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, l999
-----------------
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 issuer in its charter)
A Massachusetts Corporation 04-2832201
- ------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
240 Cabot Street Beverly, Massachusetts 0l9l5
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (978) 922-2l00
--------------
Securities registered pursuant to Section l2 (b) of the Exchange 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)
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
---------- ----------
-1-
<PAGE>
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. [X] NA
State issuer's revenues for its most recent fiscal year. $17,969,613
-----------------
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specified date within the past 60 days. (See definition of affiliate in
Rule 12b-2 of the Exchange Act). $18,255,668
-----------
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. 1,581,294
------------
Transitional Small Business Disclosure format (check one):
Yes No X
------- -------
DOCUMENTS INCORPORATED BY REFERENCE
-2-
<PAGE>
TABLE OF CONTENTS
PART I Page
ITEM 1 - DESCRIPTION OF BUSINESS 4
ITEM 2 - DESCRIPTION OF PROPERTIES 23
ITEM 3 - LEGAL PROCEEDINGS 24
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 24
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 24
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS 25
ITEM 7 - FINANCIAL STATEMENTS 34
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 34
PART III
ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS 35
ITEM 10- EXECUTIVE COMPENSATION 37
ITEM 11- SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT 46
ITEM 12- CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 48
ITEM 13- EXHIBITS, LIST AND REPORTS ON
FORM 8-K 53
SIGNATURES 50
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS
-3-
<PAGE>
PART I
------
ITEM l. DESCRIPTION OF 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 the telephone number is (978) 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, financial
planning, 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
------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Interest and fees on loans 67% 67% 69% 68% 63%
Interest and dividends on
Securities and Federal Funds
Sold 18 20 18 18 23
Charges, fees and other
sources 15 13 13 14 14
---- ---- ---- ---- ----
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, seven savings banks,
three co-operative banks and one finance company.
-4-
<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 legislation permits adequately capitalized bank holding companies to
venture across state lines to offer banking services through bank subsidiaries
to a wide geographic market. It is 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 this will have on the
Corporation or the Bank.
The Federal Reserve Act 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.
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.
-5-
<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 Corporation for all such
purchases or redemptions during the preceding twelve months, is equal to 10%
or more of the Corporation's consolidated net worth. For purposes of
Regulation Y, "net consideration" is the gross consideration paid by a
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. However,
a bank holding company need not obtain Federal Reserve Board approval of any
equity security redemption when: (i) the bank holding company's capital
ratios exceed the threshold established for "well-capitalized" state member
banks before and immediately after the redemption; (ii) the bank holding
company is well-managed; and (iii) the bank holding company is not the subject
of any unresolved supervisory issues.
After decades of debate, in November of 1999, Congress passed and President
Clinton signed legislation which repealed the restrictions that prohibited
most affiliations among bank, securities, and insurance firms. The new law,
the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (S. 900),
provides bank holding companies, banks, securities firms, insurance companies
and investment management firms the option of engaging in a broad range of
financial and related activities by opting to become a "financial holding
company." These holding companies will be subject to oversight by the FRB,
in addition to the regulatory agencies. Under the financial holding company
structure, bank holding companies will have a less-restricted ability to
purchase or establish nonbank subsidiaries which are financial in nature or
which engage in activities which are incidental or complementary to a
financial activity. Additionally, for the first time, securities and
insurance firms will be permitted to purchase full-service banks.
As a general rule, the individual entities within a financial holding company
structure will be regulated according to the type of services provided -
functional regulation. Under this approach, a financial holding company with
banking, securities, and insurance subsidiaries will have to deal with several
regulatory agencies (e.g., appropriate banking agency, SEC, state insurance
commissioner). A financial holding company that is itself an insurance
provider will be subject to FRB oversight, as well as to regulation by the
appropriate state insurance commissioner. Broker/dealer and insurance firms
electing to become financial holding companies will be subject to FRB
regulation. In addition to permitting financial services providers to enter
new lines of business, the new law gives firms the freedom to streamline
existing operations and potentially reduce costs.
The impact that Gram-Leach-Bliley Act is likely to have on the Bank and the
Corporation is difficult to predict. While the Act facilitates the ability
of financial institutions to offer a wide range of financial services, large
financial institutions would appear to be the beneficiaries as a result of
this Act because many community banks are less able to devote the capital and
management resources needed to facilitate broad expansion of financial
services.
To qualify as a financial holding company, a bank holding company must certify
to the Federal Reserve System that it and its subsidiary banks satisfy the
requisite criteria of being "well-capitalized," "well-managed" and have a CRA
rating of "satisfactory" or better. [The Corporation meets all of the
criteria to qualify as a financial holding company.]
-6-
<PAGE>
Regulation of the Bank
- ----------------------
The Bank is subject to regulation by the Office of 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 102 officers and employees, of which 77%
are full time.
-7-
<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 three years ended December
31, 1999, 1998 and 1997. The total dollar amount of interest income from
earning assets and the resultant yields are calculated on a tax equivalent
basis.
1999
---------------------------------
Average Interest Yeild/
Balance Inc./Exp. Rate
----------------------------------
ASSETS
Federal funds sold $ 9,463,613 $ 454,811 4.81%
Securities available for sale 32,884,549 1,711,622 5.20%
Other investment securities (1) 16,120,001 1,112,951 6.90%
Loans, net of unearned income (1,2,3) 139,693,823 12,081,117 8.65%
------------ ----------- -----
Total earning assets 198,161,986 15,360,501 7.75%
------------ ----------- -----
Other non interest-earning assets 18,855,837
------------
Total average assets $217,017,823
============
LIABILITIES AND STOCKHOLDER'S EQUITY
Savings deposits $ 44,550,006 $ 1,343,448 3.02%
NOW accounts 33,033,001 389,628 1.18%
Money market accounts 21,182,662 580,121 2.74%
Time deposits $100,000 and over 6,020,266 310,532 5.16%
Other time deposits 48,879,099 2,572,486 5.26%
Notes payable 64,272 12,604 19.61%
------------ ----------- ------
Total interest-bearing liabilities 153,729,306 5,208,819 3.39%
------------ ----------- ------
Non interest-bearing deposits 41,811,797
Other non interest-bearing liabilities 1,964,966
Stockholders' equity 19,511,754
------------
Total average liabilities and
stockholders' equity $217,017,823
============
Net interest income $10,151,682
===========
Net yield on interest-earning assets 5.12%
=====
-8-
<PAGE>
Distribution of Assets, Liabilities and Stockholders' Equity;
- -------------------------------------------------------------
Interest Rates and Interest Differential (Continued)
- ----------------------------------------------------
(1) Interest income and yield are stated on a fully tax-equivalent basis. The
total amount of adjustment is $83,658. A federal tax rate of 34% was used in
performing this calculation.
(2) Includes loan fees of $208,996.
(3) Includes non-accruing loan balances and interest received on non-accruing
loans.
-9-
<PAGE>
Distribution of Assets, Liabilities and Stockholders' Equity;
- -------------------------------------------------------------
Interest Rates and Interest Differential (continued)
- ----------------------------------------------------
1998
--------------------------------
Average Interest Yield/
Balance Inc./Exp. Rate
--------------------------------
ASSETS
Federal funds sold $ 18,006,162 $ 933,750 5.19%
Securities available for sale 29,155,874 1,687,359 5.79%
Other investment securities (1) 12,587,791 887,199 7.05%
Loans, net of unearned income (1,2,3) 130,398,095 11,809,845 9.06%
------------- ----------- -----
Total earning assets 190,147,922 15,318,153 8.06%
------------- ----------- -----
Other non interest-earning assets 16,793,656
-------------
Total average assets $ 206,941,578
=============
LIABILITIES AND STOCKHOLDER'S EQUITY
Savings deposits $ 39,710,542 $ 1,199,268 3.02%
NOW accounts 31,705,859 508,683 1.60%
Money market accounts 23,307,456 743,957 3.19%
Time deposits $100,000 and over 5,149,262 288,513 5.60%
Other time deposits 49,986,897 2,830,595 5.66%
Notes payable 385,627 34,680 8.99%
------------- ----------- -----
Total interest-bearing liabilities 150,245,643 5,605,696 3.73%
------------- ----------- -----
Non interest-bearing deposits 37,064,657
Other non interest-bearing liabilities 1,785,918
Stockholders' equity 17,845,360
-------------
Total average liabilities and
stockholders' equity $ 206,941,578
=============
Net interest income $ 9,712,457
===========
Net yield on interest-earning assets 5.11%
=====
-10-
<PAGE>
Distribution of Assets, Liabilities and Stockholders' Equity;
- -------------------------------------------------------------
Interest Rates and Interest Differential (Continued)
- ----------------------------------------------------
(1) Interest income and yield are stated on a fully tax-equivalent basis.
The total amount of adjustment is $72,378. A federal tax rate of 34% was
used in performing this calculation.
(2) Includes loan fees of $283,304.
(3) Includes non-accruing loan balances and interest received on non-accruing
loans.
-11-
<PAGE>
Distribution of Assets, Liabilities and Stockholders' Equity;
- -------------------------------------------------------------
Interest Rates and Interest Differential(Continued)
- ---------------------------------------------------
1997
--------------------------------
Average Interest Yield/
Balance Inc./Exp. Rate
--------------------------------
ASSETS
Federal funds sold $ 10,470,822 $ 564,714 5.39%
Securities available for sale 19,428,034 1,164,927 6.00%
Other investment securities (l) 19,994,670 1,233,482 6.17%
Loans, net of unearned income (1,2,3) 124,367,629 11,428,985 9.19%
------------ ----------- -----
Total earning assets 174,261,155 14,392,108 8.26%
------------ ----------- -----
Other non interest-earning assets 14,715,058
------------
Total average assets $188,976,213
============
LIABILITIES AND STOCKHOLDER'S EQUITY
Savings deposits $ 37,641,284 $ 1,133,582 3.01%
NOW accounts 29,496,018 471,221 1.60%
Money market accounts 20,671,361 653,027 3.16%
Time deposits $100,000 and over 4,611,490 261,092 5.66%
Other time deposits 44,172,508 2,479,397 5.61%
Notes payable 385,627 34,998 9.08%
------------ ----------- -----
Total interest-bearing liabilities 136,978,288 5,033,317 3.67%
------------ ----------- -----
Non interest-bearing deposits 34,375,951
Other non interest-bearing liabilities 1,746,323
Stockholders' equity 15,875,651
------------
Total average liabilities and
stockholders' equity $188,976,213
============
Net interest income $ 9,358,791
===========
Net yield on interest-earning assets 5.37%
=====
-12-
<PAGE>
Distribution of Assets, Liabilities and Stockholders' Equity;
- -------------------------------------------------------------
Interest Rates and Interest Differential (Continued)
- ----------------------------------------------------
(1) Interest income and yield are stated on a fully tax-equivalent basis.
The total amount of adjustment is $18,902. A federal tax rate of 34% was
used in performing this calculation.
(2) Includes loan fees of $258,451.
(3) Includes non-accruing loan balances and interest received on non-accruing
loans.
-13-
<PAGE>
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.
1999 as compared to 1998
------------------------------------
Due to a change in:
Volume(1) Rate(1) Total
------------------------------------
Interest income from:
Federal funds sold $ (414,907) $ (64,032) $ (478,939)
Other securities 244,943 (19,191) 225,752
Securities available for sale 204,978 (180,715) 24,263
Loans, net of unearned income 819,995 (548,723) 271,272
---------- ---------- -----------
Total 855,009 (812,661) 42,348
---------- ---------- -----------
Interest expense on:
Savings deposits 144,180 0 144,180
NOW accounts 20,254 (139,309) (119,055)
Money market accounts (64,315) (99,521) (163,836)
Time deposits $100,000 and over 45,976 (23,957) 22,019
Other time (61,617) (196,491) (258,108)
Notes payable 24,748 (46,825) (22,077)
---------- ---------- -----------
Total 109,226 (506,103) (396,877)
---------- ---------- -----------
Net interest income $ 745,783 $ (306,558) $ 439,225
========== ========== ===========
(1) The change in interest attributed to both rate and volume has been
allocated to the changes in the rate and the volume on a pro rated basis.
-14-
<PAGE>
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.
1998 as compared to 1997
-----------------------------------
Due to a change in:
Volume(1) Rate(1) Total
-----------------------------------
Interest income from:
Federal funds sold $ 390,771 $ (21,735) $ 369,036
Other securities (504,102) 157,819 (346,283)
Securities available for sale 564,566 (42,134) 522,432
Loans, net of unearned income 545,172 (164,312) 380,860
---------- ---------- -----------
Total 996,407 (70,362) 926,045
---------- ---------- -----------
Interest expense on:
Savings deposits 61,943 3,743 65,686
NOW accounts 37,462 0 37,462
Money market accounts 84,630 6,300 90,930
Time deposits $100,000 and over 30,209 (2,788) 27,421
Other time 328,927 22,271 351,198
Notes payable 0 (318) (318)
---------- ---------- -----------
Total 543,171 29,208 572,379
---------- ---------- -----------
Net interest income $ 453,236 $ (99,570) $ 353,666
========== ========== ===========
(1) The change in interest attributed to both rate and volume has been
allocated to the changes in the rate and the volume on a pro rated basis.
-15-
<PAGE>
Investment Portfolio
- --------------------
The following table indicates the carrying value of the Corporation's
consolidated investment portfolio at December 31, l999, 1998 and 1997:
1999 Carrying 1998 Carrying 1997 Carrying
Value Value Value
------------- ------------- -------------
Investments Held to Maturity:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 15,983,037 $ 15,003,624 $ 16,435,914
Investments Held to Maturity:
Obligations of states and
political subdivisions 695,000 849,000 449,274
Investments Held to Maturity:
Other debt securities 400,000 300,000 300,000
------------- ------------- -------------
$ 17,078,037 $ 16,152,624 $ 17,185,188
============= ============= =============
Federal Reserve Bank Stock $ 97,500 $ 97,500 $ 97,500
============= ============= =============
Federal Home Loan Bank Stock $ 636,200 $ $
============= ============= =============
Investments Available for Sale $ 30,017,299 $ 31,879,320 $ 20,796,287
============= ============= =============
-16-
<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 debt securities at December 31, l999. 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.*
After one After five
(In Thousands) Within but within but within
one year five years ten years
Maturing: Amount Yield Amount Yield Amount Yield
- -------------- ------ ----- ------- ----- ------ -----
U.S. Govt.
& Agency
obligations $3,100 5.54% $42,937 5.85% $
State and
Political
subdivisions 110 5.39% 320 5.39% 265 6.10%
Other
securities 300 8.01% 100 6.00%
------ ----- ------- ---- ------ ----
$3,210 5.53% $43,557 5.86% $ 365 6.07%
====== ===== ======= ==== ====== ====
* Federal Reserve Bank Stock and FHLB 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) 1999 1998 1997
---- ---- ----
Loans, non-accrual $363 $297 $341
Loans past due 90 days or
more and still accruing 200 173 168
---- ---- ----
Total $563 $470 $509
==== ==== ====
-17-
<PAGE>
The amount of interest income recorded during 1999, 1998 and 1997 on non-
accrual loans and restructured loans outstanding at December 31, 1999 amounted
to $3,932, in 1998 $234, and in 1997 $1,737. Had these loans performed in
accordance with their original terms, the amount recorded would have been
$28,777 in 1999, $36,165 in 1998, and $40,929 in 1997.
As of December 31, 1999, there were no loans which are not now included above
but where known information about possible credit problems of borrowers 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 of loans secured by property located
within the Bank's market area is northeastern Massachusetts.
Loan Portfolio
- --------------
The following table summarizes the distribution of the Bank's loan portfolio
and mortgages held for sale as of December 31 for the years indicated:
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
Commercial, financial
& agricultural $ 25,018 $ 24,987 $ 22,180 $ 16,947 $ 16,486
Real estate-construction and
land development 6,278 2,926 6,507 5,847 4,649
Real estate-residential 57,827 51,256 49,517 40,983 34,217
Real estate-commercial 48,546 44,223 44,242 46,150 42,588
Consumer 8,239 8,242 7,652 6,538 5,594
Municipal tax-exempt
obligations 3,477 2,670 2,750 452 465
Loans to depository
institutions 0 0 0 0 0
Other 741 1,318 517 583 787
-------- -------- -------- -------- --------
150,125 135,622 133,365 117,500 104,786
Allowance for loan losses (2,132) (1,935) (2,163) (2,197) (2,073)
Deferred loan costs (fees) net 209 137 19 (86) (97)
Unearned income 0 0 0 (0) (0)
-------- -------- -------- -------- --------
Net loans $148,203 $133,824 $131,221 $115,217 $102,616
======== ======== ======== ======== ========
-18-
<PAGE>
Loan maturities for commercial, financial and agricultural at December 31,
l999 were as follows: $13,838,973 due in one year or less; $9,956,179 due
after one year through five years; $1,227,036.58 due after five years. Of
the Bank's commercial, financial and agricultural loans due after one year,
$1,643,733 have floating or adjustable rates and $9,539,483 have fixed rates.
Loan maturities for real estate construction and land development at December
31, 1999 were as follows: $4,366,895 due in one year or less, $1,911,379 due
after one year through five years and $0 due after five years. Of the Bank's
real estate construction and land development loans due after one year,
$1,911,379 have adjustable rates and none have fixed rates.
-19-
<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 loan losses at
December 31 for each of the years indicated:
(In Thousands) 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
Average loans outstanding,
Net of unearned income $139,694 $130,398 $124,368 $110,538 $93,227
======== ======== ======== ======== =======
Allowance for loan losses
Balance at beginning of period $ 1,935 $ 2,163 $ 2,198 $ 2,073 $ 2,075
-------- -------- -------- -------- -------
Charge-offs:
Real Estate-Construction 0 0 0 0 0
Real Estate-Residential 0 (97) (25) 0 0
Real Estate-Commercial (2) 0 (14) (669) (28)
Commercial, Financial & Agric. (5) (172) (10) (76) (20)
Consumer (14) (13) (5) (9) (30)
Municipal Tax-Exempt obligations 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 6 5 0 208 50
Real Estate-Commercial 190 43 14 265 10
Commercial, Financial & Agric. 19 5 3 385 10
Consumer 3 1 2 21 6
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) recoveries 197 (228) (35) 125 (2)
-------- -------- -------- -------- -------
Provision for loan losses 0 0 0 0 0
-------- -------- -------- -------- -------
Balance at period end $ 2,132 $ 1,935 $ 2,163 $ 2,198 $ 2,073
======== ======== ======== ======== =======
Ratio of net charge-offs
(recoveries) to average loans (0.14%) 0.17% 0.03% (0.11%) 0.00%
======== ======== ======== ======== =======
-20-
<PAGE>
Allowance for 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 loan losses is considered adequate by management to absorb any reasonably
foreseeable loan losses.
The following table reflects the allocation of the allowance for loan losses
and the percentage of loans in each category to total outstanding loans as of
December 31 for each of the years indicated:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1999 1998 1997 1996 1995
--------------- --------------- --------------- --------------- ---------------
PERCENT PERCENT PERCENT PERCENT PERCENT
OF OF OF OF OF
LOANS IN LOANS IN LOANS IN LOANS IN LOANS IN
CATEGORY CATEGORY CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL FINANCIAL
& AGRICULTURAL $ 929 16.8% $1,079 18.4% $ 809 16.7% $ 397 14.6% $ 649 15.7%
REAL ESTATE-CONSTRUCTION 72 4.2% 13 2.2% 35 4.8% 41 5.0% 72 4.4%
REAL ESTATE-RESIDENTIAL 154 38.4% 203 37.7% 153 35.7% 309 34.3% 102 32.7%
REAL ESTATE-COMMERCIAL 549 32.3% 372 32.6% 448 34.6% 606 39.6% 698 40.6%
CONSUMER 29 5.5% 29 6.2% 28 5.7% 9 5.6% 20 5.4%
MUNICIPAL TAX EXEMPT
LOANS 34 2.3% 0 1.9% 0 2.1% 0 0.4% 0 0.4%
OTHER 0 0.5% 0 1.0% 0 0.4% 0 0.5% 0 0.8%
UNALLOCATED 365 0.0% 239 0.0% 690 0.0% 836 0.0% 532 0.0%
------ -------- ------ -------- ------ -------- ------- ------- ------ --------
TOTAL $2,132 100.0% $1,935 100.0% $2,163 100.0% $ 2,198 100.0% $2,073 100.0%
====== ======== ====== ======== ====== ======== ======= ======= ====== ========
</TABLE>
-21-
<PAGE>
Deposits
- --------
The following table shows the average deposits and average interest rate paid
for the last three years:
1999 1998 1997
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
------------ ----- ------------ ----- ------------ -------
Demand Deposits $ 41,811,797 0.00% $ 37,064,657 0.00% $ 34,375,951 0.00%
NOW Accounts 33,033,001 1.18% 31,705,859 1.60% 29,496,018 1.60%
Money Market
Accounts 21,182,662 2.74% 23,307,456 3.19% 20,671,361 3.16%
Savings Deposits 44,550,006 3.02% 39,710,542 3.02% 37,641,284 3.01%
Time Deposits
$100,000 and over 6,020,266 5.16% 5,149,262 5.60% 4,611,490 5.66%
Other Time Deposits 48,879,099 5.26% 49,986,897 5.66% 44,172,508 5.61%
------------ ----- ------------ ----- ------------ ------
Total $195,476,831 2.66% $186,924,673 2.98% $170,968,612 2.92%
============ ===== ============ ===== ============ ======
As of December 31, 1999, the Bank had certificates of deposit in amounts of
$100,000 and over aggregating $5,672,455. These certificates of deposit
mature as follows:
Maturity Amount
-------- -----------
3 months or less $ 1,645,034
Over 3 months through 6 months 1,429,009
Over 6 months through 12 months 660,850
Over 12 months 1,937,562
-----------
Total $ 5,672,455
===========
-22-
<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,
---------------------------
1999 1998
Return on average total
assets (net income divided
by average total assets) 1.03% 1.03%
Return on average
stockholders' equity
(net income divided by
average stockholders' equity) 11.44% 11.99%
Dividend payout ratio
(total declared dividends
divided by net income) 39.98% 32.21%
Equity to assets ratio
(average stockholders' equity
as a percentage of average
total assets) 8.99% 8.62%
Short-Term Borrowings
- ---------------------
The Bank engages in certain borrowing agreements throughout the year. These
are in the ordinary course of the Bank's business. 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. There were no short-
term borrowings during 1999, 1998 or 1997.
ITEM 2. DESCRIPTION OF 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.
The Bank's South Hamilton office, built in 1991 (2,382 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.
-23-
<PAGE>
The Bank's Topsfield office (2,310 square feet) at 15 Main Street, Topsfield,
Massachusetts is renewed by the Bank from a third party with a term that
expired February 2000 with additional (2) five-year renewals and the 1999
annual rent of $39,280.
The Bank's North Beverly Plaza office (5,126 square feet) at 63 Dodge Street,
Beverly, Massachusetts is leased by the Bank from a third party with a term
that expires October 2001 with one five-year renewal and a current annual rent
of $40,500.
The Bank, in 1997, 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 1999 annual rent for Cummings is $62,997 with a
term that expires September 2001.
The Bank, in January 2000, established a full-service branch office (1,250
square feet) at 11 Summer Street, Manchester-by-the-Sea, Massachusetts. The
1999 annual rent during improvement for Manchester is $24,000 with a term that
expires December 2029.
The Bank has five stand-alone, automated teller machines ("ATMs") in
Massachusetts which are located at Beverly Hospital, Herrick Street, Beverly,
Crosby's Market, Manchester-by-the-Sea, Cummings Center parking lot, 100
Cummings Center, Beverly, 311 Cabot Street, Beverly and 174 Rantoul Street,
Beverly.
The Bank maintains two high school branches; one located at Hamilton-Wenham
Regional High School (340 square feet) at Bay Road, Hamilton, Massachusetts
and the second one at Beverly High School (491 square feet) at Sohier Road,
Beverly, Massachusetts.
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.
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, 1999.
PART II
-------
ITEM 5. MARKET FOR 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.
-24-
<PAGE>
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, First Albany, Ryan Beck & Co., Winslow,
Evans & Crocker, Inc. and Bear Sterns.
1999 1998
------ ------
Quarter ended March 31, $17.00 $19.00*
Quarter ended June 30, 15.75 20.00
Quarter ended Sept. 30, 14.75 19.75
Quarter ended Dec. 31, 15.50 18.50
* Per share information has been adjusted to reflect the 2-for-1 stock
split of common stock effective April 7, 1998.
Capital
- -------
The Corporation's ability to pay dividends is limited by the prudent banking
principles applicable to all bank holding companies. As a practical matter,
the Corporation's ability to pay dividends is generally limited by the Bank's
ability to dividend funds to the Corporation.
For restrictions on the ability of the Bank to pay dividends to the
Corporation (see Note 15) of the financial satements.
The number of record holders of the Corporation's common stock was 365 as of
March 3, 2000. The Corporation declared quarterly cash dividends on its
outstanding common stock, which amounted to an aggregate dividend per share of
$.57 during 1999 and a $.45 dividend per share during 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS 1999 AS COMPARED TO 1998
The total assets of the Corporation as of December 31, 1999, amounted to
$221,437,654 as compared to $215,030,304 in 1998. This increase amounted to
$6,407,350 or 3.0%.
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; Securities-Held-to-Maturity, and Securities- 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.
-25-
<PAGE>
Securities-Held-to-Maturity
- ---------------------------
The investments in Securities-Held-to-Maturity totaled $17,078,037 at December
31, 1999 as compared to $16,152,624 at December 31, 1998. This is an
increase of $925,413 or 5.7%. U.S. Treasury and U.S. Agency obligations
totaled $15,983,037 at December 31, 1999 as compared to $15,003,624 at
December 31, 1998, an increase of $979,413 or 6.5%. The U.S. Agency
securities funded growth in Available-for-Sale-Securities. The majority of
investment purchases were made in the 24 to 60-month maturity range. State
and municipal obligations held to maturity totaled $695,000 at December 31,
1999, as compared to $849,000 at December 31, 1998. This decrease totaled
$154,000 or 18.1%. The decrease in the state and municipal portfolio is
attributed to runoff of matured municipal securities of local municipalities.
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 of
foreseeable events and liquidity conditions.
Securities-Available-for-Sale
- -----------------------------
The balance of Securities-Available-for-Sale totaled $30,017,299 as of
December 31, 1999 as compared to the balance of Securities-Available-for-Sale,
which totaled $31,879,320 as of December 31, 1998, a decrease of $1,862,021
or 5.8%. These investments are primarily comprised of short to medium term
U.S. Treasury and U.S. Government Agency Securities. This position is
designed to give the Bank flexibility in managing liquidity needs.
Federal Funds Sold
- ------------------
The balance of federal funds sold totaled $4,400,000 at December 31, 1999 in
comparison to $14,500,000 at December 31, 1998, reflecting the development of
assets into higher yielding instruments. Despite such strategy, the Bank's
liquidity position is considered to be adequate.
Loans
- -----
Net Loans at December 31, 1999, totaled $146,853,578 as compared to
$132,246,638 at December 31, 1998. This increase was $14,606,940 or 11.0%.
-26-
<PAGE>
Commercial Loans totaled $25,018,277 at December 31, 1999, as compared to
$24,987,512 at December 31, 1998. This is an increase of $30,765 or 0.1%.
This is attributed to increased competition for small business credit. The
growth in the Bank's loan portfolio has been primarily in the commercial real
estate, construction real estate and residential real estate portfolios.
Real estate construction loans totaled $6,278,275 at December 31, 1999, as
compared to $2,926,158 at December 31, 1998. This is an increase of
$3,352,117 or 114.6%, which can be attributed to an increase of commercial
real estate construction activity. Real estate residential loans, excluding
mortgage loans held for sale, totaled $56,478,166 at December 31, 1999, as
compared to $49,678,024 at December 31, 1998. This is an increase of
$6,800,142 or 13.7%. The increase of residential mortgage loan balances can
be attributed to aggressive marketing, a strong economy and favorable
interest rate environment. Real estate commercial loans totaled $48,546,154
at December 31, 1999 as compared to $44,223,264 at December 31, 1998,
representing an increase of $4,322,890 or 9.8%. There has been increased
competition for commercial loans, from both traditional and non traditional
sources, during both 1999 and 1998. Consumer loans totaled $8,238,379 at
December 31, 1999, as compared to $8,241,229 at December 31, 1998. This is a
decrease of $2,850.
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 composed of loans secured by real estate
located in the Bank's market area.
Premises and Equipment
- ----------------------
Premises and equipment totaled $5,135,817 at December 31, 1999, as compared
to $4,561,232 at December 31, 1998. This is an increase of $574,585 or 12.6%,
which can be attributed to additional data processing equipment, telephone
system, construction of the Manchester-by-the-Sea branch and personal computer
upgrades in 1999.
Deposits
- --------
Deposits totaled $199,228,713 at December 31, 1999, as compared to
$193,549,414 at December 31, 1998. The increase of $5,679,299 or 2.9% 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. The continued growth of the core deposits is attributable to the
ongoing effort to develop and maintain relationship banking with our customers.
Notes Payable
- -------------
Notes payable totaled $-0- at December 31, 1999, as compared to $385,627 at
December 31, 1998. The balance outstanding of notes payable reflects the
payoff of the $385,627 balance of an industrial revenue bond issued for Cabot
Street Realty Trust. Cabot Street Realty Trust repaid the loan effective
March 31, 1999.
-27-
<PAGE>
Capital
- -------
The primary increase in capital of $1,278,666 can be attributed to internal
capital growth of $1,339,967 and a net reduction of the balance of the
leveraged ESOP of $200,000 and exercised stock options of $132,867. The
change in the net unrealized loss for the available-for-sale securities totaled
$394,168.
Consolidated Statements of Income
- ---------------------------------
Net Interest Income
- -------------------
Net interest and dividend income totaled $10,151,682 for the year ended
December 31, 1999, as compared to $9,640,079 for the year ended December 31,
1998. This increase was $511,603 or 5.3%. The interest income and interest
expense described below created this occurrence.
Loan Income
- -----------
Interest and fees on loans totaled $12,081,117 for the year ended December 31,
1999, as compared to $11,748,027 for 1998. This is an increase of $333,090 or
2.8%. The loan portfolio continued to change in composition during the year.
Unsecured consumer loans continued to decline. There was an increase in real
estate loans in 1999. The growth of loan income can be based on the increased
volume of loans throughout the year.
Investment Securities Income
- ----------------------------
Taxable investment securities income for the 12 months ended December 31, 1999,
totaled $2,789,048 as compared to $2,533,214 for the same time period in 1998.
This is an increase of $255,834 or 10.1%. The average balance of taxable
investments of U.S. Treasury notes and government agencies increased in 1999,
however, the investments purchased during the year were reinvested at higher
rates.
Other Interest Income
- ---------------------
Other interest income totaled $454,811 for the 12 months ended December 31,
1999, as compared to $933,750 for the same time period in 1998, a decrease of
$478,939 or 51.3%. The decrease is attributed to lower volumes of federal
funds sold.
-28-
<PAGE>
Interest Expense
- ----------------
Interest expense on deposits totaled $5,196,215 for the year ended December 31,
1999, as compared to $5,571,016 for the year ended December 31, 1998. This is
a decrease of $374,801 or 6.7%. The decrease of certificate of deposit
balances along with core deposit growth created this reduction of expense.
There were no short-term borrowings for the 12 months ending December 31, 1999
or December 31, 1998. Interest on notes payable totaled $12,604 for the year
ended December 31, 1999, as compared to $34,680 for the year ended December 31,
1998, a decrease of $22,076 or 63.7%. This situation was created by the payoff
of the Cabot Street Realty Trust Industrial Revenue Bond.
Loan Loss Provision
- -------------------
There were no provisions to the allowance for loan losses ("ALLL") during 1999
and 1998. No provisions were warranted because of improved collateral values
and improved quality throughout most of the loan portfolio. At December 31,
1999 the Corporation's allowance for loan losses was $2,132,386 representing
1.4% of gross loans at December 31, 1999, as compared to $1,934,541,
representing a ratio of 1.4% of total loans at December 31, 1998. The
stability of this ratio reflects the continued growth in the loan portfolio
during 1999. However, such growth was primarily in secured loans, which do
not warrant substantial allocations within the ALLL.
Additional factors which eliminated the need for provisions during 1999
included management's evaluation of economic conditions including the
stabilization and improvement of the local economy. The Corporation's
non-accrual loans totaled to $362,870 at December 31, 1999, as compared to
$297,375 at December 31, 1998. Similarly, combined non-accrual loans and
past due loans 90 days or more remained low and amounted to $562,367 at
December 31, 1999, as compared to $469,747 at December 31, 1998.
The ratio of non-performing assets to total loans, mortgages held for sale and
other real estate owned ("OREO") was 0.38% for December 31, 1999, as compared
to 0.35% as of December 31, 1998. The ratio of allowance for loan losses to
non-performing assets equaled 379.2% at December 31, 1999, as compared to
411.8% at December 31, 1998.
A total of $21,027 loans were charged off by the Corporation during 1999 as
compared to $282,762 charged off during the corresponding period in 1998.
These charge-off's consisted primarily of loans to small businesses.
Recoveries of loans previously charged off totaled $218,872 during 1999 as
compared to $53,954 during the corresponding period in 1998.
-29-
<PAGE>
Non-Interest Income
- -------------------
Non-interest income totaled $2,609,112 in 1999 as compared to $2,211,229 in
1998. Income from fiduciary activities totaled $1,403,933 for the 12 months
ended December 31, 1999, as compared to $1,228,191 for the same time period
in 1998, an increase of $175,742 or 14.3%. Core earnings from recurring
fiduciary income increased. Service charges and other deposit fees remained
stable. Other income totaled $599,173 for the 12 months ended December 31,
1999 as compared to $371,462 for the same period in 1998. This increase is
due primarily to the establishment of mortgage servicing rights in 1999.
Other Expense
- -------------
The total non-interest expense totaled $9,170,814 for 1999 as compared to
$8,473,991 in 1998. This is an increase of $696,823 or 8.2%. Salaries and
benefits expense increased $299,314 or 6.1%, because of additional personnel
in the retail expansion. Occupancy expense increased $55,406 or 7.1%. This
increase represents additional rents along with repairs and maintenance.
Equipment costs totaled $453,808 for the 12 months ending December 31, 1999
as compared to $434,668 for the same period in 1998. This increase of
$19,140 or 4.4% can be attributed to continued upgrades of computer equipment
to support the technology upgrades of both the Bank and Trust Department
operating systems. Data Processing costs totaled $381,673 for the twelve
months ended December 31, 1999 as compared to $269,142 for the same period in
1998. This increase is due to higher contractual costs along with additional
services and products introduced. Stationery and supplies costs totaled
$240,039 for the twelve months ended December 31, 1999 as compared to
$174,701 for the same period in 1998. Professional fees increased $78,820 or
29.3% due to research on new products and services along with increased
benefit consulting costs. Other expenses totaled $1,689,592 for 1999 as
compared to $1,623,318 in 1998 a variance of $66,274 or 4.1% which can be
attributed to increased training consultants, public relations, communication,
and electronic banking expense.
Income Taxes
- ------------
Income tax expense totaled $1,357,339 for the year ended December 31, 1999 as
compared to $1,237,406 for the same time period in 1998. This increase
reflects the increase of taxable income.
Net Income
- ----------
Net income was $2,232,641 for 1999 as compared to $2,139,911 for 1998, which
is an increase of $92,730 or 4.3%.
Capital Resources
- -----------------
As of December 31, 1999, the Corporation had total capital in the amount of
$20,218,279 as compared with $18,939,613 at December 31, 1998, which represents
an increase of $1,278,666 or 6.8% (see Note 15). The capital ratios of the
Corporation and the Bank exceed applicable regulatory requirements.
-30-
<PAGE>
Banks and bank holding companies are generally required to maintain Tier 1
capital at a level equal to or greater than 4.0% to their adjusted total
assets. As of December 31, 1999, the Bank's Tier 1 capital amounted to 8.21%
as compared to 7.83% of total assets at December 31, 1998. Similarly, the
Corporation's Tier I capital amounted to 9.44% at December 31, 1999 as
compared to 8.86% at December 31, 1998 (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, 1999, the Bank's ratio of risk
based capital to risk weighted assets amounted to 12.56% for Tier 1 and
13.81% for total capital, which satisfies the applicable risk-based capital
requirements. At December 31, 1998, the Bank's ratio of risk-based capital
to risk-weighted assets amounted to 12.56% for Tier 1 and 13.81% for total
capital. Similarly, the Corporation's ratio of risk-based capital to risk-
weighted assets, at December 31, 1999, amounted to 14.17% for Tier I and
15.43% for total capital which exceeds all applicable regulatory requirements.
At December 31, 1998, the Corporation's ratio of risk-based capital to risk-
weighted assets amounted to 14.03% for Tier 1 and 15.29% of 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. Total securities maturing in
one year or less amounted to approximately $3,564,782 or 7.5% at December 31,
1999 of the investment securities portfolio, and $8,223,310 at December 31,
1998, representing 17.1% 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 as of December 31, 1999 by repricing
date or maturity.
-31-
<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 0 10,986 2,985 1,110 4,617 0
Investments 1,157 9,093 1,988 0 15,987 463
Available for Sale
Fed Funds Sold 4,400 0 0 0 0 0
Total Loans 18,594 2,222 5,165 10,180 50,801 62,024
Mortgages Held for
Sale 0 4 6 12 89 1,238
------ ------ ------ ------ ------ ------
Total Earning Assets 24,151 22,305 10,144 11,302 71,494 63,725
LIABILITIES
Non-interest bearing 0 0 0 0 0 44,807
Deposits
Savings 0 0 16,074 0 32,575 0
NOW Accounts 0 0 11,916 0 24,194 0
Money Market Accounts 6,611 0 0 0 6,611 6,611
Time Deposits 1,027 512 1,290 553 1,478 0
$100,000 and over
Other time deposits 3,292 4,753 5,905 8,393 22,625 2
------ ------ ------ ------ ------ ------
Total Deposits 10,930 5,265 35,185 8,946 87,483 51,420
Borrowings 0 0 0 0 0 0
Total Deposits &
Borrowings 10,930 5,265 35,185 8,946 87,483 51,420
------ ------ ------ ------ ------ ------
Net Asset (Liability)
Gap 13,221 17,040(25,041) 2,356 (15,989) 12,305
Cumulative Gap 13,221 30,261 5,220 7,576 (8,413) 3,892
% Cumulative Gap 6.51% 14.90% 2.57% 3.73% (4.14%) 1.92%
-32-
<PAGE>
Forward Looking Statements
- --------------------------
Certain statements contained in this Annual Report, including those contained
in Management's Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere, are forward looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 and are thus prospective.
Such forward looking statements are subject to risks, uncertainties and other
factors which could cause actual results to differ materially from future
results expressed or implied by such statements. Such factors include, but
are not limited to changes in interest rates, regulation, competition and the
local and regional economy.
Disclosures relating to Year 2000 Preparation.
- ----------------------------------------------
During the late 1900s, the Corporation and the Bank undertook a comprehensive
program to assess and address all issues relating to preparation for the Year
2000 and the various critical date changes associated with the transition into
the new century. Such preparation was warranted because, historically, many
computer systems used only two digits to refer to a year. This practice could
cause errors in computer programs that were date-sensitive.
In the financial services industry, a failure to resolve on material Year 2000
issues could disrupt normal business activities or operations. Accordingly,
the Corporation and Bank along with third party service providers, consultants
and others worked to assure the Corporation's preparation for the Year 2000.
Additionally, the Corporation assessed its potential exposure to the risks of
a liquidity crisis or financial loss resulting from withdrawal of significant
deposits or other sources of funds as the Millennium date approached. The
Corporation developed liquidity and other contingency plans to assure a
smooth transition into the Year 2000 without disruption or inconvenience to
customers.
Management is pleased to report that the Corporation and the Bank did not need
to implement any contingency plans because the transition into the Year 2000
was accomplished without disruption or inconvenience. The Corporation and the
Bank are continuing their efforts to assure that the remaining critical dates
associated with the Year 2000 do not cause any disruption to operations or any
inconvenience to customers.
The costs associated with preparation for the Year 2000 were expensed as
incurred and did not have a material impact on the Corporation's financial
results or condition. The Corporation's budget for such expenses during 1999
was $115,000 of which it expended $128,000. Although the Corporation does not
specifically monitor the costs of its management time and internal resources
devoted to matters associated with the Year 2000, such issues consumed a
substantial amount of staff and management attention during 1999.
-33-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
Index to Consolidated Financial Statement Schedules
Description Page Reference
----------- --------------
Consolidated Balance Sheets at
December 31, 1999 and 1998 FS 2
Consolidated Statements of Income for the years
ended December 31, 1999, 1998 and 1997 FS 3
Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 1999, 1998 and 1997 FS 4-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 FS 6-7
Notes to Consolidated Financial Statements for the years ended
1999, 1998 and 1997 including: FS 8-26
Parent Company Only Balance Sheets at December 31, 1999 and 1998 FS 27
Parent Company Only Statements of Income for the years ended
December 31, 1999, 1998 and 1997 FS 28
Parent Company Only Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 FS 29
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
NONE
-34-
<PAGE>
SHATSWELL, MacLEOD & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
83 PINE STREET
WEST PEABODY, MASSACHUSETTS, 01960-3635
TELEPHONE (978) 535-0206
FACSIMILE (978) 535-9908
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, 1999 and 1998 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,
1999. 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, 1999 and 1998,
and the consolidated results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1999, in conformity
with generally accepted accounting principles.
/S/
SHATSWELL, MacLEOD & COMPANY, P.C.
SHATSWELL, MacLEOD & COMPANY, P.C.
West Peabody, Massachusetts
January 6, 2000
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
ASSETS 1999 1998
------------- -------------
Cash and due from banks $ 11,978,530 $ 10,971,822
Federal funds sold 4,400,000 14,500,000
------------- -------------
Cash and cash equivalents 16,378,530 25,471,822
Investments in available-for-sale
securities (at fair value) 30,017,299 31,879,320
Investments in held-to-maturity
securities (fair values of $16,752,628
as of December 31, 1999 and $16,162,284
as of December 31, 1998) 17,078,037 16,152,624
Federal Home Loan Bank stock, at cost 636,200
Federal Reserve Bank stock, at cost 97,500 97,500
Loans, net of the allowance for loan
losses of $2,132,386 and $1,934,541,
respectively 146,853,578 132,246,638
Mortgages held-for-sale 1,349,314 1,576,925
Premises and equipment 5,135,817 4,561,232
Accrued interest receivable 1,268,741 1,224,462
Other assets 2,622,638 1,819,781
------------- -------------
Total assets $221,437,654 $215,030,304
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 44,806,770 $ 41,721,322
Interest-bearing 154,421,943 151,828,092
------------- -------------
Total deposits 199,228,713 193,549,414
Notes payable 385,627
Employee Stock Ownership Plan loan 200,000
Other liabilities 1,990,662 1,955,650
------------- -------------
Total liabilities 201,219,375 196,090,691
------------- -------------
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
1,622,018 shares as of December 31,
1999 and 1,609,698 shares as of
December 31, 1998; outstanding,
1,575,894 shares as of
December 31, 1999 and 1,563,574 shares
as of December 31, 1998 4,055,045 4,024,245
Paid-in capital 2,572,740 2,470,673
Retained earnings 14,349,652 13,009,685
Treasury stock, at cost (46,124 shares) (427,467) (427,467)
Unearned Compensation - Employee Stock
Ownership Plan (200,000)
Accumulated other comprehensive income (loss) (331,691) 62,477
------------- ------------
Total stockholders' equity 20,218,279 18,939,613
------------- ------------
Total liabilities and stockholders'equity $ 221,437,654 $215,030,304
============= ============
The accompanying notes are an integral part of these consolidated financial
statements.
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
Interest and dividend income: ----------- ----------- -----------
Interest and fees on loans $12,081,117 $11,748,027 $11,414,506
Interest and dividends on
securities:
Taxable 2,789,048 2,533,214 2,380,978
Tax-exempt 31,864 30,784 13,008
Dividends on marketable
equity securities 3,661
Other interest 454,811 933,750 564,714
----------- ----------- -----------
Total interest and dividend
income 15,360,501 15,245,775 14,373,206
----------- ----------- -----------
Interest expense:
Interest on deposits 5,196,215 5,571,016 4,998,319
Interest on notes payable 12,604 34,680 34,998
----------- ----------- -----------
Total interest expense 5,208,819 5,605,696 5,033,317
----------- ----------- -----------
Net interest and dividend
income 10,151,682 9,640,079 9,339,889
Provision for loan losses
----------- ----------- -----------
Net interest and dividend
income after provision
for loan losses 10,151,682 9,640,079 9,339,889
----------- ----------- -----------
Other income:
Income from fiduciary
activities 1,403,933 1,228,191 1,107,938
Service charges on deposit
accounts 389,062 387,608 443,848
Other deposit fees 216,944 223,968 227,850
Other income 599,173 371,462 368,982
----------- ----------- -----------
Total other income 2,609,112 2,211,229 2,148,618
----------- ----------- -----------
Other expense:
Salaries and employee
benefits 5,213,918 4,914,604 4,755,237
Occupancy expense 843,711 788,305 738,772
Equipment expense 453,808 434,668 415,409
Data processing fees 381,673 269,142 258,767
Stationery and supplies 240,039 174,701 182,722
Professional fees 348,073 269,253 167,843
Loss on sales of other real
estate owned, net 8,275
Other expense 1,689,592 1,623,318 1,399,168
----------- ----------- -----------
Total other expense 9,170,814 8,473,991 7,926,193
----------- ----------- -----------
Income before income taxes 3,589,980 3,377,317 3,562,314
Income taxes 1,357,339 1,237,406 1,392,301
----------- ----------- -----------
Net income $ 2,232,641 $ 2,139,911 $ 2,170,013
=========== =========== ===========
Earnings per common share $ 1.43 $ 1.39 $ 1.47
=========== =========== ===========
Earnings per common share,
assuming dilution $ 1.29 $ 1.24 $ 1.32
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated
Other
Unearned Comprehensive
Common Paid-in Retained Treasury Compensation Income
Stock Capital Earnings Stock ESOP (Loss) Total
---------- ---------- ----------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $1,978,373 $ 4,358,926 $ 9,886,901 $(685,127) $(360,000) $ (36,512) $15,142,561
Comprehensive income:
Net income 2,170,013
Net change in
unrealized holding
loss on available-
for-sale securities,
net of tax effect 42,862
Comprehensive income 2,212,875
Unearned compensation
payment 60,000 60,000
Dividends declared ($.33
per share) (497,926) (497,926)
Sale of stock on exercise of
stock options (39,834) 113,034 73,200
---------- ---------- ----------- --------- --------- ---------- -----------
Balance, December 31, 1997 1,978,373 4,319,092 11,558,988 (572,093) (300,000) 6,350 16,990,710
Comprehensive income:
Net income 2,139,911
Net change in unrealized
holding gain on
available-for-sale
securities, net of
tax effect 56,127
Comprehensive income 2,196,038
Stock split (2 for 1) 1,978,372 (1,978,372)
Tax benefit for stock options 12,357 12,357
Unearned compensation
payment 100,000 100,000
Dividends declared ($.45
per share) (689,214) (689,214)
Sale of stock on exercise of
stock options 67,500 117,596 144,626 329,722
---------- ----------- ----------- ---------- --------- -------- -----------
Balance, December 31, 1998 4,024,245 2,470,673 13,009,685 (427,467) (200,000) 62,477 18,939,613
Comprehensive income:
Net income 2,232,641
Net change in unrealized
holding gain on available-
for-sale securities,
net of tax effect (394,168)
Comprehensive income 1,838,473
Tax benefit for stock options 22,858 22,858
Unearned compensation
payment 200,000 200,000
Dividends declared ($.57
per share) (892,674) (892,674)
Sale of stock on exercise of
stock options 30,800 79,209 110,009
---------- ---------- ----------- --------- --------- ----------- -----------
Balance, December 31, 1999 $4,055,045 $2,572,740 $14,349,652 $(427,467) $ $ (331,691) $20,218,279
========== ========== =========== ========= ========= =========== ===========
</TABLE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1999, 1998 and 1997
(continued)
Reclassification disclosure for the years ended December 31:
1999 1998
------ ------
Net unrealized gains (losses) on available-for-sale
securities $(662,751) $76,335
Less reclassification adjustment for realized gains
or losses in net income 0 0
--------- -------
Other comprehensive income (loss) before income
tax effect (662,751) 76,335
Income tax (expense) benefit 268,583 (20,208)
--------- -------
Other comprehensive income (loss), net of tax $(394,168) $56,127
========= =======
Accumulated other comprehensive income as of December 31, 1999, 1998 and 1997
consists of net unrealized holding gains (losses) on available-for-sale
securities, net of taxes.
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
------------ ------------ ------------
Cash flows from operating activities:
Net income $ 2,232,641 $ 2,139,911 $ 2,170,013
Adjustments to reconcile net income
to net cash provided by operating
activities:
Net (increase) decrease in
mortgages held-for-sale 199,200 (1,199,213) 596,231
Provision (benefit) for mortgages
held-for-sale 28,411 (1,179) (8,387)
Increase in mortgage servicing
rights assets (195,530)
Loss on sales of other real estate
owned, net 8,275
Disposal of fixed asset 5,280
Depreciation and amortization 469,800 450,891 426,219
Change in prepaid interest 5,572 3,933 3,933
Deferred tax expense (benefit) 90,301 (205,379) (30,537)
Increase (decrease) in taxes
payable (416,614) 250,704 (38,209)
Increase in interest receivable (44,279) (61,965) (81,030)
Increase (decrease) in interest
payable (80,202) 42,205 21,464
Increase in accrued expenses 58,105 27,947 54,247
(Increase) decrease in prepaid
expenses 54,316 951 (66,857)
Increase in other liabilities 8,407 5,275 439
(Increase) decrease in other assets (759) 403 (37,100)
Amortization (accretion) of
securities, net 374 (129,916) (23,800)
Gain on sales of assets, net (992) (9,579) (8,489)
Change in deferred loan costs, net (72,237) (116,911) (105,838)
------------ ------------ ------------
Net cash provided by operating
activities 2,336,514 1,203,358 2,880,574
------------ ------------ ------------
Cash flows from investing activities:
Purchases of available-for-sale
securities (12,346,787) (34,608,372) (14,215,924)
Proceeds from sales of available-
for-sale securities 550,458 169,657
Proceeds from maturities of
available-for-sale securities 12,995,968 23,499,497 11,085,135
Purchases of held-to-maturity
securities (5,080,156) (16,547,000) (3,243,125)
Proceeds from maturities of held
-to-maturity securities 4,154,000 17,642,000 9,032,338
Purchases of Federal Home Loan
Bank stock (636,200)
Proceeds from sales of other real
estate owned 74,658
Net increase in loans (14,860,053) (1,842,919) (17,088,486)
Recoveries of loans previously
charged off 218,872 53,954 20,176
Capital expenditures (1,044,385) (197,797) (812,296)
Proceeds from sales of assets 107,470 512,962 508,449
------------ ------------ ------------
Net cash used in investing
activities (15,940,813) (11,318,018) (14,639,075)
------------ ------------ ------------
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998 and 1997
(continued)
1999 1998 1997
------------ ------------ ------------
Cash flows from financing activities:
Net increase in demand deposits,
NOW and savings accounts 13,241,030 10,069,448 2,811,334
Net increase (decrease) in time
deposits (7,561,731) 7,188,956 2,741,448
Proceeds from exercise of stock
options 110,009 329,722 73,200
Payment on notes payable (385,627)
Dividends paid (892,674) (689,214) (543,189)
------------ ------------ ------------
Net cash provided by financing
activities 4,511,007 16,898,912 5,082,793
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents (9,093,292) 6,784,252 (6,675,708)
Cash and cash equivalents at
beginning of year 25,471,822 18,687,570 25,363,278
------------ ------------ ------------
Cash and cash equivalents at end of
year $ 16,378,530 $ 25,471,822 $ 18,687,570
============ ============ ============
Supplemental disclosures:
Mortgages held-for-sale transferred
to loans $ 7,692,941 $ 950,938 $ 768,292
Interest paid 5,289,021 5,563,491 5,011,853
Income taxes paid 1,683,652 1,192,081 1,461,047
Donation of other real estate owned 255,000
Loans transferred to other real
estate owned 82,933
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999, 1998 and 1997
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 five full service branches and two educational
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 commercial real estate loans, and in consumer
and small business loans. The Bank also operates a trust department that
offers fiduciary and investment services.
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 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 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 and Cabot Street Realty Trust.
Cabot Street Realty Trust was formed for the purpose of real estate
development. The Bank includes the accounts of its wholly-owned subsidiary,
Beverly Community Development Corporation. Beverly Community Development
Corporation was formed to provide loans to small businesses in low income
census tracts. 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.
Cash and due from banks as of December 31, 1999 and 1998 includes $4,204,000
and $4,166,000, respectively, which is subject to withdrawals and usage
restrictions to satisfy the reserve requirements of the Federal Reserve Bank.
SECURITIES:
Investments in debt securities are adjusted for amortization of premiums and
accretion of discounts. Gains or losses on sales of investment securities are
computed on a specific identification basis.
The Corporation classifies 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.
LOANS:
Loans receivable that management has the intent and ability to hold 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 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 amortizing these amounts over the contractual life
of the related loans.
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 LOAN LOSSES:
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 Corporation considers a loan to be impaired when, based on current
information and events, it is probable that the Corporation will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. The Corporation measures impaired loans 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 Corporation considers for impairment 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 reviews its loans for impairment on a
loan-by-loan basis. The Corporation does not apply impairment 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.
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 HELD-FOR-SALE:
Mortgages held-for-sale in the secondary market are carried at the lower of
cost or estimated fair value in the aggregate. 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.
TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES:
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after
December 31, 1996 and was applied prospectively. However, SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of SFAS No. 125,"
requires the deferral of implementation as it relates to repurchase agreements,
dollar-rolls, securities lending and similar transactions until after
December 31, 1997. This Statement provides accounting and reporting standards
for transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial-components approach
that focuses on control. It distinguishes transfers of financial assets that
are sales from transfers that are secured borrowings. The adoption of SFAS
No. 127 in 1999 did not have an impact on the Corporation's financial position,
results of operations or liquidity.
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
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.
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 cash equivalents 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
future cash flows, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality.
Mortgages held-for-sale: Fair values for mortgages held-for-sale are estimated
based on outstanding investor commitments, or in the absence of such
commitments, are based on current investor yield requirements.
Accrued interest receivable: The carrying amount of accrued interest
receivable 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.
Notes payable and Employee Stock Ownership Plan loan: The carrying amounts of
notes payable and Employee Stock Ownership Plan loan approximate their fair
values.
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:
The Corporation recognizes stock-based compensation using the intrinsic value
approach set forth in APB Opinion No. 25 rather than the fair value method
introduced in SFAS No. 123. Entities electing to follow the provisions of
APB 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. The Corporation has made the pro forma disclosures required by SFAS
No. 123.
EARNINGS PER SHARE:
Statement of Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings
per Share" is effective for periods ending after December 15, 1997. SFAS No.
128 simplifies the standards of computing earnings per share (EPS) previously
found in APB Opinion No. 15. It replaces the presentation of primary EPS
with a presentation of basic EPS. It also requires dual presentation of basic
and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15.
The Corporation has computed and presented EPS for the years ended December 31,
1999, 1998 and 1997 in accordance with SFAS No. 128. EPS as so computed does
not differ materially from EPS that would have resulted if APB Opinion No. 15
had been applied.
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
Basis Gains Losses Fair
----------- ----------- ----------- -----------
Available-for-sale
securities:
December 31, 1999:
Debt securities
issued by the
U.S. Treasury and
other U.S.
government
corporations and
agencies $30,053,522 $ 4,928 $ 553,821 $29,504,629
Marketable equity
securities 520,130 7,460 512,670
----------- ---------- ---------- -----------
$30,573,652 $ 4,928 $ 561,281 $30,017,299
=========== ========== ========== ===========
December 31, 1998:
Debt securities
issued by the U.S.
Treasury and other
U.S. government
corporations and
agencies $31,136,922 $ 127,869 $ 21,471 $31,243,320
Marketable equity
securities 636,000 636,000
----------- ---------- ---------- -----------
$31,772,922 $ 127,869 $ 21,471 $31,879,320
=========== ========== ========== ===========
Gross Gross
Amortized Unrealized Unrealized
Cost Holding Holding Fair
Basis Gains Losses Value
----------- ---------- ---------- ----------
Held-to-maturity
securities:
December 31, 1999:
Debt securities
issued by the U.S.
Treasury and other
U.S. government
corporations and
agencies $15,983,037 $ 9,567 $ 370,101 $15,622,503
Debt securities
issued by states
of the United
States and
political
subdivisions of
the states 695,000 695,000
Debt securities
issued by
foreign
governments 400,000 35,125 435,125
----------- ---------- ---------- -----------
$17,078,037 $ 44,692 $ 370,101 $16,752,628
=========== ========== ========== ===========
December 31, 1998:
Debt securities
issued by the
U.S. Treasury
and other U.S.
government
corporations and
agencies $15,003,624 $ 6,380 $ 23,064 $14,986,940
Debt securities
issued by states
of the United
States and
political
subdivisions of
the states 849,000 849,000
Debt securities
issued by foreign
governments 300,000 26,344 326,344
----------- ---------- ---------- -----------
$16,152,624 $ 32,724 $ 23,064 $16,162,284
=========== ========== ========== ===========
The scheduled maturities of held-to-maturity securities and available-for-sale
securities (other than equity securities) were as follows as of December 31,
1999:
Held-to-maturity Available-for-sale
securities: securities:
------------------------- ------------------------
Amortized Amortized
Cost Fair Cost Fair
Basis Value Basis Value
------------ ------------ ------------ ------------
Due within one year $ 1,110,000 $ 1,098,125 $ 2,099,761 $ 2,093,783
Due after one year
through five years 15,603,037 15,280,722 27,953,761 27,410,846
Due after five years
through ten years 365,000 373,781
------------ ------------ ------------ ------------
$ 17,078,037 $ 16,752,628 $ 30,053,522 $ 29,204,629
============ ============ ============ ============
During 1999, proceeds from sales of available-for-sale securities amounted to
$550,458. There was no gain or loss realized from these sales. During 1998,
proceeds from sales of available-for-sale securities amounted to $169,657.
There was no gain or loss realized from these sales. During 1997, there were
no sales of available-for-sale securities.
There were no securities of issuers whose aggregate carrying amount exceeded
10% of stockholders' equity as of December 31, 1999.
Total carrying amounts of $16,348,097 and $15,555,710 of securities were
pledged to secure treasury tax and loan, trust funds and public funds on
deposit as of December 31, 1999 and 1998, respectively.
NOTE 4 - LOANS
Loans consisted of the following as of December 31:
1999 1998
------------ ------------
Commercial, financial and agricultural $ 25,018,277 $ 24,987,512
Real estate - construction and land development 6,278,275 2,926,158
Real estate - residential 56,478,166 49,678,024
Real estate - commercial 48,546,154 44,223,264
Consumer 8,238,379 8,241,229
Other 4,217,717 3,988,233
------------ ------------
148,776,968 134,044,420
Allowance for loan losses (2,132,386) (1,934,541)
Deferred loan costs, net 208,996 136,759
------------ ------------
Net Loans $146,853,578 $132,246,638
============ ============
In the years ending December 31, 1999 and 1998 the Corporation sold mortgage
loans totalling $3,475,540 and $13,060,682, respectively and retained the
servicing rights. The Bank capitalized mortgage servicing rights assets in
1999 of $218,148 and recorded amortization of $22,618. No valuation allowance
was recorded because management estimates that there is no impairment in
value of those rights. The balance of capitalized servicing rights included
in other assets at December 31, 1999 was $195,530. The fair values of these
rights approximated their carrying amount.
Certain directors and executive officers of the Corporation and companies in
which they have significant ownership interest were customers of the Bank
during 1999. Total loans to such persons and their companies amounted to
$768,117 as of December 31, 1999. During 1999 principal payments and advances
totaled $657,410 and $456,000, respectively.
Changes in the allowance for loan losses were as follows for the years ended
December 31:
1999 1998 1997
---------- ---------- ----------
Balance at beginning of period $1,934,541 $2,163,349 $2,197,694
Loans charged off (21,027) (282,762) (54,521)
Recoveries of loans previously
charged off 218,872 53,954 20,176
---------- ---------- ----------
Balance at end of period $2,132,386 $1,934,541 $2,163,349
========== ========== ==========
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:
1999 1998
----------------------- ----------------------
Recorded Related Recorded Related
Investment Allowance Investment Allowance
In Impaired For Credit In Impaired For Credit
Loans Loans Loans Loans
---------- ---------- ----------- ---------
Loans for which there
is a related allowance
for credit losses $ 109,309 $ 13,000 $ 42,504 $ 19,000
Loans for which there is
no related allowance
for credit losses 96,657 132,500
---------- ---------- ----------- --------
Totals $ 205,966 $ 13,000 $ 175,004 $ 19,000
========== ========== =========== ========
Average recorded investment
in impaired loans during
the year ended December 31 $ 228,751 $ 259,312
========== ===========
Related amount of interest
income recognized during
the time, in the year
ended December 31, that
the loans were impaired
Total recognized $ 447 $ 234
========== ===========
Amount recognized using
a cash-basis method
of accounting $ 447 $ 234
========== ===========
NOTE 5 - PREMISES AND EQUIPMENT
The following is a summary of premises and equipment as of December 31:
1999 1998
----------- -----------
Land $ 421,077 $ 421,077
Buildings 4,415,487 4,409,490
Furniture and equipment 2,791,698 2,116,576
Leasehold improvements 1,219,127 1,177,796
Construction in progress 324,922 2,987
----------- -----------
9,172,311 8,127,926
Accumulated depreciation and
amortization (4,036,494) (3,566,694)
----------- -----------
$ 5,135,817 $ 4,561,232
=========== ===========
NOTE 6 - DEPOSITS
The aggregate amount of time deposit accounts in denominations of $100,000 or
more were $5,672,455 and $5,929,306 as of December 31, 1999 and 1998,
respectively.
For time deposits as of December 31, 1999, the scheduled maturities for the
years ended December 31, are:
2000 $25,376,270
2001 19,300,151
2002 3,997,106
2003 1,000,433
Thereafter 123,644
-----------
$49,797,604
===========
NOTE 7 - NOTES PAYABLE
Notes payable consisted of the following as of December 31:
1999 1998
---------- --------
Industrial Revenue Bond, due in a balloon
payment on June 30, 2000. Interest payable
at 94.11% of the Bank Boston prime rate $ $385,627
========== ========
The Industrial Revenue Bond was issued to Cabot Street Realty Trust on August
1, 1985 in order to purchase property and finance renovations. Cabot Street
Realty Trust paid off the Industrial Revenue Bond on March 31, 1999.
NOTE 8 - INCOME TAXES
The components of the income tax expense are as follows for the years ended
December 31:
1999 1998 1997
---------- ---------- ----------
Current:
Federal $ 915,981 $1,033,042 $ 950,484
State 351,057 409,743 472,354
---------- ---------- ----------
1,267,038 1,442,785 1,422,838
---------- ---------- ----------
Deferred:
Federal 66,710 (152,692) (7,304)
State 23,591 (52,687) (23,233)
---------- ---------- ----------
90,301 (205,379) (30,537)
---------- ---------- ----------
Total income tax expense $1,357,339 $1,237,406 $1,392,301
========== ========== ==========
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:
1999 1998 1997
------ ------ ------
% of % of % of
Income Income Income
------ ------ ------
Federal income tax at statutory rate 34.0% 34.0% 34.0%
Increase (decrease) in tax resulting from:
Tax-expemt income (2.3) (2.1) (.3)
Dividends paid to ESOP (.5) (.3) (.3)
Unallowable expenses .4 .7 .2
Other (.7) (2.7) (2.8)
State tax, net of federal tax benefit 6.9 7.0 8.3
------ ------ ------
Effective tax rates 37.8% 36.6% 39.1%
====== ====== ======
The Corporation had gross deferred tax assets and gross deferred tax
liabilities as follows as of December 31:
1999 1998
---------- ----------
Deferred tax assets:
Allowance for loan losses $ 590,136 $ 590,136
Net unrealized holding loss
on available-for-sale securities 224,662
Deferred compensation 169,318 188,075
Accrued retirement benefits 90,713 82,694
Accrued interest on nonperforming loans 27,923 23,386
Net unrealized loss on mortgages
held-for-sale 10,281
Accrued pension expense 132,058 103,559
---------- ----------
Gross deferred tax assets 1,245,091 987,850
---------- ----------
Deferred tax liabilities:
Accelerated depreciation 206,696 194,429
Loan origination fees and costs, net 85,017 53,870
Net unrealized holding gain on available-
for-sale securities 43,921
Unrealized gain on mortgages held-for-sale 1,349
Other adjustments 21,793 21,009
Mortgage servicing rights 80,031
---------- ----------
Gross deferred tax liabilities 393,537 314,578
---------- ----------
Net deferred tax assets $ 851,554 $ 673,272
========== ==========
Deferred tax assets as of December 31, 1999 and 1998 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, 1999, the Corporation had no operating loss and tax credit
carryovers for tax purposes.
NOTE 9 - STOCK COMPENSATION PLANS
As of December 31, 1999, the Corporation has two 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 except that compensation costs of $18,900 was charged against
income for the Director's plan. 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 would have
been reduced to the pro forma amounts indicated below for the years ended
December 31:
1999 1998 1997
---------- ---------- ----------
Net income As reported $2,232,641 $2,139,911 $2,170,013
Pro forma $2,158,413 $2,095,148 $2,125,921
Earnings per share As reported $ 1.43 $ 1.39 $ 1.47
Pro forma $ 1.39 $ 1.36 $ 1.44
Earnings per share,
assuming dilution As reported $ 1.29 $ 1.24 $ 1.32
Pro forma $ 1.25 $ 1.22 $ 1.29
The Corporation has adopted two fixed option, stock-based compensation plans.
Under the 1998 Incentive Stock Option Plan for Key Employees the Corporation
may grant up to 60,000 shares of common stock, at fair value, to present and
future employees. This plan was approved by the stockholders in 1999. Under
the 1998 Directors' plan the Corporation may grant up to 30,000 shares of
common stock to present and future Directors. Under the 1998 Directors' Plan,
stock options are granted at prices and exercise terms as determined by the
Board of Directors. Under both plans, options expire ten years after the
grant date.
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 1999, 1998 and 1997: dividend yield of 3% for
all years, expected volatility of 16% for 1999, 16% for 1998 and 12% for 1997,
risk-free interest rate of 6.03% for 1999, 5.53% for 1998 and 6.60% for 1997
and expected lives of 8 years for all years.
A summary of the status of the Corporation's fixed stock option plans as of
December 31, 1999, 1998 and 1997 and changes during the years ending on those
dates is presented below:
1999 1998 1997
------------------ ----------------- ------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Fixed Options Shares Price Shares Price Shares Price
-------- --------- ------- --------- -------- ---------
Outstanding at
beginning of year 326,080 $ 8.42 351,600 $ 7.50 309,900 $ 7.03
Granted 28,820 14.91 34,580 16.47 55,700 9.83
Exercised (12,320) 7.40 (42,610) 7.74 (12,200) 6.00
Forfeited (3,980) 21.02 (17,490) 7.41 (1,800) 9.00
-------- ------- -------
Outstanding at end
of year 338,600 8.96 326,080 8.42 351,600 7.50
======== ======= =======
Options exercisable
at year-end 195,000 171,980 183,610
Weighted-average fair
value of options
granted during the
year $4.42 $3.47 $2.38
The following table summarizes information about fixed stock options
outstanding as of December 31, 1999:
Options Outstanding Options Exercisable
--------------------------------- ---------------------
Weighted
Number -Average Weighted Nubmer Weighted
Range of Outstanding Remaining -Average Exercisable -Average
Exercise as of Contractual Exercise as of Exercise
Prices 12/31/99 Life Price 12/31/99 Price
- -------------- ----------- ----------- -------- ----------- --------
$ 5.95 67,500 3.50 years $ 5.95 48,360 $ 5.95
7.00 - 7.65 146,300 5.03 7.39 100,040 7.32
8.18 - 9.00 30,780 6.48 8.71 11,700 8.68
10.15 35,020 7.00 10.15 13,460 10.15
14.07 19,020 9.50 14.07 8,220 14.07
16.47 -16.55 39,980 8.47 16.49 13,220 16.50
-------- --------
338,600 5.70 8.96 195,000 8.16
======== ========
NOTE 10 - EMPLOYEE BENEFITS OTHER THAN POSTRETIREMENT, MEDICAL AND LIFE
INSURANCE BENEFITS
Defined benefit pension plan
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 tables set forth information about the plan as of December 31
and the years then ended:
1999 1998
---------- ----------
Change in projected benefit obligation:
Benefit obligation at beginning of year $5,559,118 $4,881,819
Service cost 286,734 265,088
Interest cost 344,138 336,617
Actuarial gain (loss) (1,241,046) 224,464
Benefits paid (192,262) (148,870)
Liability change due to new census date (380,150)
---------- ----------
Benefit obligation at end of year 4,376,532 5,559,118
---------- ----------
Change in plan assets:
Plan assets at estimated fair value at
beginning of year 5,878,805 5,018,844
Actual return on plan assets 654,877 1,008,831
Benefits paid (192,262) (148,870)
---------- ----------
Fair value of plan assets at end
of year 6,341,420 5,878,805
---------- ----------
Funded status 1,964,888 319,687
Unrecognized net gain (2,220,519) (481,654)
Unrecognized prior service cost 30,144 32,656
Unamortized net asset existing at date of
adoption of SFAS No. 87 (96,366) (122,913)
---------- ----------
Accrued benefit cost included in
other liabilities $ (321,853) $ (252,224)
========== ==========
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 8.0% and 4.5% for 1999, 6.75% and 5.0% for 1998 and 7.0% and
5.0% for 1997, respectively. The weighted-average expected long-term rate of
return on assets was 9.0% for 1999, 1998 and 1997.
Components of net periodic benefit cost:
1999 1998 1997
-------- -------- --------
Service cost $286,734 $265,088 $235,313
Interest cost on benefit obligation 344,138 336,617 311,773
Expected return on assets (521,836) (445,126) (358,512)
Amortization of prior service cost 2,512 2,512 2,512
Recognized net actuarial cost (26,547) (26,547) (19,981)
Amortization of net gain from earlier periods (15,372)
-------- -------- --------
Net periodic benefit cost $ 69,629 $132,544 $171,105
======== ======== ========
The amounts and types of securities of the Corporation and related parties
included in plan assets as of December 31, 1999 and 1998 consists of shares of
Beverly National Corporation Stock.
Supplemental Retirement Plan
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
$193,319 in 1999, $156,039 in 1998 and $131,116 in 1997.
The financial status of the plan is as follows as of December 31:
1999 1998
-------- --------
Projected benefit obligation $631,250 $500,849
Unrecognized net gains 74,341 11,263
-------- --------
705,591 512,112
Assets of the Bank, consisting of U.S. Government
obligations, equity instruments and life
insurance policies, which are used to assist in
the administration of the plan 687,850 457,429
-------- --------
Pension liability $ 17,741 $ 54,683
======== ========
The discount rate and estimated pay increases used in determining the projected
benefit obligation were 8.00% and 5.00% in 1999, 6.75% and 5.00% for 1998, and
7.00% and 5.00% for 1997, respectively.
Defined contribution profit sharing plan
The Corporation has a defined contribution profit sharing plan. Contributions
by the Corporation were $10,000 in 1999, $14,754 in 1998 and $15,067 in 1997.
401K plan
The Corporation contributed $70,861, $82,732 and $76,479 to a 401K plan in
1999, 1998 and 1997, respectively.
Employee Stock Ownership Plan
The Corporation sponsors an Employee Stock Ownership Plan (ESOP). This plan
is offered to employees who have attained age 21 and who have been employed by
the Corporation and 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 totalled $140,454
in 1999, $144,000 in 1998 and $148,600 in 1997.
The ESOP shares were as follows as of December 31:
1999 1998
------- --------
Allocated shares 79,677 64,231
Shares released for allocation 17,146 17,216
Unreleased shares 17,146
------- --------
Total ESOP shares 96,823 98,593
======= ========
Estimated fair value of unreleased shares
as of December 31 $ $317,201
======= ========
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 2,820 shares purchased
on February 2, 1996 and 6,756 shares purchased on October 31, 1994. As of
December 31, 1999 all of these shares had been released from collateral. As
they are released, the Corporation reports the 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.
A loan payable by the ESOP, with repayment guaranteed by the Corporation, was
paid in full in 1999.
Severance Compensation Plan
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.
Change in Control
One of the Corporation's executive officers has a change in control agreement
(agreement) with the Corporation. Under the agreement, if the executive
officer's employment is terminated subsequent to a change in control as defined
in the agreement, then the officer is entitled to a lump sum equal to the
product of the average sum of annual base compensation, including salary and
bonus, for the five preceding years multiplied by three.
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.
The following tables set forth information about the plan as of December 31
and the years then ended:
1999 1998
--------- ---------
Change in accumulated postretirement benefit obligation:
Benefit obligation at beginning of year $ 631,561 $ 613,908
Service cost 1,650 2,468
Interest cost 43,554 42,974
Actuarial (gain) loss (23,930) 22,478
Benefits paid (57,085) (50,267)
--------- ---------
Benefit obligation at end of year 595,750 631,561
--------- ---------
Fair value of plan assets at end of year 0 0
--------- ---------
Funded status (595,750) (631,561)
Unrecognized net gain (183,891) (163,241)
Unrecognized transition obligation 559,200 602,100
--------- ---------
Accrued benefit cost included in other liabilities $(220,441) $(192,702)
========= =========
The weighted-average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the accumulated
postretirement benefit obligation were 8.0% and 5.0% for 1999, 6.75% and 5.00%
for 1998 and 7.00% and 5.00% for 1997, respectively. The weighted-average
expected long-term rate of return on assets was 7.0% for 1999, 1998 and 1997.
Components of net periodic benefit cost:
1999 1998 1997
------- ------- -------
Service cost $ 1,650 $ 2,468 $ 2,390
Interest cost on benefit obligation 43,554 42,974 43,661
Amortization of prior service cost 42,900 42,900 42,900
Recognized net actuarial cost (3,280) (13,814) (15,225)
------- ------- -------
Net periodic benefit cost $84,824 $74,528 $73,726
======= ======= =======
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one-percentage-point change in assumed
health care cost trend rates would have the following effects in the year ended
December 31, 1999:
1-Percentage- 1-Percentage-
Point Increase Point Decrease
-------------- --------------
Effect on total of service and interest cost
components $ 328 $ 756
Effect on postretirement benefit obligation 4,647 11,319
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 2000 and 2029. 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, 1999:
2000 $ 157,602
2001 132,016
2002 51,305
2003 51,000
2004 54,000
Years thereafter 1,566,000
----------
Total minimum lease payments $2,011,923
==========
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 $188,693 for 1999,
$150,672 for 1998 and $164,083 for 1997.
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.
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:
1999 1998
------------------------- -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------
Financial assets:
Cash and cash equivalents $ 16,378,530 $ 16,378,530 $ 25,471,822 $ 25,471,822
Available-for-sale
securities 30,017,299 30,017,299 31,879,320 31,879,320
Held-to-maturity securities 17,078,037 16,752,628 16,152,624 16,162,284
Federal Home Loan Bank stock 636,200 636,200
Federal Reserve Bank stock 97,500 97,500 97,500 97,500
Loans 146,853,578 146,060,000 132,246,638 133,027,000
Mortgages held-for-sale 1,349,314 1,349,314 1,576,925 1,576,925
Accrued interest receivable 1,268,741 1,268,741 1,224,462 1,224,462
Financial liabilities:
Deposits 199,228,713 199,229,000 193,549,414 194,043,000
Notes payable 385,627 385,627
Employee Stock Ownership
plan loan 200,000 200,000
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.
1999 1998
------------- -------------
Commitments to originate loans $ 476,091 $ 847,000
Standby letters of credit 198,894 247,529
Commercial letters of credit 23,753 712,348
Unadvanced portions of loans:
Consumer 1,401,160 1,844,086
Home equity 6,302,574 5,719,057
Commercial lines of credit 10,791,491 10,008,924
Commercial construction 1,763,702 138,550
Residential construction 1,343,221 425,810
------------- -------------
$ 22,300,886 $ 19,943,304
============= =============
There is no material difference between the notional amounts and the estimated
fair values of the off-balance sheet liabilities.
The Corporation has no derivative financial instruments subject to the
provisions of SFAS No. 119 "Disclosure About Derivative Financial Instruments
and Fair Value of Financial Instruments."
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, 1999 the Bank could declare dividends up to $4,442,879, 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 1 capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 capital
(as defined) to average assets (as defined). Management believes, as of
December 31, 1999, that the Corporation and the Bank meet all capital adequacy
requirements to which they are subject.
As of December 31, 1999, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based
and Tier 1 leverage ratios as set forth in the table. There are no conditions
or events since that notification that management believes have changed the
institution's category.
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
Adequacy Action
Actual Purposes: Provisions:
--------------- -------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ------- ------ ----- ------- --------
(Dollar amounts in thousands)
As of December 31, 1999:
Total Capital
(to Risk Weighted Assets):
Consolidated $22,367 15.43% $11,600 >8.0% N/A
Beverly National Bank 19,526 13.81 11,311 >8.0 $14,139 >10.0%
Tier 1 Capital
(to Risk Weighted Assets):
Consolidated 20,551 14.17 5,800 >4.0 N/A
Beverly National Bank 17,754 12.56 5,656 >4.0 8,484 >6.0
Tier 1 Capital
(to Average Assets):
Consolidated 20,551 9.44 8,711 >4.0 N/A
Beverly National Bank 17,754 8.21 8,652 >4.0 10,815 >5.0
To Be Well
Capitalized Under
For Capital Prompt Corrective
Adequacy Action
Actual Purposes: Provisions:
-------------- -------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ------ ------ ----- ------- -------
(Dollar amounts in thousands)
As of December 31, 1998:
Total Capital
(to Risk Weighted Assets):
Consolidated $20,563 15.29% $10,762 >8.0% N/A
Beverly National Bank 18,084 13.81 10,476 >8.0 $13,095 >10.0%
Tier 1 Capital
(to Risk Weighted Assets):
Consolidated 18,878 14.03 5,381 >4.0 N/A
Beverly National Bank 16,443 12.56 5,238 >4.0 7,857 > 6.0
Tier 1 Capital
(to Average Assets):
Consolidated 18,878 8.86 8,519 >4.0 N/A
Beverly National Bank 16,443 7.83 8,399 >4.0 10,499 > 5.0
NOTE 16 - EARNINGS PER SHARE (EPS)
In the earnings-per-share computations, the average number of shares
outstanding does not include 8,573 shares for 1999, 21,975 shares for 1998 and
16,633 shares for 1997 which were the average number of shares not committed
to be released under the Bank's ESOP plan for those years.
Reconciliation of the numerators and the denominators of the basic and diluted
per share computations for net income are as follows:
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Year ended December 31, 1999
Basic EPS
Net income and income available
to common stockholders $2,232,641 1,557,764 $1.43
Effect of dilutive securities,
options 169,990
---------- ---------
Diluted EPS
Income available to common
stockholders and assumed
conversion $2,232,641 1,727,754 $1.29
========== =========
Year ended December 31, 1998
Basic EPS
Net income and income available
to common stockholders $2,139,911 1,540,943 $1.39
Effect of dilutive securities,
options 180,234
---------- ---------
Diluted EPS
Income available to common
stockholders and assumed
conversions $2,139,911 1,721,177 $1.24
========== =========
Year ended December 31, 1997
Basic EPS
Net income and income available
to common stockholders $2,170,013 1,476,632 $1.47
Effect of dilutive securities
options and warrants 168,200
---------- ---------
Diluted EPS
Income available to common
stockholders and assumed
conversions $2,170,013 1,644,832 $1.32
========== =========
NOTE 17 - RECLASSIFICATION
Certain amounts in the prior year have been reclassified to be consistent with
the current year's statement presentation.
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, 1999 and 1998
ASSETS 1999 1998
----------- -----------
Cash $ 20,430 $ 1,186
Investment in Beverly National Bank 17,430,565 16,506,277
Investment in Cabot Street Realty Trust 519,548 525,418
Investment in available-for-sale securities 512,670 675,657
Loans 35,000 35,000
Premises and equipment 532,633 549,374
Accounts receivable from subsidiaries 1,135,858 828,357
Interest receivable 1,845 2,290
Prepaid and deferred taxes 39,547 25,384
Other assets 925
----------- -----------
Total assets $20,229,021 $19,148,943
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Employee Stock Ownership Plan loan $ $ 200,000
Accrued audit expense 3,140 3,140
Other liabilities 7,602 6,190
----------- -----------
Total liabilities 10,742 209,330
----------- -----------
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
1,622,018 shares as of December 31, 1999
and 1,609,698 shares as of December 31,
1998; outstanding, 1,575,894 shares as of
December 31, 1999 and 1,563,574 shares as
of December 31, 1998 4,055,045 4,024,245
Paid-in capital 2,572,740 2,470,673
Retained earnings 14,349,652 13,009,685
Treasury stock, at cost (46,124 shares) (427,467) (427,467)
Unearned Compensation - Employee Stock
Ownership Plan (200,000)
Accumulated other comprehensive
income (loss) (331,691) 62,477
----------- -----------
Total stockholders' equity 20,218,279 18,939,613
----------- -----------
Total liabilities and stockholders'
equity $20,229,021 $19,148,943
=========== ===========
BEVERLY NATIONAL CORPORATION
(Parent Company Only)
STATEMENTS OF INCOME
Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
Interest and dividend income:
Interest on taxable investment securities $ 16,398 $ 23,186 $ 5,801
Dividends on marketable equity securities 3,661
Interest on loans and receivables from
subsidiaries 78,354 63,224 67,022
Dividends from Beverly National Bank 892,660 687,536 497,926
---------- --------- ---------
Total interest and dividend income 991,073 773,946 570,749
---------- --------- ---------
Other income:
Rental income 36,000 36,000 36,000
---------- --------- ---------
Total other income 36,000 36,000 36,000
---------- ---------- ---------
Expenses:
Occupancy expense 16,741 21,292 16,742
Equipment expense 100 119 624
Other expense 92,617 76,431 83,971
---------- --------- ---------
Total expenses 109,458 97,842 101,337
---------- --------- ---------
Income before income tax benefit and equity
in undistributed net income (loss) of
subsidiaries 917,615 712,104 505,412
Income tax benefit (9,695) (3,400) (6,536)
---------- ---------- --------
Income before equity in undistributed net
income (loss) of subsidiaries 927,310 715,504 511,948
---------- ---------- --------
Equity in undistributed net income (loss)
of subsidiaries:
Beverly National Bank 1,311,201 1,447,336 1,684,342
Cabot Street Realty Trust (5,870) (22,929) (26,277)
---------- ---------- ----------
Total equity in undistributed net
income of subsidiaries 1,305,331 1,424,407 1,658,065
---------- ---------- ----------
Net income $2,232,641 $2,139,911 $2,170,013
========== ========== ==========
BEVERLY NATIONAL CORPORATION
(Parent Company Only)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
Cash flows from operating activities:
Net income $2,232,641 $2,139,911 $2,170,013
Adjustments to reconcile net income
to net cash provided by operating
activities:
Undistributed net income of
subsidiaries (1,305,331) (1,424,407) (1,658,065)
Increase (decrease) in accrued expenses 200 (3,941)
Depreciation expenses 16,741 21,292 16,742
Increase in taxes payable 1,412 2,541 3,830
Change in prepaid and deferred taxes 8,900 2,357 (552)
Accretion of securities (205)
(Increase) decrease in interest receivable 445 (1,288) (66)
Increase in prepaid expenses (925)
(Increase) decrease in other assets 45,263
----------- ---------- ----------
Net cash provided by operating
activities 953,883 740,401 573,224
----------- ---------- ----------
Cash flows from investing activities:
Purchases of available-for-sale
securities (394,931) (501,313) (281,500)
Proceeds from sales of available-for-sale
securities 550,458 69,656
Proceeds from maturities of available-
for-sale securities 85,000
(Increase) decrease in due from
subsidiaries (307,501) 49,000 95,000
----------- ---------- ----------
Net cash used in investing activities (151,974) (382,657) (101,500)
----------- ---------- ----------
Cash flows from financing activities:
Proceeds from exercise of stock options 110,009 329,722 73,200
Dividends paid (892,674) (689,214) (543,189)
----------- ---------- ----------
Net cash used in financing activities (782,665) (359,492) (469,989)
Net increase (decrease) in cash and cash
equivalents 19,244 (1,748) 1,735
Cash and cash equivalents at beginning of
year 1,186 2,934 1,199
----------- ---------- ----------
Cash and cash equivalents at end of year $ 20,430 $ 1,186 $ 2,934
=========== ========== ==========
Supplemental disclosure:
Income taxes received $ (20,007) $ (8,298) $ (9,814)
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, 1999, 1998 and 1997, and therefore are not reprinted here.
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 1994. Mr.
Glovsky has been a Director since 1996. Mr. Luscinski has been a Director
since 1999. Mr. Rich, Mrs. Rosser and Mr. Germano have been corporate
officers since 1999. 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 65 Director 2001 Retired Stockbroker
Neiland J. Douglas, Jr. 64 Director 2002 President, Morgan
and Douglas (Real
Estate Services)
John N. Fisher 59 Director 2003 President, Fisher &
George Electrical
Co., Inc.
Paul J. Germano 41 Vice Pres. Vice Pres.
& Clerk of & Clerk of
Corporation; Corporation;
Vice President, Vice President,
Clerk & Clerk &
Cashier of Bank Cashier of Bank
Mark B. Glovsky 52 Director 2002 Attorney, Partner,
Glovsky & Glovsky
Attorneys at Law
John L. Good, III 55 Director 2001 Vice President,
Community Relations
& Development,
Northeast Health
Systems, Inc.
Alice B. Griffin 62 Director 2003 Consultant
Robert W. Luscinski 58 Director 2003 Certified Public
Accountant
-35-
<PAGE>
James E. Rich, Jr. 48 Vice Pres. Vice President of
of Corporation; Corporaiton;
Sr. Vice Pres. Sr. Vice President
& Sr. Trust & Sr. Trust Officer
Officer of Bank of Bank
Deborah A. Rosser 44 Vice Pres. of Vice President of
Corporation Corporation
Vice Pres. & Vice President &
Sr. Loan Officer Sr. Loan Officer
of Bank of Bank
Peter E. Simonsen 49 Treasurer of Treasurer of
Corporation; Corporation;
Sr. Vice Sr. Vice
President President
and Chief and Chief
Financial Financial
Officer of Bank Officer of Bank
Clark R. Smith 61 Director 2001 Attorney
Lawrence M. Smith 58 President & 2002 President & CEO,
Chief Beverly
Executive National
Officer of Corporation and
Corporation Beverly
and Bank, National Bank,
Director Director
James D. Wiltshire 68 Director 2003 Consultant
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.
-36-
<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, 1999, 1998,
and 1997, respectively. No other Executive Officer of the Corporation or the
Bank received cash compensation in excess of $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-------------------------------------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
Other Annual Restricted Options/ LTIP All Other
Compensation Stock Award(s) SARs Payouts Compensation
Principal Position Year Salary($) Bonus($) ($)(1) ($) (#)(4) ($) (2)(3)($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence M. Smith 1999 192,000 51,125 4,934 12,420 153,398
President of the 1998 185,075 49,825 5,377 2,580 128,838
Corporation and 1997 178,300 45,000 7,324 8,000 139,810
President, Chief
Executive Officer
of the Bank
Julia L. Robichau 1999 69,609 0 15,575 0 48,064
Vice President and 1998 91,650 20,000 586 2,000 27,857
Clerk of the 1997 88,300 19,000 436 4,000 40,844
Corporation and
Vice President and
Cashier, Chief
Operations Officer
of the Bank
(Retired in 1999)
Peter E. Simonsen 1999 98,500 21,470 209 1,000 3,322
Treasurer of the 1998 95,000 19,900 316 2,000 8,756
Corporation and 1997 91,720 19,000 297 4,000 16,001
Senior Vice
President and
Chief Financial
Officer of the Bank
James E. Rich 1999 103,300 22,550 263 1,000 3,526
Vice President of 1998 99,775 20,500 425 2,000 9,225
the Corporation and 1997 96,275 12,000 370 4,000 16,680
Senior Vice
President and Senior
Trust Officer of the
Bank
Deborah A. Rosser 1999 93,208 19,201 87 1,400 3,205
Vice President of 1998 85,100 18,000 108 2,000 7,905
the Corporation and 1997 73,000 15,275 80 6,000 12,740
Vice President and
Senior Loan Officer
of the Bank
Paul J. Germano 1999 87,500 17,400 64 1,000 3,023
Vice President and 1998 77,700 15,000 35 2,000 6,358
Clerk of the 1997 72,400 10,000 28 4,000 12,634
Corporation and Vice
President and Cashier
of the Bank
<FN>
<F1>
(1) Included in other annual compensation is an automobile allowance for
Lawrence M.Smith and Excess Group Life Insurance for Lawrence M. Smith,
Julia L. Robichau, Peter E.Simonsen, James E. Rich, Deborah A. Rosser and
Paul J. Germano.
<F2>
(2) Included in all other compensation is profit sharing, ESOP, life insurance
for Lawrence M.Smith, Julia L. Robichau, Peter E. Simonsen, James E. Rich,
Deborah A. Rosser and Paul J.Germano; SERP for Lawrence M. Smith, $147,515
and key man insurance for Lawrence M. Smith.
<F3>
(3) Information concerning allocations under the Corporation's Employee Stock
Ownership Plan and Profit Sharing for 1999 are unavailable, at date of
filing.
</FN>
</TABLE>
-37-
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
- --------------------------------------------------------------
Option/SAR Values
- -----------------
The table below sets forth information regarding stock options that were
exercised, if any, during the last fiscal year, and unexercised stock options
held:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options/SARs Options/SARs
Shares At FY-/End(#) At FY-/End($)
Name and Aquired on Value Exercisable(E)/ Exercisable(E)/
Principal Position Exercise(#) Realized($) Unexercisable(U) Unexercisable(U)
- ------------------ ----------- ----------- ---------------- ----------------
Lawrence M. Smith(1) 0 $ 0 80,000(E) $537,348(E)
President of the 0(U) $ 0(U)
Corporation and
President, Chief
Executive Officer
of the Bank
Peter E. Simonsen(2) 2,500 $21,250 5,100(E) $ 35,320(E)
Treasurer of the 8,900(U) $ 45,580(U)
Corporation and
Senior Vice
President and
Chief Financial
Officer of the
Bank
James E. Rich(3) 2,000 $17,000 9,990(E) $ 76,885(E)
Vice President of 7,010(U) $ 29,515(U)
the Corporation
and Vice President
and Senior Trust
Officer of the
Bank
Deborah A. Rosser(4) 1,400 $ 6,420 340(E) $ 0(E)
Vice President of 7,060(U) $ 22,470(U)
the Corporation
and Vice President
and Senior Loan
Officer of the
Bank
Paul J. Germano(5) 0 $ 0 9,030(E) $ 66,725(E)
Vice President and 7,9,0(U) $ 34,675(U)
Clerk of the
Corporation and
Vice President and
Cashier of the
Bank
(1) As of December 31, 1999, the market value of Beverly National Corporation
Common stock was $15.50 per share. As the option exercise price for the
options previously granted to Mr. Smith equals 12,000 shares@ $5.95 per
share, 21,000 shares @ $7.00 per share, 24,000 shares @ $7.65 per share,
6,020 shares @ $10.15 per share, 1,980 shares @ $8.63 per share, 2,580
shares @ $16.47 per share, 5,400 shares @ $16.55 per share, and 7,020
shares @ $14.07 per share, which amounts to less than the December 31,
market value of $15.50, the options were "in-the-money" on December 31,
1999. 72,020 options are "in-the-money" because the fair value of the
underlying securities exceeds the exercise price of the option.
(2) The option exercise price for the options granted to Mr. Simonsen in 1993
was 7,000 shares @ $7.00 per share, in 1997 4,000 shares @ $10.15 per
share, in 1998 2,000 shares @ $16.47 per share, and in 1999 1,000 shares
@ $16.55 per share. 4,600 options were exercisable adn "in-the-money",
another 6,400 options were "in-the-money" but unexercisable on December
31, 1999.
(3) The option exercise price for the options granted to Mr. Rich in 1993 was
10,000 shares @ $7.00 per share, in 1997 4,000 shares @ $10.15 per share,
in 1998 2,000 shares @ $16.47 per share, and in 1999 1,000 shares @ $16.55
per share. 9,490 options were exercisable and "in-the-money", another
4,510 options were "in-the-money" but unexercisable on December 31, 1999.
(4) The option exercise price for the options granted to Mrs. Rosser in 1997
was 4,200 shares @ $10.15 per share, in 1998 1,800 shares @ $16.47 per
share, and in 1999 1,400 shares @ $16.55 per share. No options were
"in-the-money" and exercisable, 4,200 options were "in-the-money, but
unexercisable on December 31, 1999.
(5) The option exercise price for the options granted to Mr. Germano in 1993
was 7,500 shares @ $7.00 per share, in 1996 2,500 shares @ $9.00 per share,
in 1997 4,000 shares @ $10.15 per share, in 1998 2,000 shares @ $16.47
per share, and in 1999 1,000 shares @ $16.55 per share. 8,530 options
were "in-the-money" and exercisable, another 5,470 options were "in-the-
money and unexercisable on December 31, 1999.
-38-
<PAGE>
Option/SAR Grants in Last Fiscal Year
- -------------------------------------
With the exception of the individuals set forth in the table below, no other
executive officer of the Corporation was granted options to purchase shares of
common stock. All shares purchased upon the exercise of any option must be
paid in full at the time of purchase.
INDIVIDUAL GRANTS
NUMBER OF PERCENT OF
SERCURITES TOTAL OPTIONS/
UNDERLYING SARs GRANTED EXERCISE OR
NAME AND OPTION/SARS TO EMPLOYEES BASE PRICE EXPIRATION
PRINCIPAL POSITION GRANTED (#)(1) IN FISCAL YEAR (2) ($/SH) DATE
- ------------------ -------------- ------------------ ----------- ----------
Lawrence M. Smith 12,420 73.8% $15.15 08/01/09
President of the
Corporation and
President , Chief
Executive Officer
of the Bank
Peter E. Simonsen 1,000 5.9% $16.55 08/01/09
Treasurer of the
Corporation and
Senior Vice
President and
Chief Financial
Officer of the Bank
James E. Rich 1,000 5.9% $16.55 08/01/09
Vice President of
the Corporation and
Senior Vice
President and Senior
Trust Officer of the
Bank
Deborah A. Rosser 1,400 8.3% $16.55 08/01/09
Vice President of
the Corporation and
Vice President and
Senior Loan Officer
of the Bank
Paul J. Germano 1,000 5.9% $16.55 08/01/09
Vice President and
Clerk of the
Corporation and
Vice President and
Cashier of the Bank
(1) In 1998, the Corporation adopted the 1998 Incentive Stock Option Plan for
key employees. Under the 1998 Plan, up to 60,000 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 1998. However
in 1999, 9,800 options were granted to certain employees of the Corporation
and the Bank. With the exception of options granted to Mr. Smith to
purchase 5,400 shares of common stock which vested immediately, all options
vest over a ten year period. The options may be exercised at a price of
$16.55 per share. Included in these grants were options to Messrs.
Simonsen, Rich and Germano to enable each to purchase 1,000 shares of
the Corporation's common stock and Mrs. Rosser to enable her to purchase
1,400 shares of the Corporation's common stock.
(2) The options granted to employees in 1999 totaled 16,820. The Corporation
has not awarded any SARs.
-39-
<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 a quarterly fee
of $1,500.00. In addition, for each semimonthly meeting attended, a Director
receives $300.00. Any Director serving on a subcommittee is compensated at
the rate of $100.00 per hour for committee meetings.
Beverly National Corporation 1998 Directors Plan
- ------------------------------------------------
The purpose of the 1998 Directors Plan is to provide incentives to present and
future directors of Beverly National Corporation. The aggregate number of
shares of stock for options which may be granted under this plan is 30,000
shares. The effective date of this plan is as of December 22, 1998. Each
option shall expire 10 years after the date of such grant or no later than
three months after termination of appointee's services. A total of 19,020
options pursuant to the 1998 Directors Plan were granted in 1999. The
distribution of the grant was 7,020 to Lawrence M. Smith, which is included
in the executive compensation table. The remaining options were granted
1,500 to each of the following directors: John L. Good, III, Neiland J.
Douglas, Jr., John N. Fisher, Alice B. Griffin, Richard H. Booth, James D.
Wiltshire, Clark R. Smith, and Mark B. Glovsky.
Employment and Severance Agreements
- -----------------------------------
The Corporation has entered into an Employment Agreement and Severance
Agreement with Lawrence M. Smith. The Employment Agreement provided Mr. Smith
with a minimum compensation until May 31, 1991. At that time the contract was
extended, and on December 22, 1998, the contract was further extended to
continue through May 31, 2000; provided, however, that commencing on May 31,
2000 the term of the Employment Agreement shall automatically be extended for
one additional year unless, not later than November 30, 1999, either party
notifies the other by written notice of its intent not to extend. 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.
-40-
<PAGE>
The Corporation adopted, in 1987, a Plan for Severance Compensation After
Hostile Takeover ("Severance Compensation Plan") 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, Mr. Simonsen, Mr.
Rich, Mrs. Rosser and Mr. Germano) may participate in the Severance
Compensation Plan as soon as the employee 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, the individual 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.
Supplemental Executive Retirement 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 increased retirement benefits at age 60,
such that his total retirement payment pursuant to the SERP will approximate
70% of his annual compensation for the previous three (3) fiscal years.
Change in Control Agreement - Simonsen
- --------------------------------------
The Corporation entered into a Change in Control Agreement (the "Change in
Control Agreement") with Mr. Simonsen in February 2000, which provides that
in the event of a change in control of the Corporation, if Mr. Simonsen's
employment is terminated other than for cause defined in the Change in
Control Agreement, disability or retirement within two (2) years after the
change in control then he shall be entitled to a lump sum amount from the
Corporation approximately equal to two times annual compensation. The
aggregate on average base compensation paid to the individual during the
previous five years less one hundred dollars.
Change in Control Agreement - Rich
- ----------------------------------
The Corporation entered into a Change in Control Agreement (the "Change in
Control Agreement") with Mr. Rich in February 2000, which provides that in the
event of a change in control of the Corporation, if Mr. Rich's employment is
terminated other than for cause defined in the Change in Control Agreement,
disability or retirement within two (2) years after the change in control
then he shall be entitled to a lump sum amount from the Corporation
approximately equal to two times annual compensation. The aggregate on
average base compensation paid to the individual during the previous five
years less one hundred dollars.
-41-
<PAGE>
Change in Control Agreement - Rosser
- ------------------------------------
The Corporation entered into a Change in Control Agreement (the "Change in
Control Agreement") with Mrs. Rosser in February 2000, which provides that in
the event of a change in control of the Corporation, if Mrs. Rosser's
employment is terminated other than for cause defined in the Change in
Control Agreement, disability or retirement within two (2) years after the
change in control then she shall be entitled to a lump sum amount from the
Corporation approximately equal to two times annual compensation. The
aggregate on average base compensation paid to the individual during the
previous five years less one hundred dollars.
Change in Control Agreement - Germano
- -------------------------------------
The Corporation entered into a Change in Control Agreement (the "Change in
Control Agreement") with Mr. Germano in February 2000, which provides that in
the event of a change in control of the Corporation, if Mr. Germano's
employment is terminated other than for cause defined in the Change in Control
Agreement, disability or retirement within two (2) years after the change in
control then he shall be entitled to a lump sum amount from the Corporation
approximately equal to two times annual compensation. The aggregate on average
base compensation paid to the individual during the previous five years less
one hundred dollars.
Employment Agreement - Simonsen
- -------------------------------
The Corporation entered into an Employment Agreement with Peter E. Simonsen
in February 2000 (the "Simonsen Employment Agreement"). The Simonsen
Employment Agreement provides for Mr. Simonsen's employment as Treasurer of
the Corporation and Senior Vice President and Chief Financial Officer of the
Bank. In connection with his employment the Corporation will pay Mr. Simonsen
an annual base salary of $103,600 per year which annual salary shall be
adjusted upward from time to time at the sole discretion of the Bank.
Pursuant to the Simonsen Employment Agreement the Corporation has agreed to
provide Mr. Simonsen fringe benefits consistent with those provided to Senior
Officers of the Corporation and Bank.
-42-
<PAGE>
The Simonsen Employment Agreement contains a non-compete clause pursuant to
which Mr. Simonsen has agreed that while employed by the Corporation and for
a period of one year thereafter, Mr. Simonsen will not in any capacity
compete with the Corporation or the Bank. The term of the Simonsen Employment
Agreement continues in effect through December 31, 2002. At that time the
term of the Simonsen Employment Agreement shall automatically be extended for
two (2) years unless, no later than November 30, 2002, either party notifies
the other by written notice of his intent not to extend unless this agreement
is terminated due to Mr. Simonsen's termination, death, disability or if Mr.
Simonsen is terminated for cause as defined therein. If Mr. Simonsen becomes
disabled during the term of the agreement, Mr. Simonsen shall be entitled to
receive all benefits payable to him under the Bank's long-term disability
income plan. If Mr. Simonsen is terminated for cause as defined in the
Simonsen Employment Agreement he will receive all accrued and unpaid
compensation through the date of such termination. 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, 401(k) plan, and the
Corporation's stock option plan in which the employee was participating at
any time of the twelve (12) months preceding the date of such termination).
Employment Agreement - Rich
- ---------------------------
The Corporation entered into an Employment Agreement with James E. Rich, Jr.
in February 2000 (the "Rich Employment Agreement"). The Rich Employment
Agreement provides for Mr. Rich's employment as Vice President of the
Corporation and Senior Vice President and Senior Trust Officer of the Bank.
In connection with his employment the Corporation will pay Mr. Rich an annual
base salary of $107,500 per year which annual salary shall be adjusted upward
from time to time at the sole discretion of the Bank. Pursuant to the Rich
Employment Agreement the Corporation has agreed to provide Mr. Rich fringe
benefits consistent with those provided to Senior Officers of the Corporation
and Bank.
The Rich Employment Agreement contains a non-compete clause pursuant to which
Mr. Rich has agreed that while employed by the Corporation and for a period of
one year thereafter, Mr. Rich will not in any capacity compete with the
Corporation or the Bank. The term of the Rich Employment Agreement continues
in effect through December 31, 2002. At that time the term of the Rich
Employment Agreement shall automatically be extended for two (2) years unless,
no later than November 30, 2002, either party notifies the other by written
notice of his intent not to extend unless this agreement is terminated due to
Mr. Rich's termination, death, disability or if Mr. Rich is terminated for
cause as defined therein. If Mr. Rich becomes disabled during the term of
the agreement, Mr. Rich shall be entitled to receive all benefits payable to
him under the Bank's long-term disability income plan. If Mr. Rich is
terminated for cause as defined in the Rich Employment Agreement he will
receive all accrued and unpaid compensation through the date of such
termination. 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, 401(k) plan, and the Corporation's stock option plan in which the
employee was participating at any time of the twelve (12) months preceding
the date of such termination).
-43-
<PAGE>
Employment Agreement - Rosser
- -----------------------------
The Corporation entered into an Employment Agreement with Deborah A. Rosser
in February 2000 (the "Rosser Employment Agreement"). The Rosser Employment
Agreement provides for Mrs. Rosser's employment as Vice President of the
Corporation and Vice President and Senior Loan Officer of the Bank. In
connection with her employment the Corporation will pay Mrs. Rosser an annual
base salary of $97,100 per year which annual salary shall be adjusted upward
from time to time at the sole discretion of the Bank. Pursuant to the Rosser
Employment Agreement the Corporation has agreed to provide Mrs. Rosser fringe
benefits consistent with those provided to Senior Officers of the Corporation
and Bank.
The Rosser Employment Agreement contains a non-compete clause pursuant to
which Mrs. Rosser has agreed that while employed by the Corporation and for a
period of one year thereafter, Mrs. Rosser will not in any capacity compete
with the Corporation or the Bank. The term of the Rosser Employment Agreement
continues in effect through December 31, 2002. At that time the term of the
Rosser Employment Agreement shall automatically be extended for two (2) years
unless, no later than November 30, 2002, either party notifies the other by
written notice of her intent not to extend unless this agreement is terminated
due to Mrs. Rosser's termination, death, disability or if Mrs. Rosser is
terminated for cause as defined therein. If Mrs. Rosser becomes disabled
during the term of the agreement, Mrs. Rosser shall be entitled to receive
all benefits payable to her under the Bank's long-term disability income plan.
If Mrs. Rosser is terminated for cause as defined in the Rosser Employment
Agreement she will receive all accrued and unpaid compensation through the
date of such termination. 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, 401(k) plan, and the Corporation's stock option plan in which
the employee was participating at any time of the twelve (12) months preceding
the date of such termination).
Employment Agreement - Germano
- ------------------------------
The Corporation entered into an Employment Agreement with Paul J. Germano in
February 2000 (the "Simonsen Employment Agreement"). The Germano Employment
Agreement provides for Mr. Germano's employment as Vice President and Clerk
of the Corporation and Vice President and Cashier of the Bank. In connection
with his employment the Corporation will pay Mr. Germano an annual base salary
of $93,300 per year which annual salary shall be adjusted upward from time to
time at the sole discretion of the Bank. Pursuant to the Germano Employment
Agreement the Corporation has agreed to provide Mr. Germano fringe benefits
consistent with those provided to Senior Officers of the Corporation and Bank.
-44-
<PAGE>
The Germano Employment Agreement contains a non-compete clause pursuant to
which Mr. Germano has agreed that while employed by the Corporation and for a
period of one year thereafter, Mr. Germano will not in any capacity compete
with the Corporation or the Bank. The term of the Germano Employment
Agreement continues in effect through December 31, 2002. At that time the
term of the Germano Employment Agreement shall automatically be extended for
two (2) years unless, no later than November 30, 2002, either party notifies
the other by written notice of his intent not to extend unless this agreement
is terminated due to Mr. Germano's termination, death, disability or if Mr.
Germano is terminated for cause as defined therein. If Mr. Germano becomes
disabled during the term of the agreement, Mr. Germano shall be entitled to
receive all benefits payable to him under the Bank's long-term disability
income plan. If Mr. Germano is terminated for cause as defined in the Germano
Employment Agreement he will receive all accrued and unpaid compensation
through the date of such termination. 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, 401(k) plan, and the Corporation's stock option
plan in which the employee was participating at any time of the twelve (12)
months preceding the date of such termination).
-45-
<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 3, 2000. The
percentage is based upon 1,581,294 shares of common stock outstanding.
Number of Shares Percent of
Beneficially Outstanding
Name of Owner (9) Owned (1)(2) Shares
----------------- ---------------- -----------
Richard H. Booth 11,680 (3,4) .74%
Neiland J. Douglas, Jr. 18,952 (3,5) 1.19%
John N. Fisher 17,510 (3,6) 1.10%
Mark B. Glovsky 3,380 (3) .21%
John L. Good, III 15,892 (3) 1.00%
Alice B. Griffin 12,854 (3) .81%
Robert W. Luscinski 600 .04%
Clark R. Smith 8,866 (3) .56%
Lawrence M. Smith 87,210 (3,7) 5.25%
James D. Wiltshire 11,480 (3) .72%
All Directors and officers
as a group (14 persons) 227,014 (8) 12.99%
(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.
-46-
<PAGE>
(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 30,000 shares held in the Beverly
National Bank Retirement Plan or the 4,600 shares held in the Beverly
National Bank Profit Sharing Plan, or the 96,823 shares held by the
Corporation's Employee Stock Ownership Plan, as to which Messrs. Smith,
Good and Douglas serve as trustees.
(3) Includes stock options to purchase shares which were exercisable as of
March 3, 2000, or within 60 days thereafter, as listed: Richard H. Booth,
4,080, Neiland J. Douglas, Jr., 14,760, John N. Fisher, 10,380, Mark B.
Glovsky, 2,880, John L. Good, III, 14,760, Alice B. Griffin, 3,180, Clark
R Smith, 2,880, Lawrence M. Smith, 80,000, James D. Wiltshire, 9,480,
Officers (as a group), 24,460.
(4) Includes 130 shares owned jointly by Mr. Booth and Mr. Booth's spouse.
(5) Includes 118 shares owned by Mr. Douglas' spouse.
(6) Includes 3,038 shares owned jointly by Mr. Fisher and Mr. Fisher's spouse.
(7) Includes 2,170 shares owned jointly by Mr. Smith and Mr. Smith's spouse;
and 1,784 shares owned by Mr. Smith's spouse.
(8) Includes stock options owned by all Directors and Officers as a group to
purchase 166,860 shares which were exercisable, as of March 3, 2000 or
within 60 days thereafter.
(9) The individuals listed can be contacted through the Corporation (Beverly
National Corporation, 240 Cabot Street, Beverly, MA 01915).
-47-
<PAGE>
The following table and related notes set forth certain information as of
March 3,2000 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)
- ----------------- ---------------- -------------
Harold C. Booth 121,782 (2) 7.70%
P.O. Box 729
Center Harbor, NH 03226
Beverly National Corporation 96,823 6.12%
Employee Stock Ownership Plan
240 Cabot Street
Beverly, MA 01915
John Sheldon Clark 90,750 (3) 5.74%
430 Park Avenue
Suite 1800
New York, NY 10022
(1) The percentages above are based on 1,581,294 shares of common stock
outstanding as of March 3, 2000.
(2) Includes 92,436 shares owned by Mr. Booth's trust and 29,346 owned by Mr.
Booth's spouse's trust, of which the Bank is a trustee and shares
investment and voting power.
(3) These shares include shares held in trust for "Trust under the Will of
Charles M. Clark, Jr. for the benefit of Valer C. Austin" and "Trust
under the Will of Charles M. Clark, Jr. for the benefit of John Sheldon
Clark" (29,212 shares). Mr. Clark acts as trustee for both trusts and
has investment authority. This includes 14,980 shares owned by Mr.
Clark's spouse.
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,
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.
-48-
<PAGE>
As of December 31, 1999 and 1998 respectively, the Bank had outstanding
$768,117 and $969,527 in loans to Directors, Executive Officers, members of
their family and their associates, which represents 3.80% and 5.12% 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,
1999, the aggregate amount of extensions of credit to insiders was well below
this limit.
-49-
<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: 3/28/00 By:/S/Lawrence M. Smith
------------- --------------------
President & CEO and
Director, Principal Executive Officer
Date: 3/28/00 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
3/28/00 /s/Lawrence M. Smith
------- --------------------
Lawrence M. Smith,
President & CEO &
Director, Principal Executive Officer
3/28/00 /s/Richard H. Booth
------- -------------------
Richard H. Booth - Director
3/28/00 /s/Neiland J. Douglas, Jr.
------- --------------------------
Nieland J. Douglas, Jr. - Director
3/28/00 /s/John N. Fisher
------- -----------------
John N. Fisher - Director
3/28/00 /s/Mark B. Glovsky
------- ------------------
Mark B. Glovsky - Director
3/28/00 /s/John L. Good, III
------- --------------------
John L. Good, III - Director
-50-
<PAGE>
3/28/00 /s/Alice B. Griffin
------- -------------------
Alice B. Griffin - Director
3/28/00 /s/Robert W. Luscinski
------- ----------------------
Robert W. Luscinski - Director
3/28/00 /s/Clark R. Smith
------- -----------------
Clark R. Smith - Director
3/28/00 /s/James D. Wiltshire
------- ---------------------
James D. Wiltshire - Director
-51-
<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 2000 Annual
Meeting of Shareholders, which was held on March 28, 2000, 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 Exhchange
Act, unless specifically incorporated by reference in their reports.
-52-
<PAGE>
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) EXHIBIT INDEX
3.1 Articles of Organization of Corporation, as Amended. . . . . . . . . .(1)
3.2 By-Laws of Corporation, 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 1987 Incentive Stock Option Plan for Key Employees . . . . . . . . . . (4)
10.3 1987 Directors' Plan, as amended. . . . . . . . . . . . . . . . . . . (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)
10.6 Beverly National Corporation Plan for Severance
Compensation After Hostile Takeover. . . . . . . . . . . . . . . . . (3)
10.7 Employment Agreement between Beverly National
Corporation and Julia L. Robichau dated December 24, 1996 . . . . . . (6)
10.8 Change in Control Agreement between Beverly National
Corporation and Julie L. Robichau dated December 24, 1996 . . . . . .(7)
10.9 Consulting Agreement between Beverly National
Corporation and Julia L. Robichau dated December 24, 1996 . . . . . . (8)
10.10 Supplemental Executive Retirement Agreement between
Beverly National Corporation and Lawrence M. Smith
dated December 24, 1996. . . . . . . . . . . . . . . . . . . . . . . .(9)
10.11 Supplemental Executive Retirement Agreement between
Julia L. Robichau dated December 24, 1996. . . . . . . . . . . . . . (10)
10.12 1996 Incentive Stock Option Plan for Key Employees. . . . . . . . . .(11)
10.13 1998 Incentive Stock Option Plan for Key Employees. . . . . . . . . .(12)
10.14 1998 Directors Plan . . . . . . . . . . . . . . . . . . . . . . . . .(13)
10.15 Lawrence M. Smith Contract Extension . . . . . . . . . . . . . . . . (14)
-53-
<PAGE>
10.16 Julia L. Robichau Amendment to Consulting Agreement . . . . . . . . .(15)
10.17 Julia L. Robichau Amendment to Supplemental
Executive Retirement Agreement . . . . . . . . . . . . . . . . . . . (16)
10.18 First Amendment to Change and Control Agreement
between Beverly National Corporation and Lawrence M. Smith . . . Page 56
10.19 First Amendment to Split Dollar Agreement between
Beverly National Corporation and Lawrence M. Smith. . . . . . . .Page 57
10.20 Change in Control Agreement between Beverly National
Corporation and Peter E. Simonsen dated February 23, 2000 . . . .Page 58
10.21 Employment Agreement between Beverly National Corporation
and Peter E. Simonsen dated February 23, 2000 . . . . . . . . . Page 71
10.22 Change in Control Agreement between Beverly National
Corporation and James E. Rich, Jr. dated February 23, 2000 . . . Page 87
10.23 Employment Agreement between Beverly National
Corporation and James E. Rich, Jr. dated February 23, 2000 . . Page 100
10.24 Change in Control Agreement between Beverly National
Corporation and Deborah A. Rosser dated February 23, 2000 . . . Page 115
10.25 Employment Agreement between Beverly National
Corporation and Deborah A. Rosser dated February 23, 2000. . . . Page 128
10.26 Change in Control Agreement between Beverly National
Corporation and Paul J. Germano dated February 23, 2000 . . . . Page 143
10.27 Employment Agreement between Beverly National
Corporation and Paul J. Germano dated February 23, 2000 . . . . Page 156
20. 2000 Proxy Statement. . . . . . . . . . . . . . . . . . . . . .Page 170
21. Subsidiaries of Corporation. . . . . . . . . . . . . .. . . . . Page 177
23. Consent of Shatswell, MacLeod & Company, P.C. . .. . . . . . . .Page 178
-54-
<PAGE>
27. Financial Data Schedule . . . . . . . . . . .. . . . . . . . . .Page 179
(b) the Corporation did not file a Form 8-K during the quarter ended
December 31, 1999.
(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 identically numbered
exhibits to the Annual Report 10-KSB for December 31, 1993.
(3) Incorporated herein by reference to identically numbered
exhibits filed as part of Corporation's Registration Statement
on Form S-18 (file No. 33-22224-B filed with the Commission on
July 9, 1988.
(4) Incorporated herein by reference to Exhibit 4(a) to the
Corporation's Registration Statement on Form S-8 (No. 33-347)
filed on January 22, 1996.
(5) Incorporated herein by reference to Exhibit 4(b) to the
Corporation's Registration Statement on Form S-8 (No. 33-347)
filed on January 22, 1996.
(6) Incorporated herein by reference to Exhibit 10.8 to the Annual
Report 10-KSB for December 31, 1996.
(7) Incorporated herein by reference to Exhibit 10.9 to the Annual
Report Form 10-KSB for December 31, 1996.
(8) Incorporated herein by reference to Exhibit 10.10 to the Annual
Report Form 10-KSB for December 31, 1996.
(9) Incorporated herein by reference to Exhibit 10.11 to the Annual
Report Form 10-KSB for December 31, 1996.
(10) Incorporated herein by reference to Exhibit 10.12 to the Annual
Report Form 10-KSB for December 31, 1996.
(11) Incorporated herein by reference to Exhibit 10.13 to the Annual
Report Form 10-KSB for December 31, 1996.
-55-
<PAGE>
FIRST AMENDMENT TO CHANGE IN CONTROL AGREEMENT
BETWEEN BEVERLY NATIONAL CORPORATION AND LAWRENCE M. SMITH
----------------------------------------------------------
THIS AGREEMENT, made and entered into this 22nd day of February, 2000 by and
between Beverly National Corporation and Lawrence M. Smith is the First
Amendment to the Change in Control Agreement dated December 24, 1996 by and
between them (the "Agreement").
Section 3 of the Agreement is hereby amended by adding a new subsection (f),
which shall read in its entirety as follows:
"(f) It is the intention of the parties to this Agreement that
no payments by the Corporation to you or for your benefit under
this Agreement shall be non-deductible to the Corporation by reason
of the operation of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"). Accordingly, notwithstanding any
other provision hereof, if by reason of the operation of said
Section 280G, any such payments exceed the amount which can be
deducted by the Corporation, the amount of such payments shall be
reduced to the maximum which can be deducted by the Corporation.
To the extent that payments in excess of the amount which can be
deducted by the Corporation have been made to you or for your
benefit, they shall be refunded with interest at the applicable
rate provided under Section 1274(d) of the Code, or at such other
rate as may be required in order that no such payment to you or
for your benefit shall be non-deductible pursuant to Section 280G
of the Code. Any payments made hereunder which are not deductible
by the Corporation as a result of losses which have been carried
forward by the Corporation for Federal tax purposes shall not be
deemed a non-deductible amount for purposes of this Section 3(f)."
All other terms and conditions of the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, Beverly National Corporation has caused this Agreement
to be executed under seal by its officer thereunto duly authorized and
Mr. Smith has hereunto set his hand and seal, all as of the day and year first
above written.
BEVERLY NATIONAL CORPORATION
By: Paul J. Germano
-----------------
/s/ Lawrence M. Smith
FIRST AMENDMENT TO SPLIT DOLLAR AGREEMENT
THIS AGREEMENT, made as of the 22nd day of February, 2000 by and between
Beverly National Bank, a national banking association (hereinafter referred to
as the "Employer") and Lawrence M. Smith of Beverly, Massachusetts (hereinafter
referred to as the "Employee"), is the First Amendment to the Split-Dollar
Agreement dated as of May 1, 1990, by and between Employer and the Employee
(the "Agreement").
In consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Employer and Employee hereby agree to amend the Agreement as follows:
Section 3 of the Agreement is amended to read in its entirety as follows:
"3. The Employer agrees unconditionally to pay the premium for the
policy at the time due up and until Employee attains age 65, regardless
of whether Employee is employed by the Employer at the time the payment
becomes due or at the time the payment is made, and regardless of the
circumstances of his ceasing to be employed by Employer. The premium will
be allocated between the Employee and the Employer. In addition, Employer
agrees unconditionally to pay the premium for Policy No. 1548748, a
Flexible Premium Adjustable Life Insurance Policy from insurer Security
Life of Denver Insurance Company, at the time due up and until Employee
attains age 65, regardless of whether Employee is employed by the Employer
at the time the payment becomes due or at the time the payment is made,
and regardless of the circumstances of his ceasing to be employed by
Employer. The premium will be allocated between the Employee and the
Employer. The Employee's share of the premium (term insurance allocation)
shall be paid by the Employer as agent for the Employee and shall be
charged to the Employee as additional cash compensation."
All other terms and conditions of the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the Employer has caused this Agreement to be executed
under seal by its officer thereunto duly authorized and the Employee has
hereunto set his hand and seal, all as of the day and year first above written.
BEVERLY NATIONAL BANK
By: /s/Lawrence M. Smith
---------------------
Lawrence M. Smith
BEVERLY NATIONAL CORPORATION
240 Cabot Street
Beverly, MA 01915
February 23, 2000
Mr. Peter E. Simonsen
24 Dartmouth Street
Beverly, MA 01915
Dear Mr. Simonsen:
Beverly National Corporation, a Massachusetts corporation ("Corporation"),
recognizes that during your tenure as an officer 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 and personnel. 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
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 should such a
change in control occur.
In order to induce you to remain in the employ of the Bank and to
continue to perform your duties as an officer of the Bank in a manner which is,
in your judgment, in the best interests of the Bank, the Corporation hereby
agrees to provide you with certain severance benefits in the event your
employment with the Bank 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 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:
(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;
(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(b) hereof upon the involuntary
termination of your employment as an officer of the Bank 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 for
Cause (as hereinafter defined). In the event your employment with the Bank
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 and continue to be entitled to the benefits provided in Section 3
hereof.
(a) Retirement; Disability.
-----------------------
(i) Termination by the Bank 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 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.
(b) Cause. Termination by the Bank 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 which specifically
identifies 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 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.
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
at a meeting of such board called and held (after reasonable notice to you and
an opportunity for you, together with your counsel, to be heard before such
board), for the purpose of 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) Notice of Termination. The Corporation agrees that it will cuase
---------------------
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.
(d) 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 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 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 of competent 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, within twenty-four (24) months after a Change in
Control shall have occurred, your employment by the Bank shall be involuntarily
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
and includible in your taxable income for the five years preceding a Change in
Control multiplied by (B) the number two (2), 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).
(c) If your employment shall be terminated for Cause, or for any
reason other than as specified in Sections 3(a) and (b) above, 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.
(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) It is the intention of the parties to this Agreement that no
payments by the Corporation to you or for your benefit under this Agreement
shall be non-deductible to the Corporation by reason of the operation of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, notwithstanding any other provision hereof, if by reason of the
operation of said Section 280G, any such payments exceed the amount which can
be deducted by the Corporation, the amount of such payments shall be reduced
to the maximum which can be deducted by the Corporation. To the extent that
payments in excess of the amount which can be deducted by the Corporation have
been made to you or for your benefit, they shall be refunded with interest at
the applicable rate provided under Section 1274(d) of the Code, or at such
other rate as may be required in order that no such payment to you or for your
benefit shall be non-deductible pursuant to Section 280G of the Code. Any
payments made hereunder which are not deductible by the Corporation as a
result of losses which have been carried forward by the Corporation for Federal
tax purposes shall not be deemed a non-deductible amount of purposes of this
Section 4(c).
(f) 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.
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 had been
involuntarily terminated other than for Cause, or disability 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
ddress 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.
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(d) 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 will not constitute a breach by you of any employment
agreement between the Corporation (or the Bank 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 (or the
Bank or any subsidiary thereof), 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 subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter which will then constitute our agreement on this subject.
BEVERLY NATIONAL CORPORATION
By: Lawrence M. Smith
---------------------
Its: President
Agreed:
/s/
Peter E. Simonsen
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made and entered into as of the 23rd day of February, 2000 by
and between Beverly National Bank, a national banking association having its
principal place of business in Beverly, Massachusetts ("Bank"), and Peter E.
Simonsen (the "Employee").
W I T N E S S E T H T H A T:
WHEREAS the Employee is currently employed by the Bank and has been
employed by the Bank since March 7, 1988; and
WHEREAS the Bank desires to employ the Employee in an executive capacity
in the conduct of its business; 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 Bank hereby employs the Employee and the Employee
----
hereby accepts employment by the Bank for a period of two (2) years beginning
January 1, 2000 (the "Effective Date"), subject to the provisions of Section 7
hereof. As of each anniversary (an "Extension Date") of the Effective Date or
any previous Extension Date hereof, this Agreement shall be deemed
automatically to be extended, unless either party by written notice to the
other given at least one (1) month prior to the Extension Date notifies the
other party of its intention not to extend the same. As extended the term of
the Agreement shall be for a period of two (2) years beginning on the
Extension Date and expiring two (2) years thereafter. In the event that
notice not to extend is given by either party, this Agreement shall terminate
on the last day of the year beginning on the Extension Date. Notwithstanding
the foregoing provisions of this Section 1, this Agreement shall terminate in
any event upon the Employee's attainment of age sixty-five (65).
2. Capacity.
--------
(a) At all times during the term hereof, the Bank shall employ the
Employee as its Senior Vice President and Chief Financial Officer. In such
capacity, the Employee shall be assigned only such duties and tasks as are
appropriate for a person in such position and he shall be subject to the
supervision of the President of the Bank. The Bank shall employ the Employee
on a full-time basis, and (subject to the last sentence of this paragraph)
the Employee shall devote his full time and professional efforts to the
performance of his duties. It is the intention of the Bank and the Employee
that the Employee shall have full discretionary authority of a Chief Financial
Officer of the Bank. The Bank encourages participation by the Employee on
community boards and committees and in activities generally considered to be
in the public interest, but the Bank shall have the right to approve the
Employee's participation on such other boards and committees as may conflict
with the Bank's own business or demands upon the Employee's time.
(b) During the period of his employment by the Bank hereunder, the
Employee agrees to serve as Treasurer of Beverly National Corporation
(the "Company") without additional compensation, except for reimbursement for
all reasonable out-of-pocket expenses.
3. Compensation and Benefits.
-------------------------
(a) Base Compensation. The Bank shall pay to the Employee in equal
-----------------
monthly installments a base annual salary in the amount of $103,600.00. The
base annual salary of the Employee shall be adjusted upward from time to time
in the sole discretion of the Bank, in which case such increased amount shall
thereafter constitute the Employee's base annual salary. It is the intention
of the Bank to compensate the Employee at a level at least comparable to the
compensation of persons employed in the position of Senior Vice President and
Chief Financial officer of banks engaged in New England in activities
substantially similar to those of the Bank and having approximately the same
assets as the Bank.
(b) Fringe Benefits. At all times during the term of this Agreement,
---------------
the Bank shall provide or cause to be provided to the Employee the fringe
benefits as set forth on Exhibit A to this Agreement. 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 Bank 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, the Town of Hamilton,
Massachusetts, the Town of Topsfield, Massachusetts, and the Town of
Manchester By The Sea, Massachusetts, or (ii) municipalities contiguous to
the City of Beverly, Massachusetts, the Town of Hamilton, Massachusetts, the
Town of Topsfield, Massachusetts, and the Town of Manchester By The Sea,
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 business are constituted at any time during the term
of this Agreement. For purposes of this Section 4, the Employee's ownership of
or employment by an institution doing business in Beverly, Massachusetts,
Hamilton, Massachusetts, Topsfield, Massachusetts and Manchester By The Sea,
Massachusetts, in municipalities contiguous to Beverly, Hamilton, Topsfield,
or Manchester By The Sea, or in such other Cities or Towns, but having its
principal place of business elsewhere, shall not constitute competition
hereunder so long as the Employee does not solicit business in Beverly,
Hamilton, Topsfield, or Manchester By The Sea, 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 his
employment any employee of the Bank.
6. No Disclosure of Information. The Employee shall not at any time
----------------------------
divulge, use, furnish, disclose or make accessible to anyone other than the
Bank or any of its subsidiaries any knowledge or information with respect to
confidential or secret data, procedures or techniques of the Bank, provided,
however, that nothing in this Section 6 shall prevent the disclosure by the
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.
7. Termination of Employment. The employment of the Employee shall
-------------------------
terminate on the earliest to occur of the following dates:
(a) The expiration of the term hereof, as from time to time extended;
(b) The Employee's resignation from the Bank or the death or
disability of the Employee (the Employee being deemed to be disabled if he has
been unable for one hundred eighty (180) consecutive days to render services
required to be rendered by him during the term hereof);
(c) At the election of the Bank, for Cause, as hereinafter defined,
after ten (10) days prior written notice of the basis thereof to the Employee
if during such period the Employee shall not have cured the basis therefor.
For purposes of this Agreement, the Bank shall be deemed to have "Cause" to
terminate the employment of the Employee under this Agreement only if:
(i) The Employee refuses or fails to substantially perform or
discharge the duties or responsibilities reasonably assigned by the President
of the Bank (other than any such refusal or failure resulting from the
Employee's incapacity due to physical or mental illness), provided the
assigned responsibilities are not illegal, unethical or inconsistent with the
Employee's responsibilities 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;
(ii) The Employee is grossly negligent in the performance of his
duties;
(iii) The Employee breaches his fiduciary duty to the Bank or any
affiliate of the Bank, or breaches the terms of this Agreement or any other
agreements with the Bank or any affiliates of the Bank;
(iv) The Employee is convicted by a court of competent jurisdiction
of a felony or of any criminal offense involving dishonesty or breach of trust;
(v) The Employee commits an act of fraud materially evidencing bad
faith toward the Bank;
(vi) The Employee engages in misconduct which is materially injurious
to the Bank. Such misconduct may include sexual harassment, domestic violence,
public intoxication or being under the influence of controlled substances.
Misconduct materially injurious to the Bank shall mean misconduct which
materially and adversely affects the Bank's business, reputation, or standing
in the community. Such material adverse affect may result from non-monetary
injury as well as from monetary injury, such as from adverse publicity towards
the Bank.
8. Payments Upon Termination of Employment.
---------------------------------------
(a) Payments Upon Death. If at any time while he is employed
-------------------
hereunder the Employee shall die, in addition to all other benefits to which
he or his personal representatives may be entitled, the Bank shall pay to his
designated beneficiary or, if no such beneficiary exists, to his 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 he would have been entitled to receive them) had
he remained alive.
(b) Payments Upon Disability. If at any time during the term of this
------------------------
Agreement, in the opinion of a physician mutually agreeable to the Bank 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 he or his personal representatives may be entitled, the
Employee shall be entitled to receive all benefits payable to him under the
Bank's long-term disability income plan.
(c) Payments Upon Expiration of Term Without Renewal. In the event
------------------------------------------------
that the term of this Agreement shall expire without renewal, the Employee
shall be entitled to receive compensation through the date of expiration. This
Agreement does not limit Employee's right to benefits under all plans and
programs of the Bank in which he participates, including, without limitation,
pension, profit sharing, 401(k), and employee stock option plans.
(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 Bank shall pay to
the Employee (or to his 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 twelve months' base annual salary as in effect as of
the date of such termination.
(ii) The Bank shall maintain or cause to be maintained in effect for
the Employee for a period of twelve months following such termination, at the
Bank'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
plan, the Bank's 401K plan, and the Beverly National Corporation Employee Stock
Ownership Plan), in which the Employee was participating at any time during the
twelve (12) months preceding such termination.
(iii) 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
group insurance plans, programs or arrangements contemplated by Subsection (d)
hereof is barred by law or otherwise, or in the event that any such insurance
plan, program or arrangement is discontinued or the benefits thereunder are
materially reduced during such period, the Bank shall provide the Employee with
benefits substantially similar to those to which the Employee was entitled
immediately prior to the date of his termination of employment. Upon
expiration of the period coverage provided hereunder, the Employee shall be
provided with the opportunity to have assigned to him at no cost and with no
apportionment of prepaid premiums any assignable insurance owned by the Bank
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 Bank
240 Cabot Street
Beverly, Massachusetts 01915
Attention: Lawrence M. Smith, President
(b) To the Employee:
Mr. Peter E. Simonsen
24 Dartmouth Street
Beverly, MA 01915
Either party may by notice in writing change the address to which notices
to it or him 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. Judgment may be entered on the arbitrator's award
in any court having jurisdiction.
11. Miscellaneous.
-------------
(a) Indemnification. During the period of his employment hereunder,
---------------
the Bank agrees to indemnify, and to cause its subsidiaries to indemnify, the
Employee in his capacity as an officer of the Bank and each subsidiary, all to
the maximum extent permitted under the laws of the Commonwealth of
Massachusetts and applicable banking laws and regulations. The provisions of
this Section 11(a) shall survive expiration or termination of the Agreement for
any reason whatsoever.
(b) Legal Fees. The Bank shall pay to the Employee all reasonable
----------
legal fees and expenses incurred by him 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 Bank and the Employee in the same manner as the Agreement.
(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 Bank and the Employee.
(e) Binding Effect; Non-Assignability. This Agreement shall be
---------------------------------
binding upon the Bank and inure to the benefit of the Bank and its successors.
Neither this Agreement nor any rights arising hereunder may be assigned or
pledged by the Employee during his lifetime. This Agreement shall inure to the
benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
(f) Amendment. This Agreement may be amended or modified only by a
---------
written instrument signed by the Employee and by a duly authorized
representative of the Bank.
(g) Enforceability. If any portion or provision of this Agreement
--------------
shall to any extent be unenforceable as a result of either a declaration by a
court of competent jurisdiction or the operation of applicable banking laws and
regulations, then the remainder of the Agreement, or the application of such
portion or provisions in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed the within instrument
as a sealed document as of the date first above written.
BEVERLY NATIONAL BANK
By: Lawrence M. Smith
------------------------------
Its President
Agreed:
/s/
Peter E. Simonsen
<PAGE>
Exhibit A
to Employment Agreement
By and Between Beverly National Bank
and Peter E. Simonsen
dated February 23, 2000
1. Vacation - The Employee shall be entitled to paid vacation in
each calendar year during the term of the Agreement in accordance
with the Bank's policy. The Employee shall also be entitled to
all paid holidays recognized by the Bank. Unused accrued
vacation time is paid on termination.
2. Pension Plan - The Employee shall be entitled to participate in
the Bank's retirement plan, if and to the extent from time to
time in effect.
3. Profit Sharing Plan - The Employee shall be entitled to
participate in the Bank's profit sharing plan and its 401(k)
plan, if and to the extent from time to time in effect.
4. Incentive Stock Option Plan - The Employee shall be entitled to
participate in any incentive stock option plan of the Company, if
and to the extent from time to time in effect.
5. Employee Stock Ownership Plan - The Employee shall be entitled to
participate in the Company's employee stock ownership plan, if
and to the extent from time to time in effect.
6. Insurance - The Employee shall be entitled to participate in all
insurance programs and benefits maintained by the Company or the
Bank, if and to the extent from time to time in effect, including
without limitation life, health, accident, and disability.
4
BEVERLY NATIONAL CORPORATION
240 Cabot Street
Beverly, MA 01915
February 23, 2000
Mr. James E. Rich, Jr.
1 Hickory Hill Road
Manchester By The Sea, MA 01944
Dear Mr. Rich:
Beverly National Corporation, a Massachusetts corporation ("Corporation"),
recognizes that during your tenure as an officer 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 and personnel. 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 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 should such a change in control occur.
In order to induce you to remain in the employ of the Bank and to
continue to perform your duties as an officer of the Bank in a manner which is,
in your judgment, in the best interests of the Bank, the Corporation hereby
agrees to provide you with certain severance benefits in the event your
employment with the Bank 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 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:
(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;
(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(b) hereof upon the involuntary
termination of your employment as an officer of the Bank 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 for
Cause (as hereinafter defined). In the event your employment with the Bank
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 and continue to be entitled to the benefits provided in Section 3
hereof.
(a) Retirement; Disability.
-----------------------
(i) Termination by the Bank 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 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.
(b) Cause. Termination by the Bank 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 which specifically
identifies 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 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.
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
at a meeting of such board called and held (after reasonable notice to you and
an opportunity for you, together with your counsel, to be heard before such
board), for the purpose of 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) Notice of Termination. The Corporation agrees that it 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.
(d) 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 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
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 of competent 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, within twenty-four (24) months after a Change in Control shall
have occurred, your employment by the Bank shall be involuntarily 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
and includible in your taxable income for the five years preceding a Change in
Control multiplied by (B) the number two (2), 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).
(c) If your employment shall be terminated for Cause, or for any
reason other than as specified in Sections 3(a) and (b) above, 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.
(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) It is the intention of the parties to this Agreement that no
payments by the Corporation to you or for your benefit under this Agreement
shall be non-deductible to the Corporation by reason of the operation of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, notwithstanding any other provision hereof, if by reason of the
operation of said Section 280G, any such payments exceed the amount which can
be deducted by the Corporation, the amount of such payments shall be reduced
to the maximum which can be deducted by the Corporation. To the extent that
payments in excess of the amount which can be deducted by the Corporation
have been made to you or for your benefit, they shall be refunded with
interest at the applicable rate provided under Section 1274(d) of the Code,
or at such other rate as may be required in order that no such payment to you
or for your benefit shall be non-deductible pursuant to Section 280G of the
Code. Any payments made hereunder which are not deductible by the Corporation
as a result of losses which have been carried forward by the Corporation for
Federal tax purposes shall not be deemed a non-deductible amount of purposes
of this Section 4(c).
(f) 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.
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 had been
involuntarily terminated other than for Cause, or disability 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.
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(d) 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 will not constitute a breach by you of any employment
agreement between the Corporation (or the Bank 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 (or the
Bank or any subsidiary thereof), 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 subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter which will then constitute our agreement on this subject.
BEVERLY NATIONA CORPORATION
By: Lawrence M. Smith
----------------------
Its: President
Agreed:
/s/
James E. Rich, Jr.
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made and entered into as of the 23rd day of February, 2000 by
and between Beverly National Bank, a national banking association having its
principal place of business in Beverly, Massachusetts ("Bank"), and James E.
Rich, Jr. (the "Employee").
W I T N E S S E T H T H A T:
WHEREAS the Employee is currently employed by the Bank and has been
employed by the Bank since May 3, 1982; and
WHEREAS the Bank desires to employ the Employee in an executive capacity
in the conduct of its business; 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 Bank hereby employs the Employee and the Employee
-----
hereby accepts employment by the Bank for a period of two (2) years beginning
January 1, 2000 (the "Effective Date"), subject to the provisions of Section 7
hereof. As of each anniversary (an "Extension Date") of the Effective Date or
any previous Extension Date hereof, this Agreement shall be deemed
automatically to be extended, unless either party by written notice to the
other given at least one (1) month prior to the Extension Date notifies the
other party of its intention not to extend the same. As extended the term of
the Agreement shall be for a period of two (2) years beginning on the Extension
Date and expiring two (2) years thereafter. In the event that notice not to
extend is given by either party, this Agreement shall terminate on the last day
of the year beginning on the Extension Date. Notwithstanding the foregoing
provisions of this Section 1, this Agreement shall terminate in any event upon
the Employee's attainment of age sixty-five (65).
2. Capacity.
---------
(a) At all times during the term hereof, the Bank shall employ the
Employee as its Senior Vice President and Senior Trust Officer. In such
capacity, the Employee shall be assigned only such duties and tasks as are
appropriate for a person in such position and he shall be subject to the
supervision of the President of the Bank. The Bank shall employ the Employee
on a full-time basis, and (subject to the last sentence of this paragraph)
the Employee shall devote his full time and professional efforts to the
performance of his duties. It is the intention of the Bank and the Employee
that the Employee shall have full discretionary authority of a Senior Vice
President and Senior Trust Officer of the Bank. The Bank encourages
participation by the Employee on community boards and committees and in
activities generally considered to be in the public interest, but the Bank
shall have the right to approve the Employee's participation on such other
boards and committees as may conflict with the Bank's own business or demands
upon the Employee's time.
(b) During the period of his employment by the Bank hereunder, the
Employee agrees to serve as Vice President of Beverly National Corporation
(the "Company") without additional compensation, except for reimbursement for
all reasonable out-of-pocket expenses.
3. Compensation and Benefits.
--------------------------
(a) Base Compensation. The Bank shall pay to the Employee in equal
-----------------
monthly installments a base annual salary in the amount of $107,500.00. The
base annual salary of the Employee shall be adjusted upward from time to time
in the sole discretion of the Bank, in which case such increased amount shall
thereafter constitute the Employee's base annual salary. It is the intention
of the Bank to compensate the Employee at a level at least comparable to the
compensation of persons employed in the position of Senior Vice President and
Senior Trust Officer of banks engaged in New England in activities
substantially similar to those of the Bank and having approximately the same
assets as the Bank.
(b) Fringe Benefits. At all times during the term of this Agreement,
---------------
the Bank shall provide or cause to be provided to the Employee the fringe
benefits as set forth on Exhibit A to this Agreement. 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 Bank 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, the Town
of Hamilton, Massachusetts, the Town of Topsfield, Massachusetts, and the Town
of Manchester By The Sea, Massachusetts, or (ii) municipalities contiguous to
the City of Beverly, Massachusetts, the Town of Hamilton, Massachusetts, the
Town of Topsfield, Massachusetts, and the Town of Manchester By The Sea,
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 business are constituted at any time during the term
of this Agreement. For purposes of this Section 4, the Employee's ownership of
or employment by an institution doing business in Beverly, Massachusetts,
Hamilton, Massachusetts, Topsfield, Massachusetts and Manchester By The Sea,
Massachusetts, in municipalities contiguous to Beverly, Hamilton, Topsfield,
or Manchester By The Sea, or in such other Cities or Towns, but having its
principal place of business elsewhere, shall not constitute competition
hereunder so long as the Employee does not solicit business in Beverly,
Hamilton, Topsfield, or Manchester By The Sea, 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 his
employment any employee of the Bank.
6. No Disclosure of Information. The Employee shall not at any time
----------------------------
divulge, use, furnish, disclose or make accessible to anyone other than the
Bank or any of its subsidiaries any knowledge or information with respect to
confidential or secret data, procedures or techniques of the Bank, provided,
however, that nothing in this Section 6 shall prevent the disclosure by the
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.
7. Termination of Employment. The employment of the Employee shall
-------------------------
terminate on the earliest to occur of the following dates:
(a) The expiration of the term hereof, as from time to time extended;
(b) The Employee's resignation from the Bank or the death or
disability of the Employee (the Employee being deemed to be disabled if he has
been unable for one hundred eighty (180) consecutive days to render services
required to be rendered by him during the term hereof);
(c) At the election of the Bank, for Cause, as hereinafter defined,
after ten (10) days prior written notice of the basis thereof to the Employee
if during such period the Employee shall not have cured the basis therefor.
For purposes of this Agreement, the Bank shall be deemed to have "Cause" to
terminate the employment of the Employee under this Agreement only if:
(i) The Employee refuses or fails to substantially perform or
discharge the duties or responsibilities reasonably assigned by the President
of the Bank (other than any such refusal or failure resulting from the
Employee's incapacity due to physical or mental illness), provided the
assigned responsibilities are not illegal, unethical or inconsistent with the
Employee's responsibilities 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;
(ii) The Employee is grossly negligent in the performance of his
duties;
(iii) The Employee breaches his fiduciary duty to the Bank or any
affiliate of the Bank, or breaches the terms of this Agreement or any other
agreements with the Bank or any affiliates of the Bank;
(iv) The Employee is convicted by a court of competent jurisdiction
of a felony or of any criminal offense involving dishonesty or breach of trust;
(v) The Employee commits an act of fraud materially evidencing bad
faith toward the Bank;
(vi) The Employee engages in misconduct which is materially
injurious to the Bank. Such misconduct may include sexual harassment, domestic
violence, public intoxication or being under the influence of controlled
substances. Misconduct materially injurious to the Bank shall mean misconduct
which materially and adversely affects the Bank's business, reputation, or
standing in the community. Such material adverse affect may result from
non-monetary injury as well as from monetary injury, such as from adverse
publicity towards the Bank.
8. Payments Upon Termination of Employment.
----------------------------------------
(a) Payments Upon Death. If at any time while he is employed
-------------------
hereunder the Employee shall die, in addition to all other benefits to which
he or his personal representatives may be entitled, the Bank shall pay to his
designated beneficiary or, if no such beneficiary exists, to his 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 he would have been entitled to receive them) had
he remained alive.
(b) Payments Upon Disability. If at any time during the term of this
------------------------
Agreement, in the opinion of a physician mutually agreeable to the Bank 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 he or his personal representatives may be entitled,
the Employee shall be entitled to receive all benefits payable to him under
the Bank's long-term disability income plan.
(c) Payments Upon Expiration of Term Without Renewal. In the event
------------------------------------------------
that the term of this Agreement shall expire without renewal, the Employee
shall be entitled to receive compensation through the date of expiration.
This Agreement does not limit Employee's right to benefits under all plans and
programs of the Bank in which he participates, including, without limitation,
pension, profit sharing, 401(k), and employee stock option plans.
(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 Bank shall
pay to the Employee (or to his 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 twelve months' base annual salary as
in effect as of the date of such termination.
(ii) The Bank shall maintain or cause to be maintained in effect
for the Employee for a period of twelve months following such termination, at
the Bank'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
plan, the Bank's 401K plan, and the Beverly National Corporation Employee Stock
Ownership Plan), in which the Employee was participating at any time during
the twelve (12) months preceding such termination.
(iii) 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
group insurance plans, programs or arrangements contemplated by Subsection (d)
hereof is barred by law or otherwise, or in the event that any such insurance
plan, program or arrangement is discontinued or the benefits thereunder are
materially reduced during such period, the Bank shall provide the Employee
with benefits substantially similar to those to which the Employee was
entitled immediately prior to the date of his termination of employment. Upon
expiration of the period of coverage provided hereunder, the Employee shall be
provided with the opportunity to have assigned to him at no cost and with no
apportionment of prepaid premiums any assignable insurance owned by the Bank
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 Bank
240 Cabot Street
Beverly, Massachusetts 01915
Attention: Lawrence M. Smith, President
(b) To the Employee:
Mr. James E. Rich, Jr.
1 Hickory Hill Road
Manchester By The Sea, MA 01944
Either party may by notice in writing change the address to which notices
to it or him 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. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
11. Miscellaneous.
--------------
(a) Indemnification. During the period of his employment
---------------
hereunder, the Bank agrees to indemnify, and to cause its subsidiaries to
indemnify, the Employee in his capacity as an officer of the Bank and each
subsidiary, all to the maximum extent permitted under the laws of the
Commonwealth of Massachusetts and applicable banking laws and regulations.
The provisions of this Section 11(a) shall survive expiration or termination
of the Agreement for any reason whatsoever.
(b) Legal Fees. The Bnak shall pay to the Employee all reasonable
----------
legal fees and expenses incurred by him 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 Bank and the Employee in the same manner as the
Agreement.
(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 Bank and the Employee.
(e) Binding Effect; Non-Assignability. This Agreement shall be
---------------------------------
binding upon the Bank and inure to the benefit of the Bank and its successors.
Neither this Agreement nor any rights arising hereunder may be assigned or
pledged by the Employee during his lifetime. This Agreement shall inure to
the benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
(f) Amendment. This Agreement may be amended or modified only by
---------
a written instrument signed by the Employee and by a duly authorized
representative of the Bank.
(g) Enforceability. If any poriton or provision of this Agreement
--------------
shall to any extent be unenforceable as a result of either a declaration by a
court of competent jurisdiction or the operation of applicable banking laws and
regulations, then the remainder of the Agreement, or the application of such
portion or provisions in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed the within instrument
as a sealed document as of the date first above written.
BEVERLY NATIONAL BANK
By: Lawrence M. Smith
----------------------
Its President
Agreed:
/s/
James E. Rich, Jr.
<PAGE>
Exhibit A
to Employment Agreement
By and Between Beverly National Bank
and James E. Rich, Jr.
dated February 23, 2000
1. Vacation - The Employee shall be entitled to paid vacation in each
calendar year during the term of the Agreement in accordance with
the Bank's policy. The Employee shall also be entitled to all
paid holidays recognized by the Bank. Unused accrued vacation
time is paid on termination.
2. Pension Plan - The Employee shall be entitled to participate in
the Bank's retirement plan, if and to the extent from time to time
in effect.
3. Profit Sharing Plan - The Employee shall be entitiled to
participate in the Bank's profit sharing plan and its 401(k) plan
if and to the extent from time to time in effect.
4. Incentive Stock Option Plan - The Employee shall be entitled to
participate in any incentice stock option plan of the Company, if
and to the extent from time to time in effect.
5. Employee Stock Ownership Plan - The Employee shall be entitled to
participate in the Company's employee stock ownership plan, if and
to the extent from time to time in effect.
6. Insurance - The Employee shall be entitled to participate in all
insurance programs and benefits maintained by the Company or the
Bank, if and to the extent from time to time in effect, including
without limitation life, health, accident, and disability.
BEVERLY NATIONAL CORPORATION
240 Cabot Street
Beverly, MA 01915
February 23, 2000
Ms. Deborah Rosser
12 Wedgemere Road
Beverly, MA 01915
Dear Ms. Rosser:
Beverly National Corporation, a Massachusetts corporation
("Corporation"), recognizes that during your tenure as an officer 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 and personnel. 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 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 should such a change in control occur.
In order to induce you to remain in the employ of the Bank and to
continue to perform your duties as an officer of the Bank in a manner which is,
in your judgment, in the best interests of the Bank, the Corporation hereby
agrees to provide you with certain severance benefits in the event your
employment with the Bank 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 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:
(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;
(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(b) hereof upon the involuntary
termination of your employment as an officer of the Bank 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 for Cause
(as hereinafter defined). In the event your employment with the Bank 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 and
continue to be entitled to the benefits provided in Section 3 hereof.
(a) Retirement; Disability.
----------------------
(i) Termination by the Bank 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 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.
(b) Cause. Termination by the Bank 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 which specifically
identifies 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 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.
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
at a meeting of such board called and held (after reasonable notice to you and
an opportunity for you, together with your counsel, to be heard before such
board), for the purpose of 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) Notice of Termination. The Corporation agrees that it 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.
(d) 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 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 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 of competent 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, within twenty-four (24) months after a Change in Control shall
have occurred, your employment by the Bank shall be involuntarily 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 and
includible in your taxable income for the five years preceding a Change in
Control multiplied by (B) the number two (2), 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).
(c) If your employment shall be terminated for Cause, or for any
reason other than as specified in Sections 3(a) and (b) above, 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.
(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) It is the intention of the parties to this Agreement that no
payments by the Corporation to you or for your benefit under this Agreement
shall be non-deductible to the Corporation by reason of the operation of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, notwithstanding any other provision hereof, if by reason of the
operation of said Section 280G, any such payments exceed the amount which can
be deducted by the Corporation, the amount of such payments shall be reduced to
the maximum which can be deducted by the Corporation. To the extent that
payments in excess of the amount which can be deducted by the Corporation have
been made to you or for your benefit, they shall be refunded with interest at
the applicable rate provided under Section 1274(d) of the Code, or at such
other rate as may be required in order that no such payment to you or for your
benefit shall be non-deductible pursuant to Section 280G of the Code. Any
payments made hereunder which are not deductible by the Corporation as a result
of losses which have been carried forward by the Corporation for Federal tax
purposes shall not be deemed a non-deductible amount of purposes of this
Section 4(c).
(f) 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.
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 had been
involuntarily terminated other than for Cause, or disability 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.
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(d) 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 will not constitute a breach by you of any employment
agreement between the Corporation (or the Bank 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 (or the
Bank or any subsidiary thereof), 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 subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter which will then constitute our agreement on this subject.
BEVERLY NATIONAL CORPORATION
By: Lawrence M. Smith
-----------------
Its: President
Agreed:
/s/
Deborah Rosser
7
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made and entered into as of the 23rd day of February, 2000 by
and between Beverly National Bank, a national banking association having its
principal place of business in Beverly, Massachusetts ("Bank"), and Deborah
A. Rosser (the "Employee").
W I T N E S S E T H T H A T:
WHEREAS the Employee is currently employed by the Bank and has been
employed by the Bank since July 19, 1993; and
WHEREAS the Bank desires to employ the Employee in an executive capacity
in the conduct of its business; 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 Bank hereby employs the Employee and the Employee
----
hereby accepts employment by the Bank for a period of two (2) years beginning
January 1, 2000 (the "Effective Date"), subject to the provisions of Section 7
hereof. As of each anniversary (an "Extension Date") of the Effective Date or
any previous Extension Date hereof, this Agreement shall be deemed
automatically to be extended, unless either party by written notice to the
other given at least one (1) month prior to the Extension Date notifies the
other party of its intention not to extend the same. As extended the term of
the Agreement shall be for a period of two (2) years beginning on the
Extension Date and expiring two (2) years thereafter. In the event that notice
not to extend is given by either party, this Agreement shall terminate on the
last day of the year beginning on the Extension Date. Notwithstanding the
foregoing provisions of this Section 1, this Agreement shall terminate in any
event upon the Employee's attainment of age sixty-five (65).
2. Capacity.
--------
(a) At all times during the term hereof, the Bank shall employ the
Employee as its Vice President and Senior Loan Officer. In such capacity, the
Employee shall be assigned only such duties and tasks as are appropriate for a
person in such position and she shall be subject to the supervision of the
President of the Bank. The Bank shall employ the Employee 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.
It is the intention of the Bank and the Employee that the Employee shall have
full discretionary authority of a Senior Loan Officer of the Bank. The Bank
encourages participation by the Employee on community boards and committees and
in activities generally considered to be in the public interest, but the Bank
shall have the right to approve the Employee's participation on such other
boards and committees as may conflict with the Bank's own business or demands
upon the Employee's time.
(b) During the period of her employment by the Bank hereunder, the
Employee agrees to serve as Vice President of Beverly National Corporation (the
"Company") without additional compensation, except for reimbursement for all
reasonable out-of-pocket expenses.
3. Compensation and Benefits.
-------------------------
(a) Base Compensation. The Bank shall pay to the Employee in equal
-----------------
monthly installments a base annual salary in the amount of $97,100.00. The
base annual salary of the Employee shall be adjusted upward from time to time
in the sole discretion of the Bank, in which case such increased amount shall
thereafter constitute the Employee's base annual salary. It is the intention
of the Bank to compensate the Employee at a level at least comparable to the
compensation of persons employed in the position of Vice President and Senior
Loan Officer of banks engaged in New England in activities substantially
similar to those of the Bank and having approximately the same assets as the
Bank.
(b) Fringe Benefits. At all times during the term of this Agreement,
---------------
the Bank shall provide or cause to be provided to the Employee the fringe
benefits as set forth on Exhibit A to this Agreement. 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. Competition. At all times during which the Employee is employed
-----------
by the Bank 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, the Town of Hamilton,
Massachusetts, the Town of Topsfield, Massachusetts, and the Town of Manchester
By The Sea, Massachusetts, or (ii) municipalities contiguous to the City of
Beverly, Massachusetts, the Town of Hamilton, Massachusetts, the Town of
Topsfield, Massachusetts, and the Town of Manchester By The Sea, 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 business are constituted at any time during the term of
this Agreement. For purposes of this Section 4, the Employee's ownership of or
employment by an institution doing business in Beverly, Massachusetts,
Hamilton, Massachusetts, Topsfield, Massachusetts and Manchester By The Sea,
Massachusetts, in municipalities contiguous to Beverly, Hamilton, Topsfield, or
Manchester By The Sea, or in such other Cities or Towns, but having its
principal place of business elsewhere, shall not constitute competition
hereunder so long as the Employee does not solicit business in Beverly,
Hamilton, Topsfield, or Manchester By The Sea, 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 his
employment any employee of the Bank.
6. No Disclosure of Information. The Employee shall not at any
----------------------------
time divulge, use, furnish, disclose or make accessible to anyone other than
the Bank or any of its subsidiaries any knowledge or information with respect
to confidential or secret data, procedures or techniques of the Bank, provided,
however, that nothing in this Section 6 shall prevent the disclosure by the
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.
7. Termination of Employment. The employment of the Employee shall
-------------------------
terminate on the earliest to occur of the following dates:
(a) The expiration of the term hereof, as from time to time
extended;
(b) The Employee's resignation from the Bank 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 Bank, for Cause, as hereinafter defined,
after ten (10) days prior written notice of the basis thereof to the Employee
if during such period the Employee shall not have cured the basis therefor.
For purposes of this Agreement, the Bank shall be deemed to have "Cause" to
terminate the employment of the Employee under this Agreement only if:
(i) The Employee refuses or fails to substantially perform or
discharge the duties or responsibilities reasonably assigned by the President
of the Bank (other than any such refusal or failure resulting from the
Employee's incapacity due to physical or mental illness), provided the
assigned responsibilities are not illegal, unethical or inconsistent with the
Employee's responsibilities 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;
(ii) The Employee is grossly negligent in the performance of her
duties;
(iii) The Employee breaches her fiduciary duty to the Bank or any
affiliate of the Bank, or breaches the terms of this Agreement or any other
agreements with the Bank or any affiliates of the Bank;
(iv) The Employee is convicted by a court of competent jurisdiction
of a felony or of any criminal offense involving dishonesty or breach of trust;
(v) The Employee commits an act of fraud materially evidencing bad
faith toward the Bank;
(vi) The Employee engages in misconduct which is materially
injurious to the Bank. Such misconduct may include sexual harassment, domestic
violence, public intoxication or being under the influence of controlled
substances. Misconduct materially injurious to the Bank shall mean misconduct
which materially and adversely affects the Bank's business, reputation, or
standing in the community. Such material adverse affect may result from
non-monetary injury as well as from monetary injury, such as from adverse
publicity towards the Bank.
8. Payments Upon Termination of Employemnt.
---------------------------------------
(a) Payments Upon Death. If at any time while she is employed
-------------------
hereunder the Employee shall die, in addition to all other benefits to which
she or her personal representatives may be entitled, the Bank 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.
(b) Payments Upon Disability. If at any time during the term of
------------------------
this Agreement, in the opinion of a physician mutually agreeable to the Bank
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 Without Renewal. In the event
------------------------------------------------
that the term of this Agreement shall expire without renewal, the Employee
shall be entitled to receive compensation through the date of expiration. This
Agreement does not limit Employee's right to benefits under all plans and
programs of the Bank in which she participates, including, without limitation,
pension, profit sharing, 401(k), and employee stock option plans.
(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 Bank 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 twelve months' base annual salary as in effect as of
the date of such termination.
(ii) The Bank shall maintain or cause to be maintained in effect
for the Employee for a period of twelve months following such termination, at
the Bank'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
plan, the Bank's 401K plan, and the Beverly National Corporation Employee Stock
Ownership Plan), in which the Employee was participating at any time during the
twelve (12) months preceding such termination.
(iii) 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
group insurance plans, programs or arrangements contemplated by Subsection (d)
hereof is barred by law or otherwise, or in the event that any such insurance
plan, program or arrangement is discontinued or the benefits thereunder are
materially reduced during such period, the Bank 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
apportionment of prepaid premiums any assignable insurance owned by the Bank
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 Bank
240 Cabot Street
Beverly, Massachusetts 01915
Attention: Lawrence M. Smith, President
(b) To the Employee:
Ms. Deborah Rosser
12 Wedgemere Road
Beverly, MA 01915
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. 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 Bank agrees to indemnify, and to cause its subsidiaries to indemnify, the
Employee in her capacity as an officer of the Bank and each subsidiary, all to
the maximum extent permitted under the laws of the Commonwealth of
Massachusetts and applicable banking laws and regulations. The provisions of
this Section 11(a) shall survive expiration or termination of the Agreement for
any reason whatsoever.
(b) legal Fees. The Bank shall pay to the 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 Bank and the Employee in the same manner as the
Agreement.
(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 Bank and the Employee.
(e) Binding Effect; Non-Assignability. This Agreement shall be
---------------------------------
binding upon the Bank and inure to the benefit of the Bank and its successors.
Neither this Agreement nor any rights arising hereunder may be assigned or
pledged by the Employee during her lifetime. This Agreement shall inure to the
benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
(f) Amendment. This Agreement may be amended or modified only by
---------
a written instrument signed by the Employee and by a duly authorized
representative of the Bank.
(g) Enforceability. If any portion or porvision of this Agreement
--------------
shall to any extent be unenforceable as a result of either a declaration by a
court of competent jurisdiction or the operation of applicable banking laws and
regulations, then the remainder of the Agreement, or the application of such
portion or provisions in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed the within instrument
as a sealed document as of the date first above written.
BEVERLY NATIONAL BANK
By: Lawrence M. Smith
------------------
Its President
Agreed:
/s/
Deborah A. Rosser
<PAGE>
Exhibit A
to Employment Agreement
By and Between Beverly National Bank
and Deborah A. Rosser
dated February 23, 2000
1. Vacation - The Employee shall be entitled to paid vacation in each
calendar year during the term of the Agreement in accordance with
the Bank's policy. The Employee shall also be entitled to all
paid holidays recognized by the Bank. Unused accrued vacation
time is paid on termination.
2. Pension Plan - The Employee shall be entitled to participate in
the Bank's retirement plan, if and to the extent from time to time
in effect.
3. Profit Sharing Plan - The Employee shall be entitled to
participate in the Bank's profit sharing plan and its 401(k) plan,
if and to the extent from time to time in effect.
4. Incentive Stock Option Plan - The Employee shall be entitled to
participate in any incentive stock option plan of the Company, if
and to the extent from time to time in effect.
5. Employee Stock Ownership Plan - The Employee shall be entitled to
participate in the Company's employee stock ownership plan, if and
to the extent from time to time in effect.
6. Insurance - The Employee shall be entitled to participate in all
insurance programs and benefits maintained by the Company or the
Bank, if and to the extent from time to time in effect, including
without limitation life, health, accident, and disability.
9
BEVERLY NATIONAL CORPORATION
240 Cabot Street
Beverly, MA 01915
February 23, 2000
Mr. Paul J. Germano
10 King George Drive
Londonderry, NH 03053
Dear Mr. Germano:
Beverly National Corporation, a Massachusetts corporation ("Corporation"),
recognizes that during your tenure as an officer 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 and personnel. 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 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 should such a change in control occur.
In order to induce you to remain in the employ of the Bank and to continue
to perform your duties as an officer of the Bank in a manner which is, in your
judgment, in the best interests of the Bank, the Corporation hereby agrees to
provide you with certain severance benefits in the event your employment with
the Bank 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 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:
(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;
(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(b) hereof upon the involuntary
termination of your employment as an officer of the Bank 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 for Cause
(as hereinafter defined). In the event your employment with the Bank 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 and
continue to be entitled to the benefits provided in Section 3 hereof.
(a) Retirement; Disability.
----------------------
(i) Termination by the Bank 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 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.
(b) Cause. Termination by the Bank 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 which specifically
identifies 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 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.
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
at a meeting of such board called and held (after reasonable notice to you and
an opportunity for you, together with your counsel, to be heard before such
board), for the purpose of 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) Notice of Termination. The Corporation agrees that it 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.
(d) 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 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 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 of competent 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, within twenty-four (24) months after a Change in Control shall
have occurred, your employment by the Bank shall be involuntarily 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
and includible in your taxable income for the five years preceding a Change in
Control multiplied by (B) the number two (2), 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).
(c) If your employment shall be terminated for Cause, or for any
reason other than as specified in Sections 3(a) and (b) above, 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.
(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) It is the intention of the parties to this Agreement that no
payments by the Corporation to you or for your benefit under this Agreement
shall be non-deductible to the Corporation by reason of the operation of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, notwithstanding any other provision hereof, if by reason of the
operation of said Section 280G, any such payments exceed the amount which can
be deducted by the Corporation, the amount of such payments shall be reduced to
the maximum which can be deducted by the Corporation. To the extent that
payments in excess of the amount which can be deducted by the Corporation have
been made to you or for your benefit, they shall be refunded with interest at
the applicable rate provided under Section 1274(d) of the Code, or at such
other rate as may be required in order that no such payment to you or for your
benefit shall be non-deductible pursuant to Section 280G of the Code. Any
payments made hereunder which are not deductible by the Corporation as a result
of losses which have been carried forward by the Corporation for Federal tax
purposes shall not be deemed a non-deductible amount of purposes of this
Section 4(c).
(f) 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.
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 had been
involuntarily terminated other than for Cause, or disability 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.
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(d) 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 will not constitute a breach by you of any employment
agreement between the Corporation (or the Bank 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 (or the
Bank or any subsidiary thereof), 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 subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter which will then constitute our agreement on this subject.
BEVERLY NATIONAL CORPORATION
By: Lawrence M. Smith
-----------------
Its: President
Agreed:
/s/
Paul J. Germano
8
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made and entered into as of the 23rd day of February, 2000 by
and between Beverly National Bank, a national banking association having its
principal place of business in Beverly, Massachusetts ("Bank"), and Paul J.
Germano (the "Employee").
W I T N E S S E T H T H A T:
WHEREAS the Employee is currently employed by the Bank and has been
employed by the Bank since June 9, 1980; and
WHEREAS the Bank desires to employ the Employee in an executive capacity
in the conduct of its business; 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 Bank hereby employs the Employee and the Employee
----
hereby accepts employment by the Bank for a period of two (2) years beginning
January 1, 2000 (the "Effective Date"), subject to the provisions of Section 7
hereof. As of each anniversary (an "Extension Date") of the Effective Date or
any previous Extension Date hereof, this Agreement shall be deemed
automatically to be extended, unless either party by written notice to the
other given at least one (1) month prior to the Extension Date notifies the
other party of its intention not to extend the same. As extended the term of
the Agreement shall be for a period of two (2) years beginning on the Extension
Date and expiring two (2) years thereafter. In the event that notice not to
extend is given by either party, this Agreement shall terminate on the last day
of the year beginning on the Extension Date. Notwithstanding the foregoing
provisions of this Section 1, this Agreement shall terminate in any event upon
the Employee's attainment of age sixty-five (65).
2. Capacity.
--------
(a) At all times during the term hereof, the Bank shall employ the
Employee as its Vice President and Cashier. In such capacity, the Employee
shall be assigned only such duties and tasks as are appropriate for a person in
such position and he shall be subject to the supervision of the President of
the Bank. The Bank shall employ the Employee on a full-time basis, and
(subject to the last sentence of this paragraph) the Employee shall devote his
full time and professional efforts to the performance of his duties. It is the
intention of the Bank and the Employee that the Employee shall have full
discretionary authority of a Vice President and Cashier of the Bank. The Bank
encourages participation by the Employee on community boards and committees and
in activities generally considered to be in the public interest, but the Bank
shall have the right to approve the Employee's participation on such other
boards and committees as may conflict with the Bank's own business or demands
upon the Employee's time.
(b) During the period of his employment by the Bank hereunder, the
Employee agrees to serve as Clerk of Beverly National Corporation (the
"Company") without additional compensation, except for reimbursement for all
reasonable out-of-pocket expenses.
3. Compensation and Benefits.
-------------------------
(a) Base Compensation. The Bank shall pay to the Employee in equal
-----------------
monthly installments a base annual salary in the amount of $93,300.00. The
base annual salary of the Employee shall be adjusted upward from time to time
in the sole discretion of the Bank, in which case such increased amount shall
thereafter constitute the Employee's base annual salary. It is the intention
of the Bank to compensate the Employee at a level at least comparable to the
compensation of persons employed in the position of Vice President and Cashier
of banks engaged in New England in activities substantially similar to those of
the Bank and having approximately the same assets as the Bank.
(b) Fringe Benefits. At all times during the term of this
---------------
Agreement, the Bank shall provide or cause to be provided to the Employee the
fringe benefits as set forth on Exhibit A to this Agreement. 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 Bank 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, the Town of Hamilton,
Massachusetts, the Town of Topsfield, Massachusetts, and the Town of Manchester
By The Sea, Massachusetts, or (ii) municipalities contiguous to the City of
Beverly, Massachusetts, the Town of Hamilton, Massachusetts, the Town of
Topsfield, Massachusetts, and the Town of Manchester By The Sea, 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 business are constituted at any time during the term of
this Agreement. For purposes of this Section 4, the Employee's ownership of or
employment by an institution doing business in Beverly, Massachusetts,
Hamilton, Massachusetts, Topsfield, Massachusetts and Manchester By The Sea,
Massachusetts, in municipalities contiguous to Beverly, Hamilton, Topsfield, or
Manchester By The Sea, or in such other Cities or Towns, but having its
principal place of business elsewhere, shall not constitute competition
hereunder so long as the Employee does not solicit business in Beverly,
Hamilton, Topsfield, or Manchester By The Sea, 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 his
employment any employee of the Bank.
6. No Disclosure of Information. The Employee shall not at any
----------------------------
time divulge, use, furnish, disclose or make accessible to anyone other than
the Bank or any of its subsidiaries any knowledge or information with respect
to confidential or secret data, procedures or techniques of the Bank, provided,
however, that nothing in this Section 6 shall prevent the disclosure by the
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.
7. Termination of Employment. The employment of the Employee shall
-------------------------
terminate on the earliest to occur of the following dates:
(a) The expiration of the term hereof, as from time to time extended;
(b) The Employee's resignation from the Bank or the death or
disability of the Employee (the Employee being deemed to be disabled if he has
been unable for one hundred eighty (180) consecutive days to render services
required to be rendered by him during the term hereof);
(c) At the election of the Bank, for Cause, as hereinafter defined,
after ten (10) days prior written notice of the basis thereof to the Employee
if during such period the Employee shall not have cured the basis therefor.
For purposes of this Agreement, the Bank shall be deemed to have "Cause" to
terminate the employment of the Employee under this Agreement only if:
(i) The Employee refuses or fails to substantially perform or
discharge the duties or responsibilities reasonably assigned by the President
of the Bank (other than any such refusal or failure resulting from the
Employee's incapacity due to physical or mental illness), provided the assigned
responsibilities are not illegal, unethical or inconsistent with the Employee's
responsibilities 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;
(ii) The Employee is grossly negligent in the performance of his
duties;
(iii) The Employee breaches his fiduciary duty to the Bank or any
affiliate of the Bank, or breaches the terms of this Agreement or any other
agreements with the Bank or any affiliates of the Bank;
(iv) The Employee is convicted by a court of competent
jurisdiction of a felony or of any criminal offense involving dishonesty or
breach of trust;
(v) The Employee commits an act of fraud materially evidencing
bad faith toward the Bank;
(vi) The Employee engages in misconduct which is materially
injurious to the Bank. Such misconduct may include sexual harassment, domestic
violence, public intoxication or being under the influence of controlled
substances. Misconduct materially injurious to the Bank shall mean misconduct
which materially and adversely affects the Bank's business, reputation, or
standing in the community. Such material adverse affect may result from
non-monetary injury as well as from monetary injury, such as from adverse
publicity towards the Bank.
8. Payments Upon Termination of Employment.
---------------------------------------
(a) Payments Upon Death. If at any time while he is employed
-------------------
hereunder the Employee shall die, in addition to all other benefits to which
he or his personal representatives may be entitled, the Bank shall pay to his
designated beneficiary or, if no such beneficiary exists, to his 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 he would have been entitled to receive them) had he
remained alive.
(b) Payments Upon Disability. If at any time during the term of
------------------------
this Agreement, in the opinion of a physician mutually agreeable to the Bank
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 he or his personal representatives may be
entitled, the Employee shall be entitled to receive all benefits payable to
him under the Bank's long-term disability income plan.
(c) Payments Upon Expiration of Term Without Renewal. In the event
------------------------------------------------
that the term of this Agreement shall expire without renewal, the Employee
shall be entitled to receive compensation through the date of expiration. This
Agreement does not limit Employee's right to benefits under all plans and
programs of the Bank in which he participates, including, without limitation,
pension, profit sharing, 401(k), and employee stock option plans.
(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 Bank shall pay
to the Employee (or to his 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 twelve months' base annual salary as in
effect as of the date of such termination.
(ii) The Bank shall maintain or cause to be maintained in effect
for the Employee for a period of twelve months following such termination, at
the Bank'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
plan, the Bank's 401K plan, and the Beverly National Corporation Employee Stock
Ownership Plan), in which the Employee was participating at any time during the
twelve (12) months preceding such termination.
(iii) 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
group insurance plans, programs or arrangements contemplated by Subsection (d)
hereof is barred by law or otherwise, or in the event that any such insurance
plan, program or arrangement is discontinued or the benefits thereunder are
materially reduced during such period, the Bank shall provide the Employee
with benefits substantially similar to those to which the Employee was
entitled immediately prior to the date of his termination of employment. Upon
expiration of the period of coverage provided hereunder, the Employee shall be
provided with the opportunity to have assigned to him at no cost and with no
apportionment of prepaid premiums any assignable insurance owned by the Bank
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 Bank
240 Cabot Street
Beverly, Massachusetts 01915
Attention: Lawrence M. Smith, President
(b) To the Employee:
Mr. Paul J. Germano
10 King George Drive
Londonderry, NH 03053
Either party may by notice in writing change the address to which
notices to it or him 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. Judgment may be entered on the arbitrator's award
in any court having jurisdiction.
11. Miscellaneous.
-------------
(a) Indemnification. During the period of his employment hereunder,
---------------
the Bank agrees to indemnify, and to cause its subsidiaries to indemnify, the
Employee in his capacity as an officer of the Bank and each subsidiary, all to
the maximum extent permitted under the laws of the Commonwealth of
Massachusetts and applicable banking laws and regulations. The provisions of
this Section 11(a) shall survive expiration or termination of the Agreement for
any reason whatsoever.
(b) Legal Fees. The Bank shall pay to the Employee all reasonable
----------
legal fees and expenses incurred by him 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 Bank and the Employee in the same manner as the Agreement.
(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 Bank and the Employee.
(e) Binding Effect; Non-Assignability. This Agreement shall be
---------------------------------
binding upon the Bank and inure to the benefit of the Bank and its successors.
Neither this Agreement nor any rights arising hereunder may be assigned or
pledged by the Employee during his lifetime. This Agreement shall inure to the
benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
(f) Amendment. This Agreement may be amended or modified only by a
---------
written instrument signed by the Employee and by a duly authorized
representative of the Bank.
(g) Enforceability. If any portion or provision of this Agreement
--------------
shall to any extent be unenforceable as a result of either a declaration by a
court of competent jurisdiction or the operation of applicable banking laws and
regulations, then the remainder of the Agreement, or the application of such
portion or provisions in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed the within instrument
as a sealed document as of the date first above written.
BEVERLY NATIONAL BANK
By: Lawrence M. SMith
-------------------
Its President
Agreed:
/s/
Paul J. Germano
<PAGE>
Exhibit A
to Employment Agreement
By and Between Beverly National Bank
and Paul J. Germano
dated February 23, 2000
1. Vacation - The Employee shall be entitled to paid vacation in
each calendar year during the term of the Agreement in accordance
with the Bank's policy. The Employee shall also be entitled to
all paid holidays recognized by the Bank. Unused accrued vacation
time is paid on termination.
2. Pension Plan - The Employee shall be entitled to participate in
the Bank's retirement plan, if and to the extent from time to time
in effect.
3. Profit Sharing Plan - The Employee shall be entitled to
participate in the Bank's profit sharing plan and its 401(k) plan,
if and to the extent from time to time in effect.
4. Incentive Stock Option Plan - The Employee shall be entitled to
participate in any incentive stock option plan of the Company, if
and to the extent from time to time in effect.
5. Employee Stock Ownership Plan - The Employee shall be entitled
to participate in the Company's employee stock ownership plan, if
and to the extent from time to time in effect.
6. Insurance - The Employee shall be entitled to participate in all
insurance programs and benefits maintained by the Company or the
Bank, if and to the extent from time to time in effect, including
without limitation life, health, accident, and disability.
9
BEVERLY NATIONAL CORPORATION
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
MARCH 28, 2000
------------------------------
NOTICE IS HEREBY GIVEN that the 2000 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 28, 2000
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 constitued the full Board
of Directors at ten.
(2) Election as director of the individuals listed as nominees 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.,
Feburary 23, 2000.
By Order of the Board of Directors.
Paul J. Germano, Clerk
February 23, 2000
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
<PAGE>
BEVERLY NATIONAL CORPORATION
PROXY STATEMENT
2000 ANNUAL MEETING OF SHAREHOLDERS
MARCH 28, 2000
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: 978-922-2100) for use at the 2000
Annual Meeting of Shareholders of the Corporation to be held on March 28, 2000.
As of February 23, 2000, 1,581,294 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 23, 2000. 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 1999 Annual Report of the Corporation containing financial statements
for 1999 is being mailed to 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 25, 2000.
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 2003
annual meeting as described below. 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 the four nominees,
Mr. Fisher, Mrs. Griffin, Mr. Luscinski and Mr. Wiltshire be elected to serve
until 2003, as listed below.
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 23, 2000 Predecessor of Principal
Name (1)(2) Since Office Occupation
- ---- ----------------- --------------- ------ ----------
John N. Fisher 17,510 1989 2003 President,
Fisher &
George
Electrical
Co., Inc.
Alice B. Griffin 12,854 1992 2003 Consultant
Robert W. Luscinski 600 1999 2003 Certified
Public
Accountant
James D. Wiltshire 11,480 1993 2003 Consultant
Directors Continuing in Office
------------------------------
Shares of On Board of
Stock Owned Directors of
Beneficially the Corporation
As of or Its Term
February 23, 2000 Predecessor of Principal
Name (1)(2) Since Office Occupation
- ---- ------------------ --------------- ------ ----------
Richard H. Booth 11,680 1993 2001 Stockbroker
- Retired
Neiland J. Douglas, Jr. 18,952 1977 2002 President,
Morgan &
Douglas
Planning and
Research
Mark B. Glovsky, Esq. 3,380 1996 2002 Attorney,
Partner of
the Law Firm
of Glovsky &
Glovsky
John L. Good, III 15,892 1987 2001 Vice President
Community
Relations
Development -
NE Health
Systems, Inc.
Clark R. Smith 8,866 1994 2001 Attorney,
Family
Foundation
Lawrence M. Smith 87,210 1981 2002 President &
Chief Execu-
tive Officer
Beverly
National Cor-
poration and
Beverly
National Bank
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 23, 2000 or within 60 days thereafter, as listed: Richard H.
Booth, 4,080; Neiland J. Douglas, Jr., 14,760; John N. Fisher, 10,380;
Mark B. Glovsky, 2,880; John L. Good, III, 14,760; Alice B. Griffin,
3,180; Clark R. Smith; 2,880; Lawrence M. Smith, 80,000; and James D.
Wiltshire, 9,480.
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 23, 2000
<PAGE>
BEVERLY NATIONAL CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERES
MARCH 28, 2000
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned shareholder of
BEVERLY NATIONAL CORPORATION hereby nominates, constituted and appoints Richard
F. Mooney and Kevin M. 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 2000 Annual Meeting of the Shareholders of
said Corporation to be held at the main office of the Corporation, 240 Cabot
Street, Beverly, Massachusetts, on March 28, 2000 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:
FOR AGAINST ABSTAIN
A. 1. Fixing the number of directors who
shall consituted the full Board of
Directors at ten. ( ) ( ) ( )
2. Election as directors of the 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
before said meeting or any adjournment
thereof. ( ) ( ) ( )
B. IF ANY OF THE INDIVIDUALS LISTED AS A NOMINEE FOR DIRECTOR IN THE PROXY
STATEMENT DATED FEBRUARY 23, 2000 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 JUDEMENT OF THE PERSON OR PERSONS
ACTING HEREUNDER UNLESS EITHER "AGAINST" OR "ABSTAIN" IS INDICATED IN
RESPONSE TO ITEM A.3 ABOVE.
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT.
Dated: February 23, 2000
----------------------------
(Signature of Shareholder)
----------------------------
(Signature of Shareholder)
When acting as attorney, executor,
administrator, trustee or guardian,
please give full title. If more than No. of Shares:
one trustee, all should sign. ----------
EXHIBIT 21
21. Subsidiaries of the Corporation at December 31, 1999:
Incorporated 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 6, 2000.
/s/Shatswell, MacLeod & Company, P.C.
-------------------------------------
Shatswell, MacLeod & Company, P.C.
West Peabody, Massachusetts
March 23, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 11,978,530
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,400,000
<TRADING-ASSETS> 1,349,314
<INVESTMENTS-HELD-FOR-SALE> 30,750,999
<INVESTMENTS-CARRYING> 17,078,037
<INVESTMENTS-MARKET> 16,752,628
<LOANS> 146,853,578
<ALLOWANCE> 2,132,386
<TOTAL-ASSETS> 221,437,654
<DEPOSITS> 199,228,713
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,990,662
<LONG-TERM> 0
0
0
<COMMON> 4,055,045
<OTHER-SE> 16,163,234
<TOTAL-LIABILITIES-AND-EQUITY> 221,437,654
<INTEREST-LOAN> 12,081,117
<INTEREST-INVEST> 2,824,573
<INTEREST-OTHER> 454,811
<INTEREST-TOTAL> 15,360,501
<INTEREST-DEPOSIT> 5,196,215
<INTEREST-EXPENSE> 12,604
<INTEREST-INCOME-NET> 10,151,682
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 9,170,814
<INCOME-PRETAX> 3,589,980
<INCOME-PRE-EXTRAORDINARY> 3,589,980
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,232,641
<EPS-BASIC> 1.43
<EPS-DILUTED> 1.29
<YIELD-ACTUAL> 7.75
<LOANS-NON> 362,870
<LOANS-PAST> 199,497
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,934,541
<CHARGE-OFFS> 21,027
<RECOVERIES> 218,872
<ALLOWANCE-CLOSE> 2,132,386
<ALLOWANCE-DOMESTIC> 1,766,929
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 365,457
