of the Directors and Executive Officers
of the Corporation and of the Bank. Except as follows, all Directors and
Executive Officers of the Corporation have served as such since 1991. Mrs.
Griffin has been a Director since 1992. Mr. Booth and Mr. Wiltshire, have
been Directors since 1993. Mr. Clark R. Smith has been a Director since 1994.
Mr. Glovsky has been a Director since 1996. Each Executive Officer holds
office until the first Directors' meeting following the annual meeting of
stockholders and thereafter until his or her successor is elected and
qualified. Each Director of the Corporation is also a Director of the Bank.
Expiration Business
Date for Experience
Term of During Past
Name Age Position Office Five Years
---- --- -------- ---------- ----------
Richard H. Booth 62 Director 1998 Retired Stockbroker
Neiland J. Douglas, Jr. 61 Director 1999 President, Morgan
and Douglas (Real
Estate Services)
John N. Fisher 56 Director 2000 President, Fisher &
George Electrical
Co., Inc.
Mark B. Glovsky 49 Director 1999 Attorney, Partner,
Glovsky & Glovsky
Attorneys at Law
John L. Good, III 52 Director 1998 Vice President,
Community Relations
& Development,
Beverly Hospital
Alice B. Griffin 59 Director 2000 President,
Griffin Pension
Services, Inc.
Julia L. Robichau 59 Vice Pres. Vice Pres. & Clerk of
& Clerk of Corporation:
Corporation; Vice President,
Vice President, & Chief Operations
Chief Operations Officer & Cashier
Officer & of Bank
Cashier of Bank
<PAGE>
Peter E. Simonsen 46 Treasurer of Treasurer of
Corporation; Corporation;
Vice President Vice President
and Chief and Chief
Financial Financial
Officer of Bank Officer of Bank
Clark R. Smith 58 Director 1998 Attorney
Lawrence M. Smith 55 President & 1999 President & CEO,
Chief Beverly
Executive National
Officer of Corporation and
Corporation Beverly
and Bank, National Bank,
Director Director
Barry A. Sullivan 37 Director 2000 Certified Public
Accountant,
Sullivan and Drooks
James D. Wiltshire 65 Director 1998 President, Grimes
Wiltshire, Inc.
DBA TruForm
Industries, Inc.
No Director holds a directorship in any corporation (other than Beverly
National Corporation) with a class of securities registered pursuant to
Section 12, of the Securities Exchange Act of 1934 or subject to the
requirements of Section 15(d), of such Act or any Corporation registered as an
investment company under the Investment Company Act of 1940.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table provides certain information regarding the compensation
paid to Executive Officers for services rendered in capacities to the
Corporation and the Bank during the fiscal year ended December 31, 1996, 1995,
and 1994, respectively. No other Executive Officer of the Corporation or the
Bank received cash compensation in excess of $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
ANNUAL COMPENSATION AWARDS PAYOUTS
Other Annual Restricted Options/ LTIP All Other
Compensation Stock Award(s) SARs Payouts Compensation
Name and Principal Position Year Salary($) Bonus($) ($)(1) ($) (#) ($) (2)($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence M. Smith 1996 171,500 37,500 4,756 12,000 132,368
President of the Corporation 1995 166,075 23,400 5,563 41,434
and President, Chief 1994 160,075 15,696 5,513 39,507
Executive of the Bank
Julie L. Robichau 1996 85,000 15,000 303 28,128
Vice President and Clerk of 1995 76,600 10,000 169 5,973
the Corporation and 1994 68,100 6,675 169 5,179
Chief Operations Officer of
the Bank
Peter E. Simonsen 1996 88,370 15,425 280 4,084
Treasurer of the Corporation 1995 85,720 11,300 198 6,713
and Vice President and 1994 82,800 7,910 87 6,307
Chief Financial Officer of
the Bank
James E. Rich 1996 93,275 15,925 125 4,350
Vice President and Senior 1995 90,475 10,100 116 7,040
Trust Officer of the Bank 1994 87,775 7,425 116 6,738
<PAGE>
<FN>
<F1>
(1) Included in other annual compensation is an automobile
allowance and Excess Group Life Insurance.
<F2>
(2) Included in all other compensation is profit sharing, ESOP,
life insurance for Lawrence M. Smith, Julia L. Robichau,
Peter E. Simonsen and James E. Rich; SERPS for Lawrence M.
Smith, $119,646 and Julia L. Robichau, $24,265; and key man
insurance for Lawrence M. Smith.
<F3>
(3) Information concerning allocations under the Corporation's
Employee Stock Ownership Plan is unavailable, at date of
filing.
</FN>
</TABLE>
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
- --------------------------------------------------------------
Option/SAR Values
- -----------------
The table below sets forth information regarding stock options that were
exercised, if any, during the last fiscal year, and unexercised stock options
held by:
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options/SARS In-the-Money (1) Options/SARs
Shares At FY-/End (#) At FY-/End ($)
Acquired On Value Exercisable (E)/ Exercisable (E)/
Name and Principal Position Exercise (#) Realized($) Unexercisable (U) Unexercisable (U)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lawrence M. Smith 0 0 36,000 (E)(1)(3) $236,400 (E)
Presidnet of the Corporation 0 (U)
and President, Chief
Executive Officer of the Bank
Julia L. Robichau 0 0 6,000 (E)(2)(3) $ 37,800 (E)
Vice Presidnet and Clerk of
the Corporation and
Vice Presidnet and Cashier,
Chief Operations Officer of
the Bank
Peter E. Simonsen 0 0 2,400 (E)(2)(3) $ 15,120 (E)
Treasure of Corporation 3,600 (U) $ 22,680 (U)
and Vice President and
Chief Financial Officer of the
Bank
James E. Rich 0 0 4,290 (E)(2)(3) $ 27,027 (E)
Vice President and Senior 1,710 (U) $ 10,773 (U)
Trust Officer of the Bank
<PAGE>
<FN>
<F1>
(1) As of December 31, 1996, the market value of Beverly National Corporation
common stock was $20.30 per sahre. As the option exercise price for the
options previously granted to Mr. Smith equals 12,000 shares @ $11.90 per
share, 12,000 shares @ $14.00 per share and 12,000 shares @ $15.30 per
share which amounts to less than the December 31, 1996 market value of
$20.30, the options were "in-the-money" on December 31, 1996. Options are
"in-the-money" if the fair value of the underlying securities exceeds the
exercise price of the option.
<F2>
(2) The option exercise price for the options granted to Mrs. Robichau, Mr.
Simonsen and Mr. Rich in 1993 equals $14.00, which amount is less than
$20.30 per share as of Decemver 31, 1996. Accordingly, the options were
"in-the-money" on December 31, 1996.
<F3>
(3) In 1996, the Corporation adopted the 1996 Incentive Stock Option Plan for
key employees. Under the 1996 plan, up to 35,900 shares of Common Stock
may be granted, at fair value, to participants who will be selected from
key employees. No options were granted under this plan in 1996. However
in 1997, 21,910 options were granted to certain employees of the
Corporation and the Bank. With the exception of options granted to Mr.
Smith to purchase 3,010 shares of Common Stock and Mrs. Robichau to
purchase 2,000 shares of Common Stock which vested immediately, all
options vest over a ten year period. The options may be exercised at a
price of $20.30 per share. Included in these grants were options to
Messrs. Simonsen and Rich to enable each to purchase 2,000 shares of the
Corporations Common Stock.
</FN>
</TABLE>
<PAGE>
Option/SAR Grants in Last Fiscal Year
- -------------------------------------
With the exception of the individuals set forth in the table below, no other
executive officer of the Corporation was granted options to purchase shares of
common stock. All shares purchased upon the exercise of any option must be
paid in full at the time of the purchase.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
Number of Percent of
Securities Total Options/ Fair Market
Underlying SARs Granted Exercise of Value on
Options/SARs to Employees Base Price Date of Date of Date of Expiration
Name and Principal Position Granted(#) in Fiscal Year(1) ($/Sh) Grant Grant Exercise Date
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence M. Smith 12,000 55.6% $15.30 $18.00 02/06/96 NA 02/06/06
President of the Coporation
and President, Chief
Executive Officer of the Bank
<FN>
<F1>
(1) The options/SAR's granted to employee's in 1996 totaled 21,600 shares.
<F2>
(2) In 1996, the Corporation adopted the 1996 Incentive Stock Option Plan for
key employees. Under the 1996 plan, up to 35,900 shares of Common Stock
may be granted, at fair value, to participants who will be selected from
key employees. No options were granted under this plan in 1996. However
in 1997, 21,910 options were granted to certain employees of the
Corporation and the Bank. With the exception of options granted to Mr.
Smith to purchase 3,010 shares of common stock and Mrs. Robichau to
purchase 2,000 shares of common stock which vested immediately, all
options vest over a ten year period. The options may be exercised at a
price of $20.30 per share. Included in these grants were options to
Messrs. Simonsen and Rich to enable each to purchase 2,000 shares of the
Corporation's common stock.
</FN>
</TABLE>
<PAGE>
Directors
- ---------
The Corporation pays no cash compensation to its Directors for their services
as a Director. As a Director of the Bank, Directors are paid an annual fee of
$5,000.00. In addition, for each semimonthly meeting attended, a Director
receives $200.00. Any Director serving on a subcommittee is compensated at the
rate of $100.00 per hour for committee meetings.
All non-employee directors were granted options during 1996 pursuant to the
Corporation's non-qualified Director Stock Option Plan. Specifically, the
Corporation granted options to purchase 6,000 shares of the Corporation's
Common Stock to Messrs. Good and Douglas, 4,500 shares of the Corporation's
Common Stock to Messrs. Fisher, Sullivan, Griffin, Booth and Wiltshire and
1,500 shares of the Corporation's Common Stock to Mr. Clark R. Smith. The
Corporation granted options to purchase 12,000 shares of the Corporation's
Common Stock to Lawrence M. Smith pursuant to the non-qualified Director Stock
Option Plan. Except as discussed below, the options may be exercised in 10
installments, commencing on August 1, 1996, at a price of 415.30 per share.
The Corporation granted options to purchase 3,000 shares of the Corporation's
Common Stock to Mr. Glovsky. Mr. Glovsky's options may be exercised at a
price of $16.36 per share and may be exercised in 10 installments, commencing
August 1, 1996.
Employment and Severance Agreements
- -----------------------------------
In May 1991, Lawrence M. Smith, President and Chief Executive Officer of the
Corporation and the Bank entered into an Employment Agreement with the
Corporation. The Employment Agreement was written for a one year term and
automatically renews each year unless written notice is given by either party.
If notice is given, then the Employment Agreement will terminate on the next
anniversary date of the Employment Agreement. Also this agreement provides
that during the Employment Agreement and for one year afterward, Mr. Smith
cannot compete with the Corporation and its subsidiaries within their market
area. The Severance Agreement allows that in the event of a change in control
of the Corporation, if Mr. Smith's employment is terminated other than for
cause as defined in the agreement, disability or retirement within three years
after the change in control, then he shall be entitled to a lump sum payment
from the Corporation approximately equal to three times his average annual
compensation for the previous five years.
The Corporation adopted, in 1987, a Plan for Severance Compensation After
Hostile Takeover ("Severance Compensation) which provides for certain payments
to be made in the event that employees participating in such Plan are
terminated following a "hostile change in control" of the Corporation as
defined in such Plan. Any employee (other than Mr. Smith) may participate in
the Severance Compensation Plan as soon as he has completed two years of
continuous service with the Corporation or a subsidiary. A participant is
entitled to payments under the Severance Compensation Plan in the event that,
within two years after a hostile change in control, his employment is
terminated for any reason specified in the Plan. Such reasons include, among
others, change in the employee's duties or compensation, or termination of the
employee other than for "just cause" as defined in the Severance Compensation
Plan. The amount of the payment under the Severance Compensation Plan is
determined by the length of the participant's service, and ranges generally
from a lump sum payment equal to the employee's annual compensation during the
preceding twelve months to a lump sum payment equal to two-and-one-half times
such annual compensation.
<PAGE>
Supplemental Executive Reitrement Plans
- ---------------------------------------
In December 1996, the Corporation entered into a Supplemental Executive
Retirement Plan Agreement ("SERP") with Lawrence M. Smith. The purpose of the
SERP is to provide Mr. Smith with retirement benefits at age 60 equal to
retirement benefits under the defined benefit pension at 65, such that his
total retirement payment pursuant to the SERP will approximate 60% of his
annual compensation for the previous three (3) fiscal years.
In December 1996, the Corporation entered into a SERP with Julia L. Robichau.
The purpose of the SERP is to provide Mrs. Robichau with retirement benefits
at age 65, such that her total retirement payment pursuant to the SERP will
approximate 60% of her annual compensation for the three (3) previous years.
Robichau Employment Agreement
- -----------------------------
The Corporation entered into an employment agreement with Julia L. Robichau in
December 1996 (the "Robichau Employment Agreement"). The Robichau Employment
Agreement provides for Mrs. Robichau's employment as Vice President and Clerk
of the Corporation and Vice President, Cashier and Chief Operations Officer of
the Bank. In connection with her employment, the Corporation will pay to Mrs.
Robichau an annual base salary of $85,000 per year, which annual base salary
shall be adjusted upward from time to time in the sole discretion of the
Corporation.
Pursuant to the Robichau Employment Agreement, the Corporation has agreed to
provide to Mrs. Robichau fringe benefits consistent with those provided for
all senior officers of the Corporation and the Bank.
The Agreement contains a non-compete clause pursuant to which Mrs. Robichau has
agreed that while employed by the Corporation and for a period of one year
thereafter, Mrs. Robichau will not, in any capacity, compete with the
Corporation or the Bank.
The term of the Employment Agreement continues in effect through June 30, 1999,
which is Mrs. Robichau's scheduled retirement date, unless the Agreement is
terminated due to Mrs. Robichau's resignation, death, disability, or if Mrs.
Robichau is terminated for cause, as defined therein. If Mrs. Robichau dies
during the employment period, her estate will receive three (3) months salary,
and all other benefits to which she or her personal representatives may be
entitled. If Mrs. Robichau becomes disabled at any time during the term of
the Agreement, Mrs. Robichau shall be entitled to receive all benefits payable
to her under the Bank's long-term disability income plan. If Mrs. Robichau is
terminated without cause, as defined in the Employment Agreement, she will
receive in addition to all accrued and unpaid compensation through the date of
such termination, a lump sum equal to her base salary for the remaining term of
the Agreement, at an annual rate in effect as of the date of such termination,
plus Sixty Thousand Dollars ($60,000). The Corporation will maintain, at the
Corporation's sole expense, all group insurance and other employment benefit
plans, programs or arrangements (other than the Bank's retirement plan, the
Bank's profit sharing plan, 401k plan and the Corporation's employee stock
option plan in which the employee was participating at any time of the twelve
(12) months proceeding the date of such termination), provided that Mrs.
Robichau will be entitled to benefits under the Bank's retiree medical policy
regardless of whether such policy is subsequently changed.
<PAGE>
Change in Control Agreement
- ---------------------------
The Corporation entered into a change in control agreement (the "Change in
Control Agreement") with Mrs. Robichau in December 1996, which provides that
in the event of a Change in Control of the Corporation, if Mrs. Robichau's
employment is terminated other than for cause defined in the Change in Control
Agreement, disability or retirement within three (3) years after the change
in control, then she shall be entitled to a lump sum payment from the
Corporation approximately equal to three (3) times her average annual
compensation for the previous five (5) years.
Consulting Agreement
- --------------------
In December 1996, the Corporation entered into a consulting agreement (the
"Consulting Agreement") with Mrs. Robichau, pursuant to which the Corporation
will retain Mrs. Robichau as a consultant after Mrs. Robichau's retirement
from the Corporation. Mrs. Robichau is scheduled to retire as an officer
and employee of the Corporation on June 30, 1999. The term of the Consulting
Agreement will continue in effect through June 23, 2002. Pursuant to the
Consulting Agreement, Mrs. Robichau will be paid a consulting fee of $20,000
per year. The Consulting Agreement contains a non-compete clause and shall
terminate upon the expiration of the term of the Employment Agreement, Mrs.
Robichau's death or if the Corporation elects to terminate the Agreement for
cause. Should the Consulting Agreement be terminated, the Corporation has
agreed to pay Mrs. Robichau through the term thereof.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and related notes set forth information regarding stock
owned by each of the Directors of the Corporation and Bank and by all officers
and Directors of the Corporation and Bank as a group at March 14, 1997. The
percentage is based upon 754,382 shares of common stock outstanding.
Number of Shares Percent of
Beneficially Outstanding
Name of Owner Owned (1)(2) Shares
------------- ---------------- -----------
Richard H. Booth 2,900 (3,4) .38%
Neiland J. Douglas, Jr. 6,176 (3,5) .81%
John N. Fisher 5,815 (3,6) .77%
Mark B. Glovsky 550 (3) .07%
John L. Good, III 4,646 (3) .61%
Alice B. Griffin 3,487 (3) .46%
Clark R. Smith 3,293 (3) .44%
Lawrence M. Smith 43,828 (3,7) 5.52%
Barry A. Sullivan 2,772 (3,8) .37%
James D. Wiltshire 2,500 (2) .33%
All Directors and officers
as a group (14 persons) 96,421 (9) 11.63%
(1) Based upon information provided to the Corporation by the indicated
persons. The number of shares which each individual has the option to
purchase has been added to the number of shares actually outstanding for
the purpose of calculating the percentage of such person's ownership.
(2) Under regulations of the Securities and Exchange Commission, a person is
treated as the beneficial owner of a security if the person, directly or
indirectly (through contract, arrangement, understanding, relationship or
otherwise) has or shares (a) voting power, including the power to vote or
to direct the voting, of such security, or (b) investment power with
respect to such security, including the power to dispose or direct the
disposition of such security. A person is also deemed to have beneficial
ownership of any security that such person has the right to acquire within
60 days. Unless indicated in another footnote to this tabulation, a person
has sole voting and investment power with respect to the shares set forth
opposite his or her name. The table does not reflect the 15,000 shares
held in the Beverly National Bank Retirement Plan or the 2,300 shares held
in the Beverly National Bank Profit Sharing Plan, or the 49,652 shares
held by the Corporation's Employee Stock Ownership Plan, as to which
Mssrs. Smith, Good and Douglas serve as trustees.
<PAGE>
(3) Includes a stock option to purchase shares which were exercisable as of
March 14, 1997, or within 60 days thereafter, as listed: Richard H. Booth,
1,800, Neiland J. Douglas, Jr., 4,080, John N. Fisher, 2,250, Mark B.
Glovsky, 300, John L. Good, III, 4,080, Alice B. Griffin, 2,250,
Lawrence M. Smith, 40,000, Barry A. Sullivan, 2,250, James D. Wiltshire,
1,800, Officers (as a group), 15,890.
(4) Includes 65 shares owned jointly with Mr. Booth's spouse.
(5) Includes 59 shares owned by Mr. Douglas' spouse.
(6) Includes 1,519 shares owned jointly by Mr. Fisher and Mr. Fisher's
spouse.
(7) Includes 2,335 shares owned jointly by Mr. Smith and Mr. Smith's spouse;
and 1,115 shares owned by Mr. Smith's spouse; stock options to purchase
40,000 shares.
(8) Includes 150 shares owned by Mr. Sullivan's spouse.
(9) Includes stock options owned by all Directors and Officers as a group to
purchase 75,000 shares which were exercisable, as of March 14, 1997 or
60 days thereafter.
<PAGE>
The following table and related notes set forth certain information as of
March 14, 1997 with respect to all persons known to the Corporation to be the
beneficial owner of more than 5% of the Corporation's outstanding Common Stock:
Number of Shares
Directly and Percentage of
Name and Address Beneficially Outstanding
of Owner Owned Shares (1)
---------------- ---------------- -------------
Beverly National Bank 67,331 (2) 8.93%
Trust Department
240 Cabot Street
Beverly, MA 01915
Harold C. Booth 60,891 (3) 8.07%
P.O. Box 729
Center Harbor, NH 03226
Beverly National Corporation 49,652 6.58%
Employee Stock Ownership Plan
240 Cabot Street
Beverly, MA 01915
Nathalie D. Rothblatt 38,562 5.11%
11 Sunnycrest Avenue
Beverly, MA 01915
John Sheldon Clark 37,875 (4) 5.02%
430 Park Avenue
Suite 1800
New York, NY 10022
- --------------------------------
(1) The percentages above are based on 754,382 shares of common stock
outstanding as of March 14, 1997.
(2) These shares include shares held as Trustee and under agency agreements.
As Trustee, the Bank has sole investment and voting power over 25,355
shares, and shared investment and voting power over 41,976 shares.
(3) Includes 14,673 shares owned by Mr. Booth's spouse.
(4) These shares include shares held in trust for "Trust under the will of
Charles M. Clark Jr. for the benefit of Valer C. Austin" (4,906 shares)
and "Trust under the Will of Charles M. Clark Jr. for the benefit of John
Sheldon Clark" (6,700 shares). Mr. Clark acts as trustee for both trusts
and has investment authority. This includes 6,490 shares owned by Mr.
Clark's spouse.
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation, through its wholly-owned subsidiary, the Bank, has had,
currently has, and expects to continue to have in the future, banking
(including loans and extensions of credit) transactions in the ordinary course
of its business with its Directors, Executive Officers, members of their
family, and their associates. Such banking transactions have been and are
on substantially the same terms, including interest rates, collateral and
repayment conditions, as those prevailing at the same time for comparable
transactions with others and did not involve more than the normal risk of
collectability or present other unfavorable features.
As of December 31, 1996, the Bank had outstanding $1,358,137 in loans to
Directors, Executive Officers, members of their family and their associates,
which represents 8.97% of capital. Federal banking laws and regulations limit
the aggregate amount of indebtedness which banks may extend to bank insiders.
Pursuant to such laws, the Bank may extend credit to Executive Officers,
Directors, Principal Shareholders or any related interest of such persons, if
the extension of credit to such person is in the 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, 1996, the aggregate amount of extensions of credit to
insiders was well below this limit.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BEVERLY NATIONAL CORPORATION
Date: 3/25/97 By:/s/ Lawrence M. Smith
--------- ______________________________
President & CEO and Director,
Principal Executive Officer
Date: 3/25/97 By:/s/ Peter E. Simonsen
--------- ______________________________
Treasurer, Principal
Financial & Accounting
Officer
- -------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date Name and Capacity
---- -----------------
3/25/97 /s/ Lawrence M. Smith
________________________________
Lawrence M. Smith,
President & CEO &
Director, Principal Executive
Officer
3/25/97 /s/ Richard H. Booth
_________________________________
Richard H. Booth - Director
3/25/97 /s/ Neiland J. Douglas, Jr.
_________________________________
Neiland J.Douglas, Jr. - Director
_________________________________
John N. Fisher - Director
3/25/97 /s/ Mark B. Glovsky
_________________________________
Mark B. Glovsky - Director
3/25/97 /s/ John L. Good, III
_________________________________
John L. Good, III - Director
3/25/97 /s/ Alice B. Griffin
________________________________
Alice B. Griffin - Director
3/25/97 /s/ Clark R. Smith
________________________________
Clark R. Smith - Director
3/25/97 /s/ Barry S. Sullivan
________________________________
Barry A. Sullivan - Director
3/25/97 /s/ James D. Wiltshire
________________________________
James D. Wiltshire - Director
<PAGE>
SUPPLEMENTAL INFORMATION
------------------------
Copies of the Notice of Annual Meeting of Shareholders, Proxy Statement and
Proxy for Annual Meeting of Shareholders for the Registrant's 1997 Annual
Meeting of Shareholders, which was held on March 25, 1997, are furnished
herein. Such material is not deemed to be filed with the Commission or
otherwise subject to the liabilities of Section 18 of the Securities Exchange
Act, unless specifically incorporated by reference in their reports.
<PAGE>
PART IV
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ITEM 13. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. & 2.
3. Exhibits
(b) The Company did not file a Form 8-K during the quarter ended
December 31, 1996
EXHIBIT INDEX
3.1 Articles of Organization of Company, as Amended. . . . . . . (1)
3.2 By-Laws of Company, as Amended. . . . .. . . . . . . . . . . .(2)
10.1 Indenture dated as of January 21, 1976 between Benjamin Brown
and Virgil C. Brink, Trustees of Y & M Trust, and Beverly
National Bank. . . . . . . . . . . . . . . . . . . . . . . . .(3)
10.2 Incentive Stock Option Plan for Key Employees, as amended.....(4)
10.3 Directors' Plan, as amended and adjusted. . . . . . . . . . .(5)
10.4 Employment Agreement dated May 31, 1991 between Beverly
National Corporation and Lawrence M. Smith. . . . . . . . . . (2)
10.5 Severance Agreement dated July 8, 1987 between Beverly
National Corporation and Lawrence M. Smith. . . . . . . . . . (3)
10.7 Beverly National Corporation Plan for Severance
Compensation After Hostile Takeover. . . . . . . . . . . . . .(3)
10.8 Employment Agreement between Beverly National Corporation
and Julia L. Robichau dated December 24, 1996. . . . . . . .Page 85
10.9 Change in Control Agreement between Beverly National
Corporation and Julia L. Robichau dated December 24, 1996. .Page 107
10.10 Consulting Agreement between Beverly National Corporation
and Julia L. Robichau dated December 24, 1996. . . . . . . .Page 113
10.11 Supplemental Executive Retirement Agreement between
Beverly National Corporation and Lawrence M. Smith dated
December 24, 1996. . . . . . . . . . . . . . . . . . . . . .Page 91
10.12 Supplemental Executive Retirement Agreement between
Beverly National Corporation and Julia L.Robichau dated
December 24, 1996. . . . . . . . . . . . . . . . . . . . . Page 117
<PAGE>
10.13 1996 Incentive Stock Option Plan For Key Employees . . . . Page 128
20. 1997 Proxy Statement . . . . . . . . . . . . . . . . . . . Page 134
21. Subsidiaries of Corporation. . . . . . . . . . . . . . . . Page 140
23. Consent of Shatswell, MacLeod and Co. . . . . . . . . . . .Page 141
27. Financial Data Schedule
(1) Incorporated herein by reference to the identically numbered
exhibits to the Annual Report 10-KSB for December 31, 1994.
(2) Incorporated herein by reference to the identically numbered
exhibits to the Annual Report 10-KSB for December 31, 1993.
(3) Incorporated herein by reference to the identically numbered
exhibits filed as part of Company's Registration Statement on
Form S-18 (file No. 33-22224-B filed with the Commission on
July 9, 1988).
(4) Exhibit was filed on January 22, 1996 as Exhibit 4(a) to
Beverly National Corporation's Registration Statement on
Form S-8 (No. 33-347) and is incorporated herein by reference.
(5) Exhibit was filed on January 22, 1996 as Exhibit 4(b) to
Beverly National Corporation's Registration Statement on
Form S-8 (No. 33-347) and is incorporated herein by reference.
(6) Exhibit was filed on M arch 25, 1996 as Exhibit A to Beverly
National Corporation's Proxy Statement and is incorporated herein
by reference.
EMPLOYMENT AGREEMENT
AGREEMENT made and entered into as of this 24 day of December, 1996 by
and between Beverly National Corporation, a Massachusetts corporation having
its principal place of business in Beverly, Massachusetts ("Company"), and
Julia L. Robichau of Wenham, Massachusetts the ("Employee").
WITNESSETH THAT:
WHEREAS, the Employee is currently employed by the Company and has been
employed by the Company since March 15, 1984; and
WHEREAS, the Employee has been employed by The Beverly National Bank, a
wholly-owned subsidiary of the Company (the "Bank") for over twenty five years;
and
WHEREAS, the services of the Employee, the Employee's experience and
knowledge of the affairs of the Bank and the Company and the Employee's
reputation and contacts in the banking industry are valuable to the Company and
its subsidiaries; and
WHEREAS, the Company desires to employ the Employee in an executive
capacity in the conduct of its business until her scheduled retirement date,
and desires to retain her services as a consultant after that date, in
accordance with the terms of a Consulting Agreement; and
WHEREAS, the Employee desires to be so employed.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Term. The period of employment of the Employee under this Agreement
shall be deemed to commence as of the first above written and shall continue
in effect through June 30, 1999 Employee's scheduled retirement date.
2. Capacity. (a) At all times during the term hereof, the Company shall
employ the Employee as Vice President and Clerk, and shall cause the Bank to
employ Employee as its Vice President, Cashier and Chief Operations Officer.
In such capacities, the Employee shall be assigned only to such duties and
tasks as are appropriate for a person in such positions, and shall be subject
to the supervision of the President of the Company and the Bank, respectively.
Employee shall be employed on a full-time basis, and (subject to the last
sentence of this paragraph) the Employee shall devote her full time and
professional efforts to the performance of her duties as Vice President and
Clerk of the Company and any office she may hold in each of its subsidiaries.
It is the intention of the Company and the Employee that the Employee shall
have full discretionary authority of a Vice President and Clerk of the Company
and a Vice President, Cashier and Chief Operations Officer of the Bank. The
Company encourages participation by the Employee on community boards and
committees and in activities generally considered to be in the public interest,
but the Company shall have the right to approve the Employee's participation
on such other boards and committees as may conflict with the Company's own
business or demands upon the Employee's time.
EA1
<PAGE>
(b) During the period of her employment by the Company hereunder the
Employee agrees to serve as Vice President, Cashier and Chief Operations
Officer of the Bank without additional compensation, except for reimbursement
for all reasonable out-of-pocket expenses. In the event that during the term
of her employment the Employee is terminated as Vice President, Cashier or
Chief Operations Officer of the Bank, the Employee shall have the right to
resign as Vice President and Clerk of the Company in which case she shall be
entitled to the benefits set forth in Section 8(d) as though she had been
terminated involuntarily without cause.
3. Compensation and Benefits. (a) Base Compensation. The Company shall
pay to the Employee in equal monthly installments a base annual salary in the
amount of Eighty-Five Thousand ($85,000) Dollars. The base annual salary of
the Employee shall be adjusted upward from time to time in the sole discretion
of the Company, in which case such increased amount shall thereafter constitute
the Employee's base annual salary. It is the intention of the Company to
compensate the Employee at a level at least comparable to the compensation of
persons employed in the position of Vice President and Chief Operations Officer
of banks engaged in New England in activities substantially similar to those of
the Bank and having approximately the same combined gross assets as the Company
and its subsidiaries.
(b) Fringe Benefits. At all times during the term of this, the Company
shall provide or cause to be provided to the Employee fringe benefits
consistent with those provided for senior officers of the Company or the Bank.
The Employee shall maintain adequate records of all reimbursable expenses
necessary to satisfy reporting requirements of the Internal Revenue code and
applicable Treasury regulations.
4. Non-Competition. At all times during which the Employee is employed
by the Company under this Agreement and for a period of one (1) year
thereafter, the Employee shall not, directly or indirectly, as an employee of
any person or entity (whether or not engaged in business for profit),
individual proprietor, partner, stockholder, director, officer, joint venturer,
investor, lender or in any other capacity whatever (otherwise than as holder
of less than ten (10) percent of any securities publicly traded in the market)
compete within (i) the City of Beverly, Massachusetts, and the Town of
Hamilton, Massachusetts, or (ii) municipalities contiguous to the City of
Beverly, Massachusetts, or the Town of Hamilton, Massachusetts, or (iii) any
other Cities or Towns in which the Bank may locate during the term of this
Agreement, with the business of the Company or any of its subsidiaries, as
such businesses are constituted at any time during the term of this Agreement.
For purposes of this Section 4, Employee's ownership of or employment by an
institution doing business in Beverly, Massachusetts, Hamilton, Massachusetts,
in municipalities contiguous to Beverly or Hamilton or in such other Cities
or Towns, but having its principal place of business elsewhere, shall not
constitute competition hereunder so long as Employee does not solicit in
Beverly or Hamilton, in such contiguous municipalities, or in such other Cities
or Towns, as the case may be.
5. No Solicitation of Employees. At all times during which the Employee
is employed under this Agreement and for a period of one (1) year thereafter,
the Employee shall not, directly or indirectly, employ, attempt to employ,
recruit or otherwise solicit, induce or influence to leave her employment any
employee of the Company or its subsidiaries.
EA2
<PAGE>
6. No Disclosure of Information. The Employee shall not at any time
divulge, use, furnish, disclose or make accessible to anyone other than the
Company or any of its subsidiaries any knowledge or information with respect
to confidential or secret data, procedures or techniques of the Company or any
of its subsidiaries, provided, however, that nothing in this Section 6 shall
prevent the disclosure by Employee of any such information which at any time
comes into the public domain other than as a result of the violation of the
terms of this Section 6 by the Employee or which is otherwise lawfully acquired
by Employee.
7. Termination of Employment. This Agreement shall on the earliest to
occur of the following dates:
(a) The expiration of the term hereof;
(b) The Employee's resignation from the Company or the death or
disability of the Employee (the Employee being deemed to be disabled if she
has been unable for one hundred eighty (180) consecutive days to render
services required to be rendered by her during the term hereof);
(c) At the election of the Company, for Cause, as hereinafter
defined, after ten (10) business days' prior written notice of the basis
therefor to the Employee if during such period the Employee shall not have
cured the basis therefor. For purposes of this Agreement, the Company shall be
deemed to have "Cause" to terminate the employment of the Employee under this
Agreement only if:
(i) The Employee is convicted by a court of jurisdiction of any
criminal offense involving dishonesty or breach of trust;
(ii) The Employee shall commit an act of fraud materially
evidencing bad faith toward the Company or any of its
subsidiaries;
(iii) The Employee fails to substantially perform the duties
reasonably assigned to her by the President of the Company
(other than any such failure resulting from the Employee's
incapacity due to physical or mental illness) after a demand
for substantial performance is delivered to Employee by the
President which specifically identifies the manner in which
such officer believes that Employee has not substantially
performed such duties, making reference to this provision of
the Agreement.
8. Payments Upon Termination of Employment.
(a) Payment Upon Death. If at any time while she is employed hereunder
the Employee shall die, in addition to all other benefits which she or her
personal representatives may be entitled, the Company shall pay to her
designated beneficiary or, if no such beneficiary exists, to her estate, for
a period of three (3) months following the Employee's death, such amounts of
base annual salary as the Employee would have been entitled to receive during
said period (and at the times she would have been entitled to receive them)
had she remained alive.
EA3
<PAGE>
(b) Payments Upon Disability. If at any time during the term of this
Agreement, in the opinion of a physician mutually agreeable to the Company and
the Employee, the Employee shall be determined to be unable to render services
hereunder due to physical or mental illness or accident, in addition to all
other benefits to which she or her personal representatives may be entitled,
the Employee shall be entitled to receive all benefits payable to her under the
Bank's long term disability income plan.
(c) Payments Upon Expiration of Term. Upon expiration of the term of
this Agreement, the Employee shall be entitled to receive compensation through
the date of expiration. This Agreement does not limit Employee's rights to
benefits under all plans or programs of the Company or its subsidiaries in
which she participates, including without limitation pension, profit sharing,
401(k) and employee stock option plans, and the Retiree Medical Benefit Policy
approved December 28, 1993, the ("Retiree Medical Policy"), regardless of
whether such policy is subsequently changed except that Employee will be given
the benefit of favorable changes.
(d) Payment Upon Other Involuntary Termination. If at any time during
the term of this Agreement the employment of the Employee is terminated
involuntarily for any reason without Cause, as heretofore defined, then in such
case:
(i) Within five days after such termination, the Company shall pay
to the Employee (or to her personal representative in case of
death), in addition to all accrued and unpaid compensation
through the date of such termination, a lump sum amount equal
to Employee's base salary for the remaining term of this
Agreement, at the annual rate in effect as of the date of such
termination, plus $60,000.
(ii) The Company shall maintain or cause to be maintained in effect
for the Employee for a period of twelve months following such
termination, at the Company's sole expense, all group insurance
(including life, health, accident and disability insurance) and
all other employee benefit plans, programs or arrangements
(other than the Bank's retirement plan, the Bank's profit-
sharing and 401(k) plans, and the Company's employee stock
ownership plan), in which the Employee was participating at any
time during the twelve months preceding such termination,
provided, that in addition to the foregoing, Employee shall be
entitled to benefits under the Retiree Medical Policy, as
approved December 28, 1993, regardless of whether such policy
is subsequently changed, except that Employee shall be given the
benefit of favorable changes.
(iii) The Employee shall be entitled to receive, beginning at sixty-
five (65), a payment equal to the excess, if any, of (A) the
monthly amount to which the Employee would be entitled as a
Normal Retirement Benefit under the Beverly National Bank
Retirement Plan as in effect at the date of such termination
assuming the Employee had retired or terminated under that Plan
at the end of the term of this Agreement or, if earlier,
Employee's normal retirement date, over (B) any amounts actually
payable to the Employee under such Plan. Payments under this
paragraph (iii) shall be made at the same times and in the same
manner as any benefits payable under such Plan.
EA4
<PAGE>
(iv) The Employee shall not be required to mitigate the amount of any
payment provided for in this Section 8(d) by seeking employment
or otherwise.
In the event that the Employee's participation in any of the foregoing
plans, programs or arrangements (including those contemplated by Subsections
(c) and (d) hereof) is barred by law or otherwise, or in the event that any
such plan, program or arrangement is discontinued or the benefits thereunder
are materially reduced during such period, the Company shall provide the
Employee with benefits substantially similar to those to which the Employee was
entitled immediately prior to the date of her termination of employment. Upon
expiration of the period of coverage provided hereunder, the Employee shall be
provided with the opportunity to have assigned to her at no cost and with no
appointment of prepaid premiums any assignable insurance owned by the company
or any of its subsidiaries and relating specifically to the Employee.
9. Notices. Notices under this Agreement shall be in writing and shall
be mailed by registered or certified mail, effective upon receipt, addressed
as follows:
(a) To the Company: Beverly National Corporation
240 Cabot Street
Beverly, Massachusetts 01915
ATTN: President
(b) To the Employee: Julia L. Robichau
121 Topsfield Road
Wenham, Massachusetts 01984
Either party may by notice in writing change the address to which notices
to it or her are to be addressed hereunder.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Boston, Massachusetts, in accordance with the rules of the American Arbitration
Association then in effect. Notwithstanding the pendency of any such dispute
or controversy, the Company will pay Employee promptly an amount equal to her
full compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, base salary) and shall provide or cause
to be provided to the Employee all compensation, benefits and insurance plans
in which she was participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved. Amounts paid under this Section
10 are in addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts under this Agreement. Judgment
may be entered on the arbitrator's award in any court having jurisdiction.
11. Miscellaneous.
(a) Indemnification. During the period of her employment hereunder,
the Company agrees to indemnify the Employee in her capacity as an officer of
the Bank, The Company, and each subsidiary of either, all to the maximum
extent permitted under the laws of the commonwealth of Massachusetts and
applicable banking rules and regulations. The provisions of the Section 11(a)
shall survive expiration or termination of this Agreement for any reason
whatsoever.
EA5
<PAGE>
(b) Legal Fees. The Company shall pay to Employee all reasonable
legal fees and expenses incurred by her in contesting or disputing any
termination of this Agreement or in seeking to obtain or enforce any right or
benefit provided by this Agreement, provided that the final resolution of such
matter principally is in Employee's favor.
(c) Entire Agreement. This Agreement constitutes the entire
Agreement between the parties and may not be changed except by a writing duly
executed and delivered by the Company and Employee in the same manner as the
Agreement. This Agreement does not limit Employee's rights under other
agreements with the Company or any subsidiary, including without limitation
the Consulting Agreement and the Supplemental Executive Retirement Agreement
executed on or about the date hereof.
(d) Governing Law. This Agreement is governed by and shall be
construed in accordance with the laws of the Commonwealth of Massachusetts.
Employee agrees that it supersedes in all respects any prior agreement between
the Company or the Bank and Employee.
(e) Binding Effect; Non-Assignability. This Agreement shall be
binding upon the Company and insure to the benefit of the Company and its
successors. Neither this Agreement or any rights arising hereunder may be
assigned or pledged by Employee during her lifetime. This Agreement shall
inure to the benefit of and be enforceable by Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devises and legatees.
IN WITNESS WHEREOF, the parties hereto have executed the within
instrument as a sealed document as of the date first above written.
ATTEST BEVERLY NATIONAL CORPORATION
/s/ John L. Good III /s/ Lawrence M. Smith
______________________ By:___________________________
Chairman, Compensation President
Committee of the Board
of Directors
/s/ Julia L. Robichau
___________________________
Julia L. Robichau
EA6
BEVERLY NATIONAL CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
For
Lawrence M. Smith
December 24, 1996
RA1
<PAGE>
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS AGREEMENT, made and entered into this 24th day of December, 1996 by
and between Beverly National Corporation, its subsidiaries and affiliates,
(hereinafter called the "Corporation") and Lawrence M. Smith (hereinafter
called the "Executive").
WITNESSETH:
WHEREAS, the Executive has been in the employ of the Corporation and/or its
subsidiaries and is now serving the Corporation as its President and Chief
Executive Officer; and,
WHEREAS, because of the Executive's experience, knowledge of affairs of the
Corporation, and reputation and contacts in the industry, the Corporation deems
the Executive's continued employment with the Corporation important for its
future growth; and,
WHEREAS, it is the desire of the Corporation and in its best interest that
the Executive's service be retained; and,
WHEREAS, in order to induce the Executive to continue in the employ of the
Corporation and in recognition of his past service, the Board of Directors
voted on December 10, 1996 to authorize the Corporation to enter into an
Agreement to provide him certain benefits;
NOW, THEREFORE, in consideration of services performed in the past and to be
performed in the future as well as of the mutual promises and covenants herein
contained, it is agreed as follows:
ARTICLE ONE
1.01 Employment. The Corporation may employ the Executive in such capacity
as the Corporation may from time to time determine. Notwithstanding anything
contained herein, this Agreement is not an agreement of employment and nothing
herein shall restrict the Corporation concerning the terms and conditions of the
Executive's employment.
The benefits provided by this Agreement are not part of any salary reduction
plan or an arrangement deferring a bonus or a salary increase. The Executive
has no option to take any current payment or bonus in lieu of these salary
continuation benefits.
ARTICLE TWO
2.01 Normal Retirement Benefits.
(a) If the Executive shall continue in the employment of the Corporation
until the first of the month coincident with or next following his
sixtieth (60th) birthday (hereinafter referred to as the "Normal
Retirement Date"), he shall be entitled to a Normal Retirement Benefit,
determined as of the effective date of his actual retirement and
continuing for twenty (20) years, payable monthly, in the annual amount
of sixty percent (60%) of his Benefit Computation Base (hereinafter
defined), reduced by the sum of (1), (2) and (3) below.
RA2
<PAGE>
1. Fifty percent (50%) of the Executive's (actual or projected)
annual primary social security retirement benefit projected as
of the Executive's social security normal retirement age based
on his Benefit Computation Base in effect on the date of
termination of the Executive's employment with the Corporation;
2. The annual amount of benefits payable to the Executive (or his
beneficiaries) at the Normal Retirement Date calculated on a
single life annuity basis from any qualified defined benefit
pension plan maintained and funded by the Corporation, as such
plan or plans may be amended or modified from time to time;
3. The annual amount of benefits payable at the Normal Retirement
Date calculated on a single life annuity basis from any other
non-qualified supplemental retirement plan maintained and funded
by the Corporation, as such plan or plans may be amended or
modified from time to time.
(b) If the Executive has (or will have) completed fewer than twenty-five
(25) years (or 300 months) of service with the Corporation as of his
Normal Retirement Date, then the Normal Retirement Benefit shall be the
amount determined by multiplying the amount which would otherwise be the
Normal Retirement Benefit under paragraph (a) above, by a fraction, not
to exceed one (1), the numerator of which is the actual number of months
of the Executive's employment with the Corporation, and the denominator
of which is three hundred (300) months.
2.02 Benefit Computation Base. The Executive's Benefit Computation Base
shall be the average of the Executive's annual compensation (including base
salary, bonus, and any salary reduction amounts pursuant to Sections 401(k) or
125 of the Internal Revenue Code of 1986, as amended) paid during the thirty-
six (36) consecutive calendar months during the Executive's period of
employment by the Corporation in which such compensation is the highest.
2.03 Accrued Benefit. As used herein for the purposes of Section 3.01,
4.01, 5.01, or 5.02, the term "Accrued Benefit" shall mean the benefit amount
the Executive would be entitled to under Section 2.01, commencing at the
Executive's Normal Retirement Date with the following exceptions:
1. The event of (a) death, (b) disability, (c) termination of
employment, (d) early retirement, or (e) merger, consolidation
or sale (in the event of (e), as modified by Section 10.1
hereof) as the case may be, the benefit to which the Executive
will be entitled shall be determined by multiplying the Normal
Retirement Benefit amount by a fraction, not to exceed (1),
the numerator of which is the actual number of months of the
Executive's employment with the Corporation, and the denominator
of which is three hundred (300) months. The Corporation
recognizes and acknowledges that the Executive has been employed
for three hundred (300) months.
RA3
<PAGE>
2. If the Executive employment terminates for any reason prior to
his Normal Retirement Date, in calculating his Accrued Benefit,
(i) the offset for primary social security retirement benefit
shall be calculated on the basis of the amount projected to be
payable at the Executive's social security normal retirement age
assuming continued earnings by the Executive at the rate in
effect at termination of employment until the Executive's social
security normal retirement age; (ii) the offset for any
qualified defined benefit plan shall be calculated on the basis
of the Executive's accrued benefit in said plan upon termination
of employment projected to be payable at the Executive's Normal
Retirement Date; and (iii) the offset for any other non-
qualified supplemental retirement plan shall be calculated on
the basis of the Executive's accrued benefit in said plan upon
termination of employment projected to be payable at the
Executive's Normal Retirement Date.
2.04 Optional Forms of Payment. In lieu of the twenty (20) year certain
payments provided in Section 2.01 above, or whenever an Accrued Benefit is
payable under Section 4.01 or 5.01 of this Agreement, the Executive may elect
in the calendar year prior to the calendar year in which payments are to begin,
an optional form of payment which shall be the actuarial equivalent (factors
defined in the Corporation's qualified defined benefit pension plan) of the
said twenty (20) year certain payments. The optional form of payment shall be
any optional form of payment which is provided to the Executive under the terms
of the Corporation's qualified defined benefit pension plan.
ARTICLE THREE
3.01 Death of Executive.
(a) If the Executive dies while employed by the Corporation but prior to
the commencement of the payment of benefits under Section 2.01, 4.01,
5.01, 5.02, or 10.01, the Corporation will pay to the Executive's named
beneficiaries, for a period of twenty (20) years certain commencing on
the first day of the month next following the delivery to the
Corporation of a death certificate, a total annual amount equal to the
Accrued Benefit as of the Executive's date of death.
(b) If the Executive dies following the commencement of the payment of
benefits under Section 2.01, 4.01, 5.01, 5.02, or 10.01, such payment
of benefits shall continue to the named beneficiaries of the Executive
until all such benefits have been paid.
(c) If the Executive dies following the termination of his employment with
the Corporation and prior to the commencement of the payment of
benefits under Section 2.01, 4.01, 5.01, 5.02, or 10.01, the
Corporation shall pay to the Executive's named beneficiaries an annual
benefit which shall be the Executive's Accrued Benefit as of the date
of his termination of his employment. Such benefits shall be payable
monthly, commencing on the first day of the month next following the
Normal Retirement Date, or any date prior to the Normal Retirement Date
approved by the Corporation, and continuing for twenty (20) years.
3.02 Beneficiaries. The Executive may designate, in writing to the
Corporation, one or more beneficiaries. If no beneficiary is so named or if no
named beneficiary is living at the time a payment is due, benefit payments
shall be made, when due, to the Executive's estate.
RA4
<PAGE>
ARTICLE FOUR
4.01 Disability Prior to Retirement. In the event the Executive shall
become disabled, the Corporation will pay no disability benefits hereunder.
Disability benefits (if any) will be paid to the Executive through such
insurance programs as may be sponsored by the Corporation. Upon the
Executive's attainment of the Normal Retirement Date, the Executive shall
commence receiving payment of his Accrued Benefit determined as of the date of
the disability. The Accrued Benefit shall be paid monthly, for twenty (20)
years certain commencing on the first day of the month following the later of
the termination of such benefits or the Normal Retirement Date, or in the
manner provided in Section 2.04.
4.02 Re-employment Following Disability. In the event the Executive returns
to work with the Corporation after terminating employment because of
disability, this Agreement shall continue in full force and effect as though
such disability had not occurred.
ARTICLE FIVE
5.01 Early Retirement, Termination of Service or Discharge. Except to the
extent otherwise provided in Sections 5.03 and 5.04, in the event that the
Executive's employment with the Corporation is terminated, voluntarily or
involuntarily, before the Executive attains the Normal Retirement Date, for
reasons other than death or disability, the Executive shall be entitled to an
annual benefit, which shall be his Accrued Benefit as of the date of his
termination of employment. Such benefit shall be payable monthly, commencing
on the first day of the month next following the Normal Retirement Date and
continuing for twenty (20) years. The Executive may elect to receive such
benefit provided in this Section 5.01 prior to the Normal Retirement Date at
any date between age 55 and the Normal Retirement Date. Such early
commencement will result in a .25 percent reduction for each month payment
commences prior to age 60.
5.02 Optional Forms of Payment. In lieu of the twenty (20) year certain
payments provided in Section 5.01, the benefits payable under such Sections may
be payable in the manner provided in Section 2.04.
5.03 Employment by Competition. Anything to the contrary in this Agreement
notwithstanding, in the event that either (a) prior to the Normal Retirement
Date, the Executive's employment with the Corporation, shall have terminated
for whatever reason or (b) after he shall have begun to receive benefits
under this Agreement, and in either such event the Executive shall compete with
the business of the Corporation, then all payments which might otherwise be due
and payable hereunder shall be immediately forfeited and all rights of the
Executive and his beneficiaries hereunder shall become void. The Executive
will be deemed to have competed with the business of the Corporation if, during
the one-year period following termination of his employment with the
Corporation, he, directly or indirectly, whether as partner, shareholder (other
than as the owner of less than 2% of the outstanding capital stock of a
publicly traded corporation), consultant, agent, employee, co-venturer, or
otherwise, or through any Person (as hereafter defined),
(i) competes in the Corporation's market area (defined as the area
within 20 miles of any branch or facility of the Corporation)
with, or is employed in such market area by a Person which
competes with, the banking or any other business conducted by the
Corporation during the period of his employment,
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(ii) attempts to hire any employee of the Corporation, assist in such
hiring by any other Person, or encourages any such employee to
terminate his relationship with the Corporation, or
(iii) solicits or encourages any customer of the Corporation to
terminate its relationship with the Corporation or to conduct
with any other Person any business or activity which such
customer conducts or could conduct with the Corporation.
For purposes of this Section 5.03, the term "Person" shall mean an
individual, a corporation, an association, a partnership, an estate, a trust
and any other entity or organization, and shall include an affiliate office
within the Corporation's "market area" as defined in Section 5.03 above of a
Person whose headquarters or parent organization is located outside the "market
area" as so defined.
5.04 Forfeiture. Anything to the contrary in this Agreement notwithstanding
(other than Section 10.01), benefits under this Agreement shall be immediately
forfeited and all rights of the Executive and his beneficiaries hereunder shall
become null and void, if the Executive's employment with the Corporation is
terminated for cause. For this purpose, a termination shall be a termination
for "Cause" only if the termination is for one or more of the following:
(i) the willful and continued failure of him to substantially
perform his duties (other than any such failure resulting from
his incapacity due to physical or mental illness) after a demand
for substantial performance is delivered to him by the
Corporation or the Board which specifically identifies the
manner in which such Board believes that he has not
substantially performed his duties, or
(ii) willful misconduct by him which is materially injurious to the
Corporation monetarily or otherwise.
For purposes of this paragraph, no act, or failure to act, on the Executive's
part shall be considered "willful" unless done, or omitted to be done, by him
not in good faith and without reasonable belief that his action or omission was
in the best interests of the Corporation.
Notwithstanding the foregoing, he shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to him a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board of Directors of the Corporation or the
Board at a meeting of such Board called and held for the purpose (after
reasonable notice to him and an opportunity for him, together with his counsel,
to be heard before such Board), finding that in the good faith opinion of such
Board he was guilty of conduct set forth above in clauses (i) or (ii) of this
Section 5.04 and specifying the particulars thereof in detail.
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ARTICLE SIX
6.01 Interest. Any payment that is required to be made hereunder that is
delayed beyond the date specified in this Agreement shall bear interest at a
variable rate which shall be the rate of interest on one year U.S. Treasury
Bills determined at the first auction of each calendar year or part thereof
during the period of which interest is to be applied to any obligation
hereunder.
ARTICLE SEVEN
7.01 Alienability. Neither the Executive, 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, judgments, alimony or separate
maintenance, owed by the Executive or his beneficiary or any of them, or be
transferable by operation of law in the event of bankruptcy, or otherwise.
ARTICLE EIGHT
8.01 Participation in Other Plans. Nothing contained in this Agreement
shall be construed to alter, abridge, or in any manner affect the rights and
privileges of the Executive to participate in and be covered by any pension,
profit sharing, group insurance, bonus or any other employee plan or plans
which the Corporation may have or hereafter have.
ARTICLE NINE
9.01 Funding.
(a) The Corporation reserves the right at its sole and exclusive discretion
to insure or otherwise provide for the obligations of the Corporation
undertaken by this Agreement or to refrain from same, and to determine
the extent, nature and method thereof, including the establishment of
one or more trusts. Should the Corporation elect to insure this
Agreement, in whole or in part, through the medium of insurance or
annuities, or both, the Corporation shall be the owner and beneficiary
of the policy or annuity. At no time shall the Executive be deemed to
have any right, title or interest in or to any specified asset or
assets of the Corporation, or any trust or escrow arrangement,
including, but not by way of restriction, any insurance or annuity
contracts or the proceeds therefrom.
(b) Any such policy, contract or asset shall not in any way be considered to
be security for the performance of the obligations of this Agreement.
(c) If the Corporation purchases a life insurance or annuity policy on the
life of the Executive, the Executive agrees to sign any papers that may
be required for that purpose and to undergo any medical examination or
tests (at the Corporation's expense) which may be necessary, and
generally cooperate with the Corporation in securing such policy.
(d) To the extent the Executive acquires a right to receive benefits under
this Agreement, such right shall be equivalent to the right of an
unsecured general creditor of the Corporation.
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ARTICLE TEN
10.01 Reorganization. The Corporation shall not merge or consolidate into
or with another corporation if such merger or consolidation shall result in the
other corporation being the survivor corporation, nor shall it sell
substantially all of its assets to another corporation, firm or person, unless
and until:
(a) The Executive and such other corporation, firm or person agree (i) that
if the Executive is then employed by the Corporation, he shall continue
in the employ of the succeeding, continuing or acquiring corporation,
firm or person, and (ii) that such other corporation, firm or person
agrees in writing without further qualification to assume and discharge
the obligations of the Corporation under this Agreement, or;
(b) If the Executive and such corporation, firm or person do not agree (i)
that the Executive if then employed by the Corporation shall continue
in the employ of such corporation, firm or person, and (ii) such
corporation, firm or person does not so agree to assume and discharge
such obligations, the Corporation shall pay to the Executive, in one
lump sum, his Accrued Benefit as of the date of such merger,
consolidation or sale. All calculations of the Accrued Benefit, for
purposes of this Section 10.1(b), shall further be discounted to
present value in accordance with the actuarial tables used in the
Corporation's defined benefit pension plan.
Upon the occurrence of any such event and the written unqualified assumption
of the obligations of the Corporation by such successor corporation, firm or
person, the term "Corporation" as used in this Agreement shall be deemed to
refer to such successor or survivor corporation, firm or person.
ARTICLE ELEVEN
11.01 Benefits and Burdens. This Agreement shall be binding upon and inure
to the benefit of the Executive and his personal representatives, the
Corporation, and any successor organization which shall succeed to
substantially all of the Corporation's assets and business without regard to
the form of such succession.
11.02 Corporation. As used in this Agreement, Corporation shall mean the
Beverly National Corporation, a Massachusetts Corporation, and any affiliated
entity, successor organization, parent, subsidiary or holding company.
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ARTICLE TWELVE
12.01 Communications. Any notice or communication required of either party
with respect to this Agreement shall be made in writing and may either be
delivered personally or sent by First Class mail, as the case may be:
To the Corporation:
c/o Clerk of the Corporation
Beverly National Corporation
240 Cabot Street
Beverly, MA 01915
To the Executive:
Lawrence M. Smith
85 Grover Street
Beverly, MA 01920
Each party shall have the right by written notice to change the place to which
any notice may be addressed.
ARTICLE THIRTEEN
13.01 Claims Procedure. In the event that benefits under this Agreement are
not paid to the Executive (or his beneficiary in the case of the Executive's
death), and such person feels entitled to receive them, a claim shall be made
in writing to the Corporation within sixty (60) days after written notice from
the Corporation to the Executive or his beneficiary or personal representative
that payments are not being made or are not to be made under this Agreement.
Such claim shall be reviewed by the Corporation. If the claim is approved or
denied, in full or in part, the Corporation shall provide a written notice of
approval or denial within sixty (60) days from the date of receipt of the claim
setting forth the specific reason for denial, specific reference to the
provision of this Agreement upon which the denial is based, and any additional
material or information necessary to perfect the claim, if any. Also, such
written notice shall indicate the steps to be taken if a review of the denial
is desired. If a claim is denied (a claim shall be deemed denied if the
Corporation does not take action within the aforesaid sixty (60) day period)
and a review is desired, the Executive (or beneficiary in the case of the
Executive's death), shall notify the Corporation in writing within twenty (20)
days. In requesting a review, the Executive or his beneficiary may review this
Agreement or any document relating to it and submit any written issues and
comments he may feel appropriate. In its sole discretion the Corporation shall
then review the claim and provide a written decision within sixty (60) days.
This decision likewise shall state the specific reasons for the decision and
shall include reference to specific provisions of this Agreement on which the
decision is based.
Any decision of the Corporation shall not be binding on the Executive, his
personal representative, or any beneficiary without consent, nor shall it
preclude further action by the Executive, his personal representatives or
beneficiary.
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ARTICLE FOURTEEN
14.01 Entire Agreement. This instrument may be altered or amended only by
written agreement signed by the parties hereto.
14.02 Jurisdiction. The parties, terms and conditions of this Agreement are
subject to and shall be governed by the laws of the Commonwealth of
Massachusetts.
14.03 Gender. Any reference in this Agreement to the masculine shall be
deemed to include the feminine where the context so requires.
14.04 Operation of Law on Corporation's Obligations. In the event that any
governmental entity promulgates any statute, rule, regulation, policy or order
which restricts or prohibits the Corporation from making payments or affects
any operation of the Agreement to the Executive under this Agreement, then the
Corporation's obligations to make payments to the Executive (or his
beneficiary) hereunder shall terminate or be restricted or suspended
(consistent with such law or binding regulation, policy or order) for so long
as such restriction or prohibition applies to the Corporation. Nothing in this
Agreement is intended to require or shall be construed as requiring the
Corporation to do or fail to do any act in violation of any applicable law or
binding regulation, policy or order. Provisions other than payment provisions
which are found to be invalid or illegal will not be given effect and the
Agreement will be enforced as if those provisions had never been inserted.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly
executed by its duly authorized officer and its Corporate Seal affixed at
Beverly, Massachusetts the day and year first above written.
Attest: BEVERLY NATIONAL CORPORATION
/s/ John L. Good III /s/ Julia L. Robichau
__________________________ By__________________________
Chairman, Compensation Committee Vice President & Clerk
of the Board of Directors
/s/ Julia L. Robichau /s/ Lawrence M. Smith
__________________________ ____________________________
Witness Executive
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AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS AGREEMENT, made and entered into this 24 day of December, 1996 by and
between Beverly National Corporation, its subsidiaries and affiliates
(hereinafter called the"Corporation") and Lawrence M. Smith(hereinafter called
the "Executive").
WITNESSETH:
WHEREAS, the Executive has been in the employ of the Corporation and/or
its subsidiaries and is now serving the Corporation as its President;and,
WHEREAS, because of the Executive's experience, knowledge of affairs of
the Corporation, and reputation and contacts in the industry, the Corporation
deems the Executive's continued employment with the Corporation important for
its future growth; and,
WHEREAS, it is the desire of the Corporation and in its best interest that
the Executive's service be retained;and,
WHEREAS, the Corporation's subsidiary has entered into a Supplemental
Executive Retirement Agreement with Executive on December 15, 1994 (the "1994
SERP"), and the Corporation is comtemporaneously entering into a further
Supplemental Executive Retirement Agreement weith Executive (the "1996 SERP"),
and in connection therewith wishes to amend and restate the 1994 SERP in its
entirety;
NOW, THEREFORE in consideration of services performed in the past and to
be performed in the future as well as of the mutual promises and covenants
herein contained, the 1994 SERP is hereby amended and restated in its entirety
as follows:
ARTICLE ONE
1.01 RETIREMENT BENEFITS.
(A) For each calendar year 1994 through 1996 during which Executive
remains in the full-time employ of the Corporation, the Corporation shall pay
to Executive, at his Normal Retirement Date (as defined in the 1996 SERP) a
retirement benefit equal to $26,885, together with a payment in lieu of
interest as hereinafter provided. In the event the last fiscal year of
Executive's employment is less than a full calendar year, the retirement
benefit payable to Executive at Normal Retirement Date shall be a pro rata
portion of $26,885. In the event and during any period the Corporation has not
established a Rabbi Trust for all or any portion of this supplemental
retirement benefit, the retirement benefit shall be increased by an amount
equivalent to interest at the rate of 6% per annum, for the period from the
deemed payment date or dates (selected by the Corporation) during the year with
respect to which the benefit is earned until paid to Executive or contributed
to a Rabbi Trust;
(B) In the event the Corporation elects to establish a Rabbi Trust.;
any portion of this supplemental retirement benefit, Executive shall also be
paid, at Normal Retirement Date, all earnings of such trust attrubutable to the
benefit provided under this agreement, net of taxes and expenses.
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ARTICLE TWO
2.01 Payment. Payment shall be made at the times, in the amounts and on
the terms and conditions provided in the 1996 SERP, including particularly
Articles Three, Four and Five thereof.
ARTICLE THREE
3.01 Interest. Any payment that is required to be made hereunder that is
delayed beyond the date specified in this agreement shall bear interest at a
variable rate which shall be the rate of interest on one-year U.S. Treasury
Bills determined at the first auction of Each Calandar year on part thereof
during the period of which interest is to be applied to any obligation.
ARTICLE FOUR
4.01 Alienability. Neither the Executive, 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 Executive or her beneficiary or any of them, or be
transferable by operation of law in the event of bankruptcy, or otherwise.
ARTICLE FIVE
5.01 Participation in Other Plans. Nothing contained in this Agreement
shall be construed to alter, abridge, or in any manner affect the rights and
privleges of the Executive to participate in and be covered by any pension,
profit sharing, group insurance, bonus or any other employee plan or plans
which the Corporation may have or hereafter have.
ARTICLE SIX
6.01 Funding.
(a) The Corporation reserves the right at its sole and exclusive
discretion to insure or otherwise provide for the obligations of the
Corporation undertaken by this Agreement or to refrain from same, and to
determine the extent, nature and method thereof, including the establishment of
one or more trusts. Should the Corporation elect to insure this Agreement, in
whole or in part, through the medium of insurance of annuities, or both, the
Corporation shall be the owner and beneficiary of the policy or annuity. At no
time shall the Executive be deemed to have any right, title or interest in or
to any specified asset or assets of the Corporation, or any trust or escrow
arrangement, including, but not by way of restriction, any insurance or annuity
contracts or the proceeds therefrom.
(b) Any such policy, contract or asset shall not in any way be considered
to be security for the performance of the obligations of this agreement.
(c) If the Corporation purchases a life insurance or annuity policy on
the life of the Executive, the Executive agrees to sign any papers that may be
required for that purpose and to undergo any medical examination or tests (at
the Corporation's expense) which may be necessary, and generally cooperate with
the Corporation in securing such policy.
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(d) To the extent the Executive acquires a right to receive benefits
under this Agreement, such right shall be the right of an unsecured general
creditor of the Corporation.
ARTICLE SEVEN
7.01 Benefits and Burdens. This Agreement shall be binding upon and inure to
the benefit of the Executive and his personal representatives, the Corporation
and any successor organization whish shall succeed to substantially all of the
Corporation's assets and business without regard to the form of such succession.
7.02 Corporation. As used in this Agreement, Corporation shall mean Beverly
National Corporation, a Massachusetts corporation, its subsididary, Beverly
National Bank, a national banking association, and any affiliated entity,
successor organization, parent, subsidiary, or holding company.
ARTICLE EIGHT
8.01 Communications. Any notice or communication required of either party
with respect to this Agreement shall be made in writing and may either be
delivered personally or sent by First Class mail, as the case may be:
To the Corporation:
c/o Clerk of the Corporation
Beverly National Corporation
240 Cabot Street
Beverly, Massachusetts 01915
To the Executive:
Lawrence M. Smith
85 Grover Street
Beverly, Massachusetts 01915
Each party shall have the right by written notice to change the place to which
any notice may be addressed.
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ARTICLE NINE
9.01 Claims Procedure. In the event that benefits under this Agreement are
not paid to the Executive (or his beneficiary in the case of hte Executive's
death), and such person feels entitled to receive them, a claim shall be made
in writing to the Corporation within sixty (60) days after written notice from
the the Corporation to the Executive or his beneficiary or personal
representative that payments are not being made or are not to be made under
this Agreement. Such claim shall be reviewed by the Corporation. If the claim
is approved or denied, in full or in part, the Corporation shall provide a
written notice of approval of denial within sixty (60) days from the date of
receipt of the claim setting forth the specific reason for denial, specific
reference to the provision of this Agreement upon which the denial is based,
and any additional material or information necessary to ferfect the claim, if
any. Also, such written notice shall indicate that steps to be taken if a
review of the denial is desired. If a claim is denied (a claim shall be deemed
denied if the Corporation does not take action within the aforesaid sixty (60)
day period) and a review is desired, the Executive (or beneficiary in the case
of the Executive's death), shall notify the Corporation in writing within
twenty (20) days. In requesting a review, the Executive or his beneficiary may
review this Agreement or any document relating to it and submit any written
issues and comments he or she may feel appropriate. In its sole discretion the
Corporation shall then review the claim and provide a written decision within
sixty (60) days. This decision likewise shall state the specific reasons for
the decision and shall include reference to specific provisions of this
Agreement on which the decision is based.
Any decision of the Corporation shall not be binding on the Executive, his
personal representative, or any beneficiary without consent, nor shall it
preclude further action by the Executive, her personal representatives of
beneficiary.
9.02 Arbitration. All claims, disputes and other matters in questions between
the party hereto arising out of or relating to this Agreement or the breach
thereof may be decided by arbiration with the express mutual consent of the
Executive and the Corporation in accordance with the Rules of the American
Arbitration Association then obtaining, subject to the limitations and
restrictions stated below. This Agreement to arbitrate and any other agreement
or consent to arbitrate entered inot in accordance herewith will be
specifically enforceable under the prevailign arbitration law of any court
having jurisdiction.
Notice of demand for arbitration must be filed in writing with the other
parties to this Agreement and with the American Arbitration Association. The
demand must be made within a reasonable time after the claim, dispute or other
matter in question has arisen. in no event may the demand for arbitration be
made after institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable statute
of limitations.
The award rendered by the arbitrators will be final, not subject to appeal and
judgement may be entered upon it in any court having jurisdiction thereof.
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ARTICLE TEN
10.01 Entire Agreement. This instrument may be altered or amended only by
written agreement sighned by the parties hereto.
10.02 Jusrisdiction. The parties, terms and conditions of this Agreement are
subject to and shall be governed by the laws of the Commonwealth of
Massachusetts.
10.03 Gender. Any references in this agreement to the masculine shall be
deemed to include the feminine where the contest so requires.
10.04 Operation of Law on Corporation's obligations. In the event that any
governmental entity promulgates any statute, rule, regualation, policy or order
which restricts or prohibits the Corporation from making payments to the
Executive under this Agreement, then the Corporation's obligations to make
payments to the Executive (or her beneficiary) hereunder shall terminate or be
restricted or suspended (consistent with such law or binding regulation, policy
or order) for so long as such restriction or prohibition applies to the
Corporation. Nothing in this Agreement is intended to requrire or shall be
construed as requiring the Corporation to do or fail to do any act in violation
of any applicable law or binding regulation, policy or order.
IN WITNESS WHEREOF,the Corporation, Executive and Corporation's subsidiary
have each caused this Agreement to be duly executed, under seal, at Beverly,
Massachusetts the day and year first above written.
ATTEST: BEVERLY NATIONAL CORPORATION
/s/ John L. Good III /s/ Julia L. Robichau
________________________ By__________________________
Chairman, Compensation Vice President & Clerk
Committe of the Board
of Directors
ATTEST BEVERLY NATIONAL BANK
/s/ Julia L. Robichau /s/ Lawrence M. Smith
________________________ By_________________________
Witness Lawrence M. Smith
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BEVERLY NATIONAL CORPORATION
240 Cabot Street
Beverly, MA 01915
December 24, 1996
Ms. Julia L. Robichau
121 Topsfield Road
Wenham, MA 01984
Dear Ms. Robichau:
Beverly National Corporation, a Massachusetts corporation ("Corporation"),
recognizes that during your tenure as an officer of the Corporation and of
Beverly National Bank, a wholly-owned subsidiary of the Corporation (the
"Bank"), you have contributed to the growth and success of the Bank in
significant ways, and that you have developed an intimate knowledge of the
business and affairs of the Bank and of its policies, methods, personnel and
problems. The Corporation also recognizes that such contributions and
knowledge are expected to be of significant benefit to the future growth and
success of the Bank and the Corporation.
The Board of Directors of the Corporation (the "Board") recognizes that a
change in control of the Corporation may occur and that the threat of such a
change in control may result in the departure of management personnel to the
detriment of the Corporation and its stockholders. The Board has determined
that appropriate steps should be taken to reinforce and encourage the continued
dedication of members of the Bank's and the Corporation's management, including
yourself, to their assigned duties in the face of the potentially disturbing
circumstances arising from the possibility of such a change in control. The
continued performance of your duties as an officer of the Bank and the
Corporation may require your strenuous opposition to such a threatened change
in control which, in the judgment of the Board, may not be in the best
interests of the Corporation and its stockholders, and your opposition to such
a threatened change in control of the Corporation could prevent or inhibit you
from effectively continuing your duties as an officer of the Bank and the
Corporation should such a change of control occur.
In order to induce you to remain in the employ of the Bank and the
Corporation and to continue to perform your duties as an officer of the Bank
and the Corporation in a manner which is, in your judgment, in the best
interests of the Bank and the Corporation, the Corporation hereby agrees to
provide you with certain severance benefits in the event your employment with
the Bank or the Corporation is terminated subsequent to a change in control (as
defined in Section 1 hereof) under the circumstances described below.
1. Change in Control. No benefits shall be payable hereunder unless
there shall have been a change in control as set forth below, and your
employment by the Bank or the Corporation shall thereafter have been terminated
in accordance with Section 2 below. For purposes of this Agreement, a "Change
in Control" of the Corporation shall mean any of the following:
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(a) The acquisition of "control" (within the meaning of Section 2(a)
(2) of the Bank Holding Company Act of 1956, as amended, or Section 602 of the
Change in Bank Control Act of 1978) of the Corporation by any person, company
or other entity;
(b) Any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 thereunder), directly or indirectly, of securities of
the Corporation representing 20% or more of the combined voting power of the
Corporation's then-outstanding securities.
(c) Any such person becomes the beneficial owner, directly or
indirectly, of securities of the Corporation representing less than 20% of the
Corporation's then-outstanding securities, but is determined by a court or
regulatory agency with jurisdiction over the matter to possess or to have
exercised control over the Corporation; or
(d) During any period of two consecutive years, individuals who at
the beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof unless the election or the nomination
for election by the Corporation's stockholders of each new director was
approved by a vote of at least three-fourths of the directors of the
Corporation then still in office who were directors at the beginning of the
period; or
(e) The Corporation sells a majority of its assets, or enters into
any transaction in which another entity (other than an insurer of the deposit
liabilities of a subsidiary of the Corporation) assumes a majority of the
deposit liabilities of any subsidiary of the Corporation.
2. Termination Following Change in Control. You shall be entitled to the
benefits provided for in Section 3(c) hereof upon the termination of your
employment as an officer of the Bank or the Corporation (i) by reason of your
resignation, as defined in Section 2(c) hereof, within twenty-four (24) months
after a Change in Control, or (ii) for any other reason, voluntary or
involuntary, within twenty-four (24) months after a Change in Control, unless
your employment is terminated (A) because of your death, retirement, or
disability or (B) by the Bank or the Corporation for Cause (as hereinafter
defined). In the event your employment with the Bank or the Corporation, but
not both, shall be terminated and you shall be entitled to the benefits
provided in Section 3 hereof, you may thereafter terminate your employment with
the Corporation or the Bank, respectively, and continue to be entitled to the
benefits provided in Section 3 hereof.
(a) Retirement; Disability.
(i) Termination by the Bank or the Corporation or you of your
employment based on retirement shall mean the mandatory termination of your
employment in accordance with the Bank's retirement policy including (at your
sole election and as set forth in writing) early retirement, generally
applicable to its salaried employees or in accordance with any retirement
arrangement established with your consent with respect to you.
(ii) Termination by the Bank or the Corporation of your
employment based on disability shall mean termination because of your
inability, as a result of your incapacity due to physical or mental illness, to
perform the services required of you as an employee for a period aggregating
six months or more within any 12-month period.
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(b) Cause. Termination by the Bank or the Corporation of your
employment for "Cause" shall mean termination upon
(i) the willful and continued failure by you to substantially
perform your duties (other than any such failure resulting from your incapacity
due to physical or mental illness) after a demand for substantial performance
is delivered to you by the Board of Directors of the Bank or the Board which
specifically indentifies the manner in which such board believes that you have
not substantially performed your duties, or
(ii) a conviction for criminal misconduct by you which is
materially injurious to the Bank or the Corporation monetarily or otherwise.
For purposes of this paragraph (b), no act, or failure to act, on your
part shall be considered "willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your action or omission
was in the best interests of the Bank or the Corporation.
Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board of Directors of the Bank
or the Board at a meeting of such board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together with your
counsel, to be heard before such board), finding that in the good faith opinion
of such board you were guilty of conduct set forth above in clauses (i) or (ii)
of the first sentence of this paragraph and specifying the particulars thereof
in detail.
(c) Resignation. Your voluntary resignation from employment with the
Corporation or the Bank for any reason as set forth in a letter from you
delivered to the Board or to the Board of Directors of the Bank.
(d) Notice of Termination. The Corporation agrees that it will, and
will cause the Bank to, promptly furnish you with a written Notice of
Termination. Any purported termination by you shall be communicated by written
Notice of Termination to the Bank, with a copy to the Corporation. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if your employment is terminated for disability, thirty
(30) days after Notice of Termination is given,
(ii) if your employment is terminated by the Bank or the
Corporation for Cause, the date specified in the Notice of Termination, and
(iii) if your employment is terminated for any other reason, the
date on which a Notice of Termination is given; provided that if within five
(5) days after any Notice of Termination is given the party receiving such
Notice of Termination notifies the other party that a dispute exists concerning
the termination, the Date of Termination shall be the date on which the dispute
RA18
<PAGE>
is finally determined, either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment, order or decree of
court ofcompetent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
3. Compensation During Disability or Upon Termination.
(a) During any period that you fail to perform your duties as a result
of incapacity due to physical or mental illness, the Corporation shall pay you,
to the extent it is not paid by Bank, an amount equal to your full base salary
at the rate then in effect until the Date of Termination. Thereafter, your
benefits shall be determined in accordance with the Bank's long-term disability
plan then in effect.
(b) If your employment shall be terminated for Cause, the Corporation
shall pay you, to the extent it is not paid by Bank, an amount equal to your
full base salary through the Date of Termination at the rate in effect at the
time Notice of Termination was given and the Corporation shall have no further
obligations to you under this Agreement.
(c) If, within twenty-four (24) months after a Change in Control shall
have occurred, your employment by the Bank or the Corporation shall be
terminated other than for Cause, your death, disability or retirement, then the
Corporation shall pay you within five days after the Date of Termination an
amount equal to the sum of:
(i) An amount equal to your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination was given,
to the extent Bank does not promptly pay such amount; plus
(ii) A lump sum amount equal to the product of (A) the average
sum of your annual base compensation (salary plus bonus) paid to you by the
Bank or the Corporation and includible in your taxable income for the five
years preceding a Change in Control multiplied by (B) the number three (3),
less one hundred (100) dollars; plus
(iii) All legal fees and expenses incurred by you as a result of
such termination (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided for by this Agreement).
(d) You shall not be required to mitigate the amount of any payment
provided for in this Section 3 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 3 be reduced by
any compensation earned by you as the result of employment by another employer
after the Date of Termination, or otherwise.
(e) Notwithstanding any provision hereof to the contrary, no payment
hereunder shall be made if it would violate any applicable law, rule or
regulation, including without limitation, 12 C.F.R. Part 359, as promulgated by
the Federal Deposit Insurance Corporation.
RA19
<PAGE>
4. Successors; Binding Agreement.
(a) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation, by
agreement in form and substance satisfactory to you, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Corporation would be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Corporation in the same amount and
on the same terms as you would be entitled to hereunder if you resigned (as
defined in Section 2(c) hereof) within twenty-four (24) months after a Change
in Control, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Corporation" shall mean the
Corporation as hereinbefore defined and any successor to its business and/or
assets as aforesaid which executes and delivers the agreement provided for in
this Section 4 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees. If you should die while any
amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there be no such designee, to your estate.
5. Notices. All notices and other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth on the first
page of this Agreement, provided that all notices to the Corporation shall be
directed to the attention of the Board with a copy to the Chairman of the
Board, or to such other address as either party may have furnished to the other
in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
6. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other or failure to comply with any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws
of the Commonwealth of Massachusetts. This Agreement is made under seal.
7. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
RA20
<PAGE>
8. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
9. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Boston, Massachusetts, in accordance with the rules of the American Arbitration
Association then in effect. Notwithstanding the pendency of any such dispute or
controversy, the Corporation will pay you promptly an amount equal to your full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary) and provide you with all
compensation, benefits and insurance plans in which you were participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with Section 2(e) hereof, to the extent Bank does not
make such payments or continue such benefits. Amounts paid under this Section
9 are in addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this Agreement.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
10. Election of Benefits. An election by you to resign after a Change in
Control under the provisions of this Agreement will not constitute a breach by
you of any employment agreement between the Corporation (or any subsidiary
thereof) and you and will not be deemed a voluntary termination of employment
by you for the purpose of interpreting the provisions of any benefit plans,
programs or policies. Nothing in this Agreement will be construed to limit
your rights under any employment agreement you may then have with the
Corporation, provided, however, that if you become entitled to compensation
under Section 3 hereof following a Change in Control, you may elect either to
receive the severance payment provided in Section 3 or such termination
benefits as you may have under any such employment agreement, but may not elect
to receive both.
If this letter correctly sets forth our agreement on the object matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter which will then constitute our agreement on this subject.
ATTEST: BEVERLY NATIONAL CORPORATION
/s/ John L. Good III /s/ Lawrence M. Smith
_______________________ By__________________________
Chairman, Compensation Its: President
Committee of the Board
of Directors
Agreed to this 24th day
of December, 1996.
/s/ Julia L. Robichau
______________________
Julia L. Robichau
RA21
<PAGE>
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into as of this 24th day of December,
1996 by and between Beverly National Corporation, a Massachusetts corporation
having its principal place of business in Beverly, Massachusetts ("Company"),
and Julia L. Robichau of Wenham, Massachusetts.
W I T N E S S E T H T H A T:
WHEREAS, Ms. Robichau is currently employed by the Company and has been
employed by the Company since March 15, 1984; and
WHEREAS, Ms. Robichau has been employed by The Beverly National Bank, a
wholly-owned subsidiary of the Company (the "Bank"), over twenty-five years;
and
WHEREAS, Ms. Robichau is scheduled to retire as an officer and employee of the
Company and its subsidiaries on June 30, 1999; and
WHEREAS, the services of Ms. Robichau, her experience and knowledge of the
affairs of the Bank and the Company and her reputation and contacts in the
banking industry are valuable to the Company and its subsidiaries; and
WHEREAS, the Company desires to retain Ms. Robichau as a consultant (in such
capacity, the "Consultant"), to advise the Company and its subsidiaries; and
WHEREAS, Consultant desires to be so retained.
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Term. The period of this Consulting Agreement shall be deemed to
commence as of the date of Consultant's retirement from the Company and its
subsidiaries, and shall continue in effect through June 23, 2002. In the event
Consultant's employment with the Company and its subsidiaries terminates due to
her death, disability, or as a result of termination other than for "Cause" (as
defined in her Employment Agreement of even date), then this Consulting
Agreement shall not come into effect.
2. Consulting Services. Consultant shall provide such services, at such
time or times, as she shall agree with the President of the Company. It is
understood that Consultant has not agreed to be available on a full time or
regular basis, or for any particular number of hours. Consultant may provide
services to other businesses, subject to Sections 4, 5 and 6 hereof.
3. Fees. Consultant shall be paid a consulting fee of $20,000 per annum
(the "Consulting Fee"), prorated for portions of a year, payable monthly or as
otherwise agreed by Consultant and the Company. In addition, Company will
reimburse Consultant for her expenses. Consultant shall not be an employee of
the Company or its subsidiaries, and shall be solely responsible for the timely
payment of all income or other taxes due with respect to the Consulting Fee.
Consultant shall not be entitled to participate in the benefit programs
of the Company and its subsidiaries by virtue of this Consulting Agreement, but
nothing herein contained shall limit rights Consultant otherwise has with
respect to such benefit programs.
RA22
<PAGE>
4. Non-Competition. At all times during the term of this Consulting
Agreement and for a period of one (1) year thereafter, Consultant shall not,
directly or indirectly, as an employee of any person or entity (whether or not
engaged in business for profit), individual proprietor, partner, stockholder,
director, officer, joint venturer, investor, lender or in any other capacity
whatever (otherwise than as holder of less than ten (10) percent of any
securities publicly traded in the market) compete within (i) the City of
Beverly, Massachusetts, and the Town of Hamilton, Massachusetts, or (ii)
municipalities contiguous to the City of Beverly, Massachusetts, or the Town of
Hamilton, Massachusetts, or (iii) any other Cities or Towns in which the Bank
may locate during the term of this Consulting Agreement, with the business of
the Company or any of its subsidiaries, as such businesses are constituted at
any time during the term of this Consulting Agreement. For purposes of this
Section 4, Consultant's ownership of or employment by an institution doing
business in Beverly, Massachusetts, Hamilton, Massachusetts, in municipalities
contiguous to Beverly or Hamilton or in such other Cities or Towns, but having
its principal place of business elsewhere, shall not constitute competition
hereunder so long as Consultant does not solicit business in Beverly or
Hamilton, in such contiguous municipalities, or in such other Cities or Towns,
as the case may be.
5. No Solicitation of Employees. At all times during the term of this
Consulting Agreement and for a period of one (1) year thereafter, Consultant
shall not, directly or indirectly, employ, attempt to employ, recruit or
otherwise solicit, induce or influence to leave his or her employment any
employee of the Company or its subsidiaries.
6. No Disclosure of Information. Consultant shall not at any time divulge,
use, furnish, disclose or make accessible to anyone other than the Company or
any of its subsidiaries any knowledge of information with respect to
confidential or secret data, procedures or techniques of the Company or any of
its subsidiaries, provided, however, that nothing in this Section 6 shall
prevent the disclosure by Consultant of any such information which at any time
comes in to the public domain other than as a result of the violation of the
terms of this Section 6 by Consultant or which is otherwise lawfully acquired
by Consultant.
7.Termination of Consulting Agreement. This Consulting Agreement shall
terminate on the earliest to occur of the following:
(a) The expiration of the term hereof;
(b) Consultant's death;
(c) At the election of the Company, for Cause, as
hereinafter defined, after ten (10) business days' prior written notice of the
basis therefor to Consultant if during such period Consultant shall not have
cured the basis therefor. For purposes of this Consulting Agreement, the
Company shall be deemed to have "Cause" to terminate this Consulting Agreement
only if:
(i) Consultant is convicted by a court of competent
jurisdiction of any criminal offense involving
dishonesty or breach of trust;
(ii) Consultant shall commit an act of fraud materially
evidencing bad faith toward the Company or any of
its subsidiaries;
RA23
<PAGE>
(iii) Consultant fails to substantially perform the
duties as agreed by Consultant and the President of
the Company (other than any such failure resulting
from Consultant's incapacity due to physical or
mental illness) after a demand for substantial
performance is delivered to Consultant by the
President which specifically identifies the manner
in which such officer believes that Consultant has
not substantially performed such duties, making
reference to this provision of the Consulting
Agreement.
It is understood that in consideration of Consultant's agreement to be bound
hereby, the Company agrees to pay the Consulting Fee through the term hereof,
even if Consultant is unable to perform services due to physical or mental
illness or condition.
8. Payments Upon Termination of Consulting Agreement or Default by Company.
Upon termination of this Consulting Agreement, Consultant shall be entitled to
receive the Consulting Fee through the date of termination. If Company
purports to terminate Consultant other than for Cause, or in the event Company
fails to make any payment hereunder when due, or breaches any other term or
provision hereof, Consultant shall be entitled to receive, in a lump sum, the
Consulting Fee through the end of the term of this Consulting Agreement.
9. Notices. Notices under this Consulting Agreement shall be in writing and
shall be mailed by registered or certified mail, effective upon receipt,
addressed as follows:
(a) To the Company: Beverly National Corporation
240 Cabot Street
Beverly, Massachusetts 01915
Attention: President
(b) To the Consultant: Julia L. Robichau
121 Topsfield Road
Wenham, Massachusetts 01984
Either party may by notice in writing change the address to which notices to
it or her are to be addressed hereunder.
10. Arbitration. Any dispute or controversy arising under or in connection
with this Consulting Agreement shall be settled exclusively by arbitration in
Boston, Massachusetts, in accordance with the rules of the American Arbitration
Association then in effect. Notwithstanding the pendency of any such dispute
or controversy, the Company will pay Consultant promptly an amount equal to her
full Consulting Fee in effect when the notice giving rise to the dispute was
given (including, but not limited to, expense reimbursement. Amounts paid
underthis Section 10 are in addition to all other amounts due under this
Consulting Agreement and shall not be offset against or reduce any other
amounts due under this Consulting Agreement. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Consultant shall be entitled to seek specific performance of her right to be
paid as specified in this Section 10.
RA24
<PAGE>
11. Miscellaneous.
(a) Legal Fees. The Company shall pay to Consultant all reasonable legal
fees and expenses incurred by her in contesting or disputing any termination of
this Consulting Agreement or in seeking to obtain or enforce any right or
benefit provided by this Consulting Agreement, provided that the final
resolution of such matter principally is in Consultant's favor.
(b) Entire Agreement. This Consulting Agreement constitutes the entire
Consulting Agreement between the parties and may not be changed except by a
writing duly executed and delivered by the Company and Consultant in the same
manner as the Consulting Agreement. This Consulting Agreement does not in any
way limit Consultant's rights under any pension, profit sharing or similar
programs of the Company or its subsidiaries, under agreements of Consultant and
the Company including the Employment Agreement of even date and the
Supplemental Executive Retirement Agreement executed on or about the date
hereof, or Consultant's rights under any other benefit, program or agreement
applicable to Consultant, including without limitation the Retiree Medical
Benefit Policy ofthe Bank adopted December 28, 1993.
(c) Governing Law. This Consulting Agreement is governed by and shall be
construed in accordance with the laws of the Commonwealth of Massachusetts.
(d) Binding Effect; Non-Assignability. This Consulting Agreement shall be
binding upon the Company and inure to the benefit of the Company and its
successors. Neither this Consulting Agreement nor any rights arising hereunder
may be assigned or pledged by the Company or Consultant. This Consulting
Agreement shall inure to the benefit of and be enforceable by Consultant's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
IN WITNESS WHEREOF, the parties hereto have executed the within instrument as
a sealed document as of the date first above written.
ATTEST BEVERLY NATIONAL CORPORATION
/s/ John L. Good III /s/ Lawrence M. Smith
___________________________ By:________________________
Chairman, Compensation President
Committee of the Board
of Directors
/s/ Julia L. Robichau
___________________________
Julia L. Robichau
RA25
<PAGE>
BEVERLY NATIONAL CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT
AGREEMENT
For
Julia L. Robichau
December 24, 1996
RA26
<PAGE>
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS AGREEMENT, made and entered into this 24th day of December, 1996 by
and between Beverly National Corporation, its subsidiaries and affiliates,
(hereinafter called the "Corporation") and Julia L. Robichau (hereinafter called
the "Executive").
WITNESSETH:
WHEREAS, the Executive has been in the employ of the Corporation and/or its
subsidiaries and is now serving the Corporation as its Vice President/Cashier
and Chief Operations Officer; and,
WHEREAS, because of the Executive's experience, knowledge
of affairs of the Corporation, and reputation and contacts in the industry, the
Corporation deems the Executive's continued employment with the Corporation
important for its future growth; and,
WHEREAS, it is the desire of the Corporation and in its best interest that
the Executive's service be retained; and,
WHEREAS, in order to induce the Executive to continue in the employ of the
Corporation and in recognition of her past service, the Board of Directors
voted on December 10, 1996 to authorize the Corporation to enter into an
Agreement to provide her certain benefits;
NOW, THEREFORE, in consideration of services performed in the past and to
be performed in the future as well as of the mutual promises and covenants
herein contained, it is agreed as follows:
ARTICLE ONE
1.01 Employment. The Corporation may employ the Executive in such capacity as
the Corporation may from time to time determine. Notwithstanding anything
contained herein, this Agreement is not an agreement of employment and nothing
herein shall restrict the Corporation concerning the terms and conditions of
the Executive's employment.
The benefits provided by this Agreement are not part of any salary reduction
plan or an arrangement deferring a bonus or a salary increase. The Executive
has no option to take any current payment or bonus in lieu of these salary
continuation benefits.
ARTICLE TWO
2.01 Normal Retirement Benefits.
(a) If the Executive shall continue in the employment of the Corporation
until the first of the month coincident with or next following her
sixty- fifth (65th) birthday (hereinafter referred to as the "Normal
Retirement Date"), she shall be entitled to a Normal Retirement Benefit,
determined as of the effective date of her actual retirement and
continuing for twenty (20) years, payable monthly, in the annual amount
of sixty percent (60%) of her Benefit Computation Base (hereinafter
defined), reduced by the sum of (1), (2), and (3) below.
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<PAGE>
1. Fifty percent (50%) of the Executive's (actual or projected)
annual primary social security retirement benefit projected as of
the Executive's social security normal retirement age based on
her Benefit Computation Base in effect on the date of termination
of the Executive's employment with the Corporation;
2. The annual amount of benefits payable to the Executive (or her
beneficiaries) at the Normal Retirement Date calculated on a
single life annuity basis from any qualified defined benefit
pension plan maintained and funded by the Corporation, as such
plan or plans may be amended or modified from time to time;
3. The annual amount of benefits payable at the Normal Retirement
Date calculated on a single life annuity basis from any other
non-qualified supplemental retirement plan maintained and funded
by the Corporation, as such plan or plans may be amended or
modified from time to time.
(b) If the Executive has (or will have) completed fewer than twenty-five
(25) years (or 300 months) of service with the Corporation as of her
Normal Retirement Date, then the Normal Retirement Benefit shall be the
amount determined by multiplying the amount which would otherwise be the
Normal Retirement Benefit under paragraph (a) above, by a fraction, not
to exceed one (1), the numerator of which is the actual number of months
of the Executive's employment with the Corporation, and the denominator
of which is three hundred (300) months.
(c) The aggregate amount of Normal Retirement Benefit shall be further
reduced by any consulting fees received by the Executive from a
Consulting Agreement entered into between the Corporation and the
Executive on December 24, 1996.
2.02 Benefit Computation Base. The Executive's Benefit Computation Base shall
be the average of the Executive's annual compensation (including base salary,
bonus, and any salary reduction amounts pursuant to Sections 401(k) or 125 of
the Internal Revenue Code of 1986, as amended) paid during the thirty-six (36)
consecutive calendar months during the Executive's period of employment by the
Corporation in which such compensation is the highest.
2.03 Accrued Benefit. As used herein for the purposes of Section 3.01, 4.01,
5.01, or 5.02, the term "Accrued Benefit" shall mean the benefit amount the
Executive would be entitled to under Section 2.01, commencing at the
Executive's Normal Retirement Date with the following exceptions:
1. The event of (a) death, (b) disability, (c) termination of
employment, (d) early retirement, or (e) merger, consolidation
or sale (in the event of (e), as modified by Section 10.1
hereof) as the case may be, the benefit to which the Executive
will be entitled shall be determined by multiplying the Normal
Retirement Benefit amount by a fraction, not to exceed (1), the
numerator of which is the actual number of months of the
Executive's employment with the Corporation, and the denominator
of which is three hundred (300) months. The Corporation
recognizes and acknowledges that the Executive has been employed
for three hundred (300) months.
RA28
<PAGE>
2. If the Executive employment terminates for any reason prior to
her Normal Retirement Date, in calculating her Accrued Benefit,
(i) the offset for primary social security retirement benefit
shall be calculated on the basis of the amount projected to be
payable at the Executive's social security normal retirement age
assuming continued earnings by the Executive at the rate in
effect at termination of employment until the Executive's social
security normal retirement age; (ii) the offset for any
qualified defined benefit plan shall be calculated on the basis
of the Executive's accrued benefit in said plan upon termination
of employment projected to be payable at the Executive's Normal
Retirement Date; and (iii) the offset for any other non-
qualified supplemental retirement plan shall be calculated on
the basis of the Executive's accrued benefit in said plan upon
termination of employment projected to be payable at the
Executive's Normal Retirement Date.
2.04 Optional Forms of Payment. In lieu of the twenty (20) year certain
payments provided in Section 2.01 above, or whenever an Accrued Benefit is
payable under Section 4.01 or 5.01 of this Agreement, the Executive may elect
in the calendar year prior to the calendar year in which payments are to begin,
an optional form of payment which shall be the actuarial equivalent (factors
defined in the Corporation's qualified defined benefit pension plan) of the
said twenty (20) year certain payments. The optional form of payment shall be
any optional form of payment which is provided to the Executive under the terms
of the Corporation's qualified defined benefit pension plan.
ARTICLE THREE
3.01 Death of Executive.
(a) If the Executive dies while employed by the Corporation but prior to the
commencement of the payment of benefits under Section 2.01, 4.01, 5.01,
5.02, or 10.01, the Corporation will pay to the Executive's named
beneficiaries, for a period of twenty (20) years certain commencing on
the first day of the month next following the delivery to the Corporation
of a death certificate, a total annual amount equal to the Accrued
Benefit as of the Executive's date of death.
(b) If the Executive dies following the commencement of the payment of
benefits under Section 2.01, 4.01, 5.01, 5.02, or 10.01, such payment of
benefits shall continue to the named beneficiaries of the Executive until
all such benefits have been paid.
(c) If the Executive dies following the termination of her employment with
the Corporation and prior to the commencement of the payment of benefits
under Section 2.01, 4.01, 5.01, 5.02, or 10.01, the Corporation shall pay
to the Executive's named beneficiaries an annual benefit which shall be
the Executive's Accrued Benefit as of the date of her termination of her
employment. Such benefits shall be payable monthly, commencing on the
first day of the month next following the Normal Retirement Date, or any
date prior tothe Normal Retirement Date approved by the Corporation, and
continuing for twenty (20) years.
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<PAGE>
3.02 Beneficiaries. The Executive may designate, in writing to the
Corporation, one or more beneficiaries. If no beneficiary is so named or if no
named beneficiary is living at the time a payment is due, benefit payments
shall be made, when due, to the Executive's estate.
ARTICLE FOUR
4.01 Disability Prior to Retirement. In the event the Executive shall become
disabled, the Corporation will pay no disability benefits hereunder.
Disability benefits (if any) will be paid to the Executive through such
insurance programs as may be sponsored by the Corporation. Upon the
Executive's attainment of the Normal Retirement Date, the Executive shall
commence receiving payment of her Accrued Benefit determined as of the date of
the disability. The Accrued Benefit shall be paid monthly, for twenty (20)
years certain commencing on the first day of the month following the later of
the termination of such benefits or the Normal Retirement Date, or in the
manner provided in Section 2.04.
4.02 Re-employment following Disability. In the event the Executive returns to
work with the Corporation after terminating employment because of disability,
this Agreement shall continue in full force and effect as though such disability
had not occurred.
ARTICLE FIVE
5.01 Early Retirement, Termination of Service or Discharge. Except to the
extent otherwise provided in Sections 5.03 and 5.04, in the event that the
Executive's employment with the Corporation is terminated, voluntarily or
involuntarily, before the Executive attains the Normal Retirement Date, for
reasons other than death or disability, the Executive shall be entitled to an
annual benefit, which shall be her Accrued Benefit as of the date of her
termination of employment. Such benefit shall be payable monthly, commencing
on the first day of the month next following the Normal Retirement Date and
continuing for twenty (20) years. The Executive may elect to receive such
benefit provided in this Section 5.01 prior to the Normal Retirement Date at
any date between age 55 and the Normal Retirement Date. Such early
commencement will result in a .25 percent reduction for each month payment
commences prior to age 65.
5.02 Optional Forms of Payment. In lieu of the twenty (20) year certain
payments provided in Section 5.01, the benefits payable under such Sections may
be payable in the manner provided in Section 2.04.
5.03 Employment by Competition. Anything to the contrary in this Agreement
notwithstanding, in the event that either (a) prior to the Normal Retirement
Date, the Executive's employment with the Corporation, shall have terminated
for whatever reason or (b) after she shall have begun to receive benefits under
this Agreement, and in either such event the Executive shall compete with the
business of the Corporation, then all payments which might otherwise be due and
payable hereunder shall be immediately forfeited and all rights of the
Executive and her beneficiaries hereunder shall become void. The Executive
will be deemed to have competed with the business of the Corporation if, during
the one-year period following termination of her employment with the
Corporation, she, directly or indirectly, whether as partner, shareholder
(other than as the owner of less than 2% of the outstanding capital stock of a
publicly traded corporation), consultant, agent, employee, co-venturer, or
otherwise, or through any Person (as hereafter defined),
RA30
<PAGE>
(i) competes in the Corporation's market area (defined as the area
within 20 miles of any branch or facility of the Corporation)
with, or is employed in such market area by a Person which competes
with, the banking or any other business conducted by the
Corporation during the period of her employment,
(ii) attempts to hire any employee of the Corporation, assist in such
hiring by any other Person, or encourages any such employee to
terminate her or her relationship with the Corporation, or
(iii) solicits or encourages any customer of the Corporation to terminate
its relationship with the Corporation or to conduct with any other
Person any business or activity which such customer conducts or
could conduct with the Corporation.
For purposes of this Section 5.03, the term "Person" shall mean an individual,
a corporation, an association, a partnership, an estate, a trust and any other
entity or organization, and shall include an affiliate office within the
Corporation's "market area" as defined in Section 5.03 above of a Person whose
headquarters or parent organization is located outside the "market area" as so
defined.
5.04 Forfeiture. Anything to the contrary in this Agreement notwithstanding
(other than Section 10.01), benefits under this Agreement shall be immediately
forfeited and all rights of the Executive and her beneficiaries hereunder shall
become null and void, if the Executive's employment with the Corporation is
terminated forcause. For this purpose, a termination shall be a termination for
"Cause" only if the termination is for one or more of the following:
(i) the willful and continued failure of her to substantially perform
her duties (other than any such failure resulting from her
incapacity due to physical or mental illness) after a demand for
substantial performance is delivered to her by the Corporation or
the Board which specifically identifies the manner in which such
Board believes that she has not substantially performed her duties,
or
(ii) willful misconduct by her which is materially injurious to the
Corporation monetarily or otherwise.
For purposes of this paragraph, no act, or failure to act, on the Executive's
part shall be considered "willful" unless done, or omitted to be done, by her
not in good faith and without reasonable belief that her action or omission was
in the best interests of the Corporation.
Notwithstanding the foregoing, she shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to her a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board of Directors of the
Corporation or the Board at a meeting of such Board called and held for the
purpose (after reasonable notice to her and an opportunity for her, together
with her counsel, to be heard before such Board), finding that in the good
faith opinion of such Board she was guilty of conduct set forth above in
clauses (i) or (ii) of this Section 5.04 and specifying the particulars thereof
in detail.
RA31
<PAGE>
ARTICLE SIX
6.01 Interest. Any payment that is required to be made hereunder that is
delayed beyond the date specified in this Agreement shall bear interest at a
variable rate which shall be the rate of interest on one year U.S. Treasury
Bills determined at the first auction of each calendar year or part thereof
during the period of which interest is to be applied to any obligation
hereunder.
ARTICLE SEVEN
7.01 Alienability. Neither the Executive, 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, judgments, alimony or separate
maintenance, owed by the Executive or her beneficiary or any of them, or be
transferable by operation of law in the event of bankruptcy, or otherwise.
ARTICLE EIGHT
8.01 Participation in Other Plans. Nothing contained in this Agreement shall
be construed to alter, abridge, or in any manner affect the rights and
privileges of the Executive to participate in and be covered by any pension,
profit sharing, group insurance, bonus or any other employee plan or plans
which the Corporation may have or hereafter have.
ARTICLE NINE
9.01 Funding.
(a) The Corporation reserves the right at its sole and exclusive discretion to
insure or otherwise provide for the obligations of the Corporation
undertaken by this Agreement or to refrain from same, and to determine the
extent, nature and method thereof, including the establishment of one or
more trusts. Should the Corporation elect to insure this Agreement, in
whole or inpart, through the medium of insurance or annuities, or both,
the Corporation shall be the owner and beneficiary of the policy or
annuity. At no time shall the Executive be deemed to have any right, title
or interest in or to any specified asset or assets of the Corporation, or
any trust or escrow arrangement, including, but not by way of restriction,
any insurance or annuity contracts or the proceeds therefrom.
(b) Any such policy, contract or asset shall not in any way be considered to
be security for the performance of the obligations of this Agreement.
(c) If the Corporation purchases a life insurance or annuity policy on the
life of the Executive, the Executive agrees to sign any papers that may be
required for that purpose and to undergo any medical examination or tests
(at the Corporation's expense) which may be necessary, and generally
cooperate with the Corporation in securing such policy.
(d) To the extent the Executive acquires a right to receive benefits under
this Agreement, such right shall be equivalent to the right of an
unsecured general creditor of the Corporation.
RA32
<PAGE>
ARTICLE TEN
10.01 Reorganization. The Corporation shall not merge or consolidate into or
with another corporation if such merger or consolidation shall result in the
other corporation being the survivor corporation, nor shall it sell
substantially all of its assets to another corporation, firm or person, unless
and until:
(a) The Executive and such other corporation, firm or person agree (i) that
if the Executive is then employed by the Corporation, she shall continue
in the employ of the succeeding, continuing or acquiring corporation,
firm or person, and (ii) that such other corporation, firm or person
agrees in writing without further qualification to assume and discharge
the obligations ofthe Corporation under this Agreement, or;
(b) If the Executive and such corporation, firm or person do not agree (i)
that the Executive if then employed by the Corporation shall continue in
the employ of such corporation, firm or person, and (ii) such
corporation, firm or person does not so agree to assume and discharge
such obligations, the Corporation shall pay to the Executive, in one lump
sum, her Accrued Benefit as of the date of such merger, consolidation or
sale. All calculations of the Accrued Benefit, for purposes of this
Section 10.1(b), shall further be discounted to present value in
accordance with the actuarial tables used in the Corporation's defined
benefit pension plan.
Upon the occurrence of any such event and the written unqualified assumption of
the obligations of the Corporation by such successor corporation, firm or
person, the term "Corporation" as used in this Agreement shall be deemed to
refer to such successor or survivor corporation, firm or person.
ARTICLE ELEVEN
11.01 Benefits and Burdens. This Agreement shall be binding upon and inure to
the benefit of the Executive and her personal representatives, the Corporation,
and any successor organization which shall succeed to substantially all of the
Corporation's assets and business without regard to the form of such succession.
11.02 Corporation. As used in this Agreement, Corporation shall mean the
Beverly National Corporation, a Massachusetts Corporation, and any affiliated
entity, successor organization, parent, subsidiary or holding company.
RA33
<PAGE>
ARTICLE TWELVE
12.01 Communications. Any notice or communication required of either party
with respect to this Agreement shall be made in writing and may either be
delivered personally or sent by First Class mail, as the case may be:
To the Corporation:
c/o Clerk of the Corporation
Beverly National Corporation
240 Cabot Street
Beverly, MA 01915
To the Executive:
Julia L Robichau
121 Topsfield Road
Wenham, MA 01984
Each party shall have the right by written notice to change the place to which
any notice may be addressed.
ARTICLE THIRTEEN
13.01 Claims Procedure. In the event that benefits under this Agreement are
not paid to the Executive (or her beneficiary in the case of the Executive's
death), and such person feels entitled to receive them, a claim shall be made
in writing to the Corporation within sixty (60) days after written notice from
the Corporation to the Executive or her beneficiary or personal representative
that payments are not being made or are not to be made under this Agreement.
Such claim shall be reviewed by the Corporation. If the claim is approved or
denied, in full or in part, the Corporation shall provide a written notice of
approval or denial within sixty (60) days from the date of receipt of the claim
setting forth the specific reason for denial, specific reference to the
provision of this Agreement upon which the denial is based, and any additional
material or information necessary to perfect the claim, if any. Also, such
written notice shall indicate the steps to be taken if a review of the denial
is desired. If a claim is denied (a claim shall be deemed denied if the
Corporation does not take action within the aforesaid sixty (60) day period)
and a review is desired, the Executive (or beneficiary in thecase of the
Executive's death), shall notify the Corporation in writing within twenty (20)
days. In requesting a review, the Executive or her beneficiary may review this
Agreement or any document relating to it and submit any written issues and
comments he or she may feel appropriate. In its sole discretion the
Corporation shall then review the claim and provide a written decision within
sixty (60) days. This decision likewise shall state the specific reasons for
the decision and shall include reference to specific provisions of this
Agreement on which the decision is based. Any decision of the Corporation
shall not be binding on the Executive, her personal representative, or any
beneficiary without consent, nor shall it preclude further action by the
Executive, her personal representatives or beneficiary.
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<PAGE>
ARTICLE FOURTEEN
14.01 Entire Agreement. This instrument may be altered or amended only by
written agreement signed by the parties hereto.
14.02 Jurisdiction. The parties, terms and conditions of this Agreement are
subject to and shall be governed by the laws of the Commonwealth of
Massachusetts.
14.03 Gender. Any reference in this Agreement to the masculine shall be
deemed to include the feminine where the context so requires.
14.04 Operation of Law on Corporation's Obligations. In the event that any
governmental entity promulgates any statute, rule, regulation, policy or order
which restricts or prohibits the Corporation from making payments or affects
any operation of the Agreement to the Executive under this Agreement, then the
Corporation's obligations to make payments to the Executive (or her
beneficiary) hereunder shall terminate or be restricted or suspended
(consistent with such law or binding regulation, policy or order) for so long
as such restriction or prohibition applies to the Corporation. Nothing in this
Agreement is intended to require or shall be construed as requiring the
Corporation to do or fail to do any act in violation of any applicable law or
binding regulation, policy or order. Provisions other than payment provisions
which are found to be invalid or illegal will not be given effect and the
Agreement will be enforced as if those provisions had never been inserted.
IN WITNESS WTHEREOF, the Corporation has caused this Agreement to be duly
executed by its duly authorized officer and its Corporate Seal affixed at
Beverly, Massachusetts the day and year first above written.
BEVERLY NATIONAL CORPORATION
Attest:
/s/ John L. Good III /s/ Lawrence M. Smith
__________________________ By__________________________
Chairman, Compensation President
Committee of the
Board of Directors
/s/ Lawrence M. Smith /s/ Julia L. Robichau
__________________________ _____________________________
Witness Executive
RA35
BEVERLY NATIONAL CORPORATION
1996 Incentive Stock Option Plan for Key Employees
1. Purpose.
1.1 The purpose of the Beverly National Corporation 1996 Incentive Stock
Option Plan for Key Employees (hereinafter referred to as the "Plan") is to
provide incentives to present and future employees of Beverly National
Corporation, a Massachusetts corporation (this "Corporation"), and any of its
present and future subsidiaries at least fifty percent (50%) owned by this
Corporation ("Subsidiaries") (such employees being hereinafter referred to as
an "Employee") in order that they may provide exceptional services to this
Corporation and its Subsidiaries, and to offer inducements to Employees to
accept and continue employment with this Corporation and its Subsidiaries by
offering Employees options to purchase shares of this Corporation's common
stock which may qualify for treatment as incentive stock options under the
Internal Revenue Code of 1986, as amended (the "Code") upon the approval of the
Plan by the shareholders of this Corporation by such Employees of the
requirements and upon the satisfaction for such qualification. This Plan is
an "incentive stock option plan" described in Section 422 of the Code.
2. Administration of Plan
2.1 The Plan shall be administered by the Board of Directors of this
Corporation (the "Board of Directors") which shall: (1) determine which
Employees to purchase shares of this Corporation's Common Stock ($2.50 par
value) ("Stock") pursuant to the Plan (which options shall hereinafter be
referred to as "Options", or in the singular as an "Option" (2) determine the
time or times when Options shall be granted and the number of shares of stock
subject to each Option; (3) determine the option price at which the shares of
Stock subject to each Option may be purchased pursuant to the Plan and the
forms of the instruments evidencing any Options granted under the Plan or any
other instrument to be used in connection with the plan; (4) adopt, amend, and
rescind in its discretion rules and regulations for the administration of the
plan;(5) interpret the Plan and decide all questions and settle all
controversies and disputes which may arise in connection with the Plan, which
decisions and interpretations shall be binding upon all persons; and (6)
exercise such other powers as may be necessary or desirable to implement the
provisions of this Plan.
2.2 Members of the Board of Directors who are Employees shall be eligible
to receive Options pursuant to the Plan. The grant of an Option to an Employee
who is also a director of this Corporation shall not be affected or invalidated
by reason of the fact that such director voted to approve the grant of such
Option.
<PAGE>
2.3 No member of the Board of Directors shall be liable for any action taken
or determination made in good faith and in a manner reasonably believed to be
in the best interests of this Corporation with respect to the Plan or any
Option granted pursuant thereto. The Board of Directors may indemnify any
person against expenses reasonably incurred or the amount of any damages fine,
or settlement assessed against or agreed to by such person, in connection with
any action, suit or proceeding in which such person may be involved in
connection with any Option or this Plan to the same extent that the Board of
Directors may indemnify such person under the By-laws of this Corporation.
3. Authority to Grant Options.
3.1 Subject to the terms and conditions of this Plan, the Board of Directors
may from time to time grant to such Employees as it may determine to be capable
of making substantial contributions to the management or development of this
Corporation and its Subsidiaries Options, upon such terms and conditions as it
may deem appropriate, subject to applicable provisions of this Plan.
3.2 The Board of Directors may authorize the grant of Options to Employees
by action taken with or without a meeting. The effective date of the grant of
an option pursuant hereto shall be the date specified by the Board of Directors
in the Stock Option Agreement, as hereinafter defined.
3.3 The number of shares of Stock subject to an Option shall in each case
be determined by the Board of Directors, subject to the applicable provisions
of this Plan. More than one Option may be granted to the same Employee.
3.4 Nothing contained in this Plan or in any resolution adopted by the Board
of Directors or the shareholders of this Corporation shall constitute the grant
of an Option hereunder, and no Employee shall be entitled to the grant of an
Option unless action granting an Option to such Employee shall have been taken
by the Board of Directors and unless the recipient of an Option shall have
executed an agreement in form and substance satisfactory to the Board of
Directors containing terms, restrictions and conditions imposed upon the
exercise of the Option and the transfer of any Stock pursuant thereto ("Stock
Option Agreement").
3.5 Any purported disposition of shares of Stock acquired pursuant to an
Option which shall be in contravention of the terms, restrictions and
conditions contained in the Stock Option Agreement executed in connection with
such Option shall be ineffective, and such disposition shall not be registered
upon the stock transfer books of this Corporation.
3.6 The aggregate fair market value of Stock with respect to which Options
issued hereunder are exercisable for the first time during any calendar year,
when aggregated with the rair market value of stock subject to other incentive
stock options then outstanding under all plans of this Corporation and its
parent and subsidiary corporations and exercisable for the first time during
such calendar year, shall not exceed $100,000 or such other amount as shall be
permitted for options intended to qualify for incentive stock option treatment.
For purposes of this section the fair market value of stock subject to Options
shall be determined at the time the options are issued.
<PAGE>
4. Stock Subject to the Plan.
4.1 Stock to be issued upon the exercise of an Option shall be made
available, in the discretion of the Board of Directors, from authorized but
unissued shares of Stock or from shares of Stock held in the treasury of this
Corporation, however acquired.
4.2 The aggregate number of shares of Stock for which Options may be granted
under the Plan shall be 68,900. If an Option shall expire, terminate, or be
canceled or surrendered in whole or in part prior to the exercise thereof,the
number of shares of Stock subject to the unexercised portion of such Option
shall be subject to other Options granted theretofore or thereafter pursuant
to the Plan.
4.3 Appropriate adjustments in the number of shares of Stock subject to
Options previously issued hereunder and in the number of shares of Stock for
which Options have not yet been granted under this Plan shall be made by the
Board of Directors if at any time after the effective date of this Plan this
Corporation shall increase or decrease the number of outstanding shares of
Stock, whether by stock split, combination, stock dividend or reclassification,
or merger, consolidation, recapitalization, or reorganization.
4.4 No provision of this Plan, nor any Option granted pursuant hereto or
Stock Option Agreement entered into in connection therewith shall confer upon
any Employee or any other person any preemptive right to acquire any stock of
this Corporation.
5. Eligibility.
5.1 The Board of Directors may grant Options pursuant hereto to such
Employees as it may designate from time to time pursuant to Section 3.1 hereof
regardless of whether such Employees are also officers or Director of this
Corporation.
5.2 No officer or directors of this Corporation shall be eligible to receive
any Option pursuant to this Plan unless such officer or director is also an
Employee.
5.3 No Employee may exercise any part of an Option unless he or she has been
continuously employed by this Corporation from the date the Option was granted
until no more than three (3) months prior to the time of such exercise,
provided, that in the case of a deceased employee or an employee whose
employment terminates for reason of permanent and total disability, no Option
may be exercised unless the optionee as continuously employed by this
Corporation from the date the Option was granted until no more than 12 months
prior to the time of such exercise.
5.4 If an Employee or former Employee eligible to exercise an Option
granted pursuant to this Plan dies prior to such exercise, such Option may be
exercised to the extent permitted herein by his estate or a person who acquires
the right to exercise such Option by bequest or inheritance.
5.5 No Option granted pursuant to this Plan may be transferred by the
holder thereof other than by will or the laws of descent and distribution of
the state in which such holder is domiciled at the time of his death.
<PAGE>
6. Terms of Options.
6.1 The price at which shares of stock may purchased pursuant to an Option
be shall be the fair market value of the Stock on the date of the grant of such
Option (as determined pursuant to Section 3.2 hereof), provided, that in the
case of Options granted to an Employee who at the date of the grant of such
Option 10% or more of the combined voting stock of the Corporation owns (a "10%
Employee"), such price shall be equal to 110% of the date of the fair market
value of the stock on the date of the grant of such Option. For purposes of
determining the percentage of stock of the Corporation owned by an Employee,
attribution rules made applicable by the Code and related regulations shall
apply. The fair market value of any Stock shall be determined by the Board of
Directors in good faith.
6.2 Each Option granted under this Plan shall expire, and may not be
exercised to any extent, upon the earliest to occur of the following:
(a) Each Option shall expire ten years after the date of grant of such
Option (as determined pursuant to Section 3.2 hereof), or on such date prior
thereto as may be fixed by the Board of Directors, provided, however, that each
option granted to a 10% Employee shall expire five years after the date of
grant of such Option, or such date prior thereto as may be fixed by the Board
of Directors.
(b) Each Option shall expire not later than three months after
termination of the Optionee's employment with this Corporation or any of its
Subsidiaries (with or without cause, voluntary or involuntary) for reasons
other than death or total and permanent disability, during which three-month
period the Option may be exercised only to the extent that it was exercisable
upon termination. If the optionee's employment with this Corporation or any of
its Subsidiaries terminates for reasons of death or total and permanent
disability, then the Option shall expire 12 months after such termination of
employment, and during that 12-month period the Option may be exercised only to
the extent it was exercisable upon termination. If an optionee whose
employment terminates for reasons other than death or disability dies during
the three-month period described above, such optionee's Options shall expire
one year from the date of termination of employment, during which time they may
be exercised to the extent exercisable on the date of termination.
<PAGE>
7. Exercise of Options.
7.1 Each Option granted hereunder shall be exercisable in such installment
or installments as may be determined by the Board of Directors at the time of
the grant. The right to purchase shares shall be cumulative so that when the
right to purchase any shares has accrued such shares or any part thereof may
be purchased at any time thereafter until the expiration or termination of the
Option.
7.2 A person subject to the terms and entitled to exercise an Option may,
conditions of the Stock Option Agreement executed in connection therewith,
exercise such Option from time to time by delivery to this Corporation at its
principal office of written notice of his or her intention to exercise such
Option setting forth the number of shares with respect to which the Option is
to be exercised and accompanied by (1) payment in full of the purchase price of
the shares to be purchased, (2) payment in full of all local, state or federal
taxes due on account of the exercise of such Option, and (3) such other
documents and materials as may be required by this Corporation under the terms
of this Plan, the Stock Option Agreement, or otherwise. As promptly as
practicable thereafter, this Corporation shall deliver to the purchaser
certificates for the number of shares purchased.
7.3 The date of actual receipt by this Corporation of notice of attention
to exercise an Option shall be deemed the date of exercise of the Option with
respect to the shares then purchased. Delivery of shares purchased shall be
deemed effective when a stock transfer agent shall have deposited certificates
therefor with the United States mail for delivery to the purchaser at the
address specified in the notice of exercise provided to this Corporation.
7.4 During the life of a holder of an option issued pursuant to this Plan,
such Option may be exercised only by the holder.
7.5 No person, estate or other entity shall have any of the rights of a
shareholder of this Corporation with respect to shares subject to an Option
until a certificate or certificates for such shares shall have been delivered
by this Corporation to such person or entity. Upon delivery of such a
certificate to the purchaser thereof for the number of shares of Stock
purchased, the owner thereof shall have all the rights of a shareholder of
such shares of Stock, including the right to vote the same and receive
dividends thereon, subject, however, to the terms, conditions and restrictions
contained in this Plan and in the Stock Option Agreement executed in connection
with the Option exercised with respect to such shares.
<PAGE>
8. Miscellaneous.
8.1 The grant of an to an Option to an employee pursuant hereto shall not
confer upon such Employee a right to continued right to continued employment,
nor shall it limit the right of this Corporation or any Subsidiary to terminate
the employment of any such Employee.
8.2 The Board of Directors may modify, amend or terminate this Plan or any
provision thereof at any time and from time to time provided however, that no
amendment to this Plan shall be made which shall: (1) increase the total number
of shares of Stock for which Options under this Plan may be issued, except as
provided in Section 4.3 hereof, (2) increase the total number of shares of
Stock which may be acquired by an Employee pursuant to Options issued under
this Plan except as provided in Section 4.3 hereof, (3) extend the maximum
period during which any Option may be exercised as set forth in Section 6.2
hereof, (4) change the class of employees entitled to receive awards, (5)
reduce the purchase price of Stock subject to any Option, or (6) extend the
termination date of this Plan, without in each case the prior approval of the
holders of at least a majority of the Stock of this Corporation of all classes
voting together. No amendment to this Plan shall alter or impair any Option
previously granted pursuant hereto without the consent of the holder thereof.
8.3 The effective date of this Plan shall be April 1, 1996. No Option may
be granted pursuant hereto subsequent the date which is ten years after the
date on which the Plan shall be adopted by the Board of Directors.
8.4 This Plan, and all rights and obligations hereunder, including matters
of construction, validity and performance, shall be governed by the laws of the
Commonwealth of Massachusetts.
8.5 Notice to this Corporation pursuant to Sections 7.2 or 8.5 hereof or for
any other purpose may be given by delivery in hand or first class mail, postage
prepaid, and addressed as follows:
Beverly National Corporation
240 Cabot Street
Beverly, Massachusetts 01915
Notice to an Employee to whom an Option shall be granted hereunder may be
given by delivery in hand or first class mail, postage prepaid, to the address
listed by such Employee in the Stock Option Agreement executed by such
Employee.
5854E
BEVERLY NATIONAL CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 25, 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders
of Beverly National Corporation ("Corporation") will be held at the main
office of the Corporation at 240 Cabot Street, Beverly, Massachusetts,
on March 25, 1997, at 3 o'clock P.M., for the purpose of considering and
voting upon the following matters:
(1) Fixing the number of directors who shall constitute
the full Board of Directors at ten.
(2) Election as director of the individuals listed as
nominee in the Proxy Statement accompanying this notice
of meeting, who, together with the directors whose terms
of office do not expire at this meeting, will constitute
the full Board of Directors.
(3) Such other matters as may properly be brought before
the meeting and any adjournment thereof.
The record date and hour for the determining shareholders entitled
to notice of, and to vote at, this meeting, has been fixed at 5 o'clock
P.M., February 18, 1997.
By Order of the Board of Directors,
Julia L. Robichau, Clerk
February 24, 1997
PLEASE SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED FOR THAT PURPOSE. YOU MAY NEVERTHELESS VOTE IN PERSON
IF YOU DO ATTEND THE MEETING.
P1
<PAGE>
BEVERLY NATIONAL CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
March 25, 1997
KNOW ALL MEN BY THESE PRESENTS, that the undersigned shareholder of
BEVERLY NATIONAL CORPORATION hereby nominates, constitutes and appoints
Richard Mooney and Kevin Dalton, Esq. and each of them (with full power to
act alone), true and lawful attorneys, agents and proxies, with power of
substitution to each, to attend the 1997 Annual Meeting of the Shareholders
of said Corporation to be held at the main office of the Corporation at
240 Cabot Street, Beverly, Massachusetts on March 25, 1997, at 3 o'clock
P.M., and any adjournments thereof and thereat to vote or otherwise act in
respect of all the shares of capital stock of said Corporation that the
undersigned shall be entitled to vote, with all powers the undersigned
would possess if personally present, upon the following matters:
A. 1. Fixing the number of directors who FOR ( ) WITHHELD ( )
shall constitute the full Board of
Directors at ten.
2. Election as directors of the FOR ( ) WITHHELD ( )
individuals listed as nominees in the
Proxy Statement accompanying this Proxy,
who, together with the directors whose
terms of office do not expire at this
meeting, will constitute the full
Board of Directors.
3. Whatever other business may be brought FOR ( ) WITHHELD ( )
before said meeting or any
adjournment thereof.
B. THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" THE PROPOSITIONS LISTED
ABOVE UNLESS "WITHHELD" IS INDICATED. IF THE INDIVIDUALS LISTED AS
A NOMINEES FOR DIRECTOR IN THE PROXY STATEMENT DATED FEBRUARY 24, 1997
AND THE ACCOMPANYING NOTICE OF SAID MEETING IS UNAVAILABLE AS A
CANDIDATE OR ANY OTHER NOMINATION IS MADE OR IF ANY OTHER BUSINESS
IS PRESENTED AT SAID MEETING, THIS PROXY SHALL BE VOTED IN ACCORDANCE
WITH THE JUDGMENT OF THE PERSON OR PERSONS ACTING HEREUNDER UNLESS
"WITHHELD" IS INDICATED IN RESPONSE TO ITEM A.3 ABOVE.
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT.
Dated________________________, 1997
________________________________
(Signature of Shareholder)
_______________________________
(Signature of Shareholder
No. of Shares:_________________
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title. If more than
one trustee, all should sign.
P2
<PAGE>
BEVERLY NATIONAL CORPORATION
PROXY STATEMENT
1997 ANNUAL MEETING OF SHAREHOLDERS
MARCH 25, 1997
The following information is furnished in connection with the
solicitation of proxies by the management of Beverly National Corporation
("Corporation"), whose principal executive office is located at 240 Cabot
Street, Beverly, Massachusetts (Telephone: (508) 922-2100) for use at the
1997 Annual Meeting of Shareholders of the Corporation to be held on
March 25, 1997.
As of February 18, 1997, 754,382 shares of common stock, $2.50 par
value ("Common Stock"), of the Corporation were outstanding and entitled
to be voted.
The record date and hour for determining shareholders entitled to
vote has been fixed at 5 o'clock P.M., February 18, 1997. Only shareholders
of record at such time will be entitled to notice of, and to vote at, the
meeting. Shareholders are urged to sign the enclosed form of proxy
solicited on behalf of the management of the Corporation and return it at
once in the envelope enclosed for that purpose. Proxies will be voted in
accordance with the shareholder's directions. If no directions are given,
proxies will be voted to fix the number of directors at ten and to elect
the nominees listed below.
The affirmative vote of the holders of a majority of the Common Stock
of the Corporation present or represented and voting at the meeting is
required to fix the number of directors at ten. The affirmative vote of a
plurality of the votes cast by shareholders is required to elect directors.
The 1996 Annual Report of the Corporation containing financial
statements for 1996 is being mailed to the shareholders with the mailing
of this Notice and Proxy Statement.
The cost of the solicitation of proxies is being paid by the Corporation.
The Proxy Statement will be mailed to shareholders of the Corporation on
or about February 24, 1997.
P3
<PAGE>
DETERMINATION OF NUMBER OF DIRECTORS AND
ELECTION OF DIRECTORS
---------------------
The persons named as proxies intend to vote to fix the number of
directors for the ensuing year at ten and vote for the election of the
individuals named below as nominees for election as director, to hold office
until the 2000 annual meeting. If any nominee should not be available for
election at the time of the meeting, the persons named as proxies may vote
for another person in their discretion or may vote to fix the number of
directors at less than ten. The management does not anticipate that any
nominee will be unavailable.
The By-Laws of the Corporation provide in substance that the Board of
Directors shall be divided into three classes as nearly equal in number as
possible, and that the term of office of one class shall expire and a
successor class be elected at each annual meeting of the shareholders.
The present number of directors is ten. It is proposed by the Board,
that at the meeting, the number of directors who shall constitute the full
Board of Directors until the next annual meeting be fixed at ten and that
the nominees listed below be elected to serve until 2000.
Opposite the name of the nominees for election at this meeting and
each director continuing in office in the following tables are shown:
(1) the number of shares of stock of the Corporation owned beneficially by
the individual, including exercisable stock options; (2) the date on which
the individual's term of office as director began; (3) the term of office
for which the individual will serve; and (4) the individual's current
principal occupation or employment.
Nominees For Election at This Meeting
-------------------------------------
Shares of On Board of
Stock Owned Directors of
Beneficially the Corporation
as of or Its Term
February 18, Predecessor of Principal
Name 1997 (1)(2) Since Office Occupation
- -------------- ------------- --------------- ------ --------------------
John N. Fisher 5,815 1989 2000 President,
Fisher & George
Electrical Co., Inc.
Alice B. Griffin 3,487 1992 2000 President, Griffin
Pension Services, Inc.
Barry A. Sullivan 2,772 1991 2000 Partner, Sullivan &
Drooks, Certified
Public Accountants
P4
<PAGE>
Directors Continuing in Office
------------------------------
Shares of On Board of
Stock Owned Directors of
Beneficially the Corporation
as of or Its Term
February 18, Predecessor of Principal
Name 1997 (1)(2) Since Office Occupation
- ----------------- ------------- -------------- ------ -----------------
Richard H. Booth 2,900 1993 1998 Stockbroker - Retired
Neiland J. Douglas, 6,176 1977 1999 President, Morgan
Jr and Douglas (Planning
and Research)
Mark B. Glovsky, Esq. 550 1996 1999 Attorney, Member of the
Law Firm of Glovsky &
Glovsky
John L. Good, III 4,646 1987 1998 Vice President of
Community Relations &
Development -Beverly
Hospital
Clark R. Smith 3,293 1994 1998 Attorney, Family
Foundation
Lawrence M. Smith 43,828 1981 1999 President, Beverly
National Corporation
and Beverly National
Bank
James D. Wiltshire 2,500 1993 1998 President - Grimes -
Wiltshire d/b/a/
TruForm Industries,
Inc.
NOTE
- ----
(1) Beneficial ownership of stock for the purpose of this statement
includes securities owned by the spouse and minor children and any
relative with the same address. Certain directors may disclaim
beneficial ownership of certain of the shares listed beside their names.
(2) Includes stock options to purchase shares which were exercisable as of
February 18, 1997 or within 60 days thereafter, as listed: Richard H.
Booth, 1,800; Neiland J. Douglas, Jr., 4,080; John N. Fisher, 2,250;
Mark B. Glovsky, 300; John L. Good, III, 4,080; Alice B. Griffin,
2,250; Clark R. Smith, 300; Lawrence M. Smith, 40,000; Barry A.
Sullivan, 2,250; and James D. Wiltshire, 1,800.
P5
<PAGE>
OTHER MATTERS
-------------
The management knows of no business which will be presented for
consideration at the meeting other than that set forth in this Proxy
Statement. However, if any such business comes before the meeting, the
persons named as proxies will vote thereon according to their best judgment.
By order of the Board of Directors
Lawrence M. Smith
President
Beverly, Massachusetts
February 24, 1997
P6
<PAGE>
EXHIBIT 21
21. Subsidiaries of the Corporation at December 31, 1996:
Incorporate in Percent Owned
Subsidiary the State of by the Corporation
- ---------- -------------- ------------------
Beverly National Bank Massachusetts 100%
Cabot Street Realty Trust Massachusetts 100%
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Annual Report on
Form 10-KSB of Beverly National Corporation of our report dated January 10,
1997.
SHATSWELL, MACLEOD & COMPANY, P.C.
West Peabody, Massachusetts
March 25, 1997
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