<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________ to __________
Commission file number 0-14087
FIRST COASTAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-1177661
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
36 Thomas Drive, Westbrook, Maine 04092
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (207) 774-5000
Securities registered pursuant to Section 12(b) of the Act: Not Applicable
Securities registered pursuant to Section 12(g) of the Act: Common stock, $1.00
par value per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 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 ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. [ ]
On and effective as of September 11, 1991, First Coastal Corporation
was advised by the National Association of Securities Dealers that its Common
Stock had been removed from the NASDAQ National Market System due to an
insufficient number of active market makers in the stock. The Common Stock is
traded in the over-the-counter market in the "pink sheets," although such trades
are limited and sporadic and there is no established public trading market for
the Common Stock. The aggregate market value of the Common Stock held by
non-affiliates based on the book value per share of Common Stock of $6.66 at
December 31, 1995 was $3,989,779.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ____ No ____
As of the close of business on March 29, 1996, 600,361 shares of the
registrant's Common Stock, par value $1.00 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
First Coastal Corporation
First Coastal Corporation, a Delaware corporation ("First Coastal" or the
"Company") is a bank holding company whose sole operating subsidiary is Coastal
Savings Bank ("Coastal" or the "Bank"). The Company was organized in January
1987 for the purpose of becoming the parent holding company of Suffield Bank
following Suffield Bank's conversion from mutual to stock form. The Company
acquired Coastal Bancorp, a Maine corporation ("Bancorp"), which was the bank
holding company of Coastal, a Maine-chartered, stock savings bank, on April 1,
1987. On September 6, 1991, Suffield Bank was placed in receivership by the
Connecticut Department of Banking, leaving the Bank as the Company's sole
operating subsidiary. On July 26, 1994, Bancorp was dissolved with the effect
that the Bank became a direct wholly-owned subsidiary of the Company. See
"Certain Regulatory Matters -- Receivership of Suffield Bank" and "-- Settlement
of Cross Guaranty Claim."
Coastal Savings Bank
The Bank was formed in 1981 as a Maine-chartered savings bank through the
consolidation of Brunswick Savings Institution and York County Savings Bank,
which were organized in 1858 and 1860, respectively. On July 11, 1984, the Bank
completed its conversion from mutual form to a Maine stock savings bank.
The Bank had total assets of approximately $145 million at December 31, 1995.
The region served by the Bank includes the communities of Brunswick, Freeport,
Kennebunk, Kezar Falls, Saco, Topsham and Westbrook. The Bank operated eight
banking offices as of December 31, 1995.
The principal business of the Bank consists of attracting deposits from the
general public and originating residential real estate, construction, consumer,
commercial and commercial real estate loans and investment securities. Deposits
at the Bank are federally insured by the Bank Insurance Fund ("BIF"), which is
administered by the Federal Deposit Insurance Corporation ("FDIC").
The principal executive offices of the Company and the Bank are located at 36
Thomas Drive, Westbrook, Maine 04092; telephone (207)774-5000.
2
<PAGE>
CERTAIN REGULATORY MATTERS
Receivership of Suffield Bank
On September 6, 1991, the Company announced that Suffield Bank was placed into
receivership by the Connecticut Banking Department and the FDIC was appointed as
the receiver. Financial data reported for 1991 gives effect to the closure of
Suffield Bank as if it had occurred at the beginning of 1991. Since the
receivership of Suffield Bank, management's efforts have been primarily focused
on resolving the cross guaranty claim as described below and improving
operations of the Company's subsidiary, Coastal.
Settlement of Cross Guaranty Claim
On January 31, 1995, the Company and the Bank consummated a settlement with the
FDIC in accordance with the terms and conditions of the Amended and Restated
Settlement Agreement, dated as of November 23, 1994 (the "Amended and Restated
Settlement Agreement"), pursuant to which the FDIC waived and released its cross
guaranty claim against the Bank. The cross guaranty claim was the result of the
September 1991 failure of Suffield Bank. As part of the settlement, the Company
issued to the FDIC a non-recourse promissory note in the principal amount of
$9.0 million (the "Note" or the "FDIC Note"), secured by the Company's pledge of
the outstanding stock of the Bank. In 1994 the Company incurred an extraordinary
charge to earnings resulting from the issuance of the Note. Principal and
interest under the FDIC Note are deferred until its maturity date, which is
January 31, 1997, subject to extension under certain circumstances.
The Company announced on January 31, 1996 that it intends to pursue a
recapitalization of the Company as the means to facilitate the satisfaction of
the FDIC Note. As part of the recapitalization, the Company expects to raise
approximately $3.0 to $4.0 million through an offering of its common stock,
including a rights offering to the Company's existing stockholders. The offering
will be made only by means of a prospectus. In addition to the proceeds from the
common stock offering, the Company also expects to use funds derived from
dividends from the Bank and the proceeds from a loan to satisfy its obligation
under the FDIC Note. The recapitalization and related transactions are subject
to a number of conditions, including the receipt of appropriate regulatory
approvals, and there can be no assurance that such recapitalization and related
transactions will be consummated or that the Company will be successful in
repaying the FDIC Note. The Company anticipates that the recapitalization would
be completed in the third quarter of 1996.
Memorandum of Understanding
Effective as of January 23, 1992, Coastal consented to an Order to Cease and
Desist (the "Order to Cease and Desist" or the "Order") issued by the FDIC and
concurred with by the Maine Bureau of Banking (the "Maine Bureau of Banking").
The Order required Coastal to cease and desist from engaging in certain
activities and practices detrimental to the Bank and also required, among other
things, the maintenance by the Bank of specified capital ratios. Effective
December 8, 1994, the Order was terminated.
3
<PAGE>
The Order was replaced with a Memorandum of Understanding ("Memorandum") among
the Bank, the FDIC and the Maine Bureau of Banking effective as of November 22,
1994. The Memorandum provides, among other things, that (i) the Bank continue to
maintain its allowance for loan and lease losses in accordance with applicable
regulatory requirements, (ii) the Board of Directors of the Bank continue to
review the adequacy of the Bank's loan and lease loss reserves and provide for
adequate reserves, (iii) the Bank continue to have a Tier 1 capital to total
assets ratio at or in excess of 6.0%, (iv) the Bank continue to comply with the
FDIC's Statement of Policy on Risk-Based Capital, (v) the Bank provide monthly
progress reports regarding substandard or doubtful assets, (vi) the Bank agree
not to extend or renew credit to, or for the benefit of, any borrower who or
which has a loan or other extension of credit with the Bank that has been
charged-off or classified in whole or in part, loss, doubtful or substandard and
is uncollected unless certain conditions are met, (vii) the Bank not declare or
pay any dividends without the prior written consent of the FDIC and the Maine
Bureau of Banking, and (viii) the Bank continue to furnish written progress
reports detailing the form and manner of any action taken to seek to secure
compliance with the Memorandum. In addition, the Board of Directors is required
to develop a written plan of action to reduce the Bank's risk position with
respect to each borrower who had outstanding principal debt owing to the Bank in
excess of $500,000 and for the formulation of a strategic plan and policies
covering investments, funds management and various lending policies. At December
31, 1995, the Bank had a Tier 1 capital to total assets ratio of 9.19%.
In March 1988, the Company entered into a Memorandum of Understanding with the
Federal Reserve Bank of Boston which provided, among other things, for the
formulation of plans and policies covering capital adequacy, funds management,
the Company's management information system and the adoption of a written
dividend policy consistent with the policies of the Board of Governors of the
Federal Reserve System (the "Federal Reserve") regarding the payment of cash
dividends by bank holding companies. Management addressed these matters by
developing plans and policies which were submitted to the Federal Reserve in
1988, and updated such plans and policies in 1992 and 1995. Effective March 13,
1995, the Federal Reserve Bank of Boston terminated the Memorandum of
Understanding.
Regulatory Capital Requirements
Under applicable federal regulations, the Company and Coastal are each required
to maintain minimum levels of regulatory capital. The Federal Reserve has
adopted a leverage-based capital requirement for bank holding companies with a
composite rating of 1 under the bank holding company rating system of a minimum
level of tier 1 capital to total assets of 3.0%. All other bank holding
companies or bank subsidiaries of bank holding companies are required to
maintain a minimum ratio of tier 1 capital to total assets of 4.0% to 5.0%.
Under the Federal Reserve's risk- based capital guidelines, bank holding
companies or banks also are required to maintain a minimum ratio of qualifying
total capital to risk-weighted assets of 8.0%. The guidelines apply on a
consolidated basis to bank holding companies with consolidated assets of $150
million or more. For bank holding companies which have less than $150 million in
consolidated assets, as did the Company for each of the quarters ended March 31,
1995, June 30, 1995, September 30, 1995 and December 31, 1995, the guidelines
are applied on a bank-only basis (as opposed to a consolidated basis) unless (i)
the parent bank holding company is engaged in nonbank activity involving
significant leverage or
4
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(ii) the parent company has a significant amount of debt that is held by the
general public. The Federal Reserve capital adequacy guidelines provide that
"debt held by the general public" is debt held by parties other than financial
institutions, officers, directors, and controlling stockholders of the banking
organization or their related interests. The FDIC Note is not considered to be
"debt held by the general public" for purposes of such capital guidelines. As a
result, applied on a bank-only basis, the Company's ratios of tier 1 capital to
total assets, tier 1 capital to risk-weighted assets, qualifying total capital
to risk-weighted assets of 9.19%, 14.32%, and 15.59%, respectively, at December
31, 1995 were in compliance with such guidelines.
The FDIC has also adopted minimum capital requirements as regulations for state
non-member banks such as the Bank. Under the minimum leverage capital
requirement, insured state non-member banks must maintain a Tier 1 capital to
total assets ratio of at least 3% to 5% depending on the CAMEL rating of the
bank. The Memorandum requires that the Bank continue to maintain a Tier 1
capital to total assets ratio at or in excess of 6.0%. At December 31, 1995, the
Bank had a Tier 1 capital to total assets ratio of 9.19%.
In addition, under such regulations insured non-member banks must maintain a
minimum ratio of qualifying total capital to risk-weighted assets of 8.0%,
including a minimum ratio of Tier 1 capital to risk-weighted assets of 4.0%. At
December 31, 1995, the Bank had a ratio of Tier 1 capital to risk-weighted
assets of 14.32% and a ratio of qualifying total capital to risk-weighted assets
of 15.59%.
5
<PAGE>
LENDING ACTIVITIES
Loan Portfolio Composition
The following table sets forth the composition of the Company's loan portfolio
at the dates indicated:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------
(in thousands) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate mortgage:
Residential $30,966 $ 33,158 $ 39,771 $ 51,898 $ 71,216
Commercial 50,797 57,997 61,953 65,567 75,073
Real estate construction - - 429 669 1,542
Commercial and industrial 2,524 2,510 3,013 3,703 6,650
Consumer and other loans 16,263 15,991 18,305 22,208 26,787
-------- -------- -------- -------- --------
Total loans $100,550 $109,656 $123,471 $144,045 $181,268
======== ======== ======== ======== ========
Ratios of loans to:
Deposits 80% 84% 88% 92% 106%
Assets 69% 71% 72% 76% 85%
</TABLE>
The Bank's loan growth has been limited as a result of several factors.
Beginning in the late 1980's adverse real estate market conditions and a rising
interest rate environment in New England limited demand for new loans in the
Bank's market area. The Bank began to experience significant asset quality
problems and significant operating losses, resulting in a curtailment in loan
volume as these problems began to be addressed. The Bank's ability to grow was
further limited due to capital restraints imposed by the FDIC and the Maine
Bureau of Banking under the Order to Cease and Desist. One requirement of the
Order was that the Bank improve its Tier 1 capital to total assets ratio from
the December 31, 1991 level of 4.42% to 6.0% by December 31, 1993. This
requirement caused management to effect a strategy of selective balance sheet
shrinkage, including a reduction in loan originations. Payoffs of loans also
reduced loan balances as interest rates began to decline. Though the 6.0% Tier 1
capital to total assets level was achieved (6.24% at December 31, 1993),
management's continued focus on improving overall asset quality, in conjunction
with the pre- settlement uncertainties arising from the FDIC cross guaranty
claim, and the post-settlement efforts to develop a plan for repaying the FDIC
Note, resulted in new loan volume receiving less emphasis until mid-1995.
While the Bank's asset growth has been hampered in recent years as discussed
above, the Company's pending recapitalization is expected to allow the Bank to
focus on increasing its loan origination activities and pursuing a strategy of
managed growth, with a particular focus on residential mortgage, commercial and
industrial, and consumer loans.
See Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Loans," which is incorporated herein by reference.
6
<PAGE>
The following table sets forth the maturities of the loan portfolio by loan type
as of December 31, 1995:
<TABLE>
<CAPTION>
After One
Within But Within After
(in thousands) One Year Five Years Five Years Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real estate mortgage:
Residential $207 $1,071 $29,690 $30,968
Commercial 10,460 21,619 19,383 51,462
Real estate construction - - - -
Commercial and industrial 440 1,223 548 2,211
Consumer and other 64 1,500 14,345 15,909
----------- --------- -------- ----------
Total loans $11,171 $25,413 $63,966 $100,550
======= ======= ======= ========
Loans maturing after one year with:
Fixed interest rate $5,462 $15,975 $21,437
Variable/adjustable interest rate 19,951 47,991 67,942
-------- -------- --------
$25,413 $63,966 $89,379
======= ======= =======
</TABLE>
Loan Originations
Mortgage loans originated by the Bank are primarily secured by property located
within its existing market area in Maine. The bank is an active residential
mortgage lender. A significant percentage of loans originated are 1-4 family
residential real estate loans, a large portion of which are sold in the
secondary market on a servicing-retained basis. Most of the Bank's residential
loans are originated using the Federal National Mortgage Association ("FNMA")
underwriting guidelines.
In April 1995, the Bank hired a new senior officer responsible for branch
administration and retail lending and commenced a focused effort to originate
residential and consumer loans through its branch offices, several of which have
since been re-staffed to support such efforts. While the Bank's newly focused
origination strategy is still in its early stages, the Bank's residential and
consumer loan originations have increased since mid-1995, as set forth below.
While the Bank intends to continue its focus on residential and consumer lending
in 1996, the level of such lending will depend upon a number of factors,
including the level of interest rates and general economic conditions.
<TABLE>
<CAPTION>
For the Quarter Ended
------------------------------------------------------------------
(in thousands) December 31, September 30, June 30, March 31,
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 originations (1) :
Residential real estate $1,658 $1,563 $776 $171
Consumer 930 583 625 250
-------- -------- -------- ------
Total $2,588 $2,146 $1,401 $ 421
====== ====== ====== =====
1994 originations (1):
Residential real estate $ 561 $ 439 $1,412 $2,309
Consumer 356 404 837 219
------- ------- -------- ------
Total $ 917 $ 843 $2,249 $2,528
====== ====== ====== ======
<FN>
(1) Includes refinancing of existing portfolio and off balance sheet serviced
loans.
</FN>
</TABLE>
7
<PAGE>
The continued improvement in overall asset quality has also allowed the Bank to
begin focusing more resources towards the generation of new commercial loans.
The Bank expects to complete certain staffing changes early in 1996 that are
intended to facilitate the Bank's goal of growth in commercial loan generation
in 1996 and thereafter.
The commercial real estate mortgage portfolio of approximately $50.8 million at
December 31, 1995, as compared to $58.0 million at December 31, 1994, includes
loans secured by apartment buildings, mixed use commercial buildings, office
buildings and other income-producing properties. Substantially all of these
loans are secured by mortgages on properties located in Maine. The maturities
are set forth in the above table.
At December 31, 1995 and 1994, commercial and industrial loans totaled $2.5
million. The Bank makes commercial and industrial loans secured by equipment and
other corporate or personal assets, including accounts receivable, inventory,
marketable securities and real estate. The terms and maturities of commercial
loans are negotiated with the borrower, but generally the loans mature in seven
years or less and bear interest at a fixed or adjustable rate.
Consumer loans originated by the Bank primarily include automobile, mobile home
and boat loans, home improvement loans, loans secured by deposits, lines of
credit secured by residential real estate and credit card agreements, subject to
applicable provisions of Maine law and regulations, and student loans under the
Maine Guaranteed Student Loan Program. The interest on student loans is
partially subsidized, and a minimum of 98% of each loan is guaranteed by the
federal government. As of December 31, 1995, the Bank had approximately $16.3
million in consumer loans, compared to $16.0 million as of December 31, 1994.
All consumer loans originated are reviewed for creditworthiness, adequacy of
collateral and the borrowers' ability to repay.
For information on Allowance for Loan Losses and Nonperforming Assets, see Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations," which is incorporated herein by reference.
Secondary Market Activity
The Bank is active in secondary market transactions primarily through the sale
of long-term, fixed-rate residential mortgage loans that it originates. The sale
of these loans is intended to improve the interest rate sensitivity of the
Bank's assets (consistent with the Bank's asset/liability policy), generate
future fee income and provide additional funds for lending and liquidity. The
Bank seeks to originate longer term fixed-rate mortgages only when commitments
to sell these mortgages can readily be obtained. Due to interest rate
fluctuations, it may periodically be necessary for the Bank to fill such
commitments by selling mortgages having a higher or lower interest rate than the
rate specified in the commitment. Such sales will be made at a premium or
discount depending on the interest rate variation and will result in realized
gains or losses to the Bank on the transaction.
The Bank is an approved seller and servicer by and for FNMA and the Maine State
Housing Authority ("MSHA"). At December 31, 1995 and December 31, 1994, the Bank
was servicing loans for others of $53.7 million and $57.0 million, respectively.
8
<PAGE>
INVESTMENT ACTIVITIES
The Bank's investment portfolio is managed in accordance with a written
investment policy adopted by the Board of Directors and reviewed on an annual
basis. Under this policy, and in accordance with applicable provisions of the
Bank Holding Company Act of 1956, as amended ("BHCA"), without the prior
approval of the Federal Reserve Bank of Boston and the Board of Directors, the
Company is prohibited from purchasing shares of any company if such purchase
would cause the Company's existing ownership to equal or exceed 5% of such
company's outstanding shares. The Company's investment policy provides that all
investment purchases of equity securities initiated by the Bank must receive the
advance approval of the Board's Investment Committee. The Company's investment
portfolio is comprised primarily of U.S. government and agency obligations and
miscellaneous other securities. For a summary of investments, see Item 8,
"Financial Statements and Supplementary Data -- Notes B and D," which are
incorporated herein by reference.
Effective January 1, 1994, with the implementation of Financial Accounting
Standards Board ("FASB") Statement No. 115, investment securities classified as
available for sale are reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of stockholders'
equity. Investment securities held to maturity are stated at cost adjusted for
amortization of bond premiums and accretion of bond discounts. There was no
effect to the Company's Financial Statements on January 1, 1994 as a result of
implementing FASB Statement No. 115. During 1995, net unrealized gains (losses)
on available for sale securities increased by $323,000 as compared to December
31, 1994. The net unrealized gains (losses) on these securities was $38,000 at
December 31, 1995.
Since the adoption of FASB Statement No. 115, the Company's Investment Policy
states that all securities purchased with an original maturity of over one year,
other than mortgage backed securities originated by the Bank with current loan
production, will be classified as available for sale. Securities purchased with
an original maturity of one year or less, or callable U.S. government agency
notes, will be considered held-to-maturity. Mortgage backed securities
originated by the Bank with current loan production will be classified as
trading securities.
9
<PAGE>
SOURCES OF FUNDS
General
Deposits and advances from the Federal Home Loan Bank ("FHLB") of Boston are the
principal sources of Coastal's funds for use in lending and for other general
business purposes. Coastal's deposits are primarily derived from the areas where
its banking offices are located. Coastal does not actively solicit deposits
outside the State of Maine or use brokers to obtain deposits.
In addition to deposit accounts and advances, Coastal derives funds from loan
repayments, sales of loans and returns on investments. Unscheduled loan
repayments and scheduled amortization have been a substantial source of funds,
while deposit inflows and outflows are significantly influenced by general
interest rates, money market and general economic conditions. Subject to the
limitations described under "Borrowings", FHLB advances may be used on a
short-term basis to compensate for reductions in normal sources of funds such as
deposit inflows at less than projected levels. The Bank has also been authorized
for access to the discount window of the Federal Reserve Bank in its District;
however, to date this borrowing source has not been used. See "Regulation --
Federal Reserve System" concerning limitations on a Federal Reserve Bank's
ability to lend to undercapitalized institutions.
Deposits
The Bank has a wide variety of deposit programs designed to attract both
short-term and long-term deposits from the general public, primarily from
consumers and businesses. These programs include interest bearing and
non-interest bearing checking accounts, savings accounts, certificates of
deposit, jumbo certificates of deposit and individual retirement accounts.
Deposits at the Bank are federally insured by the BIF, which is administered by
the FDIC.
The Bank's deposit growth has been limited in large part by the same factors
discussed under "Lending Activities" above, including the Bank's prior strategy
of selectively shrinking the balance sheet. The following table sets forth the
Company's deposit balances at the dates indicated:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------
(in thousands) 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Noninterest bearing
demand deposits $5,128 $5,425 $5,871 $7,217 $7,900
Interest bearing
demand deposits 15,741 17,300 18,470 18,813 16,472
Savings and escrow deposits 42,020 48,205 53,655 55,581 52,994
Time deposits 62,776 59,107 62,591 74,707 93,017
---------- ---------- ---------- ---------- ----------
Total $125,665 $130,037 $140,587 $156,318 $170,383
======== ======== ======== ======== ========
</TABLE>
10
<PAGE>
Beginning in early 1995, while the Company evaluated various alternatives for
repaying the FDIC Note, management implemented a strategy designed to stabilize
deposit levels. As a result, total deposits were relatively unchanged at
December 31, 1995 equaling $125.7 million, as compared to the January 31, 1995
level of $126.7 million.
On February 22, 1996, the Bank entered into an agreement to sell its Kezar Falls
branch to Maine Bank & Trust Company. Included in the sale are all of the
branch's deposits (totaling approximately $9.9 million at December 31, 1995),
the real estate and certain of the furniture, fixtures and equipment of the
branch. The agreement between the Bank and Maine Bank & Trust Company is
expected to be consummated during the second quarter of 1996, subject to the
receipt of appropriate regulatory approvals.
The mix of the Bank's deposits has varied from year to year, with higher cost
time deposits increasing in 1995 as a percentage of the Bank's total deposits.
This trend is largely reflective of an industry-wide trend, reflecting the
continuing impact of deregulation on the banking industry, as well as increased
competition for funds from nonbank competitors, including money market and stock
mutual funds.
At December 31, 1995, 1994 and 1993, Coastal's deposits consisted of the
following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------
1995 1994 1993
-------------------------------------------------------------------------------
Average Average Average Average Average Average
(dollars in thousands) Amount Rate Amount Rate Amount Rate
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing
demand deposits $ 4,973 - $ 5,798 - $6,132 -
Interest bearing
demand deposits 15,958 2.24% 17,749 2.27% 12,375 2.16%
Savings deposits 44,201 2.91 51,162 2.74 60,580 2.92
Time deposits 61,344 5.43 60,930 4.60 68,288 4.96
--------- --------- ---------
Total $126,476 $135,639 $147,375
======== ======== ========
</TABLE>
At December 31, 1995, jumbo certificates of deposit maturities and weighted
average interest rates were as follows:
Balance Weighted Average
Maturities (in months) (In thousands) Interest Rate
- -----------------------------------------------------------------------------
3 months or less $438 5.50%
over 3 - 6 101 5.25
over 6 - 12 432 5.89
over 12 738 6.40
--------
Total $1,709 5.66%
======
As of December 31, 1995, Coastal had no brokered deposits as these deposits all
matured in 1993.
11
<PAGE>
Borrowings
The Bank has used FHLB advances in the past to expand its lending and investment
activities and to enhance the Bank's mix of rate-sensitive assets and
liabilities, e.g., to extend maturities or to improve liquidity. The following
table sets forth the amount of the Company's borrowed funds at the dates
indicated:
December 31,
-----------------------------------------
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------
FHLB advances $6,000 $12,612 $18,108
FDIC Note (1) 9,000 9,000 -
--------- --------- ------------
$15,000 $21,612 $18,108
======= ======= =======
(1) The FDIC Note bears interest at a rate of 5% from January 31, 1995 to
January 31, 1996 and 6.5% from February 1, 1996 to January 31, 1997,
subject to certain exceptions. See Item 8, "Financial Statements and
Supplementary Data -- Note A."
At December 31, 1995, the Bank had outstanding $6.0 million in borrowings with a
weighted average interest rate of 5.77% from the FHLB of Boston, maturing as
follows:
Amount Maturing
Due Date (in thousands) Interest Rate
----------------------------------------------------------------------
July 1997 $2,000 6.06%
January 1998 2,000 5.92
March 1998 2,000 5.32
-------
$6,000
The following table sets forth information regarding the weighted average
interest expense at December 31 and the highest month end balances of the Bank's
total borrowings:
(in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------
Weighted average interest expenses of
total borrowings 5.37% 7.28% 8.08%
Highest month end balance of
total borrowings $10,412 $18,108 $24,684
Under applicable FHLB regulations, member banks are required to maintain at all
times an amount of qualified collateral that is at least sufficient to satisfy
the collateral maintenance level. The collateral maintenance level for a member
bank is the aggregate amount of collateral that, based on certain percentages of
book value, market value or unpaid principal, has a value equal to the
12
<PAGE>
aggregate amount of the member bank's outstanding advances. Depending on the
ratio of tangible capital to assets as defined by the FHLB and certain other
factors, each member bank is assigned by the FHLB to one of three collateral
status groups:
(i) Blanket Lien Status - tangible capital of 4.5% or more of
assets;
(ii) Listing/Segregation Status - tangible capital below 4.5% of
assets; and
(iii) Delivery (Possession) Status - tangible capital below 3.5% of
assets.
Although its tangible capital is above 3.5% of assets, Coastal is in delivery
status. Because of the potential contingent liability of affiliated institutions
within a holding company structure, the FHLB closely reviews the financial
condition of a member bank's parent company. If a member bank's parent holding
company has a low tangible capital ratio or is experiencing substantial
financial problems, the member bank may be assigned to listing or delivery
status. In connection with the waiver and release of the FDIC cross guaranty
claim, the Bank requested the removal of the foregoing restrictions imposed by
the FHLB. On May 1, 1995, the Bank received a letter from the FHLB stating that
it would lengthen the maturity restriction on new fixed term and fixed rate
advances from six months to one year.
The Bank also has been approved by the Federal Reserve Bank of Boston to obtain
liquidity from its discount window. No funds have been, or are anticipated to
be, obtained from this source.
The Bank estimates that it has approximately $20 million ($7.2 million with the
FHLB and $12.8 million with the Federal Reserve Bank of Boston) in additional
short-term borrowing capacity as of December 31, 1995. This amount fluctuates
based on qualified collateral.
For additional information on Borrowings, see Item 8, "Financial Statements and
Supplementary Data -- Note I," incorporated herein by reference.
EMPLOYEES
As of December 31, 1995, the Company and its subsidiary had 65 full-time
equivalent employees.
COMPETITION
The Bank is a full service savings bank with eight banking offices which are
located in the communities of Brunswick, Freeport, Kennebunk, Kezar Falls, Saco,
Topsham and Westbrook. Competition among financial institutions in the Bank's
market area is intense and the Bank competes in obtaining funds and in making
loans with other state and national banks, savings and loan associations,
consumer financial companies, credit unions, money market mutual funds, and
other financial institutions which have far greater financial resources than
those available to the Bank. At June 30, 1995 a total of approximately 46% of
deposits in Maine was held by three large financial institutions, two of which
are wholly owned subsidiaries of superregional bank holding companies with
assets in excess of $50.0 billion and one of which is a Maine-based savings bank
with assets in excess of $2.0 billion. Competition among financial institutions
is based upon interest rates and other
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credit and service charges, the quality of services rendered, the convenience of
banking facilities and in the case of loans to larger commercial borrowers,
relative lending limits.
REGULATION
Federal Bank Holding Company Regulation
The Company is subject to regulation under the BHCA and is required to file with
the Federal Reserve annual reports and such additional information as the
Federal Reserve may require pursuant to the BHCA. The Federal Reserve may
conduct examinations of the Company and its subsidiary.
Under the BHCA, Federal Reserve approval is required for any action which causes
a bank or other company to become a bank holding company and for any action
which causes a bank to become a subsidiary of a bank holding company. A bank
holding company must obtain Federal Reserve approval before it acquires direct
or indirect ownership or control of any voting shares of any bank if, after such
acquisition, it will own or control directly or indirectly more than 5% of the
voting stock of such bank unless it already owns a majority of the voting stock
of such bank. Federal Reserve approval also must be obtained before a bank
holding company acquires all or substantially all of the assets of a bank or
merges or consolidates with another bank holding company. The Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "IBBEA") authorized
the acquisition of banks in any state by bank holding companies, subject to
compliance with federal and state antitrust laws, the Community Reinvestment Act
(the "CRA") and specific deposit concentration limits. The IBBEA removes most
state law barriers to interstate acquisitions of banks and ultimately will
permit multi-state banking operations to merge into a single bank.
A bank holding company is prohibited, except in certain statutorily-prescribed
instances, from acquiring direct or indirect ownership or control of more than
5% of the voting shares of any company which is not a bank or bank holding
company, and from engaging directly or indirectly in activities other than those
of banking, managing or controlling banks, or furnishing services to its
subsidiaries. A bank holding company may, however, subject to the approval of
the Federal Reserve, engage in, or acquire shares of companies engaged in,
activities which are deemed by the Federal Reserve to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto.
Under the Change in Bank Control Act, persons who intend to acquire control of a
bank holding company, acting directly or indirectly, or through or in concert
with one or more persons, generally must give 60 days prior written notice to
the Federal Reserve. "Control" exists when the acquiring party directly or
indirectly has voting control of at least 25% of the bank holding company's
voting securities or the power to direct the management or policies of such
company. Under Federal Reserve regulations, a rebuttable presumption of control
arises with respect to an acquisition where, after the transaction, the
acquiring party has ownership, control or the power to vote at least 10% (but
less than 25%) of any class of the company's voting securities if (i) the
company has securities registered under Section 12 of the Securities Exchange
Act of 1934 or (ii) immediately after the
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transaction no other person will own a greater proportion of that class of
voting securities. The Federal Reserve may disapprove the proposed acquisition
on certain specified grounds.
As a bank holding company, the Company is subject to capital adequacy guidelines
of the Federal Reserve. The guidelines apply on a consolidated basis to bank
holding companies with consolidated assets of $150 million or more. For bank
holding companies which have less than $150 million in consolidated assets, as
did the Company for each of the quarters ended March 31, 1995, June 30, 1995,
September 30, 1995 and December 31, 1995, the guidelines are applied on a
bank-only basis (as opposed to a consolidated basis) unless (i) the parent bank
holding company is engaged in nonbank activity involving significant leverage or
(ii) the parent company has a significant amount of debt that is held by the
general public. The Federal Reserve capital adequacy guidelines provide that
"debt held by the general public" is debt held by parties other than financial
institutions, officers, directors, and controlling stockholders of the banking
organization or their related interests. The FDIC Note is not considered to be
"debt held by the general public" for purposes of such capital guidelines.
A bank holding company's ability to pay dividends and expand business through
the acquisition of new banking subsidiaries can be restricted if its capital
falls below levels established by these guidelines. In addition, any bank
holding company whose capital falls below specified levels can be required to
implement a plan to increase capital.
The Federal Reserve's capital adequacy guidelines provide for three types of
capital: tier 1 capital (or core capital), tier 2 capital (or supplementary
capital) and total capital. Tier 1 capital generally includes common
stockholders' equity, qualifying noncumulative perpetual preferred stock and
related surplus, qualifying cumulative perpetual preferred stock and related
surplus (limited to a maximum of 25% of tier 1 elements) and minority interest
in the equity accounts of consolidated subsidiaries. Goodwill and most types of
intangible assets are required to be deducted from tier 1 capital. The only
types of intangible assets that may be included in a bank holding company's
capital are readily marketable purchased mortgage servicing rights and purchased
credit-card relationships, provided that the total amount of these assets
included in capital may not exceed 50% of tier 1 capital elements. Purchased
credit-card relationships are subject to a separate sublimit of 25% of tier 1
capital elements. The amount of purchased mortgage servicing rights and
purchased credit-card relationships that a bank holding company may include in
capital, subject to the aggregate limitations described above, is limited to the
lesser of (i) 90% of their fair market value or (ii) 100% of their book value.
Tier 2 capital generally includes allowances for loan and lease losses (limited
to 1.25% of risk-weighted assets), most perpetual preferred stock and any
related surplus, certain hybrid capital instruments, perpetual debt and
mandatory convertible securities and certain intermediate-term preferred stock
and subordinated debt instruments (subject to a maximum of 50% of tier 1 capital
excluding goodwill, but phased-out as the instrument matures). Total capital
generally includes tier 1 capital, plus qualifying tier 2 capital, minus
investments in unconsolidated subsidiaries, reciprocal holdings of bank holding
company capital securities and other deductions as may be determined by the
Federal Reserve.
Under current Federal Reserve capital adequacy guidelines, bank holding
companies generally must maintain a ratio of tier 1 capital to qualifying total
consolidated assets of 4.0% to 5.0%. The
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minimum ratio is 3.0% for the most highly rated bank holding companies or banks.
The Federal Reserve's capital adequacy guidelines also require bank holding
companies to maintain a minimum ratio of qualifying total capital to
risk-weighted assets of 8.0%, including a minimum ratio of tier 1 capital to
risk-weighted assets of 4.0%. The maximum amount of tier 2 or supplementary
capital elements that qualify as total capital is limited to 100% of tier 1
capital, net of goodwill. A bank holding company's risk-weighted assets are
determined by multiplying the balance sheet amount by a specified risk-weight
determined by the Federal Reserve in accordance with the relative risk level of
the asset. Off-balance sheet items, such as standby letters of credit, are
converted to an on-balance sheet credit equivalent amount by multiplying the
face amount of the off-balance sheet item by a credit conversion factor
determined by the Federal Reserve.
On a bank-only basis, the Company's ratios of tier 1 capital to total assets,
tier 1 capital to total risk- weighted assets, and total capital to
risk-weighted assets of 9.19%, 14.32%, and 15.59%, respectively, at December 31,
1995 were in compliance with such guidelines.
The Federal Reserve has proposed to modify its risk-based capital adequacy
guidelines to take into account interest-rate risk. The interest-rate risk
proposal would attempt to estimate the effect that changes in market interest
rates might have on the net economic value of an institution. An institution
with interest-rate risk exposure in excess of an as yet to be determined
threshold level would be required to allocate additional capital equal to the
dollar amount of the estimated change in its net economic value that is in
excess of that level. The FDIC has proposed similar changes to its risk- based
capital guidelines that will apply to the Bank. The foregoing proposals may have
the effect of requiring the Company and the Bank to maintain increased capital.
The Federal Reserve also is empowered to initiate cease and desist proceedings
and other supervisory actions for any violation of the BHCA and the regulations,
orders and notices issued by the Federal Reserve thereunder. Under Federal
Reserve regulations, banks and bank holding companies which do not meet minimum
capital requirements are considered undercapitalized. Undercapitalized bank
holding companies are required to submit an acceptable plan for achieving
capital adequacy and are subject to appropriate enforcement actions by the
Federal Reserve.
In March 1988, the Company entered into a Memorandum of Understanding with the
Federal Reserve Bank of Boston which provided, among other things, for the
formulation of plans and policies concerning capital adequacy, funds management,
the Company's management information system and the adoption of a written
dividend policy consistent with Federal Reserve policies regarding the payment
of cash dividends by bank holding companies. Management addressed these matters
by developing plans and policies which were submitted to the Federal Reserve in
1988, and updated such plans and policies in 1992 and 1995. Effective March 13,
1995, the Federal Reserve Bank of Boston terminated the Memorandum of
Understanding.
Maine Bank Holding Company Regulation
Maine state law regulates bank holding companies. The state law is designed to
conform with the registration, application and reporting requirements of the
BHCA to the maximum extent feasible. As a holding company, the Company must
register with the Maine Superintendent of Banking, and
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must notify the Maine Superintendent of Banking whenever any person or company
directly or indirectly acquires control of 5% or more of the Company's stock or
whenever there is a "material" change in the ownership of the Company. If 5% or
more of the stock in the Company is acquired by a financial institution or by a
financial institution holding company, the Superintendent must approve that
acquisition. Similarly, other transactions require advance approval by the
Superintendent including, among other things, the acquisition of control of the
Company or the Bank, the acquisition by the Company or the Bank of 5% or more of
the stock of another financial institution and the engagement of the Company,
Bank or a subsidiary in an activity closely related to banking.
In February 1996, the Maine legislature amended Maine's Banking Code to permit
interstate branching in accordance with the IBBEA. Among other things, the
amendments prohibit the operation of deposit production offices, establish a
limit on the amount of deposits that may be acquired through merger or
acquisition and impose reporting requirements necessary to monitor compliance.
The amendments also permit the establishment of de novo branches in Maine on a
reciprocal basis.
At the state level, the Maine Bureau of Banking regulates the Bank's internal
organization and its permissible activities. Under Maine law, in addition to
taking deposits and making loans, savings banks, like the Bank, are permitted to
engage in real estate investments and investments in securities. The Bank must
maintain capital in accordance with rules adopted by the Superintendent of
Banking. By law, these capital rules may be no less stringent than the capital
requirements imposed by federal banking regulators on federally chartered
institutions. The stock held by the Company in the Bank is assessable. If the
Bank's capital becomes impaired, the Superintendent may order the Board of
Directors to restore the deficiency.
Bank Regulation
As a BIF-insured savings bank, the Bank is subject to regulation, supervision
and examination by the FDIC. The Bank also is subject to regulation, supervision
and examination by the Maine Bureau of Banking.
The Maine Bureau of Banking administers the Maine statutes which regulate the
Bank's internal organization as well as its deposit, lending and investment
activities. The approval of the Maine Bureau of Banking is required for changes
in the Bank's articles of incorporation, bylaws, branch offices and major
transactions. The Maine Bureau of Banking conducts periodic examinations of the
Bank as part of its supervision. Many of the areas regulated by the Maine Bureau
of Banking, including location of branch offices, acquisitions of other
financial institutions and mergers, are subject to similar regulation by the
FDIC.
As a BIF-insured savings bank, the Bank is subject to certain FDIC requirements
designed to maintain the safety and soundness of individual banks and the
banking system. The FDIC has prescribed safety and soundness guidelines relating
to (i) internal controls, information systems and internal audit systems; (ii)
loan documentation; (iii) credit underwriting; (iv) interest rate exposure; (v)
asset growth; and (vi) compensation and benefit standards for officers,
directors, employees and principal stockholders. Such guidelines impose
standards based upon an institution's asset quality and
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earnings. The guidelines are intended to set out standards that the agencies
will use to identify and address problems at institutions before capital becomes
impaired. Institutions are required to establish and maintain a system to
identify problem assets and prevent deterioration of those assets in a manner
commensurate with its size and the nature and scope of its operations.
Furthermore, institutions must establish and maintain a system to evaluate and
monitor earnings and ensure that earnings are sufficient to maintain adequate
capital and reserves in a manner commensurate with their size and the nature and
scope of their operation.
Under the guidelines, an institution not meeting one or more of the safety and
soundness guidelines is required to file a compliance plan with the FDIC. In the
event that an institution, such as the Bank, were to fail to submit an
acceptable compliance plan or fail in any material respect to implement an
accepted compliance plan within the time allowed by the FDIC, the institution
would be required to correct the deficiency and the appropriate federal agency
would also be authorized to: (i) restrict asset growth; (ii) require the
institution to increase its ratio of tangible equity to assets; (iii) restrict
the rates of interest that the institution may pay; or (iv) take any other
action that would better carry out the purpose of the corrective action. The
Bank believes it was in compliance with all such guidelines as of December 31,
1995.
The FDIC periodically conducts examinations of insured institutions and, based
upon evaluations, may revalue assets of an insured institution and require
establishment of specific reserves in amounts equal to the difference between
such revaluation and the book value of the assets.
The FDIC also has adopted minimum capital adequacy regulations. Although there
are some differences between the capital adequacy guidelines adopted by the
Federal Reserve and the FDIC, the primary elements of each are generally
identical. Under the minimum leverage-based capital requirement adopted by the
FDIC, insured state nonmember banks must maintain a ratio of Tier 1 capital to
total assets of at least 3% to 5% depending on the CAMEL rating of the Bank.
Under such regulations, state nonmember banks must maintain a minimum ratio of
qualifying total capital to risk-weighted assets of 8.0%, including a minimum
ratio of Tier 1 capital to risk-weighted assets of 4.0%. At December 31, 1995,
the Bank had a ratio of qualifying total capital to risk- weighted assets of
15.59% and a ratio of Tier 1 capital to risk-weighted assets of 14.32%. The FDIC
has proposed to amend its risk-based capital standards to ensure that those
standards provide adequately for interest-rate risk in a manner similar to that
proposed by the Federal Reserve. See "Business -- Regulation -- Federal Bank
Holding Company Regulation."
Capital requirements higher than the generally applicable minimum requirements
may be established for a particular bank if the FDIC determines that the bank's
capital is, or may become, inadequate in view of its particular circumstances.
Individual minimum capital requirements may be appropriate where the bank is
receiving special supervisory attention, has a high degree of exposure to
interest rate risk or poses other safety and soundness concerns.
The FDIC adopted prompt corrective action regulations ("PCA regulations"). Under
the PCA regulations, insured institutions will be considered (i) "well
capitalized" if the institution has a total risk-based capital ratio of 10% or
greater, a Tier 1 risk-based capital ratio of 6% or greater, and a
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leverage ratio of 5% or greater (provided that the institution is not subject to
an order, written agreement, capital directive or prompt corrective action
directive to meet and maintain a specified capital level for any capital
measure), (ii) "adequately capitalized" if the institution has a total risk-
based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or
greater and a leverage ratio of 4% or greater (3% or greater if the institution
is rated composite 1 in its most recent report of examination and is not
experiencing or anticipating significant growth), (iii) "undercapitalized" if
the institution has a total risk-based capital ratio that is less than 8%, or a
Tier 1 risk-based ratio of less than 4% or greater and has a leverage ratio that
is less than 4% (3% if the institution is rated composite CAMEL 1 in its most
recent report of examination and is not experiencing or anticipating significant
growth), (iv) "significantly undercapitalized" if the institution has a total
risk-based capital ratio that is less than 6%, a Tier 1 capital risk-based
capital to total adjusted assets that is less than 3% or a leverage ratio to
adjusted total assets that is less than 3% and (v) "critically undercapitalized"
if the institution has a ratio of tangible equity to total assets that is less
than or equal to 2%. At December 31, 1995, the Bank was classified as an
"adequately capitalized" institution.
Any insured depository institution that falls below the minimum capital
standards must submit a capital restoration plan. Under the PCA regulations,
undercapitalized institutions are precluded from increasing their assets,
acquiring other institutions, establishing additional branches or engaging in
new lines of business without an approved capital plan and an agency
determination that such actions are consistent with the plan. Any insured
institution is prohibited from making a capital distribution if, after making
the distribution, the institution would be undercapitalized, except in limited
circumstances approved by the FDIC. Insured depository institutions that are
significantly undercapitalized may be required to take one or more of the
following actions: (i) raise additional capital so that the institution will be
adequately capitalized, (ii) be acquired by, or combined with, another
institution if grounds exist for appointing a receiver, (iii) refrain from
affiliate transactions, (iv) limit the amount of interest paid on deposits to
the prevailing rates of interest in the region where the institution is located,
(v) further restrict asset growth, (vi) hold a new election for directors,
dismiss any director or senior executive officer who held office for more than
180 days immediately before the institution became undercapitalized or employ
qualified senior executive officers, (vii) stop accepting deposits from
correspondent depository institutions and (viii) divest or liquidate any
subsidiary which the appropriate federal banking agency determines poses a
significant risk to the institution. Any company which controls a significantly
undercapitalized depository institution may be required to: (i) divest or
liquidate any affiliate other than an insured depository institution, (ii)
divest the institution if the appropriate federal banking agency determines that
divestiture would improve the institution's financial condition and future
prospects and (iii) if such company is a bank holding company, refrain from
making any capital distributions without the prior approval of the Federal
Reserve.
Critically undercapitalized institutions are subject to additional restrictions.
No later than 90 days after an insured depository institution becomes critically
undercapitalized, the appropriate federal banking agency is required to appoint
a receiver (or, with the concurrence of the FDIC, a conservator) for the
institution, unless the appropriate federal banking agency determines, with the
concurrence of the FDIC, that other action would better achieve the purposes of
FDIA. The appropriate federal banking agency must make periodic redeterminations
that the alternative action continues to be justified no less frequently than
every 90 days. The appropriate federal banking
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agency is required to appoint a receiver if the institution remains critically
undercapitalized nine months later, unless the institution is in compliance with
an approved capital plan and the applicable federal banking agency and the FDIC
certify that the institution is viable.
The FDIA also requires any company that has control of an undercapitalized
depository institution, in connection with the submission of a capital
restoration plan by the institution, to guarantee that the institution will
comply with the plan and provide appropriate assurances of performance. The
aggregate liability of any such controlling company under such guaranty is
limited to the lesser of (i) 5% of the institution's assets at the time it
became undercapitalized or (ii) the amount necessary to bring the institution
into capital compliance at the time it fails to comply with the terms of its
capital plan. If the Bank is classified as undercapitalized, the Company may be
required to guarantee performance of any capital plan required to be submitted
under the FDIA.
An insured state bank, such as the Bank, may not engage as principal in any
activity that is not permissible for a national bank, unless the FDIC has
determined that the activity would pose no significant risk to the BIF and the
state bank is in compliance with applicable capital standards. Activities of
subsidiaries of insured state banks are similarly restricted to those activities
permissible for subsidiaries of national banks, unless the FDIC has determined
that the activity would pose no significant risk to the BIF and the state bank
is in compliance with applicable capital standards. The FDIA also provides that,
except for subsidiaries of which the insured state bank is a majority owner and
except for certain investments in qualified housing projects, an insured state
bank may not, directly or indirectly, acquire or retain any equity investment of
a type that is not permissible for a national bank. Insured state banks are
required to divest any equity investment the retention of which is not
permissible as quickly as can be prudently done, but in no event later than
December 9, 1996. Notwithstanding the foregoing, an insured state bank may, to
the extent permitted by the FDIC, acquire and retain ownership of common or
preferred stock listed on a national securities exchange, provided that the
insured state bank made or maintained an investment in such securities during
the period beginning on September 30, 1990 and ending on November 26, 1991 and
provided further that the aggregate amount of the investment does not exceed
100% of the bank's capital. This exception would cease to apply with respect to
any insured state bank upon any change in control of such bank or any conversion
of the charter of such bank. Determinations under these provisions by the FDIC
must be made by regulation or order. The Bank believes that its activities as
presently conducted conform to those permissible for national banks, except for
approximately $125,000 of certain other investments of the Bank at December 31,
1995 which the Bank intends to sell pursuant to a divestiture plan.
Transactions between the Bank and its affiliates, are subject to Sections 23A
and 23B of the Federal Reserve Act. For purposes of these sections, the term
"affiliate" with respect to the Bank refers to the Company. A transaction is
deemed to be one with an affiliate if the proceeds of the transaction are
transferred to, or used for the benefit of, an affiliate. Under sections 23A and
23B, transactions between banks and their affiliates are generally limited in
the following ways: First, the aggregate amount of all "covered transactions"
(which include, among other things, loans or other extensions of credit to or on
behalf of an affiliate, purchases of assets from an affiliate or investments in
the securities of an affiliate) between a bank (and its subsidiaries) and any
one affiliate may not exceed 10% of the capital stock and surplus of the bank,
and the aggregate amount of covered transactions
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between a bank (and its subsidiaries) and all affiliates may not exceed 20% of
the capital stock and surplus of the bank. Second, any loan or extension of
credit to, or guarantee, acceptance or letter of credit issued on behalf of an
affiliate by a bank or any of its subsidiaries must at all times be secured by
collateral having a market value equal to from 100% to 130% of the outstanding
balance of the extension of credit, depending upon the nature of the collateral.
Third, neither low quality assets or securities issued by an affiliate may be
accepted by a bank as collateral for an extension of credit issued to or on
behalf of any affiliate. Fourth, a bank and its subsidiaries are prohibited from
purchasing a low-quality asset from an affiliate unless the bank or any such
subsidiary, pursuant to an independent credit evaluation, committed itself to
purchase the asset prior to the time the asset was acquired by the affiliate.
Transactions between a bank and its subsidiaries or affiliates generally must be
on terms and conditions, including credit standards, that are substantially the
same or at least as favorable to the bank or its subsidiary as those prevailing
at the time for comparable transactions with or involving unaffiliated parties
or, in the absence of comparable transactions, on terms or under circumstances,
including credit standards, that in good faith would be offered or would apply
to unaffiliated parties. Section 23B imposes additional restrictions on the
ability of a bank and its subsidiaries (i) when acting in a fiduciary capacity,
to purchase securities or assets from an affiliate, and (ii) whether acting as
principal or fiduciary, to purchase or acquire, during the existence of any
underwriting or selling syndicate, any security if a principal underwriter of
the security is an affiliate of the bank. Finally, neither a bank nor any of its
subsidiaries or affiliates may publish an advertisement or enter into any
agreement stating or suggesting that the bank is in any way responsible for the
obligations of its affiliates.
Insurance of Deposits
The Bank's deposit accounts are insured by the Bank Insurance Fund of the
Federal Deposit Insurance Corporation. The Bank is required to pay quarterly
insurance premiums on semiannual assessments for FDIC insurance.
The FDIC implemented a risk-based deposit insurance assessment system. Deposit
insurance assessment rates are currently within a range of $0.00 to $0.27 per
$100 of insured deposits, depending on the assessment risk classification
assigned to each institution. The FDIC places each institution into one of nine
assessment risk classifications based on the institution's capital and
supervisory classification. Adequately capitalized banks, such as the Bank, are
subject to BIF assessment rates within a range of $0.03 to $0.24 per $100 of
insured deposits, depending on the supervisory subgroup to which the bank is
assigned by the FDIC. The FDIC sets assessment rates at a level sufficient to
maintain the BIF's reserve ratio to 1.25% of insured deposits. The FDIC is
authorized to establish a higher reserve ratio and to impose special assessments
to pay for the costs of authorized borrowings. The FDIC considers BIF revenue
and expense levels, the BIF reserve ratio and BIF borrowings in establishing
assessment rate ranges.
In August 1995, the FDIC determined that the BIF had achieved its designated
reserve ratio and lowered BIF deposit insurance premium rates for all but the
riskiest institutions. Effective January 1, 1996, BIF deposit insurance premiums
for adequately capitalized banks were set at $0.00 to $0.27
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per $100 of insured deposits per year, depending upon an institution's
supervisory rating. The deposit insurance premiums imposed by the FDIC are
subject to change.
FDIC insurance of deposits may be terminated by the FDIC, after notice and
hearing, upon a finding by the FDIC that the insured bank has engaged or is
engaging in unsafe or unsound practices, or is in an unsafe or unsound condition
to continue operations as an insured bank, or has violated any applicable law,
regulation, rule or order of, or condition imposed on the FDIC. Additionally, if
insurance termination proceedings are initiated against a bank, the FDIC may
temporarily suspend insurance on new deposits received by the institution under
certain circumstances.
BIF insured banks, such as the Bank, and savings institutions insured through
the Savings Association Insurance Fund ("SAIF") may merge, consolidate or engage
in asset transfer and liability assumption transactions. The resulting
institution may continue to be subject to BIF and SAIF assessments in relation
to that portion of its combined deposit base which is attributable to the
deposit base of its respective predecessor BIF and SAIF institutions or may
apply to the FDIC to convert all of its deposits to either insurance fund upon
payment of the then applicable entrance and exit fees for each fund.
Under the Community Reinvestment Act (the "CRA") and the implementing FDIC
regulations, which were amended in 1995 to provide for a performance-based
evaluation system, a savings institution has a continuing and affirmative
obligation to help meet the credit needs of its local communities, including low
and moderate income neighborhoods, consistent with the safe and sound operation
of the institution. The CRA requires the board of directors of savings
institutions, such as the Bank, to adopt a CRA statement for each assessment
area that, among other things, describes its efforts to help meet the community
credit needs and the specific types of credit that the institution is willing to
extend. In connection with its examination of a savings institution, the FDIC is
required to take into account the institution's record of meeting the credit
needs of its community in determining whether to grant approval for certain
types of applications including mergers and acquisitions. The Bank's CRA rating
is satisfactory as of the last examination.
Federal Home Loan Bank System
The Bank is a member of the FHLB of Boston, one of the 12 regional banks of the
FHLB System. The FHLB System provides a central credit facility for member
institutions. The Bank, as a member of the FHLB of Boston, is required to own
shares of capital stock in the FHLB of Boston in an amount at least equal to the
greater of 1% of the aggregate principal amount of unpaid residential mortgage
loans, home purchase contracts and similar obligations at the beginning of each
year, or 5% of its advances (borrowings) from the FHLB of Boston, whichever is
greater. The Bank was in compliance with this requirement with an investment at
December 31, 1995 of $1.3 million.
Under applicable regulations, member banks are required to maintain at all times
an amount of qualified collateral that is at least sufficient to satisfy the
collateral maintenance level established by the FHLB. See "Business -- Sources
of Funds -- Borrowings."
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Federal Reserve System
The Federal Reserve has adopted regulations that require insured depository
institutions to maintain nonearning reserves against their transaction accounts
(primarily NOW and regular checking accounts) and nonpersonal time deposits
(those which are transferable or held by a person other than a natural person)
with an original maturity of less than 18 months. At December 31, 1995, the Bank
was in compliance with these requirements.
The Bank also has the ability to borrow from the Federal Reserve Bank of Boston
"discount window." The FDIA places limitations upon the ability of the Federal
Reserve Bank of Boston to extend advances to undercapitalized and critically
undercapitalized depository institutions. The FDIA provides that a Federal
Reserve Bank generally may not have advances outstanding to an undercapitalized
institution for more than 60 days in any 120-day period. Under FDIA, the Federal
Reserve Bank of Boston will be liable for a portion of any excess losses
incurred by the FDIC with respect to an institution that receives Federal
Reserve Bank of Boston advances after becoming critically undercapitalized.
TAXATION
Federal
The Company files a consolidated federal income tax return with the Bank using
the accrual method of accounting.
Internal Revenue Service ("IRS") guidance dealing with the tax consequences of
federal financial assistance (e.g., cash) provided by the FDIC requires all
federal financial assistance provided to an acquiring bank to be taxable to the
bank that has been seized. Accordingly, all federal financial assistance
provided to the acquiror of Suffield Bank's assets and liabilities may be
taxable income included in the consolidated federal income tax return of the
Company. This income may generally be offset by tax losses resulting from the
sale of assets sold by the FDIC. Although management has been informed by the
FDIC that there will be no net taxable income resulting from seizure of Suffield
Bank, management has not been able to obtain written confirmation from the FDIC
at this time. Accordingly, income taxes disclosed in the Consolidated Financial
Statements do not take into account adjustments, if any, which may result from
the seizure of Suffield Bank.
In 1990, Coastal Bancorp and its subsidiaries carried back their share of the
consolidated net operating losses of the Suffield Financial Corporation and
subsidiaries group to the years 1984, 1985 and 1986. Tentative tax refunds in
the amount of $926,000 were paid to the Bank as a result of this carryback. In
1989 and 1990, Suffield Financial Corporation and Suffield Bank also carried
back their share of the net operating losses of the group. A portion of the 1990
losses was carried back to the 1986 taxable year of the Suffield group as it
existed before the acquisition of Coastal Bancorp and the Bank (the "Old
Suffield Group") and resulted in a tentative refund of $1,973,000 and a portion
of the 1989 losses was carried back to the years 1979 through 1985 of the Old
Suffield Group and resulted in tentative refunds of $1,279,000.
23
<PAGE>
All refunds in excess of $1.0 million must be approved by the Joint Committee on
Taxation of the U.S. Congress. The IRS has reviewed and approved the refund
claims and has forwarded the case to the Joint Committee on Taxation in
Washington, D.C. with a recommendation that the refunds be approved as made. The
final approval of the Joint Committee on Taxation is expected as early as the
third quarter of 1996. If the Joint Committee on Taxation were to conclude that
the losses were not eligible for the ten-year carryback, the Bank would be
liable for the repayment of $926,000 of refunds plus interest and would increase
its net operating loss carryforwards by $2.4 million. The Bank also believes
that the requirements have been satisfied with respect to the carryback of 1989
and 1990 losses by Suffield Financial Corporation and Suffield Bank under the
ten-year rule. In any event, none of the Company, Coastal Bancorp or the Bank
were members of the Old Suffield Group in the above carryback years.
Consequently, the Bank believes that in accordance with the consolidated return
regulations, the Company, Coastal Bancorp or the Bank would not be liable for
the repayment of any refunds generated by carryback to the Old Suffield Group.
The federal income tax returns of the Company have been examined and audited or
closed without audit by the IRS for tax years through 1988 and such years are
not subject to further IRS audit except with respect to carrybacks to those
years.
State
The State of Maine imposes income and franchise taxes on financial institutions
such as the Bank equal to 1% of Maine net income and $0.08 per $1,000 of the
Bank's year-end assets, respectively. Maine net income equals the Bank's net
income or loss as reported on its federal income tax return. The Maine franchise
tax may be reduced by a credit in the event of a book net operating loss for a
particular taxable year. The credit equals the book net operating loss
multiplied by the franchise tax rate and may be carried forward for up to five
years. The Maine income and franchise taxes are deductible in determining
federal taxable income.
24
<PAGE>
ITEM 2. PROPERTIES.
The Company primarily utilizes the premises, equipment and furniture of the Bank
without direct payment of any rental or other fees to the Bank. The Bank's
executive offices and operations center is located at 36 Thomas Drive,
Westbrook, Maine. The Bank currently maintains eight branches as listed below.
<TABLE>
<CAPTION>
Location Address Leased/Owned Lease Expiration
- -------- ------- ------------ ----------------
<S> <C> <C> <C>
Brunswick 83 Main Street Owned n/a
Brunswick, ME
Brunswick 14 Gurnet Road Owned n/a
Brunswick, ME
Topsham Topsham Fair Mall Building Owned n/a
Route 196 Land Leased June 2000
Topsham, ME
Freeport 165 Main Street Owned n/a
Freeport, ME
Westbrook 36 Thomas Drive Owned n/a
Westbrook, ME
Saco 32 Saco Valley Shopping Ctr. Leased January 2001
Saco, ME
Kennebunk Shoppers Village Leased December 2000
Kennebunk, ME
Kezar Falls(1) Federal Road Owned n/a
Kezar Falls, ME
<FN>
(1) The Bank entered into an agreement with Maine Bank & Trust Company dated
February 22, 1996 pursuant to which the Bank will sell substantially all of
the assets of its Kezar Falls, Maine branch office to Maine Bank & Trust
Company, and Maine Bank & Trust Company will assume certain liabilities of
the Bank with respect to the branch. Pending the receipt of appropriate
regulatory approvals, the transaction is expected to be consummated in the
second quarter of 1996.
</FN>
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
As of December 31, 1995, there were various claims and lawsuits pending against
the Company incidental to the ordinary course of business. In the opinion of
management, after consultation with
25
<PAGE>
legal counsel, resolution of these matters is not expected to have a material
effect on the consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
As of December 31, 1995, the Company had approximately 1,700 holders of record
and 600,361 shares of Common Stock outstanding. The Common Stock is traded in
the over-the-counter market in the "pink sheets," although there is no
established public trading market for the Common Stock and the Company has no
confirmed information as to the time, price and volume at which any trades may
have been made.
No dividends were declared by the Company in 1991 through 1995. The Company's
only source of cash is from dividends from the Bank. The Amended and Restated
Settlement Agreement prohibits the payment of dividends by the Company to its
stockholders until the unpaid principal amount and interest under the FDIC Note
are paid in full in accordance with the terms thereof. There are certain
additional restrictions on the ability of the Company to pay dividends and on
the ability of the Bank to transfer funds to the Company in the form of cash
dividends. See Item 8, "Financial Statements and Supplementary Data -- Note A
and Note J," which are incorporated herein by reference.
26
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
Selected Consolidated Financial Data of First Coastal Corporation
The following table sets forth, in summary form, certain selected financial data
as of and for each of the five years in the period ended December 31, 1995.
The 1994 financial results reflect a $9.0 million extraordinary charge to
earnings as a result of the issuance by the Company of the non-recourse
promissory note to the Federal Deposit Insurance Corporation ("FDIC") in
consideration of the waiver and release of the FDIC's cross guaranty claim
against Coastal Savings Bank ("Coastal" or the "Bank") in connection with the
consummation of the Amended and Restated Settlement Agreement on January 31,
1995. See Item 8, "Financial Statements and Supplementary Data -- Note A," which
is incorporated herein by reference.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
(dollars in thousands except per share data) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Interest income $11,707 $11,780 $12,748 $16,319 $ 21,032
Interest expense (1) 5,850 5,726 7,254 9,986 14,639
------ ------ ------ ------ ------
Net interest income 5,857 6,054 5,494 6,333 6,393
Provision for loan losses (425) 107 (30) 1,136 5,967
------- ------ -------- ----- ------
Net interest income
after provision for loan losses 6,282 5,947 5,524 5,197 426
Investment securities gains (losses) (4) 38 99 (19) 360
Other income 576 391 1,323 1,126 980
Other expenses (2) 5,194 6,278 6,158 7,049 12,853
Income tax benefit - - (4) (198) (114)
-------- ---------- --------- -------- ---------
Income (loss) before minority
interest and extraordinary item 1,660 98 792 (547) (10,973)
Minority interest in
net income (loss) - - 44 (18) (378)
-------- ---------- -------- --------- ----------
Income (loss) before
Extraordinary Item 1,660 98 748 (529) (10,595)
Extraordinary Item -
Charge to earnings as a result of the
settlement of the cross guaranty claim - 9,000 - - --
-------- -------- ------- ------- ---------
Net income (loss) $1,660 $(8,902) $ 748 $ (529) $(10,595)
====== ======= ======= ====== ========
Per Share Data:
Weighted Average Shares Outstanding 600,361 600,361 600,361 600,361 600,361
Income (loss) before
extraordinary item $ 2.77 $ .16 $ 1.25 $ (.88) $ (17.65)
======= ======= ======== ======= ========
Net income (loss) $ 2.77 $(14.83) $ 1.25 $ (.88) $ (17.65)
======= ======= ======== ======= ========
There were no cash dividends declared for the five years ended December 31,
1995.
<FN>
(1) The 1995 interest expense includes $419,000 in interest expense associated
with the $9.0 million note to the FDIC.
(2) In 1995 and 1994, the Company incurred approximately $0.3 million and $0.8
million, respectively, consisting of legal and other professional fees in
connection with the settlement of the cross guaranty claim with the FDIC.
The 1991 other expense included a $3.2 million writedown for the
deconsolidation of Suffield Bank.
</FN>
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------
(dollars in thousands) 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet
Data:
Total assets $145,453 $154,212 $170,819 $188,838 $214,422
Investment securities 19,712 16,746 1,036 4,061 l,487
Assets held for sale 281 185 3,421 6,882 3,661
Loans, net 100,528 109,625 123,468 144,000 181,209
Allowance for loan losses 2,659 4,042 3,642 4,280 6,098
Nonperforming assets 7,517 9,006 11,627 24,382 27,303
Deposits 125,665 130,037 140,587 156,318 170,383
Borrowings 6,000 12,612 18,108 21,249 31,595
FDIC Note 9,000 9,000 - - -
Stockholders' equity 3,997 2,014 9,878 9,130 9,659
Financial Ratios:
Net interest rate spread 4.13% 3.79% 3.26% 3.26% 2.47%
Return on average assets before
extraordinary item 1.14 .06 .41 (.27) (4.62)
Return on average assets 1.14 (5.48) .41 (.27) (4.62)
Return on average equity before
extraordinary item 58.20 .92 7.63 (5.44) (82.20)
Return on average equity 58.20 (83.78) 7.63 (5.44) (82.20)
Equity to assets 2.75 1.31 5.78 4.83 4.50
Dividend payout ratio -- -- -- -- --
Tier 1 leverage capital 2.74 1.41 5.63 4.81 4.50
Total risk-based capital 5.54 3.46 9.69 8.02 7.72
28
<PAGE>
Selected Financial Data for Coastal Savings Bank
The following table sets forth, in summary form, certain selected financial data
as of and for each of the five years in the period ended December 31, 1995:
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------
Unaudited
---------
(in thousands) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Interest income $11,707 $11,774 $12,731 $16,275 $20,980
Interest expense 5,435 5,727 7,255 9,989 14,639
------- ------- ------- ------- -------
Net interest income 6,272 6,047 5,476 6,286 6,341
Provision for loan losses (425) 107 (30) 1,136 5,967
------- ------- -------- ------- -------
Net interest income after provision
for loan losses 6,697 5,940 5,506 5,150 374
Investment securities gains (losses) (4) 38 99 (19) 360
Other income 576 392 1,321 1,145 1,089
Other expenses 4,811 6,063 5,940 7,104 9,539
Income tax expense (benefit) -- -- 6 (198) (114)
------- ------- ------- -------- --------
Net income (loss)(1) $ 2,458 $ 307 $ 980 $ (630) $(7,602)
======= ======= ======= ======== ========
<FN>
(1) In 1994, the Bank incurred approximately $0.6 million consisting of legal
and other professional fees in connection with the settlement of the cross
guaranty claim with the FDIC.
</FN>
</TABLE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------
Unaudited
(in thousands) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $145,446 $153,948 $170,177 $188,144 $212,611
Investment
securities 19,712 16,746 1,036 4,061 l,487
Assets held for sale 281 185 3,421 6,882 3,661
Loans, net 100,528 109,625 123,468 144,000 181,209
Allowance for loan losses 2,659 4,042 3,642 4,280 6,098
Nonperforming assets 7,517 9,006 11,627 24,382 27,303
Deposits 125,764 130,076 140,599 156,378 170,528
Borrowings 6,000 12,612 18,108 21,249 31,595
Stockholders' equity 13,335 10,754 10,906 9,926 9,406
Financial Ratios:
Return on average assets 1.68% .19% .54% (.32)% (3.33)%
Return on average equity 20.67 2.82 9.20 (6.37) (49.01)
Equity to assets 9.17 6.99 6.41 5.28 4.42
Tier 1 leverage capital 9.19 7.05 6.24 5.25 4.42
Total risk-based capital 15.59 12.12 10.57 8.60 7.57
</TABLE>
29
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following management's discussion and analysis of First Coastal Corporation
("First Coastal" or the "Company") financial condition and results of operations
for the last three fiscal years should be read in conjunction with the
consolidated selected financial data and the consolidated financial statements
and notes appearing elsewhere herein.
Settlement of Cross Guaranty Claim
On January 31, 1995, the Company and the Bank consummated a settlement with the
FDIC in accordance with the terms and conditions of the Amended and Restated
Settlement Agreement, dated as of November 23, 1994 (the "Amended and Restated
Settlement Agreement"), pursuant to which the FDIC waived and released its cross
guaranty claim against the Bank. The cross guaranty claim was the result of the
September 1991 failure of Suffield Bank. As part of the settlement, the Company
issued to the FDIC a non-recourse promissory note in the principal amount of
$9.0 million (the "Note" or the "FDIC Note"), secured by the Company's pledge of
the outstanding stock of the Bank. In 1994, the Company incurred an
extraordinary charge to earnings resulting from the issuance of the Note.
Principal and interest under the FDIC Note are deferred until its maturity date,
which is January 31, 1997, subject to extension under certain circumstances.
The Company announced on January 31, 1996 that it intends to pursue a
recapitalization of the Company as the means to facilitate the satisfaction of
the FDIC Note. As part of the recapitalization, the Company expects to raise
approximately $3.0 to $4.0 million through an offering of its common stock,
including a rights offering to the Company's existing stockholders. The offering
will be made only by means of a prospectus. In addition to the proceeds from the
common stock offering, the Company also expects to use funds derived from
dividends from the Bank and the proceeds from a loan to satisfy its obligation
under the FDIC Note. The recapitalization and related transactions are subject
to a number of conditions, including the receipt of appropriate regulatory
approvals, and there can be no assurance that such recapitalization and related
transactions will be consummated or that the Company will be successful in
repaying the FDIC Note. The Company anticipates that the recapitalization would
be completed in the third quarter of 1996.
Removal of Going Concern Modification
The report of the independent accountants ("Report") issued in connection with
the Company's 1993 consolidated financial statements stated that, among other
things, the Company's financial statements have been prepared assuming that the
Company will continue as a going concern due to the significance of the
uncertainty regarding the FDIC cross guaranty claim at the time. As a result of
the consummation of the Amended and Restated Settlement Agreement and certain
other factors as described in Note A to the Company's Consolidated Financial
Statements, the 1994 and 1995 Report of Independent Accountants expresses an
unqualified opinion on the financial statements of the Company for the years
ended December 31, 1994 and 1995.
30
<PAGE>
FINANCIAL CONDITION
Interest Rate Sensitivity
The following table sets forth certain information at December 31, 1995
regarding the rate sensitivity of the Company's earning assets and sources of
funds. For purposes of this table, rate sensitive earning assets ("RSA") and
rate sensitive liabilities ("RSL") include all such assets and liabilities
maturing or subject to repricing within the time frames outlined in the
following table. Other investment securities and interest-bearing demand
deposits are considered non-rate sensitive.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
After Three
Within Months After One After Two After Three
Three within But within But within But within After Non-rate
(in thousands) Months One Year Two Years Three Years Five Years Five Years Sensitive Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest earning deposits $4,375 $4,375
Fed Funds 10,000 10,000
Securities:
Available for sale (1) 1,999 $2,021 $994 $787 $3,440 9,241
Held-to-maturity (1) 4,993 5,794 999 11,786
Assets held for sale 281 281
Loans (2) 25,713 42,850 9,769 $4,556 $2,969 12,793 1,878 100,528
Other nonearning assets 9,242 9,242
---------------------------------------------------------------------------- --------- -----------
TOTAL ASSETS $47,361 $50,665 $11,762 $4,556 $2,969 $13,580 $14,560 $145,453
======= ======= ======= ====== ====== ======= ======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Savings and MMDA's $46,056 $46,056
CD's 13,823 $26,903 $11,385 $7,533 $3,031 $101 62,776
FHLB Advances 2,000 4,000 6,000
FDIC Note 9,000 9,000
Noninterest bearing liabilities $17,624 17,624
Stockholders' equity 3,997 3,997
--------------------------------------------------------------- --------- -------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $59,879 $26,903 $22,385 $11,533 $3,031 $101 $21,621 $145,453
======= ======= ======= ======= ====== ==== ======= ========
Gap $(12,518) $23,762 $(10,623) $(6,977) $(62) $13,479 $(7,061)
Cumulative Gap (12,518) 11,244 621 (6,356) (6,418) 7,061
RSA/Total assets 32.56% 34.83% 8.09% 3.13% 2.04% 9.34% 10.01%
RSL/Total assets 41.17 18.50 15.39 7.93 2.08 0.07 14.86
Cumulative RSA/RSL 79.09 112.96 100.57 94.73 94.81 105.70
Cumulative Gap/Total assets (8.61) 7.73 .43 (4.37) (4.41) 4.85
<FN>
(1) Non-rate sensitive securities include certain equity investments such as
FHLB stock and limited partnership interests. Callable securities are
placed according to earliest call date.
(2) Nonaccrual loans are considered non-rate sensitive and the allowance for
loan losses is included in the non-rate sensitive category.
</FN>
</TABLE>
31
<PAGE>
At December 31, 1995, Coastal is asset-sensitive (positive Gap) within a one
year time frame in the amount of $11.2 million or 113.0%. This compares to a
positive Gap of $16.0 million or 101.9% at December 31, 1994. When a bank's
ability to reprice interest-earning assets exceeds its ability to reprice
interest-bearing liabilities within shorter time periods, as in the case with
the Company, decreases in interest rates generally would adversely affect net
interest income, while increases in interest rates generally would have the
opposite effect. However, because earning assets and sources of funds do not
reprice in exactly the same manner as interest levels change, the preceding
table should not be viewed as a sole indicator of how the Company will be
affected by changes in interest rates. It is the Company's policy to seek to
reduce its exposure to the adverse effects of volatile interest rates.
Evaulating and managing this potential exposure is a continual challenge in a
changing environment and a primary objective of the Company's asset/liability
management policy. The Company has an asset/liability committee which meets
weekly to discuss the management of interest rate risk, liquidity and funds
management.
Investment Securities
The Company's investment portfolio is comprised primarily of U.S. government and
agency obligations and also contains miscellaneous equity securities. Total
investment securities at December 31, 1995 were $19.7 million compared to $16.7
million at December 31, 1994. This increase is attributable to the purchase of
$11.8 million in U.S. government agency callable notes and $1.0 million in U.S.
treasury securities, partially offset by sales totaling $2.0 million of the
Bank's holdings in an adjustable rate mutual fund for financial institutions,
$1.0 million in mortgage backed securities and maturities of $7.0 million in
U.S. treasury securities.
32
<PAGE>
The following tables set forth the book value and maturities of investment
securities and weighted average yields at December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
------------------ ------------------------
(dollars in thousands) Book Value Yield Book Value Yield
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. government obligations maturing
in 1-5 years $ 5,014 5.6% $4,852 5.8%
Mortgage backed securities maturing
in over 10 years 787 7.5 858 7.5
Equity/mutual fund 2,000 6.2 3,894 5.6
Other 125 - 320 2.9
-------- --------
$7,926 5.9% $9,924 5.9%
====== ======
Held to maturity:
U.S. government obligations maturing
in one year or less $ 993 6.5% $6,822 5.2%
U.S. government agency callable notes
maturing after 1-5 years (final maturity) 8,991 6.6 -
5-10 years (final maturity) 1,802 7.3 - -
-------- ---------
10,793 6.7 - -
------- ---------
$11,786 6.7% $6,822 5.2%
======= =========
December 31, 1993
---------------------
(dollars in thousands) Book Value Yield
- ----------------------------------------------------------------------------------------------------------
U.S. government and
agency obligations:
maturing 1 year or less $ 628 3.5%
maturing after 1-5 years - -
------
628 3.5
Other bonds and notes:
maturing after 1-5 years - -
maturing after 10 years - -
Other securities 408 2.3
-------
Total investments $1,036 3.0%
=======
</TABLE>
33
<PAGE>
Loans
Loans, net of unearned income, decreased $9.1 million (or 8.3%) from $109.6
million at December 31, 1994 to $100.5 million at December 31, 1995. The reasons
for the decrease are (i) $14.4 million in early loan payoffs, (ii)
reclassification during 1995 of approximately $1.0 million of loans to real
estate owned, (iii) amortization of $3.6 million, and (iv) charge-off of loans
totaling approximately $1.3 million, partially offset by new loan volume of
$11.2 million.
The decline in loan balances in 1995 represents the continuation of a five year
trend that is largely the result of a combination of two factors: Coastal's
financial difficulties during this period and the FDIC's cross guaranty claim
against Coastal, which resulted from the 1991 failure of Suffield Bank.
Coastal's financial difficulties had two primary adverse effects on the Bank's
ability to generate new loan volume and retain existing loan customers. First,
as a result of the Order to Cease and Desist among the Bank, the FDIC and the
Maine Bureau of Banking effective January 30, 1992, Coastal was required to
improve its ratio of Tier 1 capital to total assets to 6.0% by December 31,
1993, from the December 31, 1991 level of 4.42%, with incremental improvement
required at six month intervals. As a result of this requirement, management
effected a strategy of selective balance sheet shrinkage. The reduction in asset
size, from $212.6 million at December 31, 1991 to $170.2 million at December 31,
1993, along with the Bank's return to profitability in 1993 resulted in the
Bank's Tier 1 capital to total assets ratio improving to 6.24% at December 31,
1993. At December 31, 1995, this ratio had further improved to 9.19%.
Secondly, the Bank's financial difficulties resulted in the need for management
to expend significant resources addressing the asset quality problems which were
the primary source of the Company's operating losses. The focus on asset quality
improvement resulted in a reduction in nonperforming assets from a peak level of
$29.2 million at July 31, 1992 to $7.5 million at December 31, 1995. In
combination with the need to reduce the size of Coastal's deposit and loan
balances, this focus on asset quality improvement resulted in significantly
reduced efforts at loan originations, except for residential mortgage loans
which were primarily originated with an intent to sell these loans in the
secondary mortgage market.
The uncertainties surrounding the resolution of the FDIC's cross guaranty claim
contributed further to the decline in the Bank's loan balances. Management was
required to devote significant resources towards negotiating a satisfactory
settlement of the cross guaranty claim and subsequently, towards determining the
best alternative for repaying the FDIC Note. Also, for an extended period of
time the cross guaranty claim created uncertainties with respect to the future
of the Bank. These uncertainties adversely affected Coastal's ability to develop
new commercial and retail loan business. Further, until the Company chose among
the alternatives for repaying the FDIC Note, certain management initiatives were
deferred, including those relating to the development of new loan and deposit
business. Until late 1995, the Bank's commercial real estate lending has been
primarily limited to the restructuring of existing commercial real estate loans
and the financing of real estate owned.
34
<PAGE>
The Bank began expanding in mid-1995 its residential and consumer lending
capabilities, and subsequently has experienced a significant increase in new
loan originations. In early 1996, the combination of the continued improvement
in overall asset quality and the announcement relating to the Company's plans to
recapitalize, has recently allowed the Bank to begin focusing more resources on
the generation of new commercial loans.
Coastal is an approved seller and servicer by and for the Federal National
Mortgage Association. At December 31, 1995, Coastal was servicing $53.7 million
of loans which were owned by others, as compared to $57.0 million at December
31, 1994. Servicing fee income related to these loans is reported as other
income in the consolidated statements of operations and for the years ended
December 31, 1995 and 1994, was $179,000 and $58,000, respectively. Servicing
fee income for 1994 reflects a $132,000 charge, resulting from higher than
anticipated prepayments of serviced loans.
Coastal continues to be active in secondary market transactions primarily
through the sale of residential mortgage loans and mortgage-backed securities
that it originates, although lower interest rates led to an increase in
prepayments of off balance sheet serviced loans in 1995. The sale of long-term
fixed rate mortgage loans is intended to improve the interest rate sensitivity
of the Bank's assets (consistent with the Bank's asset/liability policy),
generate future fee income and provide additional funds for lending and
liquidity.
35
<PAGE>
Allowance For Loan Losses
The following table represents the allocation of the allowance for loan losses
("Allowance") at December 31, 1995, 1994 and 1993. The percentages represent the
percent of loans in each category to total loans.
<TABLE>
<CAPTION>
December 31,
1995 1994 1993
------------------- ---------------------- --------------------
Percent Percent Percent
of Loans of Loans of Loans
to Total to Total to Total
(dollars in thousands) Amount Loans Amount Loans Amount Loans
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real estate mortgage loans:
Residential $ 82 30.8% $ 66 30.2% $ 80 32.2%
Commercial 2,216 50.5 3,322 54.6 3,000 50.2
Real estate construction loans -- -- -- -- 4 .3
Commercial and industrial loans 13 2.5 46 .6 38 2.4
Consumer and other loans 120 16.2 141 14.6 177 14.9
Unallocated 228 -- 467 -- 343 --
-------- --------- -------- --------- -------- ---------
Total $2,659 100.0% $4,042 100.0% $3,642 100.0%
====== ===== ====== ===== ====== =====
Allowance as a percentage of loans 2.65% 3.67% 2.95%
Allowance as a percentage of
nonperforming loans 47.96% 66.47% 64.11%
Allowance as a percentage of
nonperforming loans
(excluding restructured loans) 125.60% 87.90% 247.92%
</TABLE>
The Allowance at December 31, 1995 equaled $2,659,000 as compared to $4,042,000
at December 31, 1994. The reduction in the Allowance is the result of
substantial loan charge-offs in the amount of $1,333,000 and negative provision
expense totaling $425,000, partially offset by loan loss recoveries of $375,000.
The loan charge-offs were largely associated with previously identified loan
loss exposure taken into consideration as part of management's review of the
adequacy of the Allowance at December 31, 1994. The negative provision for loan
loss expense for the year of $425,000 was largely the result of management's
determination as part of its December 31, 1995 review of the Allowance that a
surplus existed in the Allowance, leading to the decision to effect a reversal
of provision for loan loss expense in the amount of $675,000 in the fourth
quarter of 1995.
The following table sets forth the changes in the Allowance, including
charge-offs and recoveries, by loan category for the past five years:
36
<PAGE>
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------
(dollars in thousands) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning
of period $ 4,042 $ 3,642 $ 4,280 $ 6,098 $ 9,185
Deconsolidation of Suffield Bank (4,400)
Charge-offs:
Real estate mortgage loans (1,113) (178) (1,197) (2,726) (3,665)
Real estate construction loans -- -- (28) (121) (201)
Commercial and industrial loans (142) -- (55) (178) (712)
Consumer and other loans (78) (112) (89) (143) (218)
----- ----- ----- ----- -----
Total charge-offs (1,333) (290) (1,369) (3,168) (4,796)
Recoveries:
Real estate mortgage loans 172 127 179 165 34
Commercial and industrial
loans 170 410 543 21 2
Consumer and other loans 33 46 39 28 106
------- -------- ------- ------- -------
Total recoveries 375 583 761 214 142
------ ------- ------ ------ -------
Net (charge-offs) recoveries (958) 293 (608) (2,954) (4,654)
------ ------- ------ ----- -----
Provision for loan losses (425) 107 (30) 1,136 5,967
------ ------- ------- ------ -------
Balance at end of period $2,659 $4,042 $3,642 $4,280 $6,098
====== ====== ====== ====== ======
Net charge-offs as a percentage
of average loans .91% (.25)% .46% 1.76% 2.39%
</TABLE>
The provision for loan losses for the years ended December 31, 1995, 1994 and
1993 have declined significantly in comparison to prior years. This is due to a
combination of factors, including (i) a reduction in the amount of new, emerging
loss exposure being identified during this period as compared to prior years,
(ii) a reduction or elimination of loss exposure previously allocated against
certain loans generally coming about as a result of improvement in the overall
credit quality of these loans or loan payoffs, and (iii) significant loan loss
recoveries.
The balance of the Allowance declined $1,383,000 during the year ended December
31, 1995. For some time prior to the beginning of the year ended December 31,
1995, management believed that a significant reduction in the level of the
Allowance as compared to the December 31, 1992, 1993 and 1994 balances of
$4,280,000, $3,642,000 and $4,042,000, respectively, was likely at some future
point, possibly as early as December 31, 1995. This expectation was based both
upon management's analysis of the loan portfolio and the fact that banks
recovering from a period of loan quality problems typically experience a decline
in the level of the allowance for loan loss reserves. This is because banks
experiencing loan quality problems typically increase their allowance for loan
loss through increases in provision expense in order to reserve against
anticipated higher future levels of loan losses. Typically over time, individual
loan losses within such loan portfolios are quantified and charged-off against
the allowance for loss. As loan quality improves, and the amount of new exposure
requiring additional loan loss declines, the amount of charge-offs against the
Allowance often signficantly exceeds the amount of offsetting new provision
expense and loan loss recoveries. For example, Coastal's large decline in the
balance of the Allowance for the year ended December 31, 1992, to $4,280,000
from the December 31, 1991 level of $6,098,000, was attributable to this factor.
During 1995, as a result of loan restructures, loan payoffs and paydowns,
management was able to quantify the loss exposure associated with a number of
large loans against which significant
37
<PAGE>
loan loss reserves were allocated. In total, the resulting charge-offs were
significantly less than the level of reserves allocated against the individual
loans. The reduced level of charge-offs in combination with significant loan
loss recoveries in the amount of $375,000 in 1995, resulted in the determination
at year end, in accordance with the Bank's allowance for loan loss policy, that
the balance of the Allowance would be significantly in excess of that required
to cover the loan loss exposure estimated to exist in the loan portfolio unless
the bank effected a provision expense reversal. As a result, a provision expense
reversal in the amount of $675,000 was recorded in the fourth quarter of 1995,
reducing the Allowance to $2,659,000. This resulted in total negative provision
expense for the year ended December 31, 1995 of $425,000.
Though the amount of charge-offs for the year ended December 31, 1995 of
$1,333,000 was high as compared to the prior year level of $290,000, this is
largely the result of the timing of the quantification of the losses and related
charge-offs associated with several of the large loans mentioned above. As
mentioned above, to a significant degree by December 31, 1994, the prospective
loss exposure associated with these loans had already been recognized and was
reflected in the balance of the Allowance.
While the current level of the Allowance is believed to be adequate, the Company
continues to hold a large concentration of commercial real estate loans that
remain vulnerable to loan default. Deterioration in the local economy or real
estate market, or upward movements in interest rates, could have an adverse
effect on the performance of the loan portfolio that could result in the need
for an increase in the Allowance. Conversely, further improvement in overall
asset quality, favorable economic conditions or a favorable local real estate
market could positively affect the Allowance.
Nonperforming Assets
Information with respect to nonperforming assets is set forth below:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------
(in thousands) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $1,948 $4,340 $1,220 $4,103 $10,638
Accruing loans past due
90 days or more 169 258 249 194 565
Restructured loans 3,427 1,483 4,212 7,455 7,678
Real estate owned 1,973 2,222 5,299 3,833 1,828
Financed real estate owned -- -- 450 1,535 --
In-substance repossessions n/a 703 197 7,262 6,594
---------- ------- ------- ------- -------
$ 7,517 $ 9,006 $11,627 $24,382 $27,303
======= ======= ======= ======= =======
</TABLE>
38
<PAGE>
Nonperforming loans (consisting of nonaccrual loans, accruing loans past due 90
days or more and restructured loans) are comprised of the following:
December 31,
-------------------------------------
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
Real estate mortgage loans:
Residential $ 386 $ 115 $ 126
Commercial 5,007 5,667 5,420
Real estate construction loans -- -- --
Commercial and industrial loans -- 156 12
Consumer and other loans 151 143 123
-------- -------- --------
Total loans $ 5,544 $ 6,081 $ 5,681
======= ======= =======
The following table sets forth certain information regarding nonperforming
commercial loans:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994 December 31, 1993
----------------------- ---------------------- --------------------
(dollars in thousands) Number of Outstanding Number of Outstanding Number of Outstanding
Type of Property Security Loans Balance Loans Balance Loans Balance
- ----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
1-4 Family Residential 1 $ 158 3 $ 308 2 $ 238
5 or more Family Residential 5 977 5 1,073 5 970
Non-Residential Real Estate 5 3,872 3 4,286 5 4,212
Commercial and Industrial -- -- 2 156 2 12
--- ---------- --- -------- --- ---------
11 $5,007 13 $5,823 14 $5,432
== ====== == ====== == ======
</TABLE>
Although the level of nonperforming assets declined in 1995, the level of
nonperforming assets had a significant adverse effect on interest income.
Interest income that would have been recorded in the year ended December 31,
1995 on nonaccrual and restructured loans under their original terms was
$487,000. Interest income actually recorded on these loans in 1995 was $406,000.
Management believes that the level of nonperforming assets will continue to
decline in 1996. However, this expectation is predicated on continued
stabilization of the real estate market and local economy, along with a
continuation of the trend in lower default rates for commercial real estate
loans. This favorable trend could be adversely affected by an increase in
interest rates.
Nonperforming loans were $5.5 million, or 5.5%, of total loans at December 31,
1995, as compared to $6.1 million, or 5.5%, of total loans at December 31, 1994.
Included in nonperforming loans at December 31, 1995 and 1994 are $3.4 million
and $1.5 million, respectively, of restructured loans which are performing in
accordance with the material terms of the restructuring.
Impaired Loans
Management reviews loans on a case by case basis to determine which loans should
be classified as impaired. If management believes there is a high probability of
a loss of principal or interest, then such loans are determined to be impaired.
At December 31, 1995, the recorded investment in loans
39
<PAGE>
for which impairment has been recognized in accordance with FASB Statement No.
114 totaled $3.7 million, of which $230,000 related to loans with no allocated
reserve because the loans have been partially written down through charge-offs
and $3.5 million related to loans with corresponding allocated reserves of
$398,000 for the year ended December 31, 1995. Included in the impaired loans
amount is $301,000 in nonaccrual loans and $3.4 million in restructured loans.
All impaired loans were secured by real estate at December 31, 1995 and
accounted for by the lower of the fair value of the collateral or amortized loan
value.
Potential Problem Loans
Though the real estate market has improved to some degree as compared to the
depressed conditions of several years ago, management recognizes that the
overall soft Maine real estate market creates an increased risk that currently
performing loans could become nonperforming. In particular, management believes
that the greatest exposure is in the area of currently performing potential
problem commercial real estate loans.
These loans, not otherwise identified as nonperforming, nonaccrual or as a
troubled debt restructuring, are largely secured by income-producing properties
located in Maine. In many cases, the borrowers on these loans have experienced
inadequate rental revenues, increased vacancies and cash flow problems. Most of
these potential problem loans were originated in the late 1980's.
At December 31, 1995, the Bank had identified approximately $6.9 million of
currently performing but potential problem loans. Such loans represented 4.7% of
total assets, ranging in size from $4,000 to $1.8 million. This compares to $9.0
million of potential problem real estate loans at December 31, 1994, a 23.5%
decrease. Of the 1995 total, three loan relationships (property type other)
involving seven loans represent $5.5 million, or 79.2%. During the first quarter
of 1996, a $500,000 payment was applied against one of the three larger loan
relationships.
The following table sets forth certain information regarding potential problem
loans at December 31, 1995:
Number of Balance
Type of Security Property Outstanding Loans (in thousands)
- --------------------------------------------------------------------------
Apartments 6 $ 2,647
Industrial 1 1,362
Single family 4 119
Other 13 2,757
-- ------
24 $6,885
== ======
Management is unable to predict the extent, if any, to which these loans may
become nonperforming in the future. An increase in the level of nonperforming
loans could result in the need for increased provisions for loan losses. As of
December 31, 1995, the Company believes the Bank's aggregate allocated loan loss
reserves against these potential problem loans, determined in accordance with
the
40
<PAGE>
Bank's allowance for loan loss policy, is adequate to cover the loss exposure
estimated to be contained within these potential problem loans.
Real Estate Owned
Real estate owned ("REO") consists of properties acquired through mortgage loan
foreclosure proceedings or in full or partial satisfaction of outstanding loan
obligations, and sales of REO properties financed by Coastal which do not meet
the requirements of Financial Accounting Standards Board ("FASB") Statement No.
66. At December 31, 1995, REO totaled approximately $2.0 million and consisted
of $1.4 million of office buildings and mixed use commercial buildings, $0.5
million of apartment buildings and $0.1 million of land.
Liquidity - Coastal
Deposits totaled $125.7 million at December 31, 1995, a decrease of $4.3 million
(or 3.4%) from the level of $130.0 million at December 31, 1994.
On February 22, 1996, the Bank entered into an agreement to sell its Kezar Falls
branch to Maine Bank & Trust Company. Included in the sale are all of the
branch's deposits (totaling approximately $9.9 million at December 31, 1995),
the real estate and certain of the furniture, fixtures and equipment of the
branch. The agreement between the Bank and Maine Bank & Trust Company is
expected to be consummated during the second quarter of 1996, subject to the
receipt of appropriate regulatory approvals.
Coastal has the capability of borrowing additional funds from the Federal Home
Loan Bank ("FHLB") of Boston with three-day advance notice when adequately
secured by qualified collateral. In addition, effective as of June 8, 1993, the
FHLB of Boston restricted new advances to maturities of six months or less as a
result of the cross guaranty claim. On May 1, 1995, the Bank received a letter
from the FHLB of Boston stating that it would lengthen the maturity restriction
on new fixed term and fixed rate advances from six months to one year. See Note
I to the Consolidated Financial Statements for information relating to advances
from the FHLB of Boston. Coastal is also approved by the Federal Reserve Bank of
Boston to obtain liquidity from its "Discount Window" provided that assets are
pledged to the Federal Reserve Bank's satisfaction.
Unfunded loan commitments for December 31, 1995 and 1994 were approximately $8.0
million and $7.8 million, respectively, consisting primarily of home equity
lines of credit secured by real estate. There were no standby letters of credit
for the years ended December 31, 1995 and 1994.
41
<PAGE>
The breakdown of such commitments is as follows:
(in thousands) 1995 1994
- -----------------------------------------------------------------------------
Real estate mortgage:
Residential $ 174 $ 85
Commercial -- --
Construction -- --
Commercial lines of credit 191 615
Consumer lines of credit 7,649 7,137
------- -------
Total $8,014 $7,837
====== ======
Coastal expects to fund these commitments through its traditional sources
previously described and believes that liquidity is adequate.
Liquidity - Parent
On a parent company only basis, the Company conducts no separate operations. Its
business consists of the business of its banking subsidiary. In addition to the
FDIC Note in the principal amount of $9.0 million issued by the Company to the
FDIC on January 31, 1995 in connection with the settlement of the cross guaranty
claim, the Company's expenses primarily include Delaware franchise taxes
associated with the Company's authorized capital stock, certain legal and
various other expenses. Expenses, including certain audit and professional fees,
insurance and other expenses, are allocated between Coastal and the Company
based upon the relative benefits derived. At December 31, 1995, the Company's
assets (other than its investment in its subsidiary) consisted of $99,000 in
cash and fixed assets of $8,000.
The principal source of cash for the Company is dividend payments from Coastal;
however, as described in Note J to the Consolidated Financial Statements, there
exist certain restrictions regarding the ability of Coastal to transfer funds.
Following the receipt of appropriate regulatory approvals, on November 30, 1994
and November 13, 1995 Coastal paid the Company cash dividends of $175,000 and
$200,000, respectively, for certain current and anticipated operating expenses
of the Company.
42
<PAGE>
Capital - Coastal
The table below sets forth the regulatory capital requirements and capital
ratios for Coastal at December 31, 1995:
(dollars in thousands)
Tier 1 capital (Leverage) to total assets (1)ratio
Qualifying capital $13,296
Actual % 9.19%
Minimum requirement % 6.00%
Average assets for fourth quarter $144,658
Tier 1 capital to risk-weighted assets
Qualifying capital $13,296
Actual % 14.32%
Minimum requirement % 4.00%
Total capital to risk-weighted assets (Tier 1 and Tier 2)
Qualifying capital $14,475
Actual % 15.59%
Minimum requirement % 8.00%
Gross risk-weighted assets $92,821
Note: As described in Note A to the Consolidated Financial Statements, the
Memorandum of Understanding among Coastal, the FDIC and the Maine Bureau of
Banking requires Coastal to maintain a Tier 1 capital to total assets ratio of
6.0% or greater. Coastal's Tier 1 capital to total assets ratio at December 31,
1995 was 9.19%.
(1) Calculated on an average quarterly basis
Capital - Company
The Federal Reserve capital adequacy guidelines apply on a consolidated basis to
bank holding companies with consolidated assets of $150 million or more. For
bank holding companies which have less than $150 million in consolidated assets,
as did the Company for each of the quarters ended March 31, 1995, June 30, 1995,
September 30, 1995 and December 31, 1995, the guidelines are applied on a
bank-only basis (as opposed to a consolidated basis) unless (i) the parent bank
holding company is engaged in nonbank activity involving significant leverage or
(ii) the parent company has a significant amount of debt that is held by the
general public. The Federal Reserve capital adequacy guidelines provide that
"debt held by the general public" is debt held by parties other than financial
institutions, officers, directors, and controlling stockholders of the banking
organization or their related interests. The FDIC Note is not considered to be
"debt held by the general public" for purposes of such capital guidelines. As a
result, applied on a bank-only basis, the Company's ratios
43
<PAGE>
of tier 1 capital to total assets, tier 1 capital to risk-weighted assets, and
qualifying total capital to risk-weighted assets of 9.19%, 14.32%, and 15.59%,
respectively, at December 31, 1995 were in complaince with such guidelines. If
the Company were required to calculate its ratios of tier 1 capital to total
assets, tier 1 capital to risk-weighted assets, and qualifying total capital to
risk-weighted assets on a consolidated basis, such ratios would be 2.74%, 4.27%
and 5.54%, respectively.
The Company suspended the payment of cash dividends to its stockholders in the
fourth quarter of 1989 and has not paid any cash dividends to its stockholders
since that time. See Item 8, "Financial Statements and Supplementary Data --
Note J," for dividend restrictions.
RESULTS OF OPERATIONS
Comparison of Year Ended December 31, 1995 to Year Ended December 31, 1994.
Net Income
For the year ended December 31, 1995, the Company had net income of $1.7 million
compared to a net loss of $8.9 million at December 31, 1994. The improvement in
earnings for 1995 is primarily attributable to three items: (i) the 1994 net
loss included a $9.0 million extraordinary charge to earnings upon the issuance
of a Note to the FDIC for the waiver and release of the cross guaranty claim
against the Bank, (ii) a negative provision for loan losses in 1995 of $425,000,
and (iii) a reduction in other expenses of $1.1 million. Each of these principal
components of the Company's operating results is discussed below.
Net Interest Income
Net interest income for the year ended December 31, 1995 was $5.9 million,
compared to $6.0 million for the year ended December 31, 1994. Included in the
1995 net interest income total is interest expense of $0.4 million for the
Company's $9.0 million Note to the FDIC.
Changes in net interest income are caused by changes in interest rates, changes
in the mix of earning assets and sources of funds, changes in the level of
earning assets and sources of funds and changes in the amount of non-earning
assets and non-interest sources of funds. Overall, the Company's interest income
for 1995 decreased $73,000 as a result of a $973,000 reduction in interest
income due to the decline in total interest earning assets, which was offset in
part by an increase in interest income of $900,000 from higher rates received on
interest earning assets. Interest expense increased by $124,000. This was the
result of increased interest expense of $921,000 due to an increase in the rates
paid on interest bearing liabilities partially offset by reduced interest
expense of $797,000 associated with lower balances of interest bearing
liabilities. For further detail, see the rate/volume analysis that follows.
Provision for Loan Losses
The provision for loan losses for the year ended December 31, 1995 was
$(425,000) as compared to $107,000 for the year ended December 31, 1994. In the
fourth quarter of 1995, the Company
44
<PAGE>
posted a $675,000 provision expense reversal resulting from the determination by
management that the level of the Allowance was at a level estimated to be in
excess of that required to adequately cover the loss exposure estimated by
management to be inherent within the loan portfolio. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Allowance for Loan Losses."
The Company's policy is to fund the Allowance by charging operations in the form
of provision for loan loss expense which represents estimated loss exposure
based on periodic evaluations of the loan portfolio and current economic trends.
The Company continues to hold a large concentration of commercial real estate
loans. The ultimate collectibility of the Company's commercial real estate loan
portfolio is particularly susceptible to changes in local real estate market
conditions. Deterioration in the local economy or real estate market, or upward
movement in interest rates, could have an adverse impact on the loan portfolio
that could result in the need for increased provision for loan losses.
Management believes that the Allowance is adequate at December 31, 1995 and that
foreclosed real estate is recorded at the lower of cost or estimated fair value
(minus estimated costs to sell). While management uses available information to
recognize losses on loans and real estate owned, future additions to the
Allowance and write-downs may be necessary based on changes in the financial
condition of various borrowers, new information that becomes available relative
to various borrowers, loan real estate collateral or real estate owned, as well
as changes in local, regional or national economic conditions. In addition,
various regulatory authorities, as an integral part of their examination
process, periodically review the Company's Allowance and the carrying value of
real estate owned. Such authorities may require the Company to recognize
additions to the Allowance and/or write down the carrying value of real estate
owned, based on their judgments on information available to them at the time of
their examination.
Other Income
Other income in 1995, including investment securities gains and losses, was
$572,000 as compared to $429,000 in 1994. This increase is primarily the result
of a $132,000 charge to earnings in 1994 establishing a valuation reserve
against the deferred mortgage servicing assets as a result of higher than
anticipated prepayments of serviced loans.
Other Expenses
The following table summarizes 1995 and 1994 other expenses:
Increase
(dollars in thousands) 1995 1994 (Decrease)
- -------------------------------------------------------------------------------
Salaries and employee benefits $2,092 $2,020 $ 72
Occupancy 440 568 (128)
Net cost of operation of REO and ISR 56 527 (471)
Other operating expenses 2,606 3,163 (557)
------- ------- --------
$5,194 $6,278 $(1,084)
====== ====== =======
45
<PAGE>
The decrease in total expenses from 1994 to 1995 is mainly attributable to four
items: (i) in 1994 the Company incurred $812,000 in expenses associated with the
settlement of the cross guaranty claim versus approximately $300,000 in 1995,
(ii) the net cost of REO declined by $471,000 ($258,000 from reduced expenses
(net of revenues) resulting from fewer REO properties and decreased vacancies,
and $213,000 resulting from a reduction in write downs from REO properties),
(iii) the cost of FDIC insurance expense on deposits declined $216,000 resulting
from a decrease in the Bank's assessment rate, and (iv) a reduction in occupancy
expenses resulting from the closure of two banking offices in the second and
third quarters of 1994.
Comparison of Year Ended December 31, 1994 to Year Ended December 31, 1993.
Net Income
For the year ended December 31, 1994, the Company had a net loss of $8.9
million, compared to net income of $0.7 million for the year ended December 31,
1993. This decrease was primarily attributable to two items. First, as a result
of the consummation of the Amended and Restated Settlement Agreement on January
31, 1995, First Coastal issued to the FDIC a Note in the amount of $9.0 million
in consideration of the waiver and release of the cross guaranty claim against
the Bank. First Coastal recorded the Note and recognized an extraordinary charge
to earnings in the amount of $9.0 million at December 31, 1994. Second, expenses
related to the settlement of the cross guaranty claim totaled $812,000 for the
year ended December 31, 1994.
Net Interest Income
Net interest income for the year ended December 31, 1994 was $6.1 million, an
increase of $0.6 million as compared to $5.5 million for the year ended December
31, 1993. This increase is mainly attributable to a rising interest rate
environment for the year ended December 31, 1994 and which resulted in an
increase in rates on existing adjustable rate loans and investments.
Notwithstanding the increased rate environment that was experienced throughout
1994, the Company's rates paid on deposit transaction accounts remained
relatively unchanged, thereby increasing the spread on Earning Assets versus
Sources of Funds, positively impacting net interest income. However, earning
assets and sources of funds do not reprice in exactly the same manner as
interest levels change. Another factor contributing to the increase in net
interest income was the investment of interest earning deposits in higher
earning securities of approximately $15.7 million throughout 1994.
Provision for Loan Losses
The provision for loan losses for the year ended December 31, 1994 was $107,000
as compared to negative provision expense of $30,000 for the year ended December
31, 1993. In 1992 and 1991, significant provisions were made to recognize the
perceived deteriorating real estate market. In 1993, there was present a more
stable environment. Also, many of the previously recognized loan problems
46
<PAGE>
were worked out or reclassified to a foreclosed status. In addition, loan
balance levels declined in 1993 and 1994 compared to prior years.
Other Income
Other income in 1994, including investment securities gains and losses, was
$429,000 as compared to $1,422,000 in 1993. This decrease was primarily the
result of a decrease in gain on sales of mortgage loans as a result of a steady
reduction in loan origination volume caused by rising interest rates experienced
during 1994; consequently, fewer mortgage backed securities were sold.
Additionally, the Company posted an unrealized loss on loans held for sale of
$134,000 in the second quarter of 1994. The 1994 servicing fee income for loans
serviced for others reflects a $132,000 charge to earnings in establishing a
valuation reserve against the deferred mortgage servicing asset as a result of
higher than anticipated prepayments of serviced loans.
Other Expenses
The following table summarizes 1994 and 1993 other expenses:
Increase
(dollars in thousands) 1994 1993 (Decrease)
- --------------------------------------------------------------------------------
Salaries and employee benefits $2,020 $2,218 $(198)
Occupancy 568 595 (27)
Net cost of operation of REO and ISR 527 593 (66)
Other operating expenses 3,163 2,752 411
------- ------- -----
$6,278 $6,158 $120
====== ====== ====
The most significant increases in other operating expenses for the year ended
December 31, 1994 were the expenses related to the settlement of the cross
guaranty claim which amounted to $812,000 of which $677,000 was for legal
expenses and $135,000 was for accounting and professional services. All other
operating expense categories, exclusive of expenses related to the settlement of
the cross guaranty claim, decreased by a net of $692,000, primarily resulting
from staff reductions, two branch closures and normal cost cutting measures
throughout most operating expense categories.
Rate/Volume Analysis
The table below sets forth certain information regarding changes in interest
income and expense of the Company for the periods indicated. For each category
of interest earning assets and interest bearing liabilities, information is
provided on changes attributable to: (i) changes in rates (change in rate
multiplied by old volume); (ii) changes in volume (change in volume multiplied
by old rate); and (iii) changes in rate/volume (change in rate multiplied by the
changes in volume which is proportionately distributed to the volume and rate
changes).
47
<PAGE>
The table illustrates the relative effect of changes in interest rates and the
Company's net earning assets on its net interest income.
Year Ended December 31, 1995
Compared to
Year Ended December 31, 1994
------------------------------------------
Increase (Decrease)
Due to
-------------------------
(in thousands) Rate Volume Total
- ------------------------------------------------------------------------------
Interest income:
Loans(1) $450 $(887) $(437)
Investments held to maturity 123 160 283
Investment available for sale 37 65 102
Interest earning deposits 294 (242) 52
Assets held for sale (4) (69) (73)
------- ------- ------
Total interest income 900 (973) (73)
----- ------ ------
Interest expense:
Savings 67 (229) (162)
Other time deposits 510 19 529
FHLB advances (75) (587) (662)
FDIC Note 419 - 419
----- -------- -----
Total interest expense 921 (797) 124
----- ----- -----
Net change in net interest income
before provision for loan losses $ (21) $ (176) $ (197)
===== ====== ======
(1) For purposes of these computations, nonaccrual loans are included in the
average balance volumes.
Year Ended December 31, 1994
Compared to
Year Ended December 31, 1993
------------------------------------------
Increase (Decrease)
Due to
-------------------------
(in thousands) Rate Volume Total
- --------------------------------------------------------------------------------
Interest income:
Loans(1) $( 32) $(1,384) $(1,416)
Investments 23 498 521
Interest earning deposits 252 (145) 107
Assets held for sale (19) (161) (180)
----- ------- -----
Total interest income 224 (1,192) (968)
---- ------ -----
Interest expense:
Savings (116) (113) (229)
Other time deposits (218) (365) (583)
FHLB advances (120) (596) (716)
---- ------ ------
Total interest expense (454) (1,074) (1,528)
---- ------ ------
Net change in net interest
income before provision
for loan losses $678 $( 118) $ 560
==== ======= ======
(1) For purposes of these computations, nonaccrual loans are included in the
average balance volumes.
48
<PAGE>
Average Balance Sheets
The table below shows the major items that affected net interest income for each
of the three years in the period ended December 31, 1995.
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
----------------------------- --------------------------- ---------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
--------------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans (1)(2) $105,742 $9,642 9.12% $115,940 $10,079 8.69% $131,795 $11,494 8.72%
Investments
Investments 1993 3,692 194 5.25
Available for sale 9,782 606 6.20 8,658 504 5.82 -- -- --
Held to maturity 7,917 494 6.24 4,504 210 4.68 -- -- --
Interest earning deposits 15,889 945 5.95 21,808 894 4.10 26,747 787 2.94
Assets held for sale 372 20 5.38 1,471 93 6.32 3,591 273 7.60
-------- ------- -------- ------- -------- --------
Total interest earning assets 139,702 11,707 8.38 152,381 11,780 7.73 165,825 12,748 7.69
Noninterest earning assets 6,444 10,206 15,880
-------- -------- --------
Total assets $146,146 $162,587 $181,705
======== ======== ========
Liabilities:
Savings $ 60,159 $ 1,644 2.73% $ 68,911 $ 1,806 2.62% $ 72,955 $2,035 2.79%
Other time deposits 61,344 3,333 5.43 60,930 2,804 4.60 68,288 3,387 4.96
FHLB advances 7,253 454 6.26 15,296 1,116 7.30 22,679 1,832 8.08
FDIC Note(3) 9,000 419 4.66 25 -- -- -- -- --
-------- ------- -------- -------- ------- ------
Total interest bearing liabilities 137,756 5,850 4.25 145,162 5,726 3.94 163,922 7,254 4.43
Noninterest bearing deposits 4,973 5,798 6,132
Noninterest bearing liabilities 565 1,002 1,844
Stockholders' equity 2,852 10,625 9,807
-------- -------- --------
Total liabilities and stockholders'equity $146,146 $162,587 $181,705
======== ======== ========
Net interest income $ 5,857 $ 6,054 $5,494
======== ======== ======
Net interest rate spread (4) 4.13% 3.79% 3.26%
Net interest margin (5) 4.19% 3.97% 3.31%
<FN>
(1) For purposes of these computations, nonaccrual loans are included in the
average loan amounts outstanding.
(2) Included in interest income on loans are loan fees of $95,000, $277,000 and
$251,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
(3) The FDIC Note bears interest commencing upon issuance on January 31, 1995
at a rate of 5.0% for the first year and 6.5% for the second year.
(4) Return on interest earning assets less cost of interest bearing
liabilities.
(5) Net interest income divided by average earning assets.
</FN>
</TABLE>
49
<PAGE>
Impact of Inflation and Changing Prices
The Company's financial statements have been prepared in terms of historical
dollars, without considering changes in the relative purchasing power of money
over time due to inflation. Unlike most industrial companies, virtually all of
the assets and liabilities of a financial institution are monetary in nature. As
a result, interest rates have a more significant impact on a financial
institution's performance than the effect of general levels of inflation.
Interest rates do not necessarily move in the same direction or in the same
magnitude as the prices of goods and services. Notwithstanding this, inflation
can directly affect the value of loan collateral, in particular real estate.
Sharp decreases in real estate prices, as discussed previously, have resulted in
significant loan losses and losses on real estate acquired. Inflation, or
disinflation, could continue to significantly affect the Company's earnings in
future periods.
50
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
First Coastal Corporation:
We have audited the accompanying consolidated balance sheets of First Coastal
Corporation (the "Company") and subsidiary as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of First
Coastal Corporation and subsidiary as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As discussed in Note B to the consolidated financial statements, on January 1,
1995, the Company changed its method of accounting for impaired loans to adopt
the provisions of Financial Accounting Standards Board Statement No. 114 and as
of January 1, 1994, changed its method of accounting for investments to adopt
the provisions of Financial Accounting Standards Board Statement No. 115.
Coopers & Lybrand, L.L.P.
Portland, Maine
February 5, 1996
51
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
First Coastal Corporation and Subsidiary
December 31,
---------------------------------
(in thousands, except share and per share amounts) 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Noninterest earning deposits and cash - Note C $4,466 $4,701
Interest earning deposits 4,375 6,636
------- -------
Cash and Cash Equivalents 8,841 11,337
Federal funds sold 10,000 10,000
Trading securities - 915
Investment securities - Note D:
Held-to-maturity 11,786 6,822
Available-for-sale (at market value) 7,926 9,924
------- -------
19,712 16,746
Federal Home Loan Bank stock-at cost 1,315 1,315
Assets held for sale - Note B 281 185
Loans - Note E 100,550 109,656
Less:Deferred loan fees, net (22) (31)
Allowance for loan losses - Note F (2,659) (4,042)
-------- ----------
97,869 105,583
Premises and equipment - Note G 3,073 2,941
Accrued income receivable 1,004 783
Real estate owned and repossessions 1,973 2,925
Other assets 1,385 1,482
----------- -----------
TOTAL ASSETS $145,453 $154,212
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits - Note H $125,665 $130,037
Advances from Federal Home Loan Bank - Note I 6,000 12,612
FDIC Note - Note A 9,000 9,000
Accrued expenses and other liabilities 791 549
----------- -----------
TOTAL LIABILITIES 141,456 152,198
STOCKHOLDERS' EQUITY - Notes J and K
Preferred stock, $1 par value; Authorized
1,000,000 shares; none outstanding
Common Stock, $1 par value: Authorized
6,700,000 shares; issued and outstanding
1995 and 1994 - 600,361 shares - Note K 600 600
Paid-in capital 29,375 29,375
Retained earnings (deficit) (26,016) (27,676)
Unrealized gain (loss) on available for sale securities 38 (285)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,997 2,014
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $145,453 $154,212
======== ========
</TABLE>
See notes to consolidated financial statements.
52
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
First Coastal Corporation and Subsidiary
Year Ended December 31,
-----------------------------------------------
(in thousands, except per share amounts) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest and Dividend Income
Interest and fees on loans $9,662 $10,172 $11,767
Interest and dividends on investment securities:
Taxable interest income 832 425 69
Dividends 268 290 125
Other interest income 945 893 787
-------- -------- --------
Total Interest and Dividend Income 11,707 11,780 12,748
Interest Expense
Deposits - Note H 4,977 4,610 5,422
Borrowings:
Advances from Federal Home Loan Bank 454 1,116 1,832
FDIC Note 419 - -
-------- ------------ -------------
Total Interest Expense 5,850 5,726 7,254
------- -------- ---------
Net Interest Income 5,857 6,054 5,494
Provision for loan losses - Note F (425) 107 (30)
-------- --------- ----------
Net Interest Income After Provision for Loan Losses 6,282 5,947 5,524
Other Income
Service charges on deposit accounts 257 284 300
Other service charges and fees 78 81 67
Gain (loss) on investment securities transactions (4) 38 99
Gain (loss) on sales of mortgage loans 17 (8) 606
Other 224 34 350
------- -------- --------
572 429 1,422
------- ------- -------
Other Expenses
Salaries and employee benefits - Note L 2,092 2,020 2,218
Occupancy - Note G 440 568 595
Net cost of operation of real estate owned 56 527 593
Other - Note P 2,606 3,163 2,752
------- ------ -------
5,194 6,278 6,158
------- ------ -------
Income Before Income Taxes,
Minority Interest and Extraordinary Item 1,660 98 788
Income tax benefit - Note M - - (4)
Minority interest - - 44
-------- -------- ------
Income Before Extraordinary Item 1,660 98 748
Extraordinary Item -
Charge to earnings as a result of the settlement
of the cross guaranty claim - Note A - 9,000 -
----------- ---------- -----------
NET INCOME (LOSS) $ 1,660 $(8,902) $ 748
======= ========= =======
PER SHARE AMOUNTS
Weighted Average Shares Outstanding - Note K 600,361 600,361 600,361
Income Per Share before Extraordinary item $ 2.77 $ .16 $ 1.25
======== ============ ========
Net Income (Loss) per share $ 2.77 $ (14.83) $ 1.25
======== ========== ========
</TABLE>
See notes to consolidated financial statements
53
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
First Coastal Corporation and Subsidiary
Net
Unrealized
Gain (Loss)
Retained on Available
Common Paid-In Earnings for Sale
(in thousands) Stock Capital (Deficit) Securities Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at December 31, 1992 $6,007 $22,645 $(19,522) - $9,130
Reverse stock split;
One-for-ten - Note K (5,407) 5,407 - - -
---------- --------- ----------- ------------ -----------
Balances at December 31, 1992,
as restated 600 28,052 (19,522) - 9,130
1993 net income 748 - 748
--------- ------------ --------- ------------ --------
Balances at December 31, 1993 600 28,052 (18,774) 9,878
1994 net loss (8,902) (8,902)
Increase in net unrealized loss on
available for sale securities - - - $ (285) (285)
Repurchase of minority interest - 1,323 - - 1,323
--------- --------- ------------- ------------ -------
Balances at December 31, 1994 600 29,375 (27,676) (285) 2,014
1995 net income 1,660 1,660
Increase in net unrealized gain on
available for sale securities - - - 323 323
--------- ------------- ------------- -------- ---------
Balances at December 31, 1995 $ 600 $29,375 $(26,016) $ 38 $ 3,997
====== ======= ======== ======== =======
</TABLE>
See notes to consolidated financial statements.
54
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
First Coastal Corporation and Subsidiary Year Ended December 31,
-----------------------------------------------
(in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net Income (loss) $1,660 $(8,902) $748
Adjustments to reconcile net income to net cash provided by operating activities:
Charge to earnings as a result of the settlement of the cross guaranty claim - 9,000 -
Provision for loan losses (425) 107 (30)
Writedowns of REO and ISR 13 226 467
Depreciation and amortization 292 300 323
Amortization of investment security (discounts) (248) (183) (2)
Realized investment securities (gains) losses 4 (38) (99)
(Gains) losses from assets held in trading accounts (33) 93 -
Realized (gains) on assets held for sale (17) (8) (606)
(Increase) decrease in trading account securities 948 (1,008) -
Net change in assets held for sale (79) 3,244 4,067
Decrease (increase) in interest receivable (221) (78) 252
Increase (decrease) in interest payable 392 (45) (77)
Net change in other assets 1,988 4,016 5,991
Net change in other liabilities (150) (129) 182
--------- ------- -------
Net cash provided by operating activities 4,124 6,595 11,216
Investing Activities
(Increase) in federal funds sold - (10,000) -
Maturities of securities - - 1,233
Maturities of securities held to maturity 8,000 634 -
Sales of securities - - 7,069
Sales of securities available for sale 2,324 233 -
Purchases of investment securities - - (5,176)
Purchases of investment securities available for sale (2) (8,990) -
Purchases of investment securities held to maturity (12,721) (6,648) -
Net change in loans 7,187 12,306 19,924
Net (purchases) of premises and equipment (424) (86) (2)
Decrease in Federal Home Loan Bank Stock - - 344
---------- ----------- ---------
Net cash provided (used) by investing activities 4,364 (12,551) 23,392
Financing Activities
Net change in deposits (4,372) (10,550) (15,731)
Proceeds from borrowings - - 5,000
Payments on borrowings (6,612) (5,496) (8,141)
Purchase of Coastal Bancorp's minority interest - (200) -
------------ ---------- ---------
Net cash used by financing activities (10,984) (16,246) (18,872)
------- -------- --------
Increase (decrease) in cash and cash equivalents (2,496) (22,202) 15,736
Cash and cash equivalents at beginning of period 11,337 33,539 17,803
------- ------- -------
Cash and cash equivalents (interest and non- interest bearing) at end of period $ 8,841 $11,337 $33,539
======= ======= =======
Noncash Investing and Financing Activities
FDIC Note - $9,000 -
Change in unrealized holding losses on investment securities available for sale $323 285 -
Securities available for sale collateralized by portfolio mortgage loans - 1,003 -
Transfer of loans to real estate owned and in-substance repossessions 952 827 $2,847
</TABLE>
See notes to consolidated financial statements.
55
<PAGE>
Notes to Consolidated Financial Statements
First Coastal Corporation and Subsidiary
December 31, 1995
Note A. REGULATORY MATTERS
Settlement of FDIC Cross Guaranty Claim
On September 6, 1991, First Coastal Corporation (the "Company") announced that
its Connecticut subsidiary, Suffield Bank, was placed into receivership by the
Connecticut Banking Department and the Federal Deposit Insurance Corporation
("FDIC") was appointed as the receiver. Under the Federal Deposit Insurance Act
("FDIA"), as amended by the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA"), commonly-controlled depository institutions
such as Suffield Bank and Coastal Savings Bank ("Coastal" or the "Bank") are
liable for any loss incurred by the FDIC, or any loss which the FDIC reasonably
anticipates incurring, in connection with the default of one or more of the
commonly-controlled institutions. The FDIC had up to two years from September 6,
1991 to assert a cross guaranty claim against the Bank.
On September 3, 1991, the Company announced that Coastal had filed an
application with the FDIC for a waiver of any cross guaranty liability arising
from Suffield Bank. On September 9, 1992, the FDIC notified Coastal that it had
denied this request. The FDIC also indicated that it had authorized the issuance
of an assessment of liability under the cross guaranty provision and claimed an
anticipated loss to the Bank Insurance Fund resulting from the failure of
Suffield Bank in an amount which, if successfully asserted, would likely result
in the appointment of a receiver for Coastal. The FDIC delegated to the Director
of Supervision the authority to negotiate a settlement of the cross guaranty
liability prior to issuing a notice of assessment. On September 1, 1993, the
FDIC notified Coastal that it had until February 14, 1994 or such later date as
may be extended by the FDIC, to reach a settlement with the FDIC over the FDIC's
cross guaranty claim against Coastal resulting from the September 1991 failure
of Suffield Bank. In establishing a February 14, 1994 deadline for payment of
the cross guaranty liability, the FDIC indicated that its intention was to
negotiate a reasonable settlement of the cross guaranty claim, which would
enable the FDIC to maximize its recovery of losses incurred as a result of the
failure of the affiliated Suffield Bank.
On April 26, 1994, the Company, Coastal Bancorp ("Bancorp") and the Bank entered
into a definitive Settlement Agreement with the FDIC (the "Original Settlement
Agreement"). The Original Settlement Agreement provided that in consideration
for the waiver of the FDIC's cross guaranty claim against the Bank, the FDIC
would receive shares of a new class of convertible preferred stock of Coastal,
representing on conversion a 95% ownership position in the Bank. The waiver of
the cross guaranty claim was conditional and would become final and
unconditional upon the earlier of the date on which no shares of the convertible
preferred stock were outstanding or three years after the closing date of the
settlement, provided there had been no judicial determinations (or pending
actions asserting) that the stock was not validly issued, fully paid or
non-assessable.
Pursuant to the Original Settlement Agreement, the preferred stock would
automatically convert to common stock upon its sale by the FDIC to any third
party. The outstanding common stock of
56
<PAGE>
Coastal, representing a 5% ownership interest in the Bank on a post conversion
basis, would continue to be held by the Company. While the preferred stock was
to be voting stock, the FDIC agreed to grant a revocable proxy to Coastal so
that such shares would be voted in proportion to the votes cast by the other
holders of the Bank's common stock, subject to certain exceptions and
limitations.
In connection with the execution of the Original Settlement Agreement, Bancorp
paid the FDIC $200,000 and the FDIC delivered to Bancorp the shares of preferred
and common stock it held in Bancorp as receiver of Suffield Bank and a waiver
and release with respect to any rights related to the stock. As a result of
Bancorp's purchase of the stock, First Coastal became the owner of 100% of the
outstanding capital stock of Bancorp.
On July 20, 1994, prior to the Company submitting the Original Settlement
Agreement to its stockholders for approval, the United States Court of Federal
Claims issued an opinion in a case captioned Branch v. United States, No.
93-133C ("Branch"), which raised significant taking issues under the U.S.
Constitution adverse to the FDIC in connection with its assertion of cross
guaranty claims. After considering the Branch decision, the Boards of Directors
of the Company and the Bank concluded that it was in the best interests of the
Company, the Bank and the Company's stockholders to seek to modify the terms of
the Original Settlement Agreement.
Following extensive negotiations by the parties, the FDIC, the Company and the
Bank entered into the Amended and Restated Settlement Agreement dated as of
November 23, 1994 (the "Amended and Restated Settlement Agreement"), providing
for the settlement of the FDIC's cross guaranty claim against the Bank.
On January 31, 1995, following the receipt of stockholder approval, the Company,
Coastal and the FDIC consummated the Amended and Restated Settlement Agreement,
pursuant to which the Company issued to the FDIC a non-recourse promissory note
(the "Note" or the "FDIC Note") in the principal amount of $9.0 million in
consideration of the unconditional and irrevocable waiver and release of the
cross guaranty claim. As a result of the consummation of the Amended and
Restated Settlement Agreement, the Company recognized an extraordinary charge to
earnings of $9.0 million in the financial statements for the year ended December
31, 1994. The Company's obligations under the Note are secured by a pledge by
the Company of 100,000 shares of common stock, par value $1.00 per share, of the
Bank ("CSB Common Stock"), representing 100% of the outstanding CSB Common
Stock, pursuant to a Stock Pledge Agreement between the Company and the FDIC
dated January 31, 1995 (the "Stock Pledge Agreement"). The Stock Pledge
Agreement provides that the Company retains the right to receive all cash
dividends declared and paid on the pledged shares of CSB Common Stock and to
exercise all voting rights with respect to such shares for so long as no event
of default exists thereunder. Payment of principal and interest under the Note
is deferred until the "Maturity Date," which is January 31, 1997. If prior to
such Maturity Date the Company and the Bank have entered into a definitive
agreement regarding either an acquisition or recapitalization of the Company and
the Bank that, in either case, provides the Company with proceeds sufficient to
pay the FDIC the unpaid principal amount and interest under the Note, the
Maturity Date will be extended until the earlier of (i) July 31, 1997, (ii) the
first business day following January 31, 1997 on which such definitive agreement
is terminated or (iii) the date of closing of the acquisition or
recapitalization of the Company and the Bank.
57
<PAGE>
The Note bears interest (i) at a rate per annum equal to 5% from January 31,
1995 through February 1, 1996 and at a rate per annum equal to 6.5% thereafter
(compounded quarterly) to and including the earlier of (x) the date on which the
FDIC receives payment of the unpaid principal amount and accrued interest in
full or (y) the day prior to the Maturity Date; or alternatively, in the event
that there is an acquisition of the Bank by a third party, (ii) in an aggregate
amount equal to one half of any proceeds over $11.5 million received by the
Company from the sale of the Bank. The Amended and Restated Settlement Agreement
provides that if the Bank is sold prior to the Maturity Date, the aggregate
consideration paid by the acquiror in connection with such transaction will be
distributed in satisfaction of the Company's obligations under the Note as
follows: the first $9.0 million will be paid to the FDIC, the next $2.5 million
of such consideration will be paid to the Company, and any consideration over
$11.5 million will be divided equally between the FDIC and the Company.
On January 31, 1996, the Company announced that it intends to pursue a
recapitalization of the Company as the means to facilitate the satisfaction of
the Company's $9.0 million FDIC Note. As part of the recapitalization, the
Company expects to raise approximately $3.0 to $4.0 million through an offering
of its common stock, including a rights offering to the Company's existing
stockholders. The offering will be made only by means of a prospectus. In
addition to the proceeds from the common stock offering, the Company also
expects to use funds derived from dividends from the Bank and the proceeds from
a loan to satisfy its obligation under the FDIC Note. The recapitalization and
related transactions are subject to a number of conditions, including the
receipt of appropriate regulatory approvals, and there can be no assurance that
such recapitalization and related transactions will be consummated or that the
Company will be successful in repaying the FDIC Note. The Company anticipates
that the recapitalization would be completed in the third quarter of 1996.
FDIC Order to Cease and Desist and Memorandum of Understanding
Effective as of January 23, 1992, Coastal consented to an Order to Cease and
Desist (the "Order") issued by the FDIC and concurred with by the Maine Bureau
of Banking (the "Maine Bureau of Banking"). The Order required Coastal to cease
and desist from operating with an excessive volume of adversely classified
assets, engaging in any lending or management practices which are detrimental to
the Bank, engaging in violations of applicable laws and regulations, operating
with inadequate loan documentation, engaging in practices which produce
inadequate operating income and excessive loan losses, operating with inadequate
allowance for loan losses for the kind and quality of loans held, failing to
submit Reports of Condition and Income to the FDIC in accordance with
instructions, operating with inadequate liquidity and operating with excessive
interest rate risk exposure. The Order also required that certain affirmative
actions be taken relating to the preparation of certain plans and analyses and
the maintenance of specified capital ratios.
Effective December 8, 1994, the FDIC terminated the Order. The Order was
replaced with a Memorandum of Understanding ("Memorandum") among the Bank, the
FDIC and the Maine Bureau of Banking effective as of November 22, 1994. The
Memorandum provides, among other things, that (i) the Bank continue to maintain
its allowance for loan and lease losses in accordance with applicable regulatory
requirements, (ii) the Board of Directors of the Bank continue to review the
adequacy of the Bank's loan and lease loss reserves and provide for adequate
reserves, (iii) the Bank continue to have a Tier 1 capital to total assets ratio
at or in excess of 6.0%, (iv) the Bank continue to comply
58
<PAGE>
with the FDIC's Statement of Policy on Risk-Based Capital, (v) the Bank provide
monthly progress reports regarding substandard or doubtful assets, (vi) the Bank
agree not to extend or renew credit to, or for the benefit of, any borrower who
or which has a loan or other extension of credit with the Bank that has been
charged-off or classified in whole or in part, loss, doubtful or substandard and
is uncollected unless certain conditions are met, (vii) the Bank not declare or
pay any dividends without the prior written consent of the FDIC and the Maine
Bureau of Banking, and (viii) the Bank continue to furnish written progress
reports detailing the form and manner of any action taken to seek to secure
compliance with the Memorandum. In addition, the Board of Directors is required
to develop a written plan of action to reduce the Bank's risk position with
respect to each borrower who had outstanding principal debt owing to the Bank in
excess of $500,000 and for the formulation of a strategic plan and policies
covering investments, funds management and various lending policies.
Federal Reserve Memorandum of Understanding
In March 1988, the Company entered into a Memorandum of Understanding with the
Federal Reserve Bank of Boston which provided, among other things, for the
formulation of plans and policies covering capital adequacy, funds management,
the Company's management information system and the adoption of a written
dividend policy consistent with the policies of the Board of Governors of the
Federal Reserve System (the "Federal Reserve") regarding the payment of cash
dividends by bank holding companies. Management originally addressed these
matters by developing plans and policies which were submitted to the Federal
Reserve in 1988, and updated such plans and policies in 1992 and 1995. Effective
March 13, 1995, the Federal Reserve Bank of Boston terminated the Memorandum of
Understanding.
Note B. ACCOUNTING POLICIES
Business
First Coastal Corporation (formerly Suffield Financial Corporation), a Delaware
Corporation, was organized in January 1987 for the purpose of becoming the
parent holding company of Suffield Bank following Suffield Bank's conversion
from mutual to stock form. The Company acquired Coastal Bancorp, a Maine
corporation, which was the bank holding company of Coastal Savings Bank, a Maine
chartered, stock savings bank, on April 1, 1987. On September 6, 1991, Suffield
Bank was placed in receivership by the Connecticut Department of Banking,
leaving the Bank as the Company's principal operating subsidiary. On July 26,
1994, Coastal Bancorp was dissolved with the effect that the Bank became a
direct wholly-owned subsidiary of the Company. The principal business of the
Bank consists of retail and commercial banking, including attracting deposits
from the general public and originating residential mortgage, consumer,
commercial and small business loans. Deposits are federally insured by the Bank
Insurance Fund ("BIF"), which is administered by the FDIC.
Coastal Savings Bank was formed in 1981 as a Maine-chartered savings bank
through the consolidation of Brunswick Savings Institution and York County
Savings Bank, which were organized in 1858 and 1860, respectively. On July 11,
1984, the Bank completed its conversion to a Maine stock savings bank.
59
<PAGE>
Basis of Presentation
The consolidated financial statements of the Company and subsidiary have been
prepared in conformity with generally accepted accounting principles and
reporting practices applied in the banking industry. 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 those estimates. Prior period amounts are reclassified when necessary to
conform with the current year's presentation. Set forth below is a summary of
the significant accounting policies.
Most of the Company's commercial real estate loans as of December 31, 1995 are
collateralized by real estate in Maine which has experienced a significant
decline in value since the market peak in the late 1980's. In addition, all of
the real estate owned ("REO") are located in this same market. Accordingly, the
ultimate collectibility of a substantial portion of the Company's loan portfolio
and the recovery of a substantial portion of the carrying amount of REO have
been impacted by this real estate market decline and are particularly
susceptible to changes in market conditions in Maine.
While management uses available information to recognize losses on loans and
REO, future additions to the allowance for loan losses ("Allowance") or
writedowns may be necessary based on changes in economic conditions. In
addition, various regulatory authorities, as an integral part of their
examination process, periodically review the Company's Allowance and the
carrying value of REO. Such authorities may require the Company to recognize
additions to the Allowance and/or write down the carrying value of REO based on
their judgments of information available to them at the time of their
examination.
New Accounting Standards
In May 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard (SFAS) No. 122, Mortgage Servicing Rights,
which amends FASB Statement No. 65, Accounting for Certain Mortgage Banking
Activities. This standard eliminates the distinction between purchased and
originated mortgage servicing rights and establishes the use of a valuation
allowance to recognize any impairment in the fair value of mortgage servicing
rights. The Company believes that there will be no material impact to its
financial position and results of operations upon adopting FASB Statement No.
122 when required in 1996.
In addition, during October 1995, FASB issued SFAS No. 123, Accounting for
Stock-Based Compensation, which establishes fair-value based accounting to
recognize compensation expense related to stock-based transactions. For
employers, the fair-value based recognition provisions are not mandatory;
however certain disclosure requirements are provided. The Company intends to
comply with the disclosure requirements when required in 1996 and expects no
material impact to its financial statements or results of operations upon
adoption.
60
<PAGE>
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Investment Securities
Effective January 1, 1994, with the implementation of FASB Statement No. 115,
investment securities classified as available for sale are reported at fair
value, with unrealized gains and losses excluded from earnings and reported as a
separate component of stockholders' equity. Investment securities held to
maturity are stated at cost adjusted for amortization of bond premiums and
accretion of bond discounts. There was no effect to the Company's financial
statements or results of operations on January 1, 1994 as a result of
implementing FASB Statement No. 115. For the year ended December 31, 1995,
investment securities classified as available for sale increased in fair value
by $323,000 as a result of declining interest rates.
As of December 31, 1995, the Company's investment accounting policy states that
all securities purchased with an original maturity of over one year, other than
mortgage backed securities originated by the Bank with current loan production,
will be classified as available for sale. Securities purchased with an original
maturity of one year or less, or callable U.S. government agency notes, will be
considered held-to-maturity. Mortgage backed securities originated by the Bank
with current loan productions, will be classified as trading securities.
Assets Held for Sale Stated at Market Value
Assets held for sale, consisting primarily of residential mortgages originated
for the purpose of potential sale, are valued at the lower of cost or market.
Loans
Interest on loans is accrued and credited to operations based on the principal
amount outstanding. The accrual of interest income is discontinued when a loan
becomes delinquent and, in management's opinion, borrowers may be unable to meet
contractual obligations. Such accrual is discontinued where interest or
principal is 90 days or more past due, unless the loans are deemed to be
adequately secured and in the process of collection. In these instances,
interest is recognized only when received. When interest accruals are
discontinued, unpaid interest credited to income in the current year is reversed
and interest accrued in prior years is charged to the Allowance.
Loan origination fees and certain direct loan origination costs are deferred and
the new amount amortized as an adjustment to the related loan yield over the
estimated contractual life of the loan.
Allowance for Loan Losses
The Allowance is maintained at a level believed adequate by management to absorb
potential losses inherent in the current loan portfolio. Management's
determination of the adequacy of the Allowance
61
<PAGE>
is based on an evaluation of the portfolio, past and expected loan loss
experience, current economic conditions, growth and diversification of the loan
portfolio, the results of the most recent regulatory examinations, the nature
and level of nonperforming assets, impaired loans and loans that have been
identified as potential problems, the adequacy of collateral and other relevant
factors. The Allowance is increased by provisions for loan losses charged
against income and recoveries on loans previously charged off.
The Company adopted FASB Statement No. 114, Accounting by Creditors for
Impairment of a Loan, on January 1, 1995. Under the new standard, a loan is
considered impaired, based on current information and events, if it is probable
that the Company will be unable to collect the scheduled payments of principal
or interest when due according to the contractual terms of the loan agreement.
Management identifies impaired loans on a loan-by-loan basis. The measurement of
impaired loans is generally based on the present value of expected future cash
flows discounted at the historical effective interest rate, with the exception
of all collateral-dependent loans, which are measured for impairment based on
the fair value of the collateral. The adoption of FASB Statement No. 114
resulted in no additional provision for loan losses as determined at January 1,
1995 and December 31, 1995.
Real Estate Owned ("REO")
REO, other than bank premises, consists of properties acquired through mortgage
loan foreclosure proceedings or in satisfaction of loans. REO is initially
recorded at the lower of cost or fair value (minus estimated costs to sell) at
the date of foreclosure and any difference is charged to the Allowance at the
time of reclassification. Subsequently, the values of such properties are
reviewed by management and writedowns, if any, are charged to expense.
Premises and Equipment
Premises and equipment are stated at cost less accumulated provisions for
depreciation and amortization, computed using the straight-line method over
estimated useful lives.
Income Taxes
The Company adopted FASB Statement No. 109, Accounting for Income Taxes, in 1993
which requires a change from the deferred method of accounting for income taxes
of APB Opinion 11 to the asset and liability method of accounting for income
taxes. Under the asset and liability method of Statement No. 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. At December 31,
1995, the Company estimated that net operating loss ("NOL") carryforwards for
federal income tax return purposes of $6.8 million were available to offset
future taxable income. Due to the uncertainty that the benefit of net deferred
tax assets will be realized, a full valuation allowance has been recorded at
December 31, 1995 and December 31, 1994.
62
<PAGE>
Retirement Benefits
Coastal has a non-contributory defined benefit pension plan covering
substantially all of their officers and employees. The benefit formula is based
on a covered employee's final average compensation and credited service. The
funding policy for this plan is to contribute amounts to the plan sufficient to
meet the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974, plus such additional amounts as the Bank may
periodically determine to be appropriate.
Note C. NONINTEREST EARNING DEPOSITS AND CASH
Noninterest bearing deposits and cash balances at December 31, 1995 are subject
to withdrawal and usage restrictions of $100,000 to be maintained at the Federal
Reserve Bank of Boston to meet Coastal's reserve requirements.
Note D. INVESTMENT SECURITIES
The following table sets forth the amortized cost, fair market value and gross
unrealized gains and losses of investment securities for each major security
type at December 31, 1995:
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------------------------------
Fair Gross Gross
Amortized Market Unrealized Unrealized
(in thousands) Cost Value Gains Losses
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for Sale:
U.S. government obligations $ 4,998 $5,014 $ 23 $ (7)
Mortgage backed securities 765 787 22 -
Equity/mutual fund 2,000 2,000 - -
Other 125 125 - -
------- ------ ------- -------
$7,888 $7,926 $ 45 $ (7)
====== ====== ==== =====
Held to Maturity:
U.S. government obligations $ 993 $ 995 $ 2 -
U.S. government agency
callable notes 10,793 10,914 121 -
------- ------- ---- -------
$11,786 $11,909 $123 -
======= ======= ==== =======
</TABLE>
63
<PAGE>
The following table sets forth the amortized cost, fair market value and gross
unrealized gains and losses of investment securities for each major security
type at December 31, 1994:
<TABLE>
<CAPTION>
December 31, 1994
---------------------------------------------------------------
Fair Gross Gross
Amortized Market Unrealized Unrealized
(in thousands) Cost Value Gains Losses
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Available for sale:
U.S. government obligations $ 4,993 $4,852 - $ (141)
Mortgage backed securities 896 858 - (38)
Equity/mutual fund 4,000 3,894 - (106)
Other 320 320 - -
--------- ------- --------- ---------
$10,209 $9,924 - $ (285)
======= ====== ========= ======
Held to maturity:
U.S. government obligations $6,822 $6,792 - $ (30)
------ ------ --------- -----
$6,822 $6,792 - $ (30)
====== ====== ========= =====
Trading securities:
Mortgage backed securities $1,008 $ 915 - $ (93)
------ ----- --------- -----
$1,008 $ 915 - $ (93)
====== ===== ========= =====
</TABLE>
The following is a summary of gross realized gains and losses on investment
securities sold for 1995, 1994 and 1993. The 1995 and 1994 security gains and
losses were all related to securities classified as available for sale. For
computation of gross realized gains and losses, cost was determined by the
specific identification method.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------
1995 1994 1993
Gross Realized Gross Realized Gross Realized
--------------------- ---------------------- --------------------
(in thousands) Gains Losses Gains Losses Gains Losses
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales of:
U.S. government obligations - - - - $ 62 -
U.S. government agency $ 1 - - - 59 -
Mortgage-backed securities - - - - - -
Equity securities 7 $ (12) $ 38 - - $ (22)
------ ----- ----- ------- -------- -----
$ 8 $ (12) $ 38 - $121 $ (22)
===== ===== ===== ======= ==== =====
</TABLE>
64
<PAGE>
The following table represents the contractual maturities for investments in
debt securities for each major security type at December 31, 1995:
<TABLE>
<CAPTION>
December 31, 1995
-------------------------------------------------------------
Maturing
-------------------------------------------------------------
After One After Five
Within But Within But Within After
(in thousands) One Year Five Years Ten Years Ten Years
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. government obligations $4,020 $ 994 -
Mortgage backed securities - - - $ 787
---------- --------- --------- ------
$4,020 $ 994 - $ 787
====== ====== ========= ======
Held to maturity:
U.S. government obligations $ 993 - - -
U.S. government agency callable
notes (final maturity) - $8,991 $1,802 -
--------- ------ ------ ---------
$ 993 $8,991 $1,802 -
====== ====== ====== =========
</TABLE>
Investment securities gains and losses as reported in the consolidated statement
of operations include for the years ended 1995, 1994 and 1993, a loss of $4,000,
a gain of $38,000 and a loss of $99,000, respectively.
At December 31, 1995, the Company had $200,000 of securities pledged as
collateral to secure public and private deposits.
Note E. LOANS
Loans consisted of the following:
December 31,
-------------------------
(in thousands) 1995 1994
- ----------------------------------------------------------------------
Real estate mortgage loans:
Residential $ 30,966 $ 33,158
Commercial 50,797 57,997
Commercial and industrial loans 2,524 2,510
Consumer and other loans 16,263 15,991
--------- ----------
$100,550 $109,656
======== ========
Included in interest and fees on loans as reported in the consolidated
statements of operations are origination, commitment, late charges and
application fees for the years ended December 31, 1995, 1994 and 1993 of
$95,000, $277,000, and $251,000, respectively.
65
<PAGE>
As of December 31, 1995 and 1994, the Company was servicing loans for others of
$53.7 million and $57.0 million, respectively. As of December 31, 1995 and 1994,
Coastal had approximately $1,504,000 and $1,468,000 in excess residential
mortgage servicing fees reflected in other assets. This amount is being
amortized over the expected average life of the loans. Accumulated amortization
was approximately $663,000 and $464,000 at December 31, 1995 and 1994,
respectively. As of December 31, 1995 and 1994, the Bank reflects a valuation
reserve of $132,000 against the deferred mortgage servicing asset as a result of
higher than anticipated prepayments on serviced loans.
At December 31, 1995, Coastal had no binding commitments for the sale of
mortgage loans held for sale.
At December 31, 1995, Coastal had $12,136,281 of loans pledged to the Federal
Home Loan Bank ("FHLB") of Boston as collateral for outstanding advances of
$6,000,000.
Information with respect to nonperforming loans was as follows:
December 31,
---------------------------------------------
(in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------
Nonaccrual loans $1,948 $4,340 $1,220
Accruing loans past due
90 days or more 169 258 249
Restructured loans 3,427 1,483 4,212
------ ------ ------
$5,544 $6,081 $5,681
====== ====== ======
Interest income recognized on nonaccrual and restructured loans totaled
$406,000, $154,000 and $280,000 in 1995, 1994 and 1993, respectively. Had
interest income on these year-end loans been paid at the contracted rates and
due dates, the Company would have recorded additional interest income in 1995,
1994 and 1993 of $81,000, $130,000 and $28,000, respectively.
Management reviews impaired loans on a case by case basis. If management
believes there is a high probability of a loss of principal or interest, then
such loans are determined to be impaired. At December 31, 1995, the recorded
investment in loans for which impairment has been recognized in accordance with
FASB Statement No. 114 totaled $3.7 million, of which $230,000 related to loans
with no allocated reserve because the loans have been partially written down
through charge-offs and $3.5 million related to loans with corresponding
allocated reserves of $398,000 (representing 15% of the Allowance of $2.7
million) for the year ended December 31, 1995. Included in the impaired loans
total is $301,000 in nonaccrual loans and $3.4 million in restructured loans.
66
<PAGE>
Impaired loans consisted of the following:
(in thousands) December 31, 1995
- ---------------------------------------------------------------------------
Real estate mortgage loans:
Residential $ 301
Commercial 3,427
Real estate construction loans -
Commercial and industrial loans -
Consumer and other loans -
----------
$3,728
==========
All impaired loans were secured by real estate at December 31, 1995 and
accounted for by the lower of the fair value of the collateral or amortized book
value.
Unfunded loan commitments for December 31, 1995 and 1994 were approximately $8.0
million and $7.8 million, respectively, consisting primarily of home equity
lines of credit secured by real estate. There were no standby letters of credit
for the years ended December 31, 1995 and 1994.
Loan commitments include unfunded portions of real estate, construction and
other loans and unused lines of credit. Loan commitments are subject to the same
credit policies as loans and generally have expiration dates and termination
clauses. Coastal obtains collateral to secure loans based upon management's
credit assessment of the borrower. Collateral held varies but may include
receivables, inventory, equipment and real estate.
Note F. ALLOWANCE FOR LOAN LOSSES
Changes in the Allowance were as follows:
Year Ended December 31,
----------------------------------------------
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
Balance at beginning
of year $4,042 $3,642 $4,280
Charge-offs (1,333) (290) (1,369)
Recoveries 375 583 761
-------- -------- --------
Net charge-offs (958) 293 (608)
Provision for loan losses (425) 107 (30)
-------- -------- --------
Balance at end of year $2,659 $4,042 $3,642
====== ====== ======
The Allowance is maintained at a level believed adequate by management to absorb
potential losses inherent in the current loan portfolio. Management's
determination of the adequacy of the Allowance is based on an evaluation of the
portfolio, past and expected loan loss experience, current economic
67
<PAGE>
conditions, growth and diversification of the loan portfolio, the results of the
most recent regulatory examinations, the nature and level of nonperforming
assets, impaired loans and loans that have been identified as potential
problems, the adequacy of collateral and other relevant factors. The Allowance
is increased by provisions for loan losses charged against income and recoveries
on loans previously charged-off.
While the current level of the Allowance is believed to be adequate, the Company
continues to hold a large concentration of commercial real estate loans that
remain vulnerable to loan default. Deterioration in the local economy or real
estate market, or upward movements in interest rates, could have an adverse
effect on the performance of the loan portfolio that could result in the need
for an increase in the Allowance. Conversely, further improvement in the overall
asset quality, favorable economic conditions or a favorable local real estate
market could positively affect the Allowance.
The Allowance at December 31, 1995 equaled $2,659,000 as compared to $4,042,000
at December 31, 1994. The reduction in the Allowance is the result of
substantial loan charge-offs in the amount of $1,333,000 and negative provision
expense totaling $425,000, partially offset by loan loss recoveries of $375,000.
The loan charge-offs were largely associated with previously identified loan
loss exposure taken into consideration as a part of management's review of the
Allowance at December 31, 1994. The negative provision for loan loss expense for
the year of $425,000 was largely the result of management's determination as
part of its December 31, 1995 review of the Allowance that a surplus existed in
the Allowance, leading to the decision to effect a reversal of provision for
loan loss expense in the amount of $675,000 in the fourth quarter of 1995.
Note G. PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
December 31,
---------------------------
(in thousands) 1995 1994
- ------------------------------------------------------------------------
Land $ 423 $ 423
Buildings and building improvements 2,774 2,670
Leasehold improvements 371 374
Equipment 2,715 3,001
------ ------
6,283 6,468
Less: Accumulated depreciation
and amortization 3,210 3,527
------ ------
$3,073 $2,941
====== ======
Total rental expense for all leases was $75,000, $163,000 and $196,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
68
<PAGE>
Future minimum payments, by year and in the aggregate, for all noncancelable
operating leases with initial or remaining terms of one year or more consisted
of the following at December 31, 1995:
(in thousands) December 31,
- -----------------------------------------------------------------------------
1996 $ 67
1997 68
1998 71
1999 75
2000 78
-----
$359
=====
All leases are for premises and include options to renew for periods ranging
from 1 to 5 years.
Note H. DEPOSITS
Deposits consisted of the following:
December 31,
----------------------------
(in thousands) 1995 1994
- ----------------------------------------------------------------------------
Noninterest bearing demand deposits $ 5,128 $ 5,425
Interest bearing demand deposits 15,741 17,300
Savings and escrow deposits 42,020 48,205
Time deposits 62,776 59,107
---------- ----------
$125,665 $130,037
======== ========
Included in 1995 time deposits is $1,709,000 of deposits of $100,000 or more.
Detail of interest expense on deposits:
December 31,
--------------------------------------------
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
Interest bearing demand deposits $ 357 $ 403 $ 443
Savings deposits 1,286 1,402 1,593
Other time deposits 3,237 2,693 3,319
Time deposits of $100,000 or more 97 112 67
--------- -------- ---------
$4,977 $4,610 $5,422
====== ====== ======
Total interest paid on deposits was $4,961,000, $4,420,000 and $5,470,000 for
the years ended December 31, 1995, 1994 and 1993, respectively.
69
<PAGE>
Note I. BORROWINGS
Advances From Federal Home Loan Bank of Boston
Maturities of advances from the FHLB of Boston outstanding at December 31, 1995
are as follows:
Weighted Average
(in thousands) Rates Interest Rate
- -------------------------------------------------------------------------------
1997 $2,000 6.06% 6.06%
1998 4,000 5.32%-5.92% 5.62%
-------
$6,000 5.77%
======
Under applicable FHLB regulations, member banks are required to maintain at all
times an amount of qualified collateral that is at least sufficient to satisfy
the established collateral maintenance level. Depending on the ratio of tangible
capital to assets as defined by the FHLB and certain other factors, each member
bank is assigned by the FHLB to one of three collateral status groups:
1. Blanket Lien Status - tangible capital of 4.5% or more of
assets;
2. Listing/Segregation Status - tangible capital below 4.5% of
assets; and
3. Delivery (Possession) Status - tangible capital below 3.5% of
assets.
Although its tangible capital is above 3.5% of assets, Coastal is in delivery
status. Because of the potential contingent liability of affiliated institutions
within a holding company structure, the FHLB closely reviews the financial
condition of a member bank's parent company. If a member Bank's parent holding
company has a low tangible capital ratio or is experiencing substantial
financial problems, the member Bank may be assigned to listing or delivery
status. In connection with the waiver and release of the FDIC cross guaranty
claim, the Bank requested the removal of the foregoing restrictions imposed by
the FHLB. On May 1, 1995, the Bank received a letter from the FHLB stating that
it will lengthen the maturity restriction on new fixed term and fixed rate
advances from six months to one year.
Total interest paid on FHLB advances amounted to $498,000, $1,159,000 and
$1,872,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
FDIC Note
No interest was paid on the FDIC Note for the year ended December 31, 1995.
Under the terms of the Note, interest and principal are deferred until the
Note's maturity date, which is January 31, 1997, subject to extension under
certain limited circumstances. Interest accrued on the Note amounted to
approximately $419,000 through December 31, 1995. (See Note A).
70
<PAGE>
Federal Reserve Bank of Boston
Coastal also has been approved by the Federal Reserve Bank of Boston to obtain
liquidity from its discount window. No funds have been, or are anticipated to
be, obtained from this source.
Note J. RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS OR ADVANCES
Payment of dividends by the Company on its stock is subject to various
restrictions. Among these restrictions is a requirement under Delaware corporate
law that dividends may be paid by the Company out of its surplus or, in the
event there is no surplus, out of its net profits for the fiscal year in which
the dividend is declared and/or the preceding fiscal year.
The Amended and Restated Settlement Agreement, which was consummated on January
31, 1995, prohibits the payment of dividends by the Company to its stockholders
on any class of stock (except for a dividend paid in shares of the Company's
common stock, or in any other stock of the Company) until the unpaid principal
amount and interest under the Note are paid in full in accordance with the terms
thereof.
The principal source of cash for the parent company would normally be a dividend
from Coastal; however, certain restrictions also exist regarding the ability of
Coastal to transfer funds to the Company in the form of cash dividends, loans or
advances. The most significant of these are described below.
Maine corporate law generally provides that dividends may only be paid out of
unreserved and unrestricted earned surplus or unreserved and unrestricted net
earnings of the current fiscal year and the next preceding fiscal year taken as
a single period. Maine banking law also imposes certain restrictions, including
the requirement that the Bank establish and maintain adequate levels of capital
as set forth in rules adopted by the Maine Bureau of Banking.
The Amended and Restated Settlement Agreement provides that the Bank may not
declare any dividends, except as necessary to pay the operating expenses of the
Company as approved from time to time by both the FDIC and the Maine Bureau of
Banking. The Amended and Restated Settlement Agreement further provides that
such operating expenses may not include any amounts for accrued interest on the
Note.
The Memorandum (effective November 22, 1994) provides that the Bank may not pay
or declare any dividends without the prior written consent of the FDIC and the
Maine Bureau of Banking.
On November 13, 1995 and November 30, 1994, following the receipt of appropriate
regulatory approvals, Coastal paid the Company cash dividends of $200,000 and
$175,000, respectively, for certain current and anticipated operating expenses
of the Company.
71
<PAGE>
Note K. REVERSE STOCK SPLIT
On May 31, 1995, the Company effected a one-for-ten reverse stock split with
respect to the issued and outstanding shares of the Company's common stock,
which was approved by the Company's stockholders on January 31, 1995. As a
result of the reverse stock split, the number of outstanding shares of common
stock of the Company was reduced from 6,006,745 shares (determined at the close
of business on May 31, 1995) to 600,361 shares. As a result, approximately
$5,407,000 was transferred from the Company's common stock account to paid-in
capital. All applicable share and per share data appearing in the consolidated
financial statements and notes thereto have been retroactively adjusted for the
reverse stock split.
Note L. BENEFIT PLANS
Pension Plan
The pension plan (the "Pension Plan") is a noncontributory defined benefit plan,
which provides retirement benefits to substantially all Bank employees.
Requirements for participation in the Pension Plan are that an employee work
more than 1,000 hours per year, have completed at least one year of service and
have attained twenty-one years of age. Employees become 100% vested after five
years of eligible service subsequent to their eighteenth birthday.
The Bank contributes such amounts as are necessary to provide assets sufficient
to meet the benefits to be paid under the terms of the Pension Plan. The Bank
has made contributions in amounts sufficient to fund the Pension Plan's current
service cost and the initial past service cost plus interest over a period of 30
years. The Pension Plan has met the ERISA minimum funding requirements.
The Bank has the right to discontinue its contributions at any time and to
terminate the Pension Plan subject to the provisions of ERISA.
Pension expense for the Pension Plan was $14,000 for each of the years ended
December 31, 1995 and December 31, 1994, as compared to a credit of $23,000 for
the year ended December 31, 1993.
72
<PAGE>
The following table sets forth the Pension Plan's funded status and amounts
recognized in the consolidated financial statements:
Year Ended December 31,
----------------------
(in thousands) 1995 1994
- -----------------------------------------------------------------------------
Actuarial Present Value of Benefit Obligations:
Accumulated benefit obligation
(including vested benefits
obligation of $1,327 in 1995 and
$1,241 in 1994) $1,414 $1,300
Effects of future salary increases 185 138
------ ------
Projected benefit obligation 1,599 1,438
Fair value of plan assets (primarily
listed stocks, U.S. bonds and
insurance contracts) 1,921 1,623
----- -----
Plan assets in excess of projected
benefit obligation 322 185
Unrecognized prior service cost (5) (6)
Unrecognized transition amount (120) (146)
Unrecognized loss 107 217
------ ------
Prepaid pension expense $ 304 $ 250
===== ======
The components of net pension expense (credit) are as follows:
Year Ended December 31,
-------------------------------------
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
Service cost - benefits $62 $ 67 $ 36
Interest cost of projected
benefits 110 102 90
Actual return on plan assets (300) 18 (216)
Net amortization and deferral 142 (173) 67
----- ---- ------
Net pension expense (credit) $ 14 $ 14 $ (23)
====== ===== =======
The weighted average discount rate used was 7.5%, 8.25% and 7.0% in 1995, 1994
and 1993, respectively, and the increase in future compensation levels used was
5.5%, 6.0% and 5.5% in 1995, 1994 and 1993, respectively, in determining the
actuarial present value of the projected benefit obligation. The expected
long-term rate of return on assets was 8.0% for 1995, 1994 and 1993.
The Bank provides no post retirement benefits other than pensions.
73
<PAGE>
Stock Option Plan
The Company has a Stock Option Plan ("Stock Option Plan") to purchase shares of
common stock of the Company. Unless terminated by the Board of Directors, the
Stock Option Plan will automatically terminate on September 18, 1996. The total
number of shares of common stock for which options may be issued under the Stock
Option Plan, adjusted as a result of the reverse stock split, is 55,189. A
summary of transactions under the Stock Option Plan follows:
Shares Option
Under Price Range
Option Per Share
- -------------------------------------------------------------------------------
Outstanding at January 1, 1993 4,726 $35.90 - $157.40
Cancelled (934) 117.90 - 141.00
------ -------------------
Outstanding at December 31, 1993 3,792 35.90 - 157.40
Cancelled (658) 35.90
------ ----------------------
Outstanding at December 31, 1994 3,134 92.50 - 157.40
Cancelled (2,667) 92.50 - 141.00
------ ----------------------
Outstanding at December 31, 1995 467 $141.00 - $157.40
====== ====================
Note M. INCOME TAXES
Due to the uncertainty that the benefit of the net deferred tax assets will be
realized, a full valuation allowance has been recorded at December 31, 1995 and
1994.
A summary of income tax benefits is as follows:
Year Ended December 31,
-------------------------------------------
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------
Current - - $(4)
- -
Deferred -------- -------- ------
- - $ (4)
======== ======== =======
A reconciliation of the difference between income tax benefit and the amount
computed by applying the statutory federal income tax rate to income before
income taxes, minority interest and extraordinary item is as follows:
74
<PAGE>
Year Ended December 31,
----------------------------------
(in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------
Federal income tax at statutory rate $564 $33 $268
Increase (decrease)
resulting from:
Expiration of capital loss carryforwards 2,060 - -
Increase in net operating loss
carryforwards (253) - -
Net operating loss utilized - - (268)
Change in valuation
allowance (2,454) (35) -
Other items, net 83 2 (4)
------- -------- -------
Income tax benefit $ 0 $ 0 $ (4)
======= ======== =======
- ------ ------- ------
Significant components of deferred income tax assets and liabilities at December
31, 1995 and 1994 are presented below:
December 31,
---------------------
(in thousands) 1995 1994
- --------------------------------------------------------------------------
Deferred tax assets:
Loans, principally due to
allowance for losses $904 $1,374
REO, principally due to writedowns 304 453
Mark to market adjustments 13 129
Deferred loan fees 8 10
Reserve for mortgage servicing rights 45 45
Investment writedowns 18 14
Federal NOL credit and tax credit carryforward 2,392 2,139
Capital loss carryforward 11 2,071
State NOL credit carryforward 143 81
FDIC Note 3,060 3,060
Other 90 69
------- -------
Total gross deferred tax assets before
valuation reserve 6,988 9,445
Valuation reserve (6,850) (9,304)
------ ------
Total gross deferred tax asset 138 141
------- -------
Deferred tax liabilities:
Difference between tax and
book basis of fixed assets 138 141
------- ------
Net deferred taxes $ 0 $ 0
======== ========
75
<PAGE>
The net deferred tax asset at December 31, 1995 and December 31, 1994 is fully
offset by a valuation allowance. The change in the balance of the valuation
allowance in 1995 that is not allocated to continuing operations consists
principally of the tax impact of the mark to market adjustment on available for
sale securities. The amount of the valuation allowance will be reviewed annually
or on an as needed basis.
At December 31, 1995, the Company had a NOL carryforward for federal income tax
return purposes of approximately $6.8 million available to offset future taxable
income. The NOL for federal income tax return purposes will expire in the years
1996 to 2010. If there is a subsequent "change of ownership" of the Company as
defined by Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"), the Companys's NOLs are subject to limitation as provided by the Code.
See Note A regarding the determination of the Company to pursue a
recapitalization as the means to facilitate the satisfaction of the FDIC Note.
In addition, as of December 31, 1995, the Company had a capital loss
carryforward, which will expire in the years 1996 to 2000, of approximately
$31,600 available to offset future capital gains, if any, from the sale of the
Company's capital assets.
As of December 31, 1995, the Company had an Investment Tax Credit carryforward
which will expire in the years 1997 to 2000, of approximately $77,000 available
to offset future federal income taxes.
In 1990, Coastal Bancorp and its subsidiaries carried back their share of the
consolidated net operating losses of the Suffield Financial Corporation and
subsidiaries group to the years 1984, 1985 and 1986. Tentative tax refunds in
the amount of $926,000 were paid to the Bank as a result of this carryback. In
1989 and 1990, Suffield Financial Corporation and Suffield Bank also carried
back their share of the net operating losses of the group. A portion of the 1990
losses was carried back to the 1986 taxable year of the Suffield group as it
existed before the acquisition of Coastal Bancorp and the Bank (the "Old
Suffield Group") and resulted in a tentative refund of $1,973,000 and a portion
of the 1989 losses was carried back to the years 1979 through 1985 of the Old
Suffield Group and resulted in tentative refunds of $1,279,000.
All refunds in excess of $1.0 million must be approved by the Joint Committee on
Taxation of the U.S. Congress. The Internal Revenue Service has reviewed and
approved the refund claims and has forwarded the case to the Joint Committee on
Taxation in Washington, D.C. with a recommendation that the refunds be approved
as made. The final approval of the Joint Committee on Taxation is expected as
early as the third quarter of 1996. If the Joint Committee on Taxation were to
conclude that the losses were not eligible for the ten-year carryback, the Bank
would be liable for the repayment of $926,000 of refunds plus interest and would
increase its net operating loss carryforwards by $2.4 million. The Bank also
believes that the requirements have been satisfied with respect to the carryback
of 1989 and 1990 losses by Suffield Financial Corporation and Suffield Bank
under the ten-year rule. In any event, none of the Company, Coastal Bancorp or
the Bank were members of the Old Suffield Group in the above carryback years.
Consequently, the Bank believes that in accordance with the consolidated return
regulations, the Company, Coastal Bancorp or the Bank would not be liable for
the repayment of any refunds generated by carryback to the Old Suffield Group.
76
<PAGE>
The federal income tax returns of the Company have been examined and audited or
closed without audit by the IRS for tax years through 1988 and such years are
not subject to further IRS audit except with respect to carrybacks to those
years.
NOTE N. LITIGATION
As of December 31, 1995, there were various claims and lawsuits pending against
the Company incidental to the ordinary course of business. In the opinion of
management, after consultation with legal counsel, resolution of these matters
is not expected to have a material effect on the consolidated financial position
or results of operations.
77
<PAGE>
Note O. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments as determined
under FASB Statement No. 107 are as follows:
December 31, 1995
----------------------
Book Fair
(in thousands) Value Value
- -------------------------------------------------------------------
Financial Assets:
Cash and cash equivalents (1) $ 8,841 $ 8,841
Federal Funds sold 10,000 10,000
Trading Securities - -
Investment securities (2)
Held-to-Maturity 11,786 11,909
Available for sale 7,926 7,926
Federal Home Loan Bank stock 1,315 1,315
Assets held for sale 281 281
Loans, net of allowance (3) 97,869 99,837
Financial Liabilities:
Deposits (4) $125,665 $128,273
Borrowings (5) 15,000 14,759
- --------------------
(1) The carrying amount of cash and cash equivalents approximates fair value
due to their short maturity.
(2) The fair value of investment securities is based on quoted market prices,
if available. If prices are not available, quotes for similar instruments
and/or information supplied to management is used.
(3) The fair market value for fixed and adjustable rate loans was estimated
using the discounted cash flow analysis. Variable rate loans are considered
to be at fair value, since such loans change directly with the market
rates. The estimated fair value of nonperforming loans are calculated by
using book value less the specific amount of allocated reserve from the
allowance for loan losses.
(4) For deposit liabilities with no defined maturities, the fair value is the
amount payable on demand. Term deposits were estimated using the discounted
cash flow analysis.
(5) The fair value for FHLB borrowings and FDIC Note was estimated using the
discounted cash flow analysis.
Note P. OTHER EXPENSES
Included in other expenses are:
Year Ended December 31,
-----------------------------------------
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------
Data processing $530 $534 $527
Equipment 340 338 384
FDIC insurance 190 406 451
Insurance-general 168 268 330
Office 273 258 294
Legal 282 676 182
Advertising 112 30 32
Other 711 653 552
------- -------- --------
$2,606 $3,163 $2,752
======= ======== ========
78
<PAGE>
<TABLE>
<CAPTION>
Note Q. FIRST COASTAL CORPORATION
(PARENT COMPANY ONLY)
FINANCIAL INFORMATION
BALANCE SHEETS
December 31,
(in thousands) 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash $ 99 $ 290
Investment in subsidiaries 13,334 10,754
Fixed assets 8 13
------- -------
Total assets $13,441 $11,057
======= =======
Liabilities
Other liabilities $ 444 $ 43
FDIC Note 9,000 9,000
Stockholders' equity 3,997 2,014
------- -------
Total liabilities and
stockholders' equity $13,441 $11,057
======= =======
<CAPTION>
STATEMENTS OF OPERATIONS
Year Ended December 31,
(in thousands) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividends $ 200 $175 -
Interest Income 4 6 $ 1
------- ------- --------
204 181 1
Interest Expense:
Interest on FDIC Note 419 - -
------- ------- --------
419 - -
------- ------- --------
Net Interest Income (loss) (215) - -
Operating Expenses:
Stockholder relations 76 59
Professional fees 293 156
Other 14 - 100
------- ------- --------
383 215 100
Loss before income
tax, equity in undistributed
net income of subsidiaries and
extraordinary item (598) (34) (99)
Income tax benefit - - (10)
Equity in undistributed net
income of subsidiaries 2,258 132 837
------- ------- --------
Income before
Extraordinary Item 1,660 98 748
Extraordinary Item -
Charge to earnings as a result of
the settlement of the cross guaranty claim - 9,000 -
------- ------- --------
Net Income (loss) $ 1,660 $(8,902) $ 748
======= ======== ========
79
<PAGE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Year Ended December 31,
(in thousands) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
Operating Activities
<S> <C> <C> <C>
Net income (loss) $1,660 $ (8,902) $748
Charge to earnings as a result of
the settlement of the
cross guaranty claim - 9,000 -
Increase (decrease) in investment
in subsidiary, due from subsidiary,
other assets and other liabilities (1,851) 199 (794)
-------- ------- -------
Net cash used
by operating activities (191) (101) (46)
Cash flows from Investing
Activities, other Net - 379 -
-------- ------ -------
Increase in cash and cash
equivalents (191) 278 -
Cash, beginning of year 290 12 58
------- ------- -------
Cash, end of year $ 99 $ 290 $ 12
======= ======= ========
Non-Cash Financing Activities
FDIC Note $ 9,000
</TABLE>
See Note J for restrictions on the payment of dividends by Subsidiary to the
Company.
80
<PAGE>
<TABLE>
<CAPTION>
Note R. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Quarter Ended,
--------------------------------------------------------------------
(in thousands, except per share information) 3/31 6/30 9/30 12/31
- ------------------------------------------------------------------------------------------------------------------------------
1995
- ----
<S> <C> <C> <C> <C>
Interest income $2,917 $2,935 $2,942 $2,913
Interest expense 1,399 1,458 1,492 1,501
----- ----- ----- -----
Net interest income 1,518 1,477 1,450 1,412
Provision for loan losses 100 75 75 (675)
Other income 168 137 125 129
Securities and loan sales gains - 2 3 8
Other expense 1,361 1,327 1,210 1,296
----- ----- ----- -----
Income before income taxes 225 214 293 928
Income tax - - - -
----- ----- ----- -----
Net income $ 225 $ 214 $ 293 $ 928
===== ===== ===== =====
Shares outstanding 600,361 600,361 600,361 600,361
Earnings per share $ .37 $ .36 $ .49 $ 1.55
===== ===== ===== ======
1994
- ----
Interest income $2,828 $3,036 $2,911 $3,005
Interest expense 1,489 1,452 1,433 1,352
------ ------ ------ ------
Net interest income 1,339 1,584 1,478 1,653
Provision for loan losses 67 - 40 -
Other income 159 157 69 14
Securities gains (losses) 72 (112) 64 6
Other expense 1,757 1,493 1,594 1,434
------ ----- ------ ------
Income (loss) before income
taxes, minority interest and
extraordinary item (254) 136 (23) 239
Income tax - - - -
Minority interest (11) 11 - -
------- ------ ------ ------
Income (loss) before
extraordinary item (243) 125 (23) 239
------- ------ ------- ------
Extraordinary Item -
Charge to earnings as a result of
the settlement of the cross
guaranty claim - - - 9,000
----- ----- ----- -----
Net income (loss) $ (243) $ 125 $ (23) $(8,761)
======== ======= ======== ========
Average shares outstanding 600,361 600,361 600,361 600,361
Earnings (loss) per share
Income (loss) per share before
Extraordinary item $ (.41) $ .21 $ (.04) $ .40
======== ======= ======= =========
Net income (loss) per share $ (.41) $ .21 $ (.04) $(14.59)
======== ======= ======= =======
</TABLE>
81
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors
Pursuant to the Company's Restated Certificate of Incorporation, the directors
are divided into three classes, as nearly equal in number as possible, with the
number of directors as specified in the Company's Amended and Restated Bylaws.
The term of office of only one class of directors expires in each year, and
their successors are elected for terms of three years and until their successors
are elected and qualified. Under the Amended and Restated Bylaws, the directors
are divided into three classes, two of which are composed of one director and
one of which is composed of two directors.
The following table sets forth the names of the directors of the Company. Each
director of the Company also serves as a director of the Bank. Also set forth is
certain other information with respect to each such person's principal
occupation or employment during the past five years, the person's age at
December 31, 1995 and the periods during which such person has served as a
director of the Company.
Age at Member of Term
Directors: December 31, 1995 Board Since Expires
- ---------- ----------------- ----------- -------
Roger E. Klein 53 1990 1996
Normand E. Simard (1) 54 1987 1997
Edward K. Simensky 54 1994 1997
Charles A. Stewart III 61 1995 1998
- -------------------
(1) Mr. Simard serves as Chairman of the Board of Directors of the Company and
the Bank.
Directors:
Roger E. Klein is President and owner of the Interest Rate Futures Research
Corporation of Princeton, New Jersey, a firm established in 1980 to manage money
in the financial futures markets. In 1982, Mr. Klein established two affiliated
companies, Futures Strategies Corporation and Timing Strategies, through which
Mr. Klein manages funds and provides investment advice to institutions,
individuals and corporations. In September 1989, Mr. Klein became the Chief
Investment Officer, Executive Vice President and part owner of Quantum American,
Inc., a minority owned investment management company located in New Orleans.
82
<PAGE>
Normand E. Simard has been President of York County Biscuit Company, a food
distributor in Biddeford, Maine, since July 1993, and prior thereto, served as
Vice President since 1967. Mr. Simard was originally nominated as a director of
the Company in 1987 in accordance with the provisions of the Merger Agreement by
and among the Company, Suffield Bank, Coastal Bancorp and the Bank.
Edward K. Simensky has been President of Simensky & Thomson, certified public
accountants, in Saco, Maine, since 1978 and a director of Mutual Fire Insurance
Company, Saco, Maine, since 1987. Mr. Simensky was a director of Suffield Bank,
a subsidiary of the Company, from 1989 until September 1991 when the Banking
Commissioner for the State of Connecticut deemed Suffield Bank insolvent and
appointed the FDIC as receiver.
Charles A. Stewart III was the President of A.L. Stewart & Sons, a food
processing company located in Cherryfield, Maine, from 1958 until 1982 when the
company was sold. Mr. Stewart also was the owner of Tennis of Maine, Inc., an
indoor tennis club located in Falmouth, Maine, from 1982 until 1985 when the
company was sold. Mr. Stewart is currently the Treasurer of M.C.S. Enterprises,
Inc., a real estate investment company based in Freeport, Maine. Mr. Stewart has
been a director of the Bank since 1986. Mr. Stewart has been a director of the
Boys & Girls Club of Greater Portland since 1987 and became chairman of the
organization's planned giving committee in 1994. In addition, in 1994, Mr.
Stewart became a director of the Maine Tennis Foundation.
Executive Officers
The following table sets forth the names of the executive officers of the
Company and the Bank, each of whom is elected to serve for a one-year period.
Also set forth is certain other information with respect to each such person's
principal occupation or employment during the past five years, the person's age
at December 31, 1995 and the positions currently held with the Company and the
Bank. Each executive officer serves pursuant to an employment protection
agreement with the Bank.
<TABLE>
<CAPTION>
Age at
Name December 31, 1995 Positions Held
---- ----------------- --------------
<S> <C> <C>
Gregory T. Caswell 40 President and Chief Executive Officer of the Company
and the Bank and a director of the Bank
Dennis D. Byrd 33 Treasurer of the Company and Executive Vice
President, Chief Financial Officer and Treasurer and a
director of the Bank
</TABLE>
Gregory T. Caswell joined the Bank in December 1991 as Senior Vice President and
Senior Loan Officer responsible for managing the lending, loan workout and
credit administration functions of the Bank. From 1982 to 1991, he was with
First NH Banks most recently as Vice President in the bank's special assets
group. In 1994, Mr. Caswell was promoted to Executive Vice President -- Lending
Division of the Bank. Effective March 31, 1995 upon the resignation of James H.
Whittaker, Mr.
83
<PAGE>
Caswell was elected President and Chief Executive Officer of the Company and the
Bank and a director of the Bank.
Dennis D. Byrd joined the Bank in October 1985 as Deposit Operations Technician.
From 1987 to 1992, Mr. Byrd was responsible for financial operations of the
Bank, promoted to Assistant Treasurer/Controller in 1989 and Assistant Vice
President in 1990. In 1993, Mr. Byrd was promoted to Vice President/Controller
and Treasurer of the Bank, and Treasurer of the Company and Coastal Bancorp. In
1994, Mr. Byrd was promoted to Executive Vice President, Chief Financial Officer
and Treasurer of the Bank and on March 31, 1995, Mr. Byrd was elected to the
Board of Directors of the Bank.
In December 1994, the Bank entered into employment protection agreements with
each of Messrs. Caswell and Byrd, which superseded the employment protection
agreements entered into with each of such executive officers in December 1993.
See Item 11, "Executive Compensation -- Employment Agreements," which
information is incorporated herein by reference.
Section 16(a) Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of its
Common Stock, to file with the SEC initial reports of ownership of the Company's
equity securities and to file subsequent reports when there are changes in such
ownership. Based on a review of reports submitted to the Company, the Company
believes that, during the fiscal year ended December 31, 1995, all Section 16(a)
filing requirements applicable to the Company's officers, directors and more
than 10% owners were complied with on a timely basis, except that initial
reports on behalf of Edward K. Simensky and Charles A. Stewart III in connection
with their election as a directors of the Company were not filed until after the
required filing date.
ITEM 11. EXECUTIVE COMPENSATION.
Cash Compensation
Upon the resignation of James H. Whittaker and effective March 31, 1995, Gregory
T. Caswell was elected President and Chief Executive Officer of the Company and
the Bank. The following table sets forth the compensation paid by the Company
and its subsidiary during 1995, 1994 and 1993 to each of Messrs. Caswell and
Whittaker and to Dennis D. Byrd, who was the only other executive officer whose
compensation exceeded $100,000 for services rendered in all capacities to the
Company and its subsidiary during the year ended December 31, 1995 (the "named
executive officers").
84
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
---------------------------------------------------
Other Annual
Principal Positions Year Salary Bonus Compensation
<S> <C> <C> <C> <C>
Gregory T. Caswell 1995 $111,827 $34,000 -
President and Chief 1994 76,416 3,000 -
Executive Officer 1993 70,000 5,000 -
James H. Whittaker 1995 56,250 10,000 $2,454(1)
President and 1994 180,000 52,500 7,133
Chief Executive 1993 143,520 30,000 2,129
Officer (2)
Dennis D. Byrd 1995 81,154 21,500 -
Treasurer 1994 53,510 3,000 -
1993 41,554 5,000 -
- -----------------------
<FN>
(1) Reimbursement for federal and state taxes on compensation for living
expenses paid by the Company in 1995.
(2) Mr. Whittaker resigned as President and Chief Executive Officer of the
Company and the Bank effective March 31, 1995.
</FN>
</TABLE>
Option Grants
No options were granted during the fiscal year ended December 31, 1995.
Option Holdings
The following table sets forth information with respect to the number of
securities underlying unexercised options held by each of the named executive
officers at December 31, 1995.
Fiscal Year-End Options
Number of Securities
Underlying Unexercised
Options at FY-End (1)(2)
Name Exercisable/Unexercisable
---- -------------------------
Gregory T. Caswell 0/0
James H. Whittaker (3) 0/0
Dennis D. Byrd 10/0
(1) The fair market value of the underlying shares of Common Stock at December
31, 1995 was less than the exercise price of all such options previously
granted.
(2) Adjusted to reflect the one for ten reverse stock split effective May 31,
1995.
(3) Mr. Whittaker resigned as President and Chief Executive Officer of the
Company and the Bank effective March 31, 1995.
85
<PAGE>
Pension Plan
The Bank maintains a qualified noncontributory pension plan (the "Pension Plan")
for its officers and other employees through RSI Retirement Trust, created to
provide retirement benefits for the employees of savings banks and their allied
organizations. The Pension Plan is jointly administered by the plan
administrator and a pension committee appointed by the Bank and RSI Retirement
Trust. All employees are eligible to participate in the Pension Plan if they
have reached age 21 and have completed one year's service of 1,000 or more
hours. Vesting occurs after a participant completes five years of service of
1,000 or more hours per plan year. The Pension Plan is subject to the
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
The Pension Plan provides for monthly benefits to or on behalf of each covered
employee at age 65 and has provisions for death benefits, early retirement after
attainment of age 55 and 10 years of service, and disability benefits. The
annual retirement benefit is 2% of the average annual earnings during the
highest paid consecutive three years of the five years immediately preceding
retirement multiplied by years of service (maximum 30 years), reduced by 1-2/3%
of the primary social security benefits multiplied by years of service (maximum
30 years). In addition, a participant will receive an annuity based upon the
actuarial value of any accumulated voluntary contributions. Annual earnings for
purposes of determining benefits under the Pension Plan consist of the annual
base compensation excluding overtime, bonus payments or any other special
payments.
The following table illustrates annual pension benefits for retirement as of
December 31, 1995 at age 65 for various levels of compensation and years of
service under the Pension Plan.
<TABLE>
<CAPTION>
Pension Plan Table
Years of Service (1)
--------------------
Annual
Compensation 15 20 25 30 35
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 75,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 45,000
100,000 30,000 40,000 50,000 60,000 60,000
125,000 37,500 50,000 62,500 75,000 75,000
150,000 45,000 60,000 75,000 90,000 90,000
175,000 45,000 60,000 75,000 90,000 90,000
200,000 45,000 60,000 75,000 90,000 90,000
225,000 45,000 60,000 75,000 90,000 90,000
250,000 45,000 60,000 75,000 90,000 90,000
- ----------------------
<FN>
(1) Benefits represent annual amounts under a five year and life benefit
payment option. A portion of the participant's primary social security
benefit will reduce the amount shown in this table. Pension benefits are
currently subject to a statutory maximum of $120,000, subject to
cost-of-living adjustments. The maximum annual compensation on which
retirement benefits may be calculated is limited to $150,000.
</FN>
</TABLE>
86
<PAGE>
Mr. Whittaker had 3.5 years of credited service under the Pension Plan as of
March 31, 1995. Mr. Whittaker's termination of employment on March 31, 1995 was
prior to his completion of five years of service required for the vesting of
benefits. Messrs. Caswell and Byrd have 4.25 and 10.25 years, respectively, of
credited service under the Pension Plan as of December 31, 1995. Messrs.
Caswell's and Byrd's annual accrued benefit payable at age 65 under the Pension
Plan is $5,937 and $8,492, respectively, determined as of December 31, 1995. The
compensation of Messrs. Caswell and Byrd covered by the Pension Plan for 1995
consists of their respective base salary as set forth in the Summary
Compensation Table. See "Executive Compensation -- Cash Compensation."
Compensation of Directors
During 1995, there were no fees or other forms of compensation earned by or paid
to directors of the Company for any service provided as a director of the
Company. The Company has not made and does not anticipate making any payments to
directors for 1996. During 1995, each non-employee director of the Bank received
a quarterly retainer of $1,250 and a monthly aggregate meeting fee of $250
provided that at least one meeting of the Board of Directors of the Bank was
held during the month. No amounts were paid to non-employee directors of the
Bank for meetings of committees on which such directors served. Employee
directors of the Bank receive no additional compensation for serving as
directors or committee members of the Bank.
A deferred compensation plan (the "Deferred Compensation Plan") was established
in 1987 for members of the Board of Directors of the Company and non-employee
directors of the boards of subsidiaries of the Company. Under the Deferred
Compensation Plan, each participant has the right to elect to defer a portion of
his or her annual directors' fees, with amounts deferred credited monthly with
interest at an annual rate which is determined prior to the beginning of each
calendar year. For 1995, the interest rate was 5.60% and for 1996, is 7.23%.
Payment of amounts credited is available to participants by a lump sum or a
designated number of monthly installments, which number may not be less than 12
nor more than 120. For 1995, no director of the Bank elected to defer any
portion of his director fees.
Employment Agreements
In December 1994, the Bank entered into employment protection agreements (the
"Employment Protection Agreements") with each of Messrs. Caswell and Byrd, which
superseded the employment protection agreements entered into with each of such
executive officers in December 1993. The Employment Protection Agreements were
amended in April 1995 to reflect the new titles of Messrs. Caswell and Byrd. The
initial term of the Employment Protection Agreements expires December 31, 1996
and may be renewed by the written agreement of the Bank and the executive
officer. In the event of a termination of the executive officer's employment
during the term of the Employment Protection Agreement by the Bank without
"cause" or by the executive officer for "good reason" (in each case as defined
therein), the executive officer is entitled to receive a lump sum cash payment
equal to one year's "current compensation," plus $12,000 reduced by the
aggregate amount of any "performance bonuses" that have been paid to the
executive officer as of the date of such termination. "Current compensation" is
equal to (i) the executive officer's salary at the annual rate in effect at the
time of his termination, but not less than the amount paid to the officer during
the 12-month period
87
<PAGE>
preceding his termination, (ii) any bonuses (other than performance bonuses)
paid to the officer during the 12-month period prior to his termination and
(iii) any deferred compensation credited to his account as of December 31 of the
year preceding his termination. "Performance bonuses" means $3,000 payable on
December 31, 1994, $3,000 payable on April 30, 1995, $3,000 payable on August
31, 1995 and $3,000 payable on December 31, 1995, provided that the executive
officer continues to be employed by the Bank on the applicable date. The
Employment Protection Agreements provide that the executive officer is required
to give the Bank at least 90 days written notice before he voluntarily
terminates his employment with the Bank (other than for "good reason").
In December 1994, the Bank entered into an employment agreement (the "Whittaker
Employment Agreement") with Mr. Whittaker, which superseded the employment
agreement entered into with Mr. Whittaker in December 1993. The Whittaker
Employment Agreement terminated effective upon the resignation of Mr. Whittaker
on March 31, 1995.
Under the terms of the Whittaker Employment Agreement, Mr. Whittaker was
employed as Chairman, President and Chief Executive Officer of the Bank. The
initial term of employment was for a two-year period expiring December 31, 1996.
Pursuant to the Whittaker Employment Agreement and during the term thereof, Mr.
Whittaker's annual salary was $225,000, and he was entitled to receive certain
"performance bonuses" totaling up to $60,000. Such performance bonuses were paid
or were payable as follows: (i) $12,500 upon the execution of the Whittaker
Employment Agreement, (ii) $10,000 on January 31, 1995, (iii) $12,500 on April
30, 1995, (iv) $12,500 on August 31, 1995 and (v) $12,500 on December 31, 1995,
provided that Mr. Whittaker continued to be employed by the Bank on the
applicable date. In addition, the Whittaker Employment Agreement provided, among
other things, for Mr. Whittaker to participate in any discretionary bonus,
retirement, stock option, employee stock ownership, stock purchase and other
employee benefit plans applicable to employees generally. The Bank agreed to pay
or reimburse Mr. Whittaker for rental of a furnished apartment within 50 miles
of the Bank's operations center in Westbrook and for travel expenses from his
residence in Connecticut to Maine, as well as reimbursement of certain taxes.
Under the Whittaker Employment Agreement, Mr. Whittaker's employment could be
terminated at any time, but any termination other than for "cause" (as defined
therein), required not less than 90 days written notice and the Bank would be
obligated to make a lump sum cash payment equal to Mr. Whittaker's annual
salary, including unpaid performance bonuses. Mr. Whittaker would also be
entitled to retirement, employee benefits and other existing fringe benefits for
twelve months following such termination and outplacement expenses. If the Bank
terminated Mr. Whittaker's employment or Mr. Whittaker terminated his employment
in connection with or within one year after a "change in control," such
termination would be treated as a termination of Mr. Whittaker without "cause"
entitling Mr. Whittaker to the foregoing payments as liquidated damages. A
"change of control" would be deemed to occur if (i) the Bank was acquired by
means of a cash tender or exchange offer, merger, sale of assets or other
business combination transaction (collectively, "Acquisition Transaction"), (ii)
any person, other than the FDIC, became the beneficial owner of more than 25% of
the total number of outstanding voting shares of the Bank or (iii) as a result
of an Acquisition Transaction, the individuals who were directors of the Bank
immediately before such transaction ceased to constitute at least a majority of
the Board of the Bank or any successor Company.
88
<PAGE>
In the event of Mr. Whittaker's death, the Whittaker Employment Agreement
provided that the Company would pay to the beneficiary of Mr. Whittaker, or in
the absence of a designated beneficiary, to the estate of Mr. Whittaker, the sum
of (i) $60,000 less the aggregate amount of performance bonuses paid through the
date of his death, plus (ii) any unpaid salary or bonus (other than a
performance bonus) payable before the time of his death.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Stock Owned by Management
The following table sets forth information as of December 31, 1995 with respect
to the amount of Common Stock beneficially owned by each director of the
Company, by each of the named executives officers, and by all directors and
executive officers of the Company as a group. This information is based on
information furnished to the Company by such persons.
<TABLE>
<CAPTION>
Amount and Nature of Percent of Common
Name Beneficial Ownership (1)(2) Stock Outstanding
- ---- --------------------------- -----------------
<S> <C> <C>
Dennis D. Byrd
Treasurer 10(3) *
Gregory T. Caswell
President and Chief Executive Officer - -
James H. Whittaker
President and Chief Executive Officer (4) 3,376(5) *
Roger E. Klein
Director 102 *
Normand E. Simard
Chairman of the Board 822 *
Edward K. Simensky
Director 205 *
Charles A. Stewart III
Director 308(3) *
All directors and executive officers
as a group (6 persons) 1,447(6) *
- -------------------
<FN>
*Less than 1% of shares outstanding.
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is considered to "beneficially own" shares (i) over which he has or
shares voting or investment power or (ii) of which he has the right to
acquire beneficial ownership at any time within 60 days of December 31,
1995. As used herein, "voting power" is the power to vote or direct the
voting of shares and "investment power" is the power to dispose or direct
the disposition of shares.
(2) Adjusted to reflect the one for ten reverse stock split effective May 31,
1995.
(3) Consists of options which are presently exercisable.
(4) Mr. Whittaker resigned as President and Chief Executive Officer of the
Company and the Bank effective March 31, 1995.
(5) Includes 2,900 shares held jointly by Mr. Whittaker and his wife and a
total of 49 shares held by Mr. Whittaker on behalf of certain of his
children. Does not include a total of 49 shares held by Mr. Whittaker's
father on behalf of certain of his grandchildren.
(6) Includes a total of 318 options which are presently exercisable.
</FN>
</TABLE>
89
<PAGE>
Principal Holders of Common Stock
The following table sets forth information as of December 31, 1995 with respect
to the ownership of Common Stock by each person believed by management to be the
beneficial owner of more than 5% of the outstanding Common Stock. The historical
information set forth below is based on the most recent Schedule 13D filed on
behalf of each such person with the SEC.
<TABLE>
<CAPTION>
Amount and Percent of
Name and Address of Nature of Beneficial Common Stock
Beneficial Owner Ownership (1) Outstanding
---------------- ------------- -----------
<S> <C> <C>
Angelina J. McGillivray.......................... 56,416 (2) 9.4%
195 Ethan Drive
Windsor, Connecticut 06095
Jonathan Googel ........................... 31,050 (3) 5.2
Ben Sisti
65 Kane Street
West Hartford, Connecticut 06119
- ------------------------
<FN>
(1) Adjusted to reflect the one for ten reverse stock split effective May 31,
1995.
(2) A Schedule 13D dated May 15, 1992 states that Ms. McGillivray has sole
voting and dispositive power over such shares.
(3) An Amendment No.5 to Schedule 13D filed on February 5, 1988 ("Amendment No.
5") states that Messrs. Googel and Sisti have shared voting power and
shared dispositive power over 31,050 shares. Amendment No. 5 further states
that Mr. Googel has sole voting and sole dispositive power over an
additional 3,000 shares. Amendment No. 5 also states that Mr. Sisti has
sole voting and sole dispositive power over an additional 1,300 shares.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the 1995 fiscal year, the Bank paid Futures Strategies Corporation
("FSC"), which is owned by Mr. Klein and of which he is President, $1,500 per
month for general investment services. There is no written contract between the
Bank and FSC with respect to the payment of such fees to, and the provision of
such services by, FSC.
90
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) The following consolidated financial statements of First Coastal
Corporation and Subsidiary, included at Item 8:
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Operations for each of the three years in the period
ended December 31, 1995
Consolidated Statements of Stockholders' Equity for each of the three years in
the period ended December 31, 1995
Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 1995
Notes to Consolidated Financial Statements--December 31, 1995
Report of Independent Accountants
(a)(2) All schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.
(a)(3) Exhibits. The following exhibits are either filed as part of this Report
or are incorporated herein by reference:
Exhibit No. 3 Articles of Incorporation and Bylaws
3.1(i) Restated Articles of Incorporation (filed herewith).
3.1(ii) Amended and Restated Bylaws (filed herewith).
Exhibit No. 10 Material Contracts
10.1 Suffield Financial Corporation Stock Option Plan and Suffield Bank
Stock Option Plan (filed as Exhibits 4.5 and 4.6, respectively, to the Company's
Registration Statement on Form S-8, File No. 33-11400, and incorporated herein
by reference).
10.2 Coastal Savings Bank Stock Option Plan (filed as Exhibit 4.7 to
Post-Effective Amendment No. 1 on Form S-8 to Form S-4, File No. 33-10189, and
incorporated herein by reference).
91
<PAGE>
10.3 First Coastal Corporation Director's Deferred Compensation Plan (filed
as Exhibit 10.13 to the Annual Report on Form 10-K for the year ended December
31, 1993, File No. 0-14087, and incorporated herein by reference.)
10.4 Amended and Restated Settlement Agreement, dated as of November 23,
1994, among First Coastal Corporation, Coastal Savings Bank and the Federal
Deposit Insurance Corporation (filed as Exhibit 99a to Current Report on Form
8-K, filed December 5, 1994, and incorporated herein by reference).
10.5 Promissory Note, dated January 31, 1995, by First Coastal Corporation
for the benefit of the Federal Deposit Insurance Corporation (filed as Exhibit
99b to Current Report on Form 8-K, filed February 13, 1995 ("1995 Form 8-K"),
and incorporated herein by reference).
10.6 Stock Pledge Agreement, dated as of January 31, 1995, between First
Coastal Corporation and the Federal Deposit Insurance Corporation (filed as
Exhibit 99c to 1995 Form 8-K, and incorporated herein by reference).
10.7 Memorandum of Understanding, among Coastal Savings Bank, the Federal
Deposit Insurance Corporation and the Maine Bureau of Banking, effective as of
November 22, 1994 (filed as Exhibit 10.16 to Annual Report on Form 10-K for the
year ended December 31, 1994, File No. 0-14087 ("1994 Form 10-K"), and
incorporated herein by reference).
10.8 Employment Agreement, dated December 21, 1994, between Coastal Savings
Bank and James H. Whittaker (filed as Exhibit 10.17 to 1994 Form 10-K, and
incorporated herein by reference).
10.9 Employment Protection Agreement, dated December 21, 1994, between
Coastal Savings Bank and Dennis D. Byrd (filed as Exhibit 10.18 to 1994 Form
10-K, and incorporated herein by reference).
10.10 Employment Protection Agreement, dated December 21, 1994, between
Coastal Savings Bank and Gregory T. Caswell (filed as Exhibit 10.19 to 1994 Form
10-K, and incorporated herein by reference).
10.11 Purchase and Assumption Agreement, dated February 22, 1996, between
Coastal Savings Bank and Maine Bank & Trust Company (filed herewith).
10.12 Agreement for Data Processing Services, dated February 28, 1996,
between Coastal Savings Bank and Data Dimensions Inc. (filed herewith).
Exhibit No. 21 Subsidiary of the Registrant
Subsidiary of the Company (filed herewith).
Exhibit No. 27 Financial Data Schedule
Financial Data Schedule
14(b) Not applicable.
14(c) Exhibits to this Form 10-K are attached or incorporated herein by
reference as stated above.
14(d) Not applicable.
92
<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.
FIRST COASTAL CORPORATION
March 29, 1996 By: /s/ Gregory T. Caswell
----------------------
Gregory T. Caswell
President and Chief Executive 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.
March 29, 1996 By: /s/ Gregory T. Caswell
----------------------
Gregory T. Caswell
President and Chief Executive Officer
(Principal Executive Officer)
March 29, 1996 By: /s/ Dennis D. Byrd
------------------
Dennis D. Byrd
Treasurer
(Principal Financial and Accounting Officer)
And by a majority of the Board of Directors of the Registrant.
March 29, 1996 By: /s/ Normand E. Simard
---------------------
Normand E. Simard
Chairman of the Board and Director
March 29, 1996 By: /s/ Roger E. Klein
------------------
Roger E. Klein
Director
March 29, 1996 By: /s/ Edward K. Simensky
----------------------
Edward K. Simensky
Director
March 29, 1996 By: /s/ Charles A. Stewart III
--------------------------
Charles A. Stewart III
Director
93
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
--- ----------------------
3.1(i) Restated Articles of Incorporation.
3.1(ii) Amended and Restated Bylaws of the Corporation.
10.11 Purchase and Assumption Agreement dated February 22, 1996,
between Coastal Savings Bank and Maine Bank & Trust
Company.
10.12 Agreement for Data Processing Services dated February 28,
1996, between Coastal Savings Bank and Data Dimensions
Inc.
21 Subsidiary of the Registrant
27 Financial Data Schedule
94
<PAGE>
STATE OF DELAWARE
RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST COASTAL CORPORATION
First Coastal Corporation, a corporation organized on August 15, 1986
under the name of "Suffield Financial Corporation" and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that the Board of Directors of the
Corporation at a meeting of the Board of Directors duly called and held on
December 20, 1995 approved and adopted in accordance with the requirements of
Section 245 of the Delaware General Corporation Law ("DGCL"), the following
resolution with respect to the approval and adoption of the Restated Certificate
of Incorporation of the Corporation (the "Restated Certificate"), which Restated
Certificate only restates and integrates and does not further amend the
provisions of the Corporation's certificate of incorporation as theretofore
amended or supplemented, and that there is no discrepancy between those
provisions and the provisions of the Restated Certificate except as otherwise
permitted by Section 245(c) of the DGCL:
RESOLVED, that the proposed Restated Certificate of Incorporation of
the Corporation (the "Restated Certificate") as herein set forth, which Restated
Certificate restates and integrates but does not further amend the certificate
of incorporation of the Corporation, as theretofore amended or supplemented in
accordance with the DGCL, hereby is approved and adopted in accordance with and
pursuant to Section 245 of the DGCL:
Article 1. Corporate Title. The name of the corporation is First
Coastal Corporation (the "Corporation").
Article 2. Duration. The duration of the Corporation is perpetual.
Article 3. Purpose. The purpose or purposes for which the Corporation
is organized are to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
Article 4. Capital Stock. The total number of shares of all classes of
the capital stock which the Corporation has authority to issue is seven million
seven hundred thousand (7,700,000), of which six million seven hundred thousand
(6,700,000) shall be common stock, par value $1.00 per share, amounting in the
aggregate to six million seven hundred thousand dollars ($6,700,000), and one
million (1,000,000) shall be serial preferred stock, par value $1.00 per share,
amounting in the aggregate to one million dollars ($1,000,000). The shares may
be issued by the Corporation from time to time as approved by its Board of
Directors without the approval of its shareholders. The consideration for the
issuance of the shares shall be paid in full before their issuance and shall not
be less than the par value per share. Neither promissory notes nor future
services shall constitute payment or part payment for the issuance of the shares
of the Corporation. The
<PAGE>
consideration for the shares shall be in cash, services actually performed for
the Corporation, personal property, real property, leases of real property or
any combination of the foregoing. In the absence of actual fraud in the
transaction, the value of such property, labor or services, as determined by the
Board of Directors of the Corporation, shall be conclusive. Upon payment of such
consideration such shares shall be deemed to be fully paid and nonassessable.
Nothing contained in this Article 4 (or in any resolution or
resolutions adopted by the Board of Directors pursuant hereto) shall entitle the
holders of any class or series of capital stock to more than one vote per share.
A description of the different classes and series of the Corporation's
capital stock and a statement of the designations, and the powers, preferences
and rights, and the qualifications, limitations and restrictions of the shares
of each class of and series of capital stock are as follows:
A. Common Stock. Except as provided in this Article 4 (or in any
resolution or resolutions adopted by the Board of Directors pursuant hereto),
the holders of the common stock shall exclusively possess all voting power. Each
holder of shares of common stock shall be entitled to one vote for each share
held by such holder, including the election of directors. There shall be no
cumulative voting rights in the election of directors.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and of sinking fund or retirement fund or other retirement
payments, if any, to which such holders are respectively entitled in preference
to the common stock, then dividends may be paid on the common stock and on any
class or series of stock entitled to participate therewith as to dividends, out
of any assets legally available for the payment of dividends; but only when as
declared by the Board of Directors.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid to or set aside for the holders of
any class having preferences over the common stock in the event of liquidation,
dissolution or winding up of the full preferential amounts of which they are
respectively entitled, the holders of the common stock, and of any class or
series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets, shall be entitled after payment or provision for payment
of all debts and liabilities of the Corporation, to receive the remaining assets
of the Corporation available for distribution, in cash or in kind.
Each share of common stock shall have the same relative rights as and
be identical in all respects with all the other shares of common stock.
B. Serial Preferred Stock. Except as provided in this Article 4, the
Board of Directors of the Corporation is authorized by resolution or resolutions
from time to time adopted and by filing a certificate pursuant to the applicable
law of the
-2-
<PAGE>
State of Delaware, to provide for the issuance of serial preferred stock in
series and to fix and state the voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating, optional
or other special rights of the shares of each such series and the
qualifications, limitations and restrictions thereof to the full extent now or
hereafter permitted by the General Corporation Law of the State of Delaware.
Without limiting the generality of the grant of authority contained in the
preceding sentence, the Board of Directors is authorized to determine any or all
of the following, and the shares of each series may vary from the shares of any
other series in any or all of the following respects:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such shares
may be redeemed;
(e) The amount or amounts payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the Corporation and, if so,
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of preferred stock and
whether such shares may be reissued as shares of the same or any other series of
preferred stock.
-3-
<PAGE>
Dividends on outstanding shares of preferred stock shall be paid, or
declared and set apart for payment, before any dividends shall be paid or
declared and set apart for payment on the common stock with respect to the same
dividend period.
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets available for distribution to holders
of shares of preferred stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of preferred
stock in accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
Article 5. Preemptive Rights. Holders of the capital stock of the
Corporation shall not be entitled to preemptive rights with respect to any
shares or other securities of the Corporation which may be issued or any
securities convertible into any such shares, including, without limitation,
warrants, subscription rights and options to acquire shares.
Article 6. Directors. The Corporation shall be under the direction of a
Board of Directors. The number of directors shall be as set forth in the
Corporation's Bylaws. The Board of Directors shall be divided into three classes
as nearly equal in number as possible, with one class to be elected annually.
When the number of directors is changed, the Board of Directors shall determine
the class or classes to which the increased or decreased number of directors
shall be apportioned; provided, that the directors in each class shall be as
nearly equal in number as possible; provided, further, that no decrease in the
number of directors shall affect the term of any director then in office.
The classification shall be such that the term of one class shall
expire each succeeding year. The Corporation's Board of Directors shall
initially be divided into three classes named Class I, Class II and Class III.
The terms, classifications, qualifications and election of the Board of
Directors and the filling of vacancies thereon shall be as provided herein and
in the Bylaws.
The persons serving as members of the executive committee of the Board
of Directors of Suffield Savings Bank (the "Bank") on the date of incorporation
of the Corporation shall be designated the initial Board of Directors of the
Corporation and each such director shall continue to serve as a director of the
Corporation for the remainder of his or her term as a director of the Bank and
until their successors are elected and qualified.
Subject to the foregoing, at each annual meeting of shareholders the
successors to the class of directors whose term shall then expire shall be
elected to
-4-
<PAGE>
hold office for a term expiring at the third succeeding annual meeting and until
their successors shall be elected and qualified.
Any vacancy occurring in the Board of Directors, including any vacancy
created by reason of an increase in the number of directors, shall be filled for
the unexpired term by the concurring vote of a majority of the directors then in
office, whether or not a quorum, and any director so chosen shall hold office
for the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
No director may be removed except for cause and then only by an
affirmative vote of at least two-thirds of the total votes eligible to be voted
by shareholders at a duly constituted meeting of shareholders called for such
purpose. At least 30 days prior to such meeting of shareholders, written notice
shall be sent to the director or directors whose removal will be considered at
such meeting.
No director shall be personally liable to the Corporation or its
shareholders for monetary damages for breach of a fiduciary duty as a director
other than liability (i) for any breach of the director's duty of loyalty to the
Corporation or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
any payment of a dividend or approval of a stock repurchase that is illegal
under ss. 174 of the General Corporation Law of the State of Delaware, or (iv)
for any transaction from which the director derived an improper personal
benefit.
Article 7. Bylaws. The Board of Directors or the shareholders may from
time to time adopt, alter, amend or repeal the Bylaws of the Corporation. Such
action by the Board of Directors shall require the affirmative vote of at least
two-thirds of the directors then in office at a duly constituted meeting of the
Board of Directors called expressly for such purpose. Such action by the
shareholders shall require the affirmative vote of at least two-thirds of the
total votes eligible to be voted at a duly constituted meeting of shareholders
called expressly for such purpose.
Article 8. Special Meetings. Special meetings of shareholders may be
called at any time but only by the Chairman of the Board or the President of the
Corporation or by the Board of Directors of the Corporation.
Article 9. Registered Office. The street address of the Corporation's
initial registered office in the State of Delaware is 1209 Orange Street, City
of Wilmington, County of New Castle, and the name of its initial registered
agent at such address is The Corporation Trust Company.
-5-
<PAGE>
Article 10. Approval for Acquisitions of Control and Offers to Acquire
Control.
Subsection 1. Three-Year Restrictions on
Acquisitions of Control and Offers to
Acquire Control.
For a period of three years from the date of consummation of the
conversion of the Bank to a Connecticut capital stock savings bank, no Person
shall acquire Control of the Corporation, or make any Offer to acquire Control
of the Corporation, unless such acquisition or Offer has received the prior
approval of both the Banking Commissioner of the State of Connecticut and the
Board of Directors of the Corporation. The terms "Person," "Control" and "Offer"
as used in this Article 10 are defined in Subsection 5 hereof.
Subsection 2. Shareholder Vote and Regulatory
Approval Required for Acquisition of
Control at any Time.
No Person shall acquire Control of the Corporation at any time, unless
such acquisition of Control has been approved prior to its consummation by the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Voting Stock (as defined in Subsection 5 hereof) at a duly constituted
meeting of shareholders called for such purpose; provided, however, that this
provision shall not apply if such acquisition of Control has been approved by at
least two-thirds of the directors then in office at a duly constituted meeting
of the board of directors called for such purpose. In addition, no Person shall
acquire Control of the Corporation at any time without obtaining prior thereto
all regulatory approvals required under applicable federal and state statutes
and in the manner provided by all applicable regulations adopted thereunder. In
the event that Control is acquired without obtaining all such regulatory
approvals, such acquisition shall constitute a violation of this Article 10 and
the Corporation shall be entitled to institute a private right of action to
enforce such statutory and regulatory provisions.
Subsection 3. Excess Shares.
In the event that Control of the Corporation is acquired in violation
of this Article 10, all shares of Voting Stock owned by the Person so acquiring
Control in excess of the number of shares the beneficial ownership of which is
deemed under Subsection 5 hereof to confer Control of the Corporation shall be
considered from and after the date of their acquisition by such Person to be
"excess shares" for purposes of this Article 10. Such excess shares shall
thereafter no longer (i) be entitled to vote on any matter, (ii) be entitled to
take other shareholder action, (iii) be entitled to be counted in determining
the total number of outstanding shares for purposes of any matter involving
shareholder action, or (iv) be transferable, except with the approval of the
Board of Directors or by an independent trustee appointed
-6-
<PAGE>
by the Board of Directors for the purpose of having such excess shares sold on
the open market or otherwise. The proceeds from the sale by the trustee of such
excess shares shall be paid (i) first, to the trustee in an amount equal to the
trustee's reasonable fees and expenses, (ii) second, to the "beneficial owner"
(as defined in Article 12, Subsection 3, paragraph C hereof) of such excess
shares in an amount up to such owner's federal income tax basis in such excess
shares, and (iii) third, to the Corporation as to any remaining balance.
Subsection 4. Approval Required for Offers to
Acquire Control after Three Years.
After three years from the date of consummation of the conversion of
the Bank to a Connecticut capital stock savings bank, no Person shall make any
Offer to acquire Control of the Corporation, if the common stock is then traded
on a national securities exchange or quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System, unless such Person has
received prior approval to make such Offer by complying with either of the
following procedures:
1. The Offer shall have been approved by the Board of Directors of the
Corporation, or
2. The Person proposing to make such Offer shall have:
(a) obtained all required federal and state regulatory
approvals; and
(b) furnished to the Board of Directors of the
Corporation, concurrently with such Person's filing
thereof with federal and state regulatory
authorities, a complete copy of all notices,
submissions and documents (including all exhibits
thereto) and other information filed by such Person
pursuant to applicable federal and state law and
regulations.
Subsection 5. Certain Definitions.
For purposes of this Article 10:
A. "Control" means the sole or shared power to vote or to direct the
voting of, or to dispose or to direct the disposition of, 10 percent or more of
the Voting Stock; provided, that the solicitation, holding and voting of proxies
obtained by the Board of Directors of the Corporation pursuant to a solicitation
under Regulation 14A of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") shall not constitute
"Control."
B. "Group Acting in Concert" includes Persons seeking to combine or
pool their voting or other interests in the Voting Stock for a common purpose,
pursuant to any contract, understanding, relationship, agreement or other
arrangement,
-7-
<PAGE>
whether written or otherwise; provided, that a "Group Acting in Concert" shall
not include the Board of Directors of the Corporation in its solicitation,
holding and voting of proxies obtained by it pursuant to a solicitation under
Regulation 14A of the General Rules and Regulations under the Exchange Act.
C. "Offer" means every offer to buy or acquire, solicitation of an
offer to sell, tender offer for, or request or invitation for tender of, Voting
Stock.
D. "Person" means any individual, firm, corporation or other entity
including a Group Acting in Concert.
E. "Voting Stock" means the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors.
Subsection 6. Inapplicability to Public Offering.
This Article 10 shall not apply to the purchase of securities of the
Corporation by underwriters in connection with a public offering of such
securities.
Article 11. Criteria for Evaluating Certain Offers. The Board of
Directors of the Corporation, when evaluating any offer to (i) make a tender or
exchange offer for the common stock of the Corporation, (ii) merge or
consolidate the Corporation with another institution, or (iii) purchase or
otherwise acquire all or substantially all of the properties and assets of the
Corporation, shall, in connection with the exercise of its judgment in
determining what is in the best interests of the Corporation and its
shareholders, give due consideration to all relevant factors, including without
limitation the economic effects of acceptance of such offer on (a) depositors,
borrowers and employees of the insured bank or institution subsidiary or
subsidiaries of the Corporation, and on the communities in which such subsidiary
or subsidiaries operate or are located and (b) the ability of such subsidiary or
subsidiaries to fulfill the objectives of an insured institution under
applicable federal and state statutes and regulations.
Article 12. Certain Business Combinations. The votes of shareholders
and directors required to approve any Business Combination shall be as set forth
in this Article 12. The term "Business Combination" is used as defined in
Subsection 1 of this Article 12. All other capitalized terms not otherwise
defined in this Article 12 or elsewhere in this Certificate of Incorporation are
used as defined in Subsection 3 of this Article 12.
Subsection 1. Vote Required for Certain Business
Combinations.
A. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or this Certificate of Incorporation, and
except as otherwise expressly provided in Subsection 2 of this Article 12:
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(i) any merger, consolidation or share exchange of the
Corporation or any Subsidiary (as hereinafter defined) with (a) any
Interested Shareholder (as hereinafter defined) or (b) any other
corporation (whether or not itself an Interested Shareholder) which is,
or after the merger, consolidation or share exchange would be, an
Affiliate or Associate (as those terms are hereinafter defined) of such
Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition other than in the usual and regular course of
business (in one transaction or a series of transactions in any
twelve-month period) to or with any Interested Shareholder or any
Affiliate or Associate of such Interested Shareholder, other than the
Corporation or any of its Subsidiaries, of any assets of the
Corporation or any Subsidiary having, measured at the time the
transaction or transactions are approved by the Board of Directors of
the Corporation, an aggregate book value as of the end of the
Corporation's most recent fiscal quarter of five percent or more of the
total Market Value (as hereinafter defined) of the outstanding shares
of the Corporation or of its net worth as of the end of its most recent
fiscal quarter; or
(iii) any purchase, exchange, lease or other acquisition by
the Corporation or any Subsidiary involving more than five percent of
the assets or business of an Interested Shareholder or any Affiliate or
Associate of an Interested Shareholder; or
(iv) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
equity securities of the Corporation or any Subsidiary having an
aggregate Market Value of five percent or more of the total Market
Value of the outstanding shares of the Corporation to any Interested
Shareholder or any Affiliate or Associate of any Interested
Shareholder, other than the Corporation or any of its Subsidiaries,
except pursuant to the exercise of warrants, rights or options to
subscribe for or purchase securities offered, issued or granted pro
rata to all holders of the Voting Stock (as hereinafter defined) of the
Corporation or any other method affording substantially proportionate
treatment to the holders of Voting Stock; or
(v) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation or any Subsidiary proposed by or on
behalf of an Interested Shareholder or any Affiliate or Associate of
such Interested Shareholder, other than the Corporation or any of its
Subsidiaries; or
(vi) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
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consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Shareholder) which has the effect, directly or
indirectly, in one transaction or a series of transactions, of
increasing the proportionate amount of the outstanding shares of any
class of equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any Interested
Shareholder or any Affiliate or Associate of any Interested
Shareholder, other than the Corporation or any of its Subsidiaries;
shall be approved by affirmative vote of the holders of at least 80 percent of
the total number of outstanding shares of Voting Stock. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
B. Definition of "Business Combination." The term "Business
Combination" as used in this Article 12 shall mean any transaction which is
referred to in any one or more of clauses (i) through (vi) of paragraph A of
this Subsection 1.
Subsection 2. When Higher Vote Is Not Required.
The provisions of Subsection 1 of this Article 12 shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
provision of this Certificate of Incorporation, if all of the conditions
specified in either paragraph A or paragraph B of this Subsection 2 are met:
A. Approval by Continuing Directors. The Business Combination shall
have been approved by a majority of the Continuing Directors (as hereinafter
defined) then in office at a duly constituted meeting of the Board of Directors
of the Corporation called for such purpose.
B. Price and Procedure Requirements. All of the following conditions
shall have been met:
(i) The aggregate amount of the cash and the Market Value as
of the Valuation Date (as hereinafter defined) of the Business
Combination of consideration other than cash to be received per share
by holders of common stock in such Business Combination shall be at
least equal to the highest of the following:
(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Shareholder for any shares of
common stock acquired by it (1) within the two-year period immediately
prior to
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the first public announcement of the proposal of the Business
Combination (the "Announcement Date") or (2) in the transaction in
which it became an Interested Shareholder, whichever is higher; or
(b) the Market Value per share of common stock of the
same class or series on the Announcement Date or on the date on which
the Interested Shareholder became an Interested Shareholder (such
latter date is referred to in this Article 12 as the "Determination
Date"), whichever is higher; or
(c) the price per share equal to the Market Value per
share of common stock of the same class or series determined pursuant
to subdivision (i)(b) hereof, multiplied by the fraction of (1) the
highest per share price (including brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the Interested Shareholder
for any shares of common stock of the same class or series acquired by
it within the two-year period immediately prior to the Announcement
Date, over (2) the Market Value per share of common stock of the same
class or series on the first day in such two-year period on which the
Interested Shareholder acquired shares of common stock.
(ii) The aggregate amount of the cash and the Market Value as
of the Valuation Date of consideration other than cash to be received
per share by holders of shares of any class or series of outstanding
Voting Stock, other than common stock, shall be at least equal to the
highest of the following (it being intended that the requirements of
this paragraph B(ii) shall be required to be met with respect to every
class of outstanding Voting Stock, whether or not the Interested
Stockholder has previously acquired any shares of a particular class of
Voting Stock):
(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Shareholder for any shares of
such class or series of Voting Stock acquired by it: (1) within the
two-year period immediately prior to the Announcement Date or (2) in
the transaction in which it became an Interested Shareholder, whichever
is higher; or
(b) (if applicable) the highest preferential amount per
share to which the holders of shares of such class or series of Voting
Stock are entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; or
(c) the Market Value per share of such class or series
of Voting Stock on the Announcement Date or on the Determination Date,
whichever is higher; or
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(d) the price per share equal to the Market Value per
share of such class or series of stock determined pursuant to
subdivision (ii)(c) hereof multiplied by the fraction of (1) the
highest per share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by the Interested Shareholder
for any shares of any class or series of Voting Stock acquired by it
within the two-year period immediately prior to the Announcement Date
over (2) the Market Value per share of the same class or series of
Voting Stock on the first day in such two-year period on which the
Interested Shareholder acquired any shares of the same class or series
of Voting Stock.
(iii) The consideration to be received by holders of a
particular class or series of outstanding Voting Stock shall be in cash
or in the same form as the Interested Shareholder has previously paid
for shares of such class or series of Voting Stock. If the Interested
Shareholder has paid for shares of any class or series of Voting Stock
with varying forms of consideration, the form of consideration for such
class or series of Voting Stock shall be either cash or the form used
to acquire the largest number of shares of such class or series of
Voting Stock previously acquired by it.
(iv) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of such Business
Combination: (a) there shall have been no failure to declare and pay at
the regular date therefor any full quarterly dividends (whether or not
cumulative) on any outstanding preferred stock of the Corporation; (b)
there shall have been (1) no reduction in the annual rate of dividends
paid on any class or series of the capital stock of the Corporation
(except as necessary to reflect any stock split, stock dividend or
subdivision of the capital stock), and (2) an increase in such annual
rate of dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization, reorganization
or any similar transaction which has the effect of reducing the number
of outstanding shares of capital stock; and (c) such Interested
Shareholder shall have not become the Beneficial Owner (as hereinafter
defined) of any additional shares of capital stock except as part of
the transaction which results in such Interested Shareholder becoming
an Interested Shareholder or by virtue of proportionate stock splits or
stock dividends.
The provisions of subdivisions (iv)(a) and (iv)(b) of this
Subsection 2 do not apply if the Interested Shareholder or any
Affiliate or Associate of the Interested Shareholder voted as a
director of the Corporation in a manner inconsistent with such
subdivisions, and the Interested Shareholder, within ten days after any
act or failure to act inconsistent with such subdivisions, notifies the
Board of Directors of
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the Corporation in writing that the Interested Shareholder disapproves
thereof and requests in good faith that the Board of Directors rectify
such act or failure to act.
(v) After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided by the Corporation or any of its Subsidiaries (whether in
anticipation of or in connection with such Business Combination or
otherwise).
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (or any subsequent provisions replacing such
Act, rules or regulations) shall be mailed to public shareholders of
the Corporation at least 20 days prior to the consummation of such
Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or subsequent
provisions).
Subsection 3. Certain Definitions.
For the purposes of this Article 12:
A. "Person" shall mean any individual, firm or corporation,
partnership, association, joint stock company, trust, unincorporated
organization, group acting in concert or other entity.
B. "Interested Shareholder" shall mean any Person (other than the
Corporation or any Subsidiary) who or which:
(i) is the Beneficial Owner, directly or indirectly, of 10
percent or more of the voting power of the then outstanding Voting
Stock; or
(ii) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question was the
Beneficial Owner, directly or indirectly, of 10 percent or more of the
voting power of the then outstanding Voting Stock.
C. "Beneficial Owner," when used with respect to any Voting Stock,
means a Person:
(i) that, individually or with any of its Affiliates or
Associates, beneficially owns Voting Stock directly or indirectly; or
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(ii) that, individually or with any of its Affiliates or
Associates, has (a) the right to acquire Voting Stock (whether such
right is exercisable immediately or only after passage of time),
pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise; (b) the right to vote or direct the voting of Voting Stock
pursuant to any agreement, arrangement or understanding; or (c) the
right to dispose of or to direct the disposition of Voting Stock
pursuant to any agreement, arrangement or understanding; or
(iii) that, individually or with any of its Affiliates or
Associates, has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of Voting Stock with
any other person that beneficially owns, or whose Affiliates or
Associates beneficially own, directly or indirectly, such shares of
Voting Stock.
D. For the purposes of determining whether a Person is an Interested
Shareholder pursuant to paragraph B of this Subsection 3, the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned
through application of paragraph C of this Subsection 3 but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
E. "Affiliate" means a Person that directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common control
with, a specified person.
F. "Associate" when used to indicate a relationship with any Person,
means: (1) any domestic or foreign corporation or organization, other than the
Corporation or a Subsidiary of the Corporation, of which such Person is an
officer, director or partner or is, directly or indirectly, the Beneficial Owner
of ten percent or more of any class of equity securities; (2) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as a trustee or in a similar fiduciary capacity; and (3) any
relative or spouse of such Person, or any relative of such spouse who has the
same home as such Person or who is a director or officer of the Corporation or
any of its Affiliates.
G. "Subsidiary" means any corporation of which Voting Stock having a
majority of the votes entitled to be cast is owned, directly or indirectly, by
the Corporation.
H. "Continuing Director" means any member of the Board of Directors of
the Corporation who is unaffiliated with the Interested Shareholder and was a
member of the Board of Directors of the Corporation prior to the time that the
Interested Shareholder (including any Affiliate or Associate of such Interested
Shareholder) became an Interested Shareholder, and any successor of a Continuing
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Director who is unaffiliated with the Interested Shareholder and is recommended
to succeed a Continuing Director by a majority of Continuing Directors then on
the Board of Directors of the Corporation.
I. "Market Value" means:
(i) in the case of stock, the highest closing sale price
during the 30-day period immediately preceding the date in question of
a share of such stock on the composite tape for New York Stock
Exchange-listed stocks, or, if such stock is not quoted on the
composite tape, on the New York Stock Exchange, or, if such stock is
not listed on such exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934 on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing sales price or bid quotation with respect
to a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc.
Automated Quotation System or any system then in use, or if no such
quotations are available, the fair market value on the date in question
of a share of such stock as determined by the Board of Directors of the
Corporation in good faith; and
(ii) in the case of property other than cash or stock, the
fair market value of such property on the date in question as
determined by a majority of the Board of Directors of the Corporation
in good faith.
J. "Valuation Date" means: (A) For a Business Combination voted on by
shareholders, the later of the day prior to the date of the shareholders' vote
or the date twenty days prior to the consummation of the Business Combination;
and (B) for a Business Combination not voted upon by the shareholders, the date
of the consummation of the Business Combination.
K. "Voting Stock" means the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors.
L. In the event of any Business Combination in which the Corporation is
the surviving corporation, the phrase "consideration other than cash to be
received" as used in paragraphs B(i) and B(ii) of Subsection 2 of this Article
12 shall include the shares of common stock and/or the shares of any other class
or series of outstanding Voting Stock retained by the holders of such shares.
Subsection 4. Powers of the Board of Directors.
A majority of the Continuing Directors then in office shall have the
power and duty to determine for the purposes of this Article 12, on the basis of
information known to them after reasonable inquiry, all of the terms and
provisions of this Article 12 including, without limitation, (A) whether a
Person is an Interested Shareholder, (B) the number of shares of Voting Stock
beneficially owned by any
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Person, (C) whether a Person is an Affiliate or Associate of another, (D)
whether the assets that are the subject of a Business Combination represent more
than five percent of the assets or business of the Interested Shareholder or any
Affiliate or Associate of an Interested Shareholder, (E) whether an action is
with, proposed by, or on behalf of an Interested Shareholder or an Affiliate or
an Associate thereof, and (F) whether the requirements of paragraph B of Section
2 have been met with respect to any Business Combination; and the good faith
determination of a majority of the Continuing Directors on such matters shall be
conclusive and binding for all the purposes of this Article 12.
Subsection 5. No Effect on Fiduciary Obligations of
Interested Shareholders.
Nothing contained in this Article 12 shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
Article 13. Anti-Greenmail. Any direct or indirect purchase or other
acquisition by the Corporation of any Voting Stock (as defined in Article 12
hereof) from any Significant Shareholder (as hereinafter defined) who has been
the Beneficial Owner (as defined in Article 12 hereof) of such Voting Stock for
less than two years prior to the date of such purchase or other acquisition
shall, except as hereinafter expressly provided, require the affirmative vote of
the holders of at least a majority of the total number of outstanding shares of
Voting Stock, excluding in calculating such affirmative vote and the total
number of outstanding shares all Voting Stock beneficially owned by such
Significant Shareholder. Such affirmative vote shall be required notwithstanding
the fact that no vote may be required, or that a lesser percentage may be
specified, by law or in any agreement with any national securities exchange or
otherwise, but no such affirmative vote shall be required (i) with respect to
any purchase or other acquisition of Voting Stock made as part of a tender or
exchange offer by the Corporation to purchase Voting Stock on the same terms
from all holders of the same class of Voting Stock and complying with the
applicable requirements of the Securities Exchange Act of 1934 and the rules and
regulations thereunder or (ii) with respect to any purchase of Voting Stock,
where the Board of Directors has determined that the purchase price per share of
the Voting Stock does not exceed the fair market value of the Voting Stock. Such
fair market value shall be calculated on the basis of the average closing price
or the mean of the bid and ask prices of a share of Voting Stock for the 20
trading days immediately preceding the date of the execution of a definitive
agreement to purchase the Voting Stock from a Significant Shareholder.
For the purposes of this Article 13, "Significant Shareholder" shall
mean any person (other than the Corporation or any Subsidiary (as defined in
Article 12 hereof)) who or which is the Beneficial Owner, directly or
indirectly, of five percent or more of the voting power of the outstanding
Voting Stock.
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Article 14. Shareholder Action. Any action required or permitted to be
taken by the shareholders of the Corporation must be effected at a duly called
annual or special meeting of such holders and may not be effected by any consent
in writing by such holders, unless such consent is unanimous.
Except as provided in Article 12, any merger or consolidation involving
the Corporation shall, as a condition to its effectiveness, be approved by the
affirmative vote of at least two-thirds of the issued and outstanding shares of
each class of capital stock.
Article 15. Amendment of Certificate of Incorporation. Except as set
forth in this Article 15 or as otherwise specifically required by law, no
amendment of any provision of this Certificate of Incorporation shall be made
unless such amendment has been first proposed by the Board of Directors of the
Corporation upon the affirmative vote of at least two-thirds of the directors
then in office at a duly constituted meeting of the Board of Directors called
for such purpose and thereafter approved by the shareholders of the Corporation
by the affirmative vote of the holders of at least a majority of the shares
entitled to vote thereon at a duly called annual or special meeting; provided,
however, that if such amendment is to the provisions set forth in this clause of
Article 15 or in Article 6, 7, 8, 10, 11, 13 or 14 hereof, such amendment must
be approved by the affirmative vote of the holders of at least two-thirds of the
shares entitled to vote thereon rather than a majority; provided, further, that
if such amendment is to the provisions set forth in this clause of Article 15 or
in Article 12 hereof, such amendment must be approved by the affirmative vote of
the holders of at least 80 percent of the shares entitled to vote thereon rather
than a majority.
IN WITNESS WHEREOF, First Coastal Corporation has caused this
Certificate to be signed by Gregory T. Caswell, its President and Chief
Executive Officer, and attested to by Dennis D. Byrd, its Treasurer, this 2nd
day of January, 1996.
FIRST COASTAL CORPORATION
By:/s/Gregory T. Caswell
--------------------------------------
Gregory T. Caswell
President and Chief Executive Officer
ATTEST:
By: /s/Dennis D. Byrd
-----------------------------
Dennis D. Byrd
Treasurer
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AMENDED AND RESTATED BYLAWS
OF
FIRST COASTAL CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the city of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors may from time to time determine.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. Meetings of shareholders for the election
of directors or for any other purpose shall be held at such time and place,
either within or without the State of Delaware, as shall be designated from time
to time by the board of directors and stated in the notice of the meeting or in
a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The annual meetings of shareholders shall
be held at such date and hour as shall be designated from time to time by the
board of directors within thirteen months subsequent to the later of the date of
incorporation or the last annual meeting of shareholders and as shall be stated
in the notice of the meeting, at which meetings the shareholders shall elect by
a plurality vote a board of directors and transact such other business as may
properly be brought before the meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
shareholder entitled to vote at such meeting not less than 20 nor more than 50
days before the date of the meeting. The notice shall also set forth the purpose
or purposes for which the meeting is called.
Section 3. Business at Annual Meeting. At an annual meeting of the
shareholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the board of directors, (b) otherwise
properly brought before the meeting by or at the direction of the board of
directors, or (c) otherwise properly brought before the meeting by a
shareholder.
For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 30 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 45 days' notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be so received not later than the
close of business on the 15th day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made. A
shareholder's notice to the secretary shall set forth as to each matter the
shareholder proposes to
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bring before the annual meeting (a) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such business, (c) the class
and number of shares of the Corporation which are beneficially owned by the
shareholder, and (d) any material interest of the shareholder in such business.
No later than the tenth day following the date of receipt of a shareholder
notice pursuant to this Section 3, the chairman of the board of directors of the
Corporation shall, if the facts warrant, determine and notify in writing the
shareholder submitting such notice that such notice was not made in accordance
with the time limits and/or other procedures prescribed by the bylaws. If no
such notification is mailed to such shareholder within such ten-day period, such
shareholder notice containing a matter of business shall be deemed to have been
made in accordance with the provisions of this Section 3. Notwithstanding
anything in these bylaws to the contrary, no business shall be conducted at an
annual meeting except in accordance with the procedures set forth in this
Section 3.
Section 4. Special Meetings. Special meetings of shareholders for any
purpose may be called only as provided in the Certificate of Incorporation.
Written notice of a special meeting stating the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called shall be
given not less than 20 nor more than 50 days before the date of the meeting to
each shareholder entitled to vote at such meeting.
Section 5 Quorum. The holders of one-third of the capital stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder entitled to vote at the
meeting.
Section 6. Voting. Except as otherwise required by law, the Certificate
of Incorporation or these bylaws, any matter brought before any meeting of
shareholders shall be decided by the affirmative vote of the majority of the
votes cast on the matter. Each shareholder represented at a meeting of
shareholders shall be entitled to cast one vote for each share of the capital
stock entitled to vote thereat held by such shareholder.
Section 7. List of Shareholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of shareholders, a complete
list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder of the Corporation who is
present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the shareholders entitled to examine the list
required by Section 7 of this Article II or to vote in person or by proxy at any
meeting of shareholders.
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Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or his duly authorized
attorney-in-fact. Proxies solicited on behalf of the board of directors shall be
voted as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid
after three years from its date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power.
Section 10. Voting of Shares in the Name of Two or More Persons. If
shares or other securities having voting power stand of record in the names of
two or more persons, whether fiduciaries, members of a partnership, joint
tenants, tenants in common, tenants by the entirety or otherwise, or if two or
more persons have the same fiduciary relationship respecting the same shares,
unless the secretary of the Corporation is given written notice to the contrary
and is furnished with a copy of the instrument or order appointing them or
creating the relationship wherein it is so provided, their acts with respect to
voting shall have the following effect: (1) if only one votes, his act binds
all; (2) if more than one vote, the act of the majority so voting binds all; (3)
if more than one vote, but the vote is evenly split on any particular matter,
each faction may vote the securities in question proportionally, or any person
voting the shares, or a beneficiary, if any, may apply to the Court of Chancery
of the State of Delaware or such other court as may have jurisdiction to appoint
an additional person to act with the persons so voting the shares, which shall
then be voted as determined by a majority of such persons and the person
appointed by the Court. If the instrument so filed shows that any such tenancy
is held in unequal interests, a majority or even-split for the purposes of this
subsection shall be a majority or even-split in interest.
Section 11. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by any officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him, but no
trustee shall be entitled to vote shares held by him without a transfer of such
shares into his name. Shares standing in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a receiver may be
voted by such receiver without the transfer into his name if authority so to do
is contained in an appropriate order of the court or other public authority by
which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares unless in the transfer by the pledgor on the books of the Corporation he
has expressly empowered the pledgee to vote thereon, in which case only the
pledgee, or his proxy, may represent such stock and vote thereon.
Neither treasury shares of its own stock held by the Corporation, nor
shares held by another corporation, if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the
Corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
Section 12. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment
thereof. If the board of directors so appoints such inspectors, that appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, and on the request of
not less than ten percent of the votes represented at the meeting shall, make
such appointments at the meeting. In case any person appointed as inspector
fails to appear or fails or refuses to act, the vacancy may be filled by
appointment by the board of directors in advance of the meeting or by the
chairman of the board or the president.
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Unless otherwise prescribed by law, the duties of such inspectors shall
include: determining the number of shares of stock entitled to vote, the voting
power of each share, the shares of stock represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining the result; and such acts as may
be proper to conduct the election or the vote with fairness to all shareholders.
Section 13. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with rules prescribed by the presiding officer of the
meeting, unless otherwise prescribed by law or these bylaws. The board of
directors shall designate, when present, either the chairman of the board or the
president to preside at such meetings.
ARTICLE III
DIRECTORS
Section 1. The number of directors shall be four. Directors need not be
residents of the State of Delaware.
Directors shall be elected only by shareholders at annual meetings of
shareholders, other than the initial board of directors and except as provided
in Section 2 of this Article III in the case of vacancies and newly created
directorships. Each director elected shall hold office for the term for which he
is elected and until his successor is elected and qualified or until his earlier
resignation or removal; provided, however, that no person of an age 70 years or
older shall be eligible for election, reelection, appointment or reappointment
to the board of directors and no director becoming 70 years of age shall
continue to serve as such beyond the earlier of the annual meeting of
shareholders immediately following his attainment of such age or the election of
his successor by the board of directors prior to such annual meeting of
shareholders.
Section 2. Classes; Terms of Office; Vacancies. The board of directors
shall divide the directors into three classes; and, when the number of directors
is changed, shall determine the class or classes to which the increased or
decreased number of directors shall be apportioned; provided, further, that no
decrease in the number of directors shall affect the term of any director then
in office. At each annual meeting of shareholders, directors elected to succeed
those whose terms are expiring shall be elected for a term of office to expire
at the third succeeding annual meeting of shareholders and when their respective
successors are elected and qualified; provided, however, that a director elected
by the board of directors pursuant to Section 1 of this Article III to succeed a
director who has attained 70 years of age shall serve until the annual meeting
of shareholders immediately following such election.
Vacancies and newly created directorships resulting from any increase
in the authorized number of directors may be filled, for the unexpired term, by
the concurring vote of a majority of the directors then in office, whether or
not a quorum, and any director so chosen shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the board of directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these bylaws
directed or required to be exercised or done by the shareholders. The board of
directors shall annually elect, from its members, a chairman of the board who
shall preside at its meetings and shall annually elect, from its members or
otherwise, a president.
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Section 4. Meetings. The board of directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. The annual regular meeting of the board of directors shall be held
without other notice than this bylaw immediately after, and at the same place
as, the annual meeting of the shareholders. Additional regular meetings of the
board of directors may be held with or without notice at such time and at such
place as may from time to time be determined by the board of directors. Special
meetings of the board of directors may be called by the chairman of the board,
the president or a majority of directors then in office. Notice thereof stating
the place, date and hour of the meeting shall be given to each director either
by mail or by courier at the address at which the director is most likely to be
reached not less than 48 hours before the date of the meeting, or by telephone
or telegram on 24 hours notice.
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these bylaws, at all meetings of the
board of directors, a majority of the directors then in office shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the board of directors. If a quorum shall not be present at any meeting of the
board of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 6. Actions Without Meeting. Any action required or permitted to
be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all the members of the board of directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board of directors or
committee.
Section 7. Meetings by Means of Conference Telephone. Members of the
board of directors of the Corporation, or any committee designated by the board
of directors, may participate in a meeting of the board of directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 7 shall constitute
presence in person at such meeting but shall not constitute attendance for the
purpose of compensation pursuant to Section 8 of this Article III.
Section 8. Compensation. The board of directors shall have the
authority to fix the compensation of directors. The directors may be paid their
reasonable expenses, if any, of attendance at each meeting of the board of
directors and may be paid a reasonable fixed sum for actual attendance at each
meeting of the board of directors. Directors, as such, may receive a stated
salary for their services. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 9. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board of directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the board of directors or the committee, and the board of directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote
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of the shareholders; or (iii) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified by the board
of directors, a committee thereof or the shareholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the board of directors or of a committee which authorizes the contract or
transaction.
Section 10. Corporate Books. The directors may keep the books of the
Corporation outside of the State of Delaware at such place or places as they may
from time to time determine.
Section 11. Presumption of Assent. A director of the Corporation who is
present at a meeting of the board of directors at which action on any matter is
taken shall be presumed to have assented to the action taken unless his dissent
or abstention shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the Corporation within five days after the
date he receives a copy of the minutes of the meeting. Such right to dissent
shall not apply to a director who voted in favor of such action.
Section 12. Resignation. Any director may resign at any time by sending
a written notice of such resignation to the chairman of the board or the
president of the Corporation. Unless otherwise specified therein such
resignation shall take effect upon receipt thereof by the chairman of the board
or the president. More than three consecutive absences from regular meetings of
the board of directors, unless excused by resolution of the board of directors,
shall automatically constitute a resignation, effective when such resignation is
accepted by the board of directors.
Section 13. Nominees. Only persons who are nominated in accordance with
the procedures set forth in this Section 13 shall be eligible for election as
directors. Nominations of persons for election to the board of directors of the
Corporation may be made at a meeting of shareholders by or at the direction of
the board of directors or by any shareholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this Section 13. Such nominations, other than those made
by or at the direction of the board of directors, shall be made pursuant to
timely notice in writing to the secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 30 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 45 days' notice or prior public disclosure of the date of the meeting
is given or made to shareholders, notice by the shareholder to be timely must be
so received not later than the close of business on the 15th day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such shareholder's notice shall set forth (a) as to each
person whom the shareholder proposes to nominate for election or re-election as
a director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation which are beneficially owned by
such person, and (iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A, or any
successor regulation, under the Securities Exchange Act of 1934, as amended
(including without limitation such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected) and
(b) as to the shareholder giving notice (i) the name and address, as they appear
on the Corporation's books, of such shareholder and (ii) the class and number of
shares of the Corporation which are beneficially owned by such shareholder. At
the request of the board of directors, any person nominated by the board of
directors for election as a director shall furnish to the secretary of the
Corporation that information required to be set forth in a shareholder's notice
of nomination which pertains to the nominee. No later than the tenth day
following the date of receipt of a shareholder nomination submitted pursuant to
this Section 13, the chairman of the board of directors of the Corporation
shall, if the facts warrant, determine and notify in writing the shareholder
making such nomination that such nomination was not made in accordance with the
time limits and/or other procedures
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prescribed by the bylaws. If no such notification is mailed to such shareholder
within such ten-day period, such nomination shall be deemed to have been made in
accordance with the provisions of this Section 13. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the procedures set forth in this Section 13.
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
Section 1. Appointment. The board of directors, by resolution adopted
by a majority of the full board, may designate the chief executive officer and
two or more other directors to constitute an executive committee. The chairman
of the board shall serve as the chairman of the executive committee, unless a
different director is designated as chairman by the board of directors. The
designation of any committee pursuant to this Article IV and the delegation of
authority thereto shall not operate to relieve the board of directors, or any
director, of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the board of
directors is not in session, shall have and may exercise all the powers and
authority of the board of directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it, except to the extent, if any, that
such powers and authority shall be limited by the resolution appointing the
executive committee; and except also that the executive committee shall not have
the power or authority of the board of directors with reference to amending the
Certificate of Incorporation; adopting an agreement of merger or consolidation;
recommending to the shareholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets; recommending to the
shareholders a dissolution of the Corporation or a revocation of a dissolution;
amending the bylaws of the Corporation; filling a vacancy or creating a new
directorship; or approving a transaction in which any member of the executive
committee, directly or indirectly, has any material beneficial interest; and
unless the resolution or bylaws expressly so provide, the executive committee
shall not have the power or authority to declare a dividend or to authorize the
issuance of stock or securities convertible into or exercisable for stock.
Section 3. Tenure. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next annual regular meeting of the board of directors following his designation
and until his successor is designated as a member of the executive committee.
Section 4. Meetings. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee may
be called by the chairman of the executive committee, any two members thereof or
the chief executive officer upon not less than 24 hours' notice stating the
place, date and hour of the meeting, which notice may be written or oral. Any
member of the executive committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted
to be taken by the executive committee at a meeting may be taken without a
meeting if a consent in writing, setting
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forth the action so taken, shall be signed by all of the members of the
executive committee and the writing or writings are filed with the minutes of
the proceedings of the committee.
Section 7. Vacancies. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the chairman of the board or the president of the Corporation. Unless
otherwise specified therein, such resignation shall take effect upon receipt.
The acceptance of such resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee may fix its own rules of
procedure which shall not be inconsistent with these bylaws. It shall keep
regular minutes of its proceedings and report the same to the full board of
directors for its information at the meeting thereof held next after the
proceedings shall have been taken.
Section 10. Other Committees. The board of directors by resolution
shall establish an audit committee and a stock option committee, composed in
each case only of directors who are not employees of the Corporation or any
subsidiary thereof. The board of directors by resolution may also establish such
other committees composed of directors as they may determine to be necessary or
appropriate for the conduct of the business of the Corporation and may prescribe
the duties and powers thereof.
ARTICLE V
OFFICERS
Section 1. Positions. The officers of the Corporation shall include a
president, one or more vice presidents, a secretary and a treasurer, each of
whom shall be elected by the board of directors. The board of directors may also
designate the chairman of the board as an officer. The president shall be the
chief executive officer unless the board of directors designates the chairman of
the board as the chief executive officer. The offices of the secretary and
treasurer may be held by the same person and a vice president may also be either
the secretary or the treasurer. The board of directors may designate one or more
vice presidents as executive vice president or senior vice president. The board
of directors may also elect or authorize the appointment of such other officers
as the business of the Corporation may require. The officers shall have such
authority and perform such duties as the board of directors may from time to
time authorize or determine. In the absence of action by the board of directors,
the officers shall have such powers and duties as generally pertain to their
respective offices.
Section 2. President. Except to the extent that the board of directors
shall have delegated all or a portion of such authority to the chairman of the
board or one or more other officers, the president, or in his absence a director
or other officer of the Corporation appointed by the board of directors, shall
preside at all meetings of the shareholders, and the president shall have
general charge and direction of the business of the Corporation and shall
perform such other duties as are properly required of him by the board of
directors, the certificate of incorporation or these bylaws.
Section 3. Vice Presidents. In the absence of the president or in the
event of his inability or refusal to act, the vice president (or in the event
there may be more than one vice president, the vice presidents in the order
designated, or in the absence of any designations, then in the order of their
election) shall perform the duties of the president, and, when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president.
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Section 4. Secretary. The secretary shall keep the minutes of the
meetings of shareholders and the board of directors and shall give notice of all
such meetings as required by these bylaws. The secretary shall have custody of
such minutes, the corporate seal and the stock certificate records of the
Corporation, except to the extent some other person is authorized to have
custody and possession thereof by resolution of the board of directors.
Section 5. Treasurer. The treasurer shall keep the fiscal accounts of
the Corporation, including an account of all moneys received or disbursed.
Section 6. Election. The board of directors at its first meeting held
after the annual meeting of shareholders shall elect annually the officers of
the Corporation who shall exercise such powers and perform such duties as shall
be set forth in these bylaws and as determined from time to time by the board of
directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Any vacancy occurring in any office of the Corporation shall be filled
by the board of directors. The salaries of all officers of the Corporation shall
be fixed by the board of directors.
Section 7. Removal. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal, other than for cause, shall be without
prejudice to the contract rights, if any, of the person so removed.
Section 8. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the president or any vice president and any
such officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and powers incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The board of directors may, by resolution, from time to time confer
like powers upon any other person or persons.
ARTICLE VI
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in the name of
the Corporation by (i) the chairman of the board or the president and (ii) by
the secretary or an assistant secretary of the Corporation, representing the
number of shares registered in certificate form.
Section 2. Signatures. Any or all of the signatures on a certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of issue.
Section 3. Lost Certificates. The president or any vice president may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the president or any vice president may, in his discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to advertise the
same in such manner as such officer may require and/or to give the
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Corporation a bond in such sum as he may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued.
Section 5. Record Date. In order that the Corporation may determine the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall not be more than 50 days nor less than 20 days before the date
of such meeting, nor more than 50 days prior to any other action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not the Corporation shall
have express or other notice thereof, except as otherwise required by law.
ARTICLE VII
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these bylaws to be given to any director, member
of a committee or shareholder, such notice may be given by mail, addressed to
such director, member of a committee or shareholder, at his address as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when, the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these bylaws to be given to any director,
member of a committee or shareholder, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting with the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at nor the purpose of any regular or special meeting
of the shareholders, directors, or members of a committee of directors need be
specified in any other waiver of notice unless so required by the Certificate of
Incorporation or these bylaws.
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ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation and
the laws of the State of Delaware, may be declared by the board of directors at
any regular or special meeting, and may be paid in cash, in property or in
shares of capital stock of the Corporation.
Subject to the provisions of the General Corporation Law of the State
of Delaware, such dividends may be paid either out of surplus, out of the net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year.
Section 2. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the board of directors may from time to time designate.
Section 3.Fiscal Year; Annual Audit. The fiscal year of the Corporation
shall end on December 31 of each year. The Corporation shall be subject to an
annual audit as of the end of its fiscal year by independent public accountants
appointed by and responsible to the board of directors. The appointment of such
accountants shall be subject to annual ratification by the shareholders.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The Seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.
ARTICLE IX
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other
Than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article IX, the Corporation shall indemnify, to the fullest extent permitted by
applicable law as it presently exists or may hereafter be amended, any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, and any appeal therein, whether
civil, criminal, administrative, arbitrative or investigative (other than an
action by or in the right of the Corporation) by reason of the fact that he is
or was a director, officer, trustee, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
trustee, employee or agent of another corporation, association, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines, penalties and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding,
and any appeal therein, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding, and any appeal therein, by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article IX, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, trustee, employee or agent of the
Corporation, or is or was
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serving at the request of the Corporation as a director, officer, trustee,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against amounts paid in settlement and expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation; provided, however, that no indemnification shall be made
against expenses in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Corporation or against
amounts paid in settlement unless and only to the extent that there is a
determination (as set forth in Section 3 of this Article IX) that despite the
adjudication of liability or the settlement, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses or amounts paid in settlement.
Section 3. Authorization of Indemnification. Any indemnification under
this Article IX (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, trustee, employee or agent is proper
in the circumstances because such director, officer, trustee, employee or agent
has met the applicable standard of conduct set forth in Section 1 or Section 2
of this Article IX and, if applicable, is fairly and reasonably entitled to
indemnity as set forth in the proviso in Section 2 of this Article IX, as the
case may be. Such determination shall be made (i) by the directors who were not
parties to such action, suit or proceeding, even though less than a quorum, (ii)
if there are no such directors, or, if such directors so direct, by independent
legal counsel in a written opinion, or (iii) by the shareholders. To the extent,
however, that a director, officer, trustee, employee or agent of the Corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith, without the necessity of
authorization in the specific cases. No director, officer, trustee, employee or
agent of the Corporation shall be entitled to indemnification in connection with
any action, suit or proceeding voluntarily initiated by such person unless the
action, suit or proceeding was authorized by a majority of the entire board of
directors.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article IX, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any association, partnership, joint venture, trust or
other enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent. The provisions
of this Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standards of conduct set forth in Sections 1 or 2 of this Article IX, as the
case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article IX, and
notwithstanding the absence of any determination thereunder, any director,
officer, trustee, employee or agent may apply to any court of competent
jurisdiction in the State of Delaware for indemnification to the extent
otherwise permissible under Sections 1 and 2 of this Article IX. The basis of
such indemnification by a court shall be a determination by such court that
indemnification of the director, officer, trustee, employee or agent is proper
in the circumstances because he has met the applicable standards of conduct set
forth in Sections 1 and 2 of this Article IX, as the case may be. Notice of any
application for
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indemnification pursuant to this Section 5 shall be given to the Corporation
promptly upon the filing of such application. Notwithstanding any of the
foregoing, unless otherwise required by law, no director, officer, trustee,
employee or agent of the Corporation shall be entitled to indemnification in
connection with any action, suit or proceeding voluntarily initiated by such
person unless the action, suit or proceeding was authorized by a majority of the
entire board of directors.
Section 6. Expenses Payable in Advance. Expenses incurred in connection
with a threatened or pending action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, trustee, employee or agent to repay such amount if it shall be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article IX.
Section 7. Contract, Non-exclusivity and Survival of Indemnification.
The indemnification provided by this Article IX shall be deemed to be a contract
between the Corporation and each director, officer, employee and agent who
serves in such capacity at any time while this Article IX is in effect, and any
repeal or modification thereof shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought based in whole or
in part upon any such state of facts. Further, the indemnification and
advancement of expenses provided by this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any certificate of incorporation,
bylaw, agreement, contract, vote of shareholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that, subject to the limitation in Section 3 of this Article IX
concerning voluntary initiation of actions, suits or proceedings,
indemnification of the persons specified in Sections 1 and 2 of this Article IX
shall be made to the fullest extent permitted by law. The provisions of this
Article IX shall not be deemed to preclude the indemnification of any person who
is not specified in Sections 1 or 2 of this Article IX but whom the Corporation
has the power or obligation to indemnify under the provisions of the law of the
State of Delaware. The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article IX shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, trustee, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, trustee,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent of another
corporation, association, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power or the obligation to indemnify him against such liability
under the provisions of this Article IX.
Section 9. Meaning of Corporation for Purposes of Article IX. For
purposes of this Article IX, references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, association,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article IX with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
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ARTICLE X
AMENDMENTS
The board of directors or the shareholders may from time to time amend
the bylaws of the Corporation. Such action by the board of directors shall
require the affirmative vote of at least two thirds of the directors then in
office at a duly constituted meeting of the board of directors called for such
purpose. Such action by the shareholders shall require the affirmative vote of
at least two thirds of the total votes eligible to be voted at a duly
constituted meeting of shareholders called for such purpose.
* * * * * *
The Amended and Restated Bylaws of the Corporation were originally
approved and adopted by the board of directors of the Corporation on July 28,
1994.
Sections 1 and 3 of ARTICLE IX were amended on December 21, 1994.
Sections 1 and 3 of ARTICLE III and Section 1 of ARTICLE V were amended
effective as of March 31, 1995.
Section 1 of ARTICLE III was amended on April 26, 1995.
(Revised 04/26/95)
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PURCHASE AND ASSUMPTION AGREEMENT
KEZAR FALLS, MAINE
This Purchase and Assumption Agreement, dated as of February
22, 1996 ("Agreement"), between Coastal Savings Bank, a Maine chartered savings
bank having its principal offices located in Westbrook, Maine ("Seller"), and
Maine Bank & Trust Company, a Maine chartered trust company having its principal
offices located in Portland, Maine ("Buyer").
WHEREAS, Seller desires to sell, and Buyer desires to acquire,
certain assets of Seller with respect to Seller's Kezar Falls, Maine branch
office (the "Branch") in accordance with the terms and provisions of this
Agreement; and
WHEREAS, Seller desires to assign to Buyer, and Buyer desires
to assume from Seller, certain liabilities of Seller with respect to the Branch
in accordance with the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
promises and covenants contained herein, subject to the terms and conditions set
forth herein, Seller and Buyer agree as follows:
1. Effective Date. Except as otherwise provided herein, the
closing date (hereinafter referred to as the "Effective Date") shall be: (a) the
last business day of the first full week following the date on which all
regulatory approvals for this transaction have been obtained and all regulatory
waiting periods have expired, so that this transaction may be legally
consummated in accordance with the terms of this Agreement; or (b) such other
date as may be mutually agreed to by the Seller and Buyer.
2. Purchase of Assets. (a) Seller agrees that, subject to the
terms and conditions of this Agreement, it will validly sell, assign, transfer,
convey and deliver to Buyer, as of the close of business on the Effective Date:
(i) all of its rights, title and interest in all
real property pertaining to the Branch (the
"Real Estate"); and
(ii) all of its rights, title and interest in and
to all of the furniture, fixtures and
equipment (other than digital equipment and
DDS circuits as provided by NYNEX) used in
the operation of the Branch as listed on
Exhibit A hereto (the "FFE").
<PAGE>
(b) Buyer agrees, subject to the terms and conditions of this
Agreement, to pay to Seller, on the Effective Date, $86,131.04 for the Real
Estate and $10,168.48 for the FFE.
3. Assumption of Deposit Liabilities. (a) Buyer agrees,
subject to the terms and conditions of this Agreement, to assume and to pay,
perform and discharge all deposit liabilities of Seller, including accrued
interest, attributed on the records of Seller to the Branch at the close of
business on the Effective Date.
(b) Buyer further agrees, subject to the terms and conditions
of this Agreement, to pay to Seller, on the Effective Date, a premium equal to
four and two/one-hundredths percent (4.02%) of the daily average of all deposit
liabilities, including accrued interest, attributed on the records of Seller to
the Branch for the period commencing at the close of business on February 15,
1996 and ending at the close of business on March 15, 1996.
(c) The amounts under Sections 3(a) and 3(b) on the Effective
Date shall be based on Seller's estimates of the amounts of the deposit
liabilities and accrued interest, with an adjustment to be made based on the
actual amounts within ten business days of the Effective Date.
4. Purchase of Loans. (a) In addition to the purchase of
assets and assumption of deposit liabilities described above, Buyer shall
purchase on the Effective Date certain deposit related loans attributed on the
records of Seller to the Branch. These loans shall consist of loans arising from
"overdraft" or "check protection" lines of credit in connection with demand
deposit accounts, or NOW accounts included in the deposit liabilities assumed by
Buyer (the "Loans"). A list of such Loans will be provided to Buyer. The
aggregate credit lines limit of such Loans was $12,650.00 at January 31, 1996.
The aggregate payoff amount of such Loans was $3,416.58 at January 31, 1996.
(b) If Buyer shall discover within 90 days after the Effective
Date: (i) that any of the Loans was not current as of the Effective Date or (ii)
that the documentation or customer disclosure relating to a particular Loan was
not materially correct and substantially complete and in substantial compliance
with applicable statutes or regulations (a "non-conforming loan"), and if Buyer
so notifies Seller specifying the particular non-conformity with respect to each
such Loan, then Seller shall have the opportunity for the period of thirty (30)
days from the date of such notification to cure any such non-conformity. Buyer
shall cooperate with Seller in Seller's attempts to cure such non-conformities.
If the non-conformity cannot be cured within such period, the non-conforming
loan will be repurchased by Seller at the price paid by Buyer for such
non-conforming loan calculated pursuant to Section 4(d). Notwithstanding the
foregoing, if Seller determines prior to the Effective Date that any of the
Loans are not current or are otherwise non-conforming as herein defined and so
notifies Buyer in writing and Buyer
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nevertheless determines to accept such Loans as of the Effective Date, then
Buyer shall not thereafter have the right to reject such Loans on the basis of
the disclosed non-conformity or non-current status and Seller's representations
as hereinabove set forth shall not be deemed applicable to such Loans. This
provision shall not be deemed to impose any obligation on Seller to review any
Loan to determine conformity or non-conformity as defined in this Section 4(b),
and Seller makes no representation or warranty with respect to the quality or
collectibility of the Loans other than the representations set forth in this
Section 4(b).
(c) The purchase price for each Loan purchased pursuant to
Section 4(a) shall be equal to the unpaid principal balance plus accrued and
unpaid interest as of the close of business on the Effective Date.
(d) The amount paid or offset under Section 4(c) on the
Effective Date shall be based on Seller's estimates of the amount of all Loans
to be purchased under Section 4(a), with an adjustment to be made based on the
actual amount within ten business days of the Effective Date.
5. Obligations of Seller on the Effective Date. On the
Effective Date, Seller will:
(a) deliver to Buyer such of the assets purchased as
shall be capable of physical delivery;
(b) execute, acknowledge (if appropriate) and deliver to Buyer
a bill of sale in substantially the form of Exhibit B hereto, a warranty deed in
substantially the form of Exhibit C hereto, and all customary endorsements,
assignments or other instruments of conveyance, assignment and transfer as shall
be reasonably necessary or advisable to consummate the sale and transfer to
Buyer of the purchased assets;
(c) make available to Buyer immediately available funds as
soon as possible on the Effective Date equal to the deposits plus accrued
interest assumed by Buyer under Section 3(a), LESS the sum of: (i) the purchase
price for the Loans to be assumed pursuant to Section 4(a), (ii) the payment for
the assets set forth in Section 2(a), (iii) the deposit premium determined
pursuant to Section 3(b) and (iv) cash and cash equivalents at the Branch at the
close of business on the Effective Date;
(d) assign, transfer and deliver to Buyer such of the
following records and documents pertaining to the deposit liabilities to be
assumed by Buyer and Loans to be purchased by Buyer and any other records or
documents reasonably requested by Buyer as exist and are in Seller's possession,
and as are necessary to enable Buyer to service such deposit accounts and Loans
on a continuing basis:
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(i) Originals (or copies where appropriate) of
signature cards, retirement account files,
orders and contracts between Seller and
customers of accounts to be transferred
hereunder, taxpayer identification number
certifications and historical records and
documents relating thereto;
(ii) The form of rules and regulations and
disclosures applicable to the accounts to be
transferred hereunder;
(iii) Loan files and other historical records and
documents, including original notes or
similar instruments; and
(iv) Data as to escheat law compliance.
Buyer agrees that it will preserve and safely keep, for as
long as may be required by applicable law, all of the signature cards, orders,
contracts, forms, taxpayer identification number certifications, and records
hereinabove referred to for the joint benefit of itself and Seller, and that it
will permit Seller and its representatives, subject to applicable law, to
inspect, and make extracts from or copies of, any such signature cards, orders,
files, contracts, forms, taxpayer identification number certifications or
records, at any reasonable time, as shall be reasonably necessary to Seller for
purposes of its records. Seller agrees that it will preserve and safely keep,
for as long as may be required by applicable law, all of the files, books of
accounts and records as exist and are in Seller's possession pertaining to the
past history of the accounts transferred hereunder, including deposit slips,
canceled checks or withdrawal orders, for the joint benefit of itself and Buyer,
and that it will permit Buyer and its representatives, subject to applicable
law, to inspect, and make extracts from or copies of, any such files, books of
accounts or records, at any reasonable time, as shall be reasonably necessary to
Buyer for purposes of its records.
6. Safe Deposit Boxes and Safekeeping Items. (a) Seller agrees
on the Effective Date to transfer and deliver to Buyer all safe deposit boxes at
the Branch, together with all contracts, records, master keys and, as to
unrented boxes, customer keys relating thereto.
(b) Buyer agrees to assume, honor, and discharge, after the
Effective Date, the duties and obligations of Seller with respect to such safe
deposit boxes, and shall be entitled to any right or benefit arising henceforth
from such safe deposit business after the Effective Date.
(c) There are no safekeeping activities conducted by Seller at
the Branch other than its safe deposit business.
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(d) Net prepaid safe deposit rental income shall be allocated
pro rata between the Seller and Buyer as of the Effective Date, with such amount
to be paid by Seller to Buyer within ten business days of the Effective Date.
7. Assumption Agreement. To evidence the assumption by Buyer
of the liabilities and obligations of Seller assumed pursuant to this Agreement,
Buyer will execute, acknowledge, and deliver to Seller, on the Effective Date,
an assignment and assumption agreement in substantially the form attached hereto
as Exhibit D.
8. Certain Transitional Matters. Following the Effective Date:
(a) Buyer agrees to honor in accordance with law, up to the
collected amount on deposit (and any other funds available by reason of any
agreement between the depositor and Seller), all properly drawn and presented
checks, drafts, electronic debits and credits and withdrawal orders presented to
Buyer by mail, over its counters, through the check clearing system, and
Automated Clearing House of the banking industry, by depositors of the accounts
assumed, whether drawn on the checks, withdrawal or draft forms provided by
Seller, or by Buyer, and in all other respects to discharge, in the usual course
of the banking business, the duties and obligations of Seller with respect to
the balances due and owing to the depositors whose accounts are assumed by
Buyer. Buyer's obligation under this Section 8(a) to honor checks, withdrawals,
draft forms and electronic debits and credits provided by Seller and carrying
its imprint shall expire at the close of business on the 90th business day after
the Conversion Date (as defined below) or a date mutually agreeable to the
Seller and Buyer.
(b) Within ten (10) business days before the Effective Date
(or such earlier time before the Effective Date as agreed upon by Seller and
Buyer), Buyer shall, at its own cost and expense, have the right to provide
notice regarding the pending assumption to each depositor of an account to be
assumed, which notice shall be reasonably acceptable to Seller as to form and
content. On or as soon as practicable after the Effective Date, Buyer shall
begin processing checks drawn on the assumed accounts on the forms of Buyer. The
date on which Buyer begins processing checks on its forms is called the
"Conversion Date." Prior to the Conversion Date, depositors whose deposit
accounts have been assumed by Buyer may continue to draw checks on the assumed
accounts using the forms of Seller, provided that after the Effective Date, the
cost of processing checks drawn on the assumed accounts and the payment of such
checks shall be the responsibility of Buyer.
If after the Conversion Date, any such depositors continue to
use checks on forms of Seller, or otherwise demand payment from Seller for all
or any part of any such assumed deposit liabilities, Seller shall not be
responsible or liable for making such payment. Instead, at any time up to and
including the 90th
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business day after the Conversion Date, or a date mutually agreeable to both
parties, Seller shall assume custody of the check or other item presented for
payment, including electronic items, on an account which has been transferred
with the Branch, batch such items in a manner that is mutually agreed upon by
both parties, and make them available to Buyer in such manner and at such time
and place as shall be mutually agreed upon by both parties, in order to allow
Buyer sufficient time to process such items in accordance with applicable
statutes, regulations, and clearing house agreements to which Buyer is subject.
In order to reduce the continuing charges to Seller through
the check clearing system of the banking industry which will result from check
forms of Seller being used after the Conversion Date by the depositors whose
accounts are assumed, Buyer agrees, at its cost and expense, and without cost to
depositors, prior to the Conversion Date but not earlier than ten (10) business
days prior to the Effective Date (and only with the express written consent of
Seller if prior to the Effective Date), to furnish each depositor of an assumed
account with not fewer than 50 checks on the forms of Buyer, with instructions
to utilize Buyer's checks and to destroy unused checks of Seller after the
Conversion Date or a date mutually agreeable to both parties. Seller hereby
agrees that after the 90th business day after the Conversion Date or a date
mutually agreeable to both parties, it shall, with respect to any check or other
item presented to it for payment on an account which has been transferred with
the Branch, at its sole option, either: (i) return such check or other item with
reference to the maker thereof; or (ii) assume custody thereof, batch the same
in a manner that is mutually agreed upon by Buyer and Seller, and make it
available to Buyer in such manner and at such time and place as shall be
mutually agreed upon by Seller and Buyer, in order to allow Buyer sufficient
time to process such items in accordance with applicable statutes, regulations,
and clearing house agreements to which Buyer is subject.
(c) Buyer agrees, no later than the start of the second
business day after demand by Seller, to pay Seller an amount equivalent to the
amount of any uncollected item included in a depositor's balance on the
Effective Date which is returned after the Effective Date as not collected.
Buyer shall be required to make such payment for an item only up to the amount
on deposit with Buyer at the time Seller makes the demand aforesaid and for any
item paid before the expiration of a hold properly placed on the depositor's
account by Seller prior to the close of business on the Effective Date.
(d) If the balance due on any Loan purchased pursuant to
Section 4(a) has been reduced by Seller as a result of a payment by check
received prior to the Effective Date, which item is returned after the Effective
Date as uncollected, the asset value represented by the Loan transferred shall
be correspondingly increased and an amount in cash equal to such increase shall
be paid by Buyer to Seller after the Effective Date upon demand.
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9. Indemnification.
(a) Seller shall indemnify, hold harmless and defend Buyer
from and against all losses and liabilities, including reasonable legal fees and
expenses, arising out of any actions, suits or proceedings commenced on or prior
to the Effective Date (other than proceedings to prevent or limit the
consummation of this Agreement) relating to actions or omissions involving
operations at the Branch or to the assets transferred or the liabilities assumed
pursuant to this Agreement, and Seller shall indemnify, hold harmless and defend
Buyer from and against all losses and liabilities (including reasonable legal
fees) arising out of any actions, suits or proceedings commenced after the
Effective Date but which relate to actions or omissions on or prior to the
Effective Date involving operations at the Branch or the assets transferred or
the liabilities assumed pursuant to this Agreement. Seller agrees further to
indemnify, hold harmless (and where applicable defend) Buyer against all claims,
losses, liabilities (including reasonable legal fees and expenses) and
obligations resulting from any material breach of any agreement or warranty made
by Seller in this Agreement or in any document delivered to Buyer hereunder or
resulting from the material inaccuracy of any representation made in this
Agreement or in any document delivered by Seller to Buyer hereunder. Buyer will
give Seller written notice of a threatened or pending injury within 30 days of
becoming aware of such pending or threatened injury (except in the case where
Buyer's first notice is its receipt of the complaint in which case such time for
giving notice shall be 15 days of its learning of such threatened or pending
injury), together with a general statement of facts known to it regarding such
threatened or pending injury. Seller will then have 45 days from the date it
received such notice or until the fifth day before an answer to any complaint is
due, whichever occurs first, to investigate the threatened or pending claim and
determine whether it will elect to assume the defense of the matter involving
such threatened or pending injury. If it does so elect, Seller will be given
Buyer's full cooperation and assistance in maintaining such defense. Unless such
settlement contains a full release of Buyer, Seller shall not settle a claim
without the prior written consent of Buyer, which consent shall not be
unreasonably withheld. Seller shall not be liable for any amounts in settlement
of a claim or action as described above if such settlement is effected without
Seller's prior written consent, which consent shall not be unreasonably
withheld. It is understood that the obligations of Seller under this Section
9(a) shall survive the Effective Date.
(b) Buyer shall indemnify, hold harmless and defend Seller
from and against all claims, losses, liabilities and obligations (including
reasonable legal fees and expenses), which Seller may incur relating to actions
or omissions after the Effective Date involving operations at the Branch or the
assets transferred or the liabilities assumed pursuant to this Agreement. Buyer
agrees further to defend, indemnify, hold harmless (and where applicable defend)
Seller against all claims, losses, liabilities (including reasonable legal fees
and expenses) and obligations resulting from any material breach of any
agreement or warranty made by Buyer in
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this Agreement or in any document delivered to Seller hereunder or resulting
from the material inaccuracy of any representation made in this Agreement or in
any document delivered by Buyer to Seller hereunder. Seller will give Buyer
written notice of a threatened or pending injury within 30 days of becoming
aware of such pending or threatened injury (except in the case where Seller's
first notice is its receipt of a complaint, in which such time for giving notice
shall be 15 days) of its learning of such threatened or pending injury, together
with a general statement of facts known to it regarding such threatened or
pending injury. Buyer will then have 45 days from the date it receives such
notice or until the fifth day before an answer to any complaint is due,
whichever occurs first, to investigate the threatened or pending injury to
determine whether it will elect to assume the defense of the matter involving
such threatened or pending injury. If it does so elect, Buyer will be given
Seller's full cooperation and assistance in maintaining such defense. Unless
such settlement contains a full release of Seller, Buyer shall not settle a
claim without the prior written consent of Seller, which consent shall not be
unreasonably withheld. Buyer shall not be liable for any amounts in settlement
of a claim or action as described above if such settlement is effected without
Buyer's prior written consent, which consent shall not be unreasonably withheld.
It is understood that the obligations of Buyer under this Section 9(b) shall
survive the Effective Date.
10. Prorata Adjustment of Certain Expenses Relating to the
Branch. All real estate taxes, FDIC insurance related rebates or credits, if
any, applicable to such period, utility payments, service contracts and similar
expenses relating to the Branch shall be prorated between the Buyer and Seller
as of the Effective Date. Seller has service contracts as to building cleaning,
furniture, fixtures and equipment maintenance, and armored car/courier services.
Seller will give notice to terminate such service contracts with respect to the
Branch as of the Effective Date.
11. Title. Title to the Real Estate shall be deemed to be in
conformity with the requirement of this Agreement if said title is good and
marketable in accordance with the Maine Title Standards adopted by the Maine
State Bar Association.
Buyer shall give to Seller reasonable notice of, and a
reasonable opportunity to cure, any defects in title which would make Seller
unable to give title to the Real Estate as herein stipulated, and the Effective
Date hereunder shall be extended accordingly, if necessary, but in no event
beyond June 30, 1996. If Seller acts not to remedy any such defect to title, or
if any such cure by Seller cannot be effected, Buyer may elect to accept title
to the Real Estate subject to the uncured defects of title.
12. Sales and Transfer Taxes. (a) All excise, sales, use and
transfer taxes (other than Seller's portion of real estate transfer taxes as set
forth in Section 12(b)) which are payable or arise as a result of this Agreement
or the transactions
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contemplated by this Agreement will be paid by Buyer whether such taxes are
imposed upon Buyer or Seller. Buyer shall indemnify and hold Seller harmless
from and against any such taxes.
(b) Seller will be responsible for (i) any tax of the nature
described in Section 12(a) imposed or arising by virtue of its ownership or
operation of the Branch prior to the Effective Date, and (ii) Seller's portion
of real estate transfer taxes payable in connection with the transfer of the
Branch.
13. Employees of Seller. (a) Commencing on the date hereof and
within five (5) business days thereafter, Buyer shall interview each of Seller's
full time employees at the Branch, and within twenty (20) business days
thereafter, shall, at its discretion, offer employment with Buyer, commencing as
of the Effective Date, to each of Seller's full time employees at the Branch.
(b) Seller shall permit Buyer, at Buyer's expense, to install
one or more of Buyer's terminals in the Branch prior to the Effective Date for
purposes of training such employees as may be retained, if any, in Buyer's
systems and shall permit Buyer to train such employees at such reasonable times
to which Seller consents. The installation of such terminals, and training on
them shall be solely at Buyer's expense. In the event of termination of this
Agreement, Buyer shall promptly remove its terminals from the Branch.
(c) Buyer will provide to Seller between the date hereof and
the Effective Date "leased" employees of Buyer to fill any vacancies arising at
the Branch.
(d) Seller agrees, for a period of one year after the
Effective Date, not to solicit for reemployment with Seller any such employee of
Seller accepting employment with Buyer.
14. Regulatory Approvals. Seller and Buyer will each use its
best efforts and will cooperate fully with a view to obtaining all necessary
approvals of the transactions contemplated by this Agreement by banking
regulatory and other authorities as soon as practicable. Each shall make
available all information reasonably required in connection with obtaining such
approvals.
15. Cooperation Before and After Effective Date. Before and
after the Effective Date, Seller and Buyer will cooperate fully, provide all
information and take all action reasonably appropriate with a view to carrying
out the transactions contemplated by, and accomplishing the purposes of, this
Agreement and to ensuring an orderly transition of the Branch, including
permitting Buyer and its agents access to the premises of the Branch at
reasonable times and in such manner so as not to disrupt Seller's businesses to
prepare the premises for Buyer (such as wiring for computer and telephones and
preliminary site work for the ATM lane).
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<PAGE>
16. Records and Information. (a) Until the Effective Date, and
to the extent permitted by law, Seller will provide to Buyer full access
(without unreasonably interfering with normal business and operations) to the
Branch during normal business hours and will make available to Buyer all books,
records, files, reports, computer data, and other information relating to the
Branch and the assets to be purchased and the liabilities to be assumed under
this Agreement. Buyer will treat all such information furnished by Seller as
confidential and upon any termination of this Agreement, Buyer will return all
copies of all such information to Seller and further agrees thereafter to make
no use of such information or to provide it to others. The agreement set forth
in the immediately preceding sentence shall survive the termination of this
Agreement.
(b) On the Effective Date, Seller will turn over to Buyer all
books, records, files, computer data, and other information relating to the
Branch reasonably required for Buyer to operate the Branch and to take over and
administer the assets to be purchased and the liabilities to be assumed under
this Agreement.
17. Form 1099s for 1996. Seller shall provide Form 1099s for
the period January 1, 1996 through the Effective Date. Prior to the Effective
Date, Seller and Buyer will mutually agree on procedures to be followed so as to
assure that deposit customers at the Branch will receive on a timely basis Form
1099s for the period January 1, 1996 through the Effective Date.
18. Cooperation as to Computer Conversion. Buyer and Seller
shall cooperate with each other and their respective data processing system
servicers so as to achieve a conversion of all computerized deposit account
information relating to the Branch from Seller's servicer to Buyer's servicer on
the Effective Date or as soon as practicable thereafter. Seller shall cause its
servicer, at Buyer's expense, to continue to service the deposit accounts at the
Branch after the Effective Date and until such conversion occurs. Buyer shall
promptly reimburse Seller for all charges made by Seller's servicer related to
servicing the deposit accounts at the Branch after the Effective Date and until
such conversion occurs. All direct conversion costs relating to such conversion
shall be paid by Buyer as to its servicer and by Seller as to its servicer.
Seller will cause its servicer promptly to provide Buyer with a copy of such
servicer's fee schedule that will apply to such deposit accounts during such
period.
19. Press Releases. Buyer and Seller will cooperate and
coordinate all press releases regarding this transaction. No press release shall
be issued until the termination right set forth in Section 27(c) hereof shall
have lapsed without exercise.
20. Conduct of Business Until Transfer. Until the Effective
Date, Seller:
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<PAGE>
(a) will carry on the banking businesses of the Branch
substantially in the same manner as before this Agreement, with a view to
maintaining the good will of the Branch's customers and others doing business
with the Branch;
(b) will not transfer from the Branch to the Seller's other
operations or from the Seller's other operations to the Branch any material
amount of assets or deposits of the type to be purchased or assumed under this
Agreement, except in the ordinary course of business; and
(c) will not undertake any banking or other transaction with
respect to the Branch or any employee of the Branch or enter into any
commitment, agreement or arrangement regarding the same, except in the ordinary
course of business.
21. Further Assurances. On and after the Effective Date,
Seller and Buyer will (i) provide such further assurances to each other, (ii)
execute and deliver all such further instruments and papers, (iii) provide such
records and information and (iv) take such further action, as may be reasonably
appropriate to carry out the transactions contemplated by, and to accomplish the
purposes of, this Agreement and to ensure the orderly transition of the Branch.
22. Non-Competition. For a period of three years after the
Effective Date, Seller will not directly solicit banking or other financial
services business from customers of the Branch or others in the Kezar Falls
market consisting of the towns of Cornish, Kezar Falls, West Baldwin, East
Parsonfield, Newfield, Porter, Brownfield, Fryeburg, Denmark, Limerick,
Limington, West Newfield, Hiram and Standish, except as may occur in the
ordinary course of business in connection with (i) advertising or solicitations
directed to the public generally, (ii) already existing lending, deposit or safe
deposit box trust relationships of the customers at other offices of Seller or
(iii) notices of the transaction approved by Buyer or other communications
required by law. For a period of three (3) years after the Effective Date,
Seller will not open or operate a banking branch in the Kezar Falls market as
described above. It is the intention of the parties that Seller shall not
directly solicit customers whose deposits are being transferred, but Buyer
recognizes and agrees that Seller cannot control mass mailing, distribution of
statement "stuffers" of a general nature or other advertising materials to
persons who also hold deposits at other branches of Seller or newspaper, radio
and television advertisements of a general nature, and that Seller cannot
control the solicitation of such customers who enter other premises of Seller or
make telephone inquiries of Seller. Nothing in this Section 22 shall preclude
Seller from servicing customers of the Branch who have a borrowing relationship
with Seller. This Section 22 shall not be binding on successors of Seller or its
parent corporation, First Coastal Corporation ("FCC"), pursuant to any
reorganization, merger, consolidation or other similar transaction involving
Seller or FCC in which there is a "change of control" of Seller or FCC, or
pursuant to a sale of all or substantially all of the assets of Seller or FCC to
one or
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<PAGE>
more other corporations or entities. For purposes of the immediately preceding
sentence, a "change of control" of (a) the Seller shall be deemed to have taken
place if FCC's beneficial ownership of the total number of voting shares of
Seller is reduced to less than fifty percent and (b) FCC shall be deemed to have
taken place if any person shall (i) acquire direct or indirect beneficial
ownership of at least fifty percent of the issued and outstanding common stock
of FCC or (ii) have the power (whether such power arises as a result of the
ownership of capital stock, by contract or otherwise), or ability to elect or
cause the election of directors consisting at the time of such election of a
majority of the Board of Directors of FCC.
23. Change of Name. From and after the Effective Date, Buyer
will change to Buyer's name the name on all signs, documents, forms, brochures,
papers and facilities relating to the Branch and will discontinue the use of
Seller's name in any way in connection with the Branch.
24. Disclaimers. (a) Seller makes no representations or
warranties as to the physical condition of the Branch or of any of the assets to
be transferred under this Agreement, all of which are being sold "as is" at the
Effective Date, except as otherwise expressly provided herein.
(b) Seller makes no representations or warranties to Buyer as
to the quality or collectibility of the Loans, except as may be otherwise
expressly provided herein.
(c) Seller makes no representations or warranties to Buyer as
to whether, or the length of time during which any banking deposits assumed by
Buyer under this Agreement will be maintained by the depositors at the Branch
after the Effective Date.
(d) No transfers to Buyer of accounts for which Seller acts as
a fiduciary or in other representative capacity are contemplated by this
Agreement.
25. Seller's Representations. (a) Seller represents and
warrants to Buyer as follows:
(i) Seller has the authority to engage in the
operation of the Branch, and has the
corporate power and authority to carry out
all of its obligations under this Agreement,
all of which obligations have been duly
authorized by all necessary corporate
action. Seller is a duly organized and
existing savings bank under the laws of the
State of Maine.
(ii) Seller has good and marketable title
(subject only to customary title exceptions,
which do not materially and adversely affect
the marketability thereof) to the Real
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<PAGE>
Estate and FFE; there will be no limitation
or restriction on the sale and transfer of
the Real Estate and FFE and upon delivery,
they shall be free and clear of all liens,
charges and encumbrances except as
hereinabove provided and as provided in
Section 11.
(iii) Except as otherwise provided herein or as
otherwise agreed by Buyer and Seller as to
specific items, the Real Estate and FFE
include all the physical properties which
are used by Seller for the conduct of
business at the Branch in the manner in
which it has been operated, and the FFE are
in reasonably good repair and operating
condition, giving consideration to its age
and use and subject to ordinary wear and
tear.
(iv) Seller has paid or accrued all federal,
state and local taxes, or installments
thereof, required to be paid or accrued in
any way related to the Real Estate or its
operation of the Branch.
(v) Seller is not engaged in or to its
knowledge, threatened with any litigation or
governmental proceeding, for income tax
deficiencies, violation of any hazardous
waste or environmental statute or
regulation, or otherwise, which is
reasonably likely to give rise to any claim
against or affect the Branch or the assets
to be purchased.
(vi) Seller has substantially and materially
complied with all applicable federal, state
and local laws relating to the employment of
labor at the Branch, including the
provisions thereof relating to wages, hours,
collective bargaining and the payment of
social security taxes; Seller is not liable
for any arrearages of wages or any tax or
penalties for failure to comply with any of
the foregoing; and there are no
controversies known by Seller to be pending
or threatened between the Seller and its
employees at the Branch.
(vii) Seller knows of no material violation of any
applicable law or regulation of federal,
state and local governments relating to the
operation of the Branch or the ownership or
use of the assets to be purchased.
(viii) The execution, delivery and performance of
this Agreement by the Seller will not
violate or constitute
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<PAGE>
a default under any agreement, contract,
governmental order, or other proceeding to
which the Seller is a party.
(ix) With respect to the Loans, the documentation
and disclosures to the customers for such
loans are materially correct and
substantially complete and in substantial
compliance with applicable law.
(x) To the best of Seller's knowledge, Seller
has not violated any applicable law or
regulation with respect to Hazardous
Materials. The terms "Hazardous Materials"
shall mean any flammable explosives,
radioactive materials, hazardous materials,
hazardous waste, hazardous matter, hazardous
or toxic substances, or toxic pollutants, as
any of those terms are used or defined in
the Comprehensive Environmental Response
Compensation and Liability Act of 1980, the
Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, and
any applicable Maine statutes.
(xi) No representation or warranty of the Seller
contains any untrue statement of a material
fact or omits a material fact necessary to
make the statements contained therein not
materially misleading.
(b) Buyer hereby represents and warrants to Seller as of the
date of this Agreement as follows:
(i) Buyer is a banking institution duly
organized, validly existing and in good
standing under the laws of the State of
Maine.
(ii) Neither the execution and delivery of this
Agreement, nor the consummation of the
transactions contemplated hereby will
violate or conflict with (a) the charter or
Bylaws of the Buyer, (b) any provision of
any agreement, judgment, order, consent or
any other restriction of any kind to which
Buyer is a party or by which Buyer is
subject or (c) any statute, law, decree or
regulation of any governmental authority
known to Buyer, or will result in a default
under, or cause the acceleration of the
maturity of, any obligation or loan to which
Buyer is a party. Buyer has the corporate
power and authority to carry out all its
obligations under this Agreement. Buyer is
in material compliance with the rules and
regulations of its
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<PAGE>
regulatory authorities and knows no facts or
circumstances which would hinder its ability
to complete the transactions contemplated
herein in a timely manner.
(iii) The execution and delivery of this Agreement
and the consummation of the transactions
contemplated hereby have been duly
authorized by the Board of Directors of the
Buyer. No further corporate authorization on
the part of Buyer is necessary to consummate
these transactions.
(iv) No representation or warranty of the Buyer
contains any untrue statement of a material
fact or omits a material fact necessary to
make the statements contained therein not
materially misleading.
26. Conditions: Closing. (a) The obligation of the Buyer to
complete the transactions provided for herein is subject, at its election, to
the performance by the Seller of all of the agreements and obligations to be
performed by it hereunder at or before the Effective Date, and to all of the
following further conditions:
(i) The representations and warranties of the
Seller in Section 25(a) shall be true and
correct in all material respects on and as
of the Effective Date, with the same effect
as if such representations and warranties
had been made on and as of the Effective
Date, and the Buyer shall have received from
the Seller a certificate signed by it dated
the Effective Date to that effect.
(ii) The Buyer shall have received from the
Seller a warranty deed in substantially the
form of Exhibit C hereto and a bill of sale
in substantially the form of Exhibit B
hereto and such other documents, instruments
and certificates, as the Buyer's counsel
shall have reasonably requested to effect
the transfer of the Real Estate and the FFE.
(iii) All required approvals of this Agreement and
the contemplated transactions by banking
regulatory and other authorities shall have
been obtained; and all necessary conditions,
including any legally required waiting or
appeal periods, shall have been fully
satisfied.
(iv) No action, suit or governmental proceeding
shall be pending or threatened against the
Seller which does or will materially and
adversely affect the business, properties or
assets of the Branch.
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<PAGE>
(v) There shall be no litigation pending on the
Effective Date seeking to prohibit
consummation of the transactions provided
for in this Agreement.
(b) The obligation of the Seller to complete the transactions
provided for herein is subject, at its election, to the performance by the Buyer
of all of the agreements and obligations to be performed by it hereunder at or
before the Effective Date, and to all of the following further conditions:
(i) The representations and warranties of the
Buyer in Section 25(b) shall be true and
correct in all material respects on and as
of the Effective Date, with the same effect
as if such representations and warranties
had been made on and as of the Effective
Date, and the Seller shall have received
from the Buyer a certificate signed by it
dated the Effective Date to that effect.
(ii) All required approvals of this Agreement and
the contemplated transactions by banking
regulatory and other authorities shall have
been obtained; and all necessary conditions,
including any legally required waiting or
appeal periods, shall have been fully
satisfied.
(iii) There shall be no litigation pending on the
Effective Date seeking to prohibit
consummation of the transactions provided
for in this Agreement.
27. Methods Of Termination. This Agreement may be terminated
at any time, but not later than the Effective Date:
(a) By mutual written agreement of the Board of Directors of
Seller and Board of Directors of Buyer; or
(b) By the Board of Directors of Buyer if any of the
conditions provided for in Section 26(a) of this Agreement shall not have been
met or waived in writing by Buyer; or
(c) By the Board of Directors of Buyer no later than 3:00 p.m.
on the seventh (7th) business day after the date of this Agreement if the Buyer
shall not have obtained satisfactory results regarding the presence or absence
of Hazardous Materials from any environmental assessment or survey it chooses to
conduct on, in and about the Branch, for which purposes Buyer or its agents will
be granted reasonable access to the Real Estate during such seven (7) business
day period; or
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<PAGE>
(d) By the Board of Directors of Seller if any of the
conditions provided for in Section 26(b) of this Agreement shall not have been
met or waived in writing by Seller; or
(e) By the Board of Directors of Seller or the Board of
Directors of Buyer if the Effective Date has not occurred on or before June 30,
1996, unless as a result of a breach of this Agreement by the party seeking to
terminate.
28. Procedure Upon Termination. In the event of termination
pursuant to Section 27 hereof, written notice thereof shall be given to the
other party, and this Agreement shall terminate immediately upon receipt of such
notice, unless an extension is consented to by the party or parties having the
right to terminate. If this Agreement is terminated as provided herein:
(a) Each party will redeliver all documents, work papers and
other materials of the party relating to this transaction, whether so obtained
before or after the execution hereof, to the party furnishing the same.
(b) All information received by either party hereto with
respect to the business of the other party (other than information which is a
matter of public knowledge or which has heretofore been or is hereafter
published in any publication for public distribution or filed as public
information with any governmental authority) shall not at any time be used for
business advantage by such party or disclosed by such party to third persons to
the detriment of the party furnishing such information or if otherwise
prohibited by state or federal law.
(c) Any improvements or work performed on the Branch by or on
behalf of Buyer prior to termination shall remain and become the property of
Seller, and any equipment of Buyer located at the Branch shall be promptly
removed by Buyer.
(d) Nothing contained in Sections 27 and 28 shall be deemed to
excuse either party for a breach of any of its obligations or agreements
undertaken or made in this Agreement.
29. Amendment; Waiver. The provisions of this Agreement may be
modified in any respect by the mutual written consent of Seller and Buyer, and
any of the conditions to the performance of the respective obligations of the
parties may be waived by the party or parties entitled to the benefit of such
conditions.
30. Other. (a) This Agreement contains the entire agreement
and understanding of Seller and Buyer with respect to the transactions
contemplated hereby, and there are no agreements, representations and warranties
or understandings between Seller and Buyer which are not expressly set forth in
this Agreement. This Agreement supersedes all prior communications, submissions
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<PAGE>
of information and understandings between Seller and Buyer or their
representatives with respect to the transactions contemplated hereby.
(b) Seller and Buyer each represents and warrants that no
broker or finder has been employed in connection with this Agreement or the
transactions contemplated by this Agreement other than the engagement of First
Albany Corporation by Seller, the fees as to which shall be the sole
responsibility of Seller.
(c) This Agreement will be governed by Maine law, except to
the extent federal law controls.
(d) Any notice or other communication required or permitted
under this Agreement will be effective only if it is in writing and delivered
personally, by facsimile transmission, or by registered or certified mail,
postage prepaid, addressed as follows:
<TABLE>
<CAPTION>
<S> <C>
If to Buyer: Wayne C. McGarvey
President and Chief Executive Officer
Maine Bank & Trust Company
P.O. Box 619
467 Congress Street
Portland, Maine 04101
Fax: (207) 828-3175
with a copy to John R. Opperman, Esq.
(which shall not be Perkins, Thompson, Hinckley
deemed notice): & Keddy
One Canal Plaza, P.O. Box 426
Portland, Maine 04112
Fax: (207) 871-8026
If to Seller: Gregory T. Caswell
President and Chief Executive Officer
Coastal Savings Bank
36 Thomas Drive
Westbrook, Maine 04092
Fax: (207) 775-3089
with a copy to Howard I. Flack, Esq.
(which shall not be Hogan & Hartson L.L.P.
deemed notice): 555 13th Street, N.W.
Washington, D.C. 20004
Fax: (202) 637-5910
or such other address as such party may designate by notice to the other party.
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<PAGE>
(e) This Agreement and all of the provisions hereof shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned, until after
the Effective Date, by either of the parties hereto without the prior written
consent of the other.
(f) This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) The headings of the Sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
(h) Unless otherwise specifically provided herein, the
respective representations and warranties of the parties hereto contained in
this Agreement or in documents delivered pursuant hereto shall survive for a
period of one year after the Effective Date.
(i) The parties hereto acknowledge that monetary damages could
not adequately compensate either party hereto in the event of a breach of this
Agreement by the other, that the nonbreaching party would suffer irreparable
harm in the event of such breach and that the nonbreaching party shall have, in
addition to any other rights or remedies it may have at law or in equity,
specific performance and injunctive relief as a remedy for the enforcement
hereof.
(j) Each party herein shall pay for its own expenses and costs
in connection with the carrying out of this Agreement except as stated otherwise
herein. All filing fees relating to the approvals of the appropriate regulatory
authorities shall be paid by the party responsible for making the filing. All
costs for notices to depositors of the assumption of deposit liabilities
provided for in this Agreement shall be paid by Buyer.
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<PAGE>
IN WITNESS WHEREOF, the Buyer and Seller hereto have caused
this Agreement to be duly executed and delivered by their duly authorized
officers and their corporate seals to be affixed as of the date first written
above.
WITNESS: COASTAL SAVINGS BANK
- --------------------------- By: /s/Gregory T. Caswell
---------------------------
Its President and Chief Executive
Officer
MAINE BANK & TRUST COMPANY
- --------------------------- By: /s/Wayne C. McGarvey
---------------------------
Its President and Chief Executive
Officer
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<PAGE>
PURCHASE AND ASSUMPTION AGREEMENT
LIST OF EXHIBITS
Exhibit A -- Furniture, Fixtures and Equipment
Exhibit B -- Bill of Sale
Exhibit C -- Warranty Deed
Exhibit D -- Assignment and Assumption Agreement
<PAGE>
EXHIBIT A
FURNITURE, FIXTURES AND EQUIPMENT
<PAGE>
EXHIBIT B
BILL OF SALE
THIS BILL OF SALE, dated ________________, 1996 is from
Coastal Savings Bank, a Maine chartered savings bank, having its principal
office at Westbrook, Maine ("Seller") and Maine Bank & Trust Company, a Maine
chartered trust company having its principal office at Portland, Maine
("Buyer"). Capitalized terms used herein, which are defined in the Purchase and
Assumption Agreement dated as of February __, 1996 between Seller and Buyer (the
"Agreement") shall have the same meanings herein as therein unless defined
herein or the context otherwise requires.
For good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, Seller does hereby,
pursuant to and in accordance with the Agreement with respect to the Branch,
located in Kezar Falls, Maine, grant, assign, sell, convey, transfer and deliver
to Buyer, its successors and assigns the following property as of the close of
business on the date hereof:
(i) all of its right, title and interest in the FFE as
listed on Exhibit A hereto; and
(ii) the aggregate amount of coin and currency and cash
equivalents in the Branch as of the close of business
on the Effective Date.
The assets hereby transferred pursuant to the Agreement are
entitled to all the benefits of the Agreement, specifically including the
applicable Seller's Representations set forth in Section 25(a) thereof, and are
subject to the terms and provisions of the Agreement.
Seller hereby assigns to Buyer all of Seller's rights, title
and interest in and to any manufacturer's warranties with respect to the FFE.
TO HAVE AND TO HOLD, all of the property to Buyer, its
successors and assigns, to its and their own use and behoof forever.
IN WITNESS WHEREOF, this Bill of Sale has been executed and
delivered as of the date first set forth above.
WITNESS: COASTAL SAVINGS BANK
______________________ By:_____________________________
Its President and
Chief Executive Officer
<PAGE>
EXHIBIT C
WARRANTY DEED
Corporate Grantor
Maine Statutory Short Form
KNOW ALL BY THESE PRESENTS, that Coastal Savings Bank, a
corporation organized and existing under the laws of the State of Maine, and
having a place of business in Westbrook, County of Cumberland and State of
Maine, for consideration paid, GRANTS to Maine Bank & Trust Company, a
corporation organized and existing under the laws of the State of Maine, and
having a place of business in Portland, County of Cumberland and State of Maine,
whose mailing address is 467 Congress Street, P.O. Box 619, Portland, ME 04104,
with WARRANTY COVENANTS, the land in Kezar Falls, County of York and State of
Maine, which is more particularly described in Exhibit A attached hereto and
made a part hereof.
IN WITNESS WHEREOF, the said Coastal Savings Bank has caused
this instrument to be sealed with its corporate seal and signed in its corporate
name by Gregory T. Caswell, its President and Chief Executive Officer, thereunto
duly authorized, this ___ day of ____________, 1996.
SIGNED, SEALED AND DELIVERED
IN PRESENCE OF: COASTAL SAVINGS BANK
___________________________ By:_______________________________
Its President and
Chief Executive Officer
STATE OF MAINE
COUNTY OF CUMBERLAND ______________, 1996
Then personally appeared the above-named Gregory T. Caswell, President
and Chief Executive Officer of said grantor corporation as aforesaid, and
acknowledged the foregoing instrument to be his free act and deed in his said
capacity, and the free act and deed of said grantor corporation.
Before me,
-----------------------------
Notary Public/Attorney at Law
Printed Name:________________
<PAGE>
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT, dated ___________, 1996 is
between Coastal Savings Bank, a Maine chartered savings bank ("Seller"); and
Maine Bank & Trust Company, a Maine chartered trust company ("Buyer"), and is
made pursuant to and in accordance with a certain Purchase and Assumption
Agreement dated February ___, 1996 between Seller and Buyer ("Agreement") with
respect to a certain bank branch located in Kezar Falls, Maine (the "Branch").
Capitalized terms used herein, which are defined in the Agreement, shall have
the same meanings herein as therein unless defined herein or the context
otherwise requires.
For good and valuable consideration, the receipt and sufficiency of
which are hereby mutually acknowledged, Seller and Buyer hereby agree as
follows:
1. Seller hereby assigns, grants and transfers to Buyer all of the
deposit liabilities of Seller, including accrued interest, attributed on the
records of the Seller to the Branch (the "Deposit Liabilities") on the close of
business on the Effective Date.
2. Buyer does hereby assume and agree to pay, perform and discharge (i)
the liability of Seller for the payment of the principal balance and unpaid
interest accrued through the close of business on the Effective Date and
thereafter on the Deposit Liabilities, and (ii) all liabilities, duties and
obligations of Seller with respect to the Deposit Liabilities for the period
from and after the date hereof, including without limitation the obligations to
service the Deposit Liabilities, in accordance with the terms and provisions of
the deposit contracts and account regulations and otherwise as required by
applicable law and regulations.
3. Seller hereby transfers and assigns to Buyer all its right, title
and interest in and to all assets used in connection with the safety deposit box
business conducted at the Branch including all safety deposit boxes and vaults,
keys, records, data and contracts relating thereto (the "Safety Deposit Box
Business"). Buyer hereby assumes and agrees to pay, perform and discharge any
and all liabilities, duties and obligations of Seller from and after the date
thereof with respect to the Safety Deposit Box Business.
4. Seller hereby transfers and assigns to Buyer the Loans, including
Seller's rights under all notes or other evidence of indebtedness and any
collateral security with respect to the Loans as described in the list attached
hereto as Exhibit A, and said list is accepted by Buyer. Buyer assumes and
agrees to perform
<PAGE>
and discharge any and all liabilities, duties and obligations of Seller from and
after the date hereof with respect to the Loans.
5. The Deposit Liabilities, Safety Deposit Box Business, and Loans are
being transferred pursuant to the Agreement, are entitled to all the benefits of
the Agreement, and such assignment and assumption are subject to the terms and
conditions of the Agreement.
6. In the event Seller becomes obligated to repurchase any of the
Loans, all as provided in Section 4(b) of the Agreement, then Buyer agrees to
reconvey the same to Seller by instruments consistent with the provisions
hereof.
TO HAVE AND TO HOLD said Deposit Liabilities, Safety Deposit Box
Business and Loans unto the said Buyer, its successors and assigns, to its and
their own use and behoof forever.
IN WITNESS WHEREOF, Seller and Buyer have caused this agreement to be
executed and delivered as of the date hereinabove set forth.
WITNESS: COASTAL SAVINGS BANK
____________________ By:______________________________
Its President
WITNESS: MAINE BANK & TRUST COMPANY
____________________ By:______________________________
Its President
<PAGE>
</TABLE>
Coastal Savings Bank
Operational Enhancement Solution Agreement
PCTeller/Platform
TeleBanker
Signature Verification
Terminal Emulator (site license)
PCXFER
Loan Wizard
PC Extract
<PAGE>
Association Name ("Customer") Customer Number
COASTAL SAVINGS BANK 13
Street Address Date Signed
36 THOMAS DRIVE
City State Zip Code
WESTBROOK ME 04092
Upon the terms and subject to the conditions hereof, and in reliance upon the
representations, and agreements of Customer contained herein, Data Dimensions,
Inc. (DDI) and the customer, whose name appears above ("Customer") agree that
all equipment, programs and services to be provided by DDI to Customer hereunder
shall be furnished only under the terms and conditions of this Agreement. The
terms of this Agreement shall control notwithstanding any contrary provision of
any purchase order utilized by Customer to effect the furnishing of any
equipment, programs or services.
<PAGE>
STANDARD AGREEMENT
PC Teller/Platform
<TABLE>
<CAPTION>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Program & Equipment Purchase Price Training & Installation Fee Annual License Fee
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C>
34 PC Teller/Platform HW $ 48,522.00 See Add #2
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
50 PC Teller SW $ 12,500.00 $ 9,375.00
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
15 Platform JetForm $ 22,500.00 See Add. #1
$3,375.00
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
TOTALS $83,522.00 $12,750.00
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
TERMS OF PAYMENT
A. The purchase price(s), license fee, training, and installation fee(s) for
the program(s) and equipment listed above shall be paid as follows:
$8 ,352.00 Upon execution of this Agreement by Customer. (This
represents 10% of the Total Purchase Price)
$ Balance (all remaining fees and costs associated with
this Agreement) due and payable in accordance with the
terms of invoice.
B. The total Annual License Fee shall be due and payable upon initiation of
installation of the Program. Thereafter, charges will be invoiced
annually, in advance. All invoices shall be due and payable in accordance
with their terms.
2
<PAGE>
PC Teller/Platform
Addendum I
This addendum #1 is attached to and forms a part of the PC Teller/Platform
Agreement between DDI and COASTAL SAVINGS BANK, WESTBROOK, ME
Installation and Training
The assigned dates for installation and training will be mutually agreed upon
and scheduled after the execution and acceptance of the agreement.
Cable requirements will be established at time of contract .
The per diem rate established for installation and training will be $750.00 per
day plus expense per person.
Work station setup: Included in PC price
Format Disk
Load Software
Install Data Com Board
Exercise External Ports
Connect and Test Printers
Conduct a 24 Hour Burn-in Communications Test
Repackage for Shipment
Teller/platform authoring:
Teller Modify and/or establish special
screens. Adjust for special
printing, etc.
Platform Set up all forms associated with new
accounts and the platform operation.
Authoring at DDI office $750 per day
Authoring at customer site $750 per day plus expenses per person
JETFORM Integration $1,000.
Interface Fee
3
<PAGE>
PC Teller/Platform
Addendum 2
This addendum is attached to and forms a part of the PC Teller/Platform
Agreement between Data Dimensions, Inc., and Coastal Savings Bank, Westbrook,
ME.
The data processing equipment and features which are included in this equipment
referred to in Part 1, Paragraph 1(A) of the agreement are as follows:
<TABLE>
<CAPTION>
- ---------------------- ------------------------------------ --------------------------------------------------------
Quantity Style # Description
- ---------------------- ------------------------------------ --------------------------------------------------------
<S> <C> <C>
34 CWV 410022-530 Teller Workstation LAN
- ---------------------- ------------------------------------ --------------------------------------------------------
CWV 10021-350 Teller Workstation NON LAN
- ---------------------- ------------------------------------ --------------------------------------------------------
CWV 10021-350 Teller Workstation LAN
- ---------------------- ------------------------------------ --------------------------------------------------------
34 CEE 40001-AC1 Accessory Kit CWV
- ---------------------- ------------------------------------ --------------------------------------------------------
21 SVG 250 COL SVG Color Monitor
- ---------------------- ------------------------------------ --------------------------------------------------------
EVG 300 COL EVG Color Monitor
- ---------------------- ------------------------------------ --------------------------------------------------------
EF 4600 Passbook Printer
- ---------------------- ------------------------------------ --------------------------------------------------------
EF 4565 Passbook Printer
- ---------------------- ------------------------------------ --------------------------------------------------------
TDI06 TDI/RS232 Converter
- ---------------------- ------------------------------------ --------------------------------------------------------
VERSA-CON TDI RS232 Board
- ---------------------- ------------------------------------ --------------------------------------------------------
High Speed VERSA-CON High Speed TDI RS232 Board
- ---------------------- ------------------------------------ --------------------------------------------------------
MS4 / MS6 Modem Splitter
- ---------------------- ------------------------------------ --------------------------------------------------------
C24-M Modem Splitter - 3 port
- ---------------------- ------------------------------------ --------------------------------------------------------
50 PLUS Teller Software
- ---------------------- ------------------------------------ --------------------------------------------------------
15 PLUS Platform Software JETFORM
- ---------------------- ------------------------------------ --------------------------------------------------------
PLUS Teller & Platform Software
- ---------------------- ------------------------------------ --------------------------------------------------------
34 MPM2-4M MEM 4MB Expansion
- ---------------------- ------------------------------------ --------------------------------------------------------
C6600 LT ASYNC/SYNC to TDI/RS232 convert
- --------------------------------------------------------------------------------------------------------------------
Authorization:
- ---------------------- ---------------------------------------------------------------------------------------------
Shipping Same as on face of contract
Address:
- ---------------------- ---------------------------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------------------------------------------------------
Data Dimensions, Inc. O.E.S. Agreement
- -------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Teller / Platform Workstation
- ----------------------------------------------------------------- --------------- --------------- ------------------
Description Price Quantity Extension
- ----------------------------------------------------------------- --------------- --------------- ------------------
PW
- ----------------------------------------------------------------- --------------- --------------- ------------------
CWV 410022-530 Workstation LAN $1,551.00 21 $32,571.00
PW 486 100 MHZ, 530 mb with US Keyboard, MS-DOS, Windows, Color
Monitor, 8 MB Memory
- ----------------------------------------------------------------- --------------- --------------- ------------------
CWV 410022-530 Workstation LAN $1,227.00 13 $15,951.00
PW 486 100 MHZ, 530 mb with US Keyboard, MS-DOS, Windows, 8 MB
Memory
- ----------------------------------------------------------------- --------------- --------------- ------------------
Subtotal $48,522.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
Miscellaneous
- ----------------------------------------------------------------- --------------- --------------- ------------------
VERSA CON BOARD $150.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
HIGH SPEED VERSA CON BOARD $230.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
MEM 4 MB EXPANSIONS $213.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
PW2 SUPPLY KIT (recommend 1/10 workstations) $100.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
C6600 LT $900.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
SBC 68 3 Terminal Modem Splitter $65.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
C24-M Modem Splitter $45.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
Subtotal
- ----------------------------------------------------------------- --------------- --------------- ------------------
TOTAL $48,522.00
HARDWARE
- ----------------------------------------------------------------- --------------- --------------- ------------------
SOFTWARE
- ----------------------------------------------------------------- --------------- --------------- ------------------
DDI SOFTWARE TELLER * $250.00 50 $12,500.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
DDI SOFTWARE PLATFORM * $1,500.00 15 $22,500.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
DDI SOFTWARE TELLER/PLATFORM $1,750.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
UP-CHARGE NON DDI EQUIPMENT $250.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
PCXFER $900.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
TERMINAL EMULATOR $250.00
- ----------------------------------------------------------------- --------------- --------------- ------------------
TOTAL $35,000.00
SOFTWARE
- ----------------------------------------------------------------- --------------- --------------- ------------------
GRAND $83,522.00
TOTAL
- ----------------------------------------------------------------- --------------- --------------- ------------------
Authoring for Teller/Platform will be per diem plus expenses. *If hardware is
not purchased from DDI the software cost is $500.00 more per machine, it will
also be necessary that the user provide DDI with a complete unit to test in
order to validate compatibility of the machine to the UNISYS PW Series.
- ----------------------------------------------------------------- --------------- --------------- ------------------
5
<PAGE>
- ----------------------------------------------------------------- --------------- --------------- ------------------
Coastal Savings Bank
Quote Valid Through: 02/13/96
- ----------------------------------------------------------------- --------------- --------------- ------------------
STANDARD AGREEMENT
DDI TeleBanker
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Program & Equipment Purchase Price Training & Installation Fee Annual License Fee
(if required) (15% of purchase price)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
1 TELEBANKER $15,000.00 $750.00/day + expenses $2,250.00
Hardware & Software
(FOR 1 LINE)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
1 ADDITIONAL LINE $8,400.00 $1,260.00
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
TOTALS $23,400.00 $3,510.00
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
TERMS OF PAYMENT
A. The purchase price(s), license fee, training, and installation fee(s) for
the program(s) and equipment listed above shall be paid as follows:
$ 2,340.00 Upon execution of this Agreement by Customer. (This
represents 10% of the Total Purchase Price)
Balance (all remaining fees and costs associated
with this Agreement) due and payable in accordance
with the terms of invoice.
B. The total Annual License Fee shall be due and payable upon initiation of
installation of the Program. Thereafter, charges will be invoiced
annually, in advance. All invoices shall be due and payable in accordance
with their terms.
6
<PAGE>
STANDARD AGREEMENT
Signature Verification System
<TABLE>
<CAPTION>
- ------------------------------- ---------------------------- -------------------------- ----------------------------
Program & Equipment Purchase Price Training & Installation Annual License Fee
Fee
- ------------------------------- ---------------------------- -------------------------- ----------------------------
<S> <C> <C>
01 PC Scanning $9,000.00 See Add #2
Station HW/SW* $1,350.00
- ------------------------------- ---------------------------- -------------------------- ----------------------------
01 Mainframe Scanning SW $6,000.00 $900.00
- ------------------------------- ---------------------------- -------------------------- ----------------------------
- ------------------------------- ---------------------------- -------------------------- ----------------------------
TOTALS $15,000.00 $2,250.00
- ------------------------------- ---------------------------- -------------------------- ----------------------------
</TABLE>
*Option to rent additional scanning station(s) at a rate of $500.00 per station
per month.
TERMS OF PAYMENT
A. The purchase price(s), license fee, training, and installation fee(s) for
the program(s) and equipment listed above shall be paid as follows:
$1,500.00 Upon execution of this Agreement by Customer. (This
represents 10% of the Total Purchase Price)
Balance (all remaining fees and costs associated
with this Agreement) due and payable in accordance
with the terms of invoice.
B. The total Annual License Fee shall be due and payable upon initiation of
installation of the Program. Thereafter, charges will be invoiced
annually, in advance. All invoices shall be due and payable in accordance
with their terms.
7
<PAGE>
Signature Verification
Addendum #1
This Addendum #1 attached to and forms a part of the Signature Verification
Agreement Data Dimensions, Inc. and Coastal Savings Bank, Westbrook, ME for the
Data Processing Equipment and features which are included in the equipment
referred to in Part I, Paragraph 1(A) of the Agreement as follows:
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
1 Signature Verification Mainframe Software
1 *Scanning Station:
PW with:
Super VGA Color Monitor
Keyboard Accessory Kit and Scanner
* Additional scanning station(s) optional for rent on a
monthly basis
SHIPPING ADDRESS: Same as on face of contract
8
<PAGE>
SIGNATURE VERIFICATION PRICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------ ------------------------- -----------------------------
Mainframe Asset Size Price Total
- ------------------------------------------------------------ ------------------------- -----------------------------
<S> <C> <C>
Less than 50M $ 3,600.00
- ------------------------------------------------------------ ------------------------- -----------------------------
50M - 100M $ 4,800.00
- ------------------------------------------------------------ ------------------------- -----------------------------
100M - 200M $ 6,000.00 $6,000.00
- ------------------------------------------------------------ ------------------------- -----------------------------
200M - 300M $ 7,100.00
- ------------------------------------------------------------ ------------------------- -----------------------------
300M - 400M $ 8,200.00
- ------------------------------------------------------------ ------------------------- -----------------------------
400M - 500M $ 9,300.00
- ------------------------------------------------------------ ------------------------- -----------------------------
Above 500M $12,000.00
- --------------------------------------------------------------------------------------------------------------------
PC Hardware and Software
- ------------------------------------------------------------ ------------------------- -----------------------------
Complete scanning workstation $ 9,000.00 $9,000.00
1. Minimum Unisys 486 33MHz PC.
A. Minimum 170 meg hard disk drive
B. Minimum 4 meg ram
C. Color Monitor
D. Mouse
2. Logitech Hand Scanner.
3. Scanning Tray.
4. Host Communication Adapter.
5. Preinstalled Signature Verification
Software.
- ------------------------------------------------------------ ------------------------- -----------------------------
TOTAL $15,000.00
- ------------------------------------------------------------ ------------------------- -----------------------------
</TABLE>
9
<PAGE>
Signature Verification
Addendum #2
This Addendum #2 attached to and forms a part of the Agreement ("Agreement")
dated between DDI and Coastal Savings Bank, Westbrook, ME for the TRAINING AND
INSTALLATION FEES.
All training and installation will be done at our then current rate. As of 1/96
the rate is $750.00 per day per person plus expenses.
10
<PAGE>
STANDARD AGREEMENT
Terminal Emulator Site License
<TABLE>
<CAPTION>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Program & Equipment Purchase Price Training & Installation Fee Annual License Fee
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<C> <C> <C> <C>
01 SITE LICENSE 2,500.00 Daily rate + expenses $750.00
TERMINAL EMULATION if required.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
TOTALS $2,500.00 $750.00
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
TERMS OF PAYMENT
A. The purchase price(s), license fee, training, and installation fee(s) for
the program(s) and equipment listed above shall be paid as follows:
$ 250.00 Upon execution of this Agreement by Customer. (This
represents 10% of the Total Purchase Price)
Balance (all remaining fees and costs associated with
this Agreement) due and payable in accordance with
the terms of invoice.
B. The total Annual License Fee shall be due and payable upon initiation of
installation of the Program. Thereafter, charges will be invoiced
annually, in advance. All invoices shall be due and payable in accordance
with their terms.
11
<PAGE>
STANDARD AGREEMENT
DDI PC XFER
<TABLE>
<CAPTION>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Program & Equipment Purchase Price Training & Installation Fee Annual License Fee
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<C> <C> <C> <C>
01 PC XFER SW LICENSE $900.00 Daily rate + expenses $90.00
if required.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
01 Additional PC XFER Station $200.00 $20.00
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
TOTALS $1,100.00 $110.00
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
TERMS OF PAYMENT
A. The purchase price(s), license fee, training, and installation fee(s) for
the program(s) and equipment listed above shall be paid as follows:
$110.00 Upon execution of this Agreement by Customer. (This
represents 10% of the Total Purchase Price)
Balance (all remaining fees and costs associated with
this Agreement) due and payable in accordance with
the terms of invoice.
B. The total Annual License Fee shall be due and payable upon initiation of
installation of the Program. Thereafter, charges will be invoiced
annually, in advance. All invoices shall be due and payable in accordance
with their terms.
12
<PAGE>
STANDARD AGREEMENT
DDI Loan Wizard
<TABLE>
<CAPTION>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Program & Equipment Purchase Price Training & Installation Fee Annual License Fee
15% AFTER 1ST YEAR
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<C> <C> <C> <C>
1 LOAN WIZARD 10 USER $1,995.00 $299.25
SITE LICENSE
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
LOAN WIZARD $0.00 $0.00
NETWORK 3 USERS
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
TOTALS $1,995.00 $299.25
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
TERMS OF PAYMENT
A. The purchase price(s), license fee, training, and installation fee(s) for
the program(s) and equipment listed above shall be paid as follows:
$ 199.00 Upon execution of this Agreement by Customer. (This
represents 10% of the Total Purchase Price)
Balance (all remaining fees and costs associated with
this Agreement) due and payable in accordance with
the terms of invoice.
B. The total Annual License Fee shall be due and payable upon initiation of
installation of the Program. Thereafter, charges will be invoiced
annually, in advance. All invoices shall be due and payable in accordance
with their terms.
13
<PAGE>
STANDARD AGREEMENT
DDI PC XTRACT
<TABLE>
<CAPTION>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Program & Equipment Purchase Price Training & Installation Fee Annual License Fee
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<C> <C> <C> <C>
01 PC XTRACT SW LICENSE $1,995.00 Daily rate + expenses $299.25
if required.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
TOTALS $1,995.00 $299.25
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
TERMS OF PAYMENT
A. The purchase price(s), license fee, training, and installation fee(s) for
the program(s) and equipment listed above shall be paid as follows:
$199.00 Upon execution of this Agreement by Customer. (This
represents 10% of the Total Purchase Price)
Balance (all remaining fees and costs associated with
this Agreement) due and payable in accordance with
the terms of invoice.
B. The total Annual License Fee shall be due and payable upon initiation of
installation of the Program. Thereafter, charges will be invoiced
annually, in advance. All invoices shall be due and payable in accordance
with their terms.
14
<PAGE>
This Agreement shall be effective only when executed by both parties. Notice of
acceptance is waived. Customer will be furnished a copy showing acceptance by
DDI.
COASTAL SAVINGS BANK Data Dimensions, Inc.
Customer Accepted
/s/Dennis D. Byrd /s/Willie C. Moss
- ------------------------------- -------------------------------
By Executive Vice President President and Chief Executive
Officer
February 28, 1996 February 28, 1996
- ------------------------------- -------------------------------
Date Date
IMPORTANT NOTICE
The provisions of this Agreement set forth all of the rights and
responsibilities between DDI and Customer. They take the place of and supersede
all warranties expressed or implied and whether of merchantability, fitness or
otherwise. Customer's remedies provided for herein are exclusive. Customer
hereby waives all other remedies, including, but not limited to, consequential
damages.
THE TERMS AND CONDITIONS ON THE SUBSEQUENT PAGES ARE PART OF THIS AGREEMENT.
OFFER VALID THROUGH 02/28/96
DEPOSITS REQUIRED
PC TELLER/PLATFORM $8,352.00
TELEBANKER $2,340.00
SIGNATURE VERIFICATION $1,500.00
TERMINAL EMULATOR $ 250.00
PC XFER $ 110.00
LOAN WIZARD $ 199.00
PC XTRACT $ 199.00
TOTAL DEPOSIT REQUIRED TO EXECUTE CONTRACT $ 12,950.00
------------
15
<PAGE>
PART I
SALE AND LICENSE
1. PROPERTY SOLD AND LICENSED
A. Equipment
Customer agrees to purchase from DDI, and DDI agrees by
acceptance of this Agreement to sell to Customer, the data
processing equipment and features ("Equipment"), if any, listed
and described on Addendum 1 attached to and forming a part
hereof. If Addendum 1 is not attached, no Equipment is included
within the terms of this Agreement.
B. Licensed Program
The term "Program" when used herein shall mean the programs(s)
of DDI which are listed on the first page of this Agreement,
consisting of Software (object codes in machine readable form).
DDI hereby grants to Customer a limited non-transferable, non-exclusive
license to use the Program upon the terms and subject to the conditions
contained herein.
2. AMOUNT DUE
Amount payable to DDI hereunder is payable in full without deduction,
and is net of all sales, use or other taxes or duties. Customer shall
duly and timely pay all taxes or duties, however designated, levied or
based upon amount payable to DDI hereunder (exclusive of United States
Federal, State or Local taxes) based upon the net income of (DDI) or
the ownership, use or possession of the Equipment and/or Program.
Customer shall not deduct from payments due DDI hereunder any amounts
paid or payable to third parties for taxes or duties, however
designated.
3. TRAINING AND INSTALLATION
See Training and Installation Addendum (Addenda) attached.
4. SCOPE AND USE
A. The license herein granted to Customer is limited to use of the
Program by Customer and any wholly owned subsidiaries of Customer
for the processing of Customer's data and files at the bona fide,
primary data processing facility of Customer.
B. The license herein granted shall not be assigned, sublicensed or
otherwise conveyed or transferred by Customer to any other
person, firm, corporation or other entity, without the prior
written consent of DDI; provided, however, a successor in
interest to Customer by merger or operation of law shall acquire
all rights and assume all obligations of Customer under this
Agreement.
5. WARRANTY AND REMEDY
A. Equipment
The Equipment referred to in Paragraph 1(A) of this Part I is
covered by the original manufacturer's warranty. The original
manufacturer's warranty is the sole warranty for the Equipment.
DDI makes no warranties, express or implied, of merchantability,
fitness for a particular purpose or otherwise, which extend
beyond the description of the equipment in Paragraph 1(A) and
Addendum 1.
Customer acknowledges that the manufacturer of the Equipment has
made no representations or warranties to Customer with respect to
(i) any software other than that provided by such manufacturer,
(ii) its performance on the Equipment, or (iii) the service to be
provided with respect to such software, and
16
<PAGE>
Customer agrees that the manufacturer of the Equipment shall
incur no liability to Customer arising out of the use of such
software or the furnishing of such service. Customer acknowledges
that no software is being furnished to Customer by the
manufacturer of the Equipment, except pursuant to a separate
written license agreement between the manufacturer and Customer.
B. Program
i. Warranty
For a period of one (1) year after the installation of the
Programs, DDI warrants that the Program, as delivered and
used with specified hardware and accessories and without
Customer modification, will function without error which can
be verified by DDI and recreated with the latest unaltered
release of the Program. DDI has the sole right to verify the
existence of a Program error claimed to exist by Customer.
During the one (1) year warranty period DDI agrees to provide
programming services without additional charge to correct
Program errors.
ii. Exclusion of all other warranties
Except as otherwise provided above in Paragraph 5(B) (I), use
of the program is being licensed on an as is basis without
any warranty of any kind or description, either express or
implied, of merchantability, fitness for a particular purpose
or otherwise.
iii. Remedy
The soul and exclusive remedy for any breach of the warranty
contained in Paragraph 5(B) (I) shall be the correction of
program errors through programming services or replacement of
the program.
iv. Limitation of Remedy
Except as expressly provided above in Paragraph 5(B) (iii),
Customer agrees that it is not entitled to any remedy or
recovery whatsoever against DDI as a consequence of the
license or the use of the program on any theory including a
theory of negligence, and that the foregoing exclusion of
remedy shall specifically preclude, by way of illustration
and not of limitation, any recovery of the license fee paid
by customer, incidental damages, consequential damages or
lost profits.
6. PROPRIETARY PROTECTION
A. No transfer of title to the Program is effected by this Agreement
B. The terms and conditions of this Agreement are confidential.
C. Customer acknowledges that the Program is a commercially valuable
proprietary product of DDI, the design and development of which
has involved the expenditure of substantial amounts of money and
the use of skilled development experts over a long period of
time. Customer acknowledges that the Program (specifically
including, but not limited to, the design, programming
techniques, flow charts, object codes and documentation thereof)
is CONFIDENTIAL INFORMATION AND TRADE SECRETS disclosed to
Customer on a confidential basis under this Agreement to be used
only as may be expressly permitted by the terms and conditions of
this Agreement.
D. Customer, its officers, directors, employees and agents shall
protect the Program and all information pertaining thereto,
whether written or oral, as the CONFIDENTIAL INFORMATION AND
TRADE SECRETS OF DDI. Customer shall not disclose any proprietary
information concerning the Program to any other person, firm,
organization or employee who is not of necessity authorized by
Customer to use the Program in connection with the conduct of
Customer's business.
E. Neither the Program, nor any documentation related thereto, may
be copied or reprinted in whole or in part, except that i.
Customer may make two (2) additional copies of the Program
excluding the documentation for "back up" and maintenance
purposes, and ii. Customer may make such number of copies of the
manuals included in the documentation as Customer deems necessary
or advisable, after having first given DDI written notice of the
identity of the manuals to be copied and the number of copies of
each to be made.
17
<PAGE>
F. The license granted hereunder governs all items and materials
included in the Program, in machine readable or printed form,
provided by DDI and any copies made by Customer.
G. Customer agrees to produce and include DDI's copyright notice on
any and all whole or partial copies and containers thereof in any
form, including partial copies and modifications of the Program
hereunder, identical to the copyright notices contained in the
originals.
H. In the event of a violation of any of the foregoing provisions of
this Paragraph 6 by Customer, Customer acknowledges that DDI will
not have an adequate remedy in money damages, and accordingly,
shall be entitled to a temporary restraining order without
notice, and thereafter to a temporary and permanent injunction
against such breach without any requirement to post bond as a
condition of such relief, all in addition to any other available
legal or equitable remedies.
I. In the event of any breach by Customer or its agents, servants,
or employees which suffers or permits the Program or any of the
components thereof to come into the hands of any unauthorized
person, firm or corporation, Customer agrees, at its expense, to
retrieve and deliver to DDI the Program or such components. If
DDI elects voluntarily to take any steps to retrieve or recover
the Program or components (which DDI may, but shall be under no
obligation to do) then DDI shall be entitled to recover from
Customer its expenses and attorneys' fees incurred in efforts to
retrieve the same.
J. Customer shall take reasonable action by instruction, agreement
or otherwise, with respect to Customers' employees or other
persons permitted access to the Program, to comply fully with the
Customer's obligations hereunder concerning the use, copying,
protection and security of the Program.
7. PATENT AND COPYRIGHT INDEMNIFICATION
Subject to the limitations of liability stated in this Paragraph 7, DDI
will defend at its expense any action brought against Customer to the
extent that such action is based on a claim that the Program, as used
within the scope of the license granted hereunder, infringes on a
United States copyright or United States patent. DDI will pay any costs
and damages finally awarded against Customer in such action which are
attributable to such claim, provided the Customer notified DDI in
writing within fifteen (15) days after Customer learned of the claim
and afforded DDI the opportunity to participate fully in the defense
and/or settlement of such claim. Should the Program become or likely
become, in DDI's opinion, the subject of an infringement of copyright
or patent action, DDI may secure for Customer the right to continue
using the licensed Program or replace or modify it to make it
non-infringing, or discontinue it. DDI shall have no liability to
Customer for any claim of copyright or patent infringement based on (1)
use of other than the latest unmodified release of the licensed Program
from DDI if such infringement would have been avoided by the use of the
latest release of the Program, or (2) use or combination of the Program
with other programs or data. The foregoing states the entire liability
of DDI with respect to infringement or copyrights or patents by the
Program or any parts thereof and DDI shall have no liability with
respect to any other proprietary rights.
8. RISK OF LOSS
If the Equipment, Program or any component(s) thereof is lost or
damaged during shipment to Customer, DDI will replace the Equipment,
Program or component(s) at no additional charge to Customer. Customer
shall bear all risk of loss or damage after the Equipment and Program
is in the possession of Customer.
9. OWNERSHIP OF PROGRAM
Customer acknowledges that the Program and all parts and components
thereof are the sole and exclusive property of DDI and that Customer
has not and will not acquire any right, title, interest or claim
thereto or therein except as expressly provided by this Agreement.
18
<PAGE>
PART II
MAINTENANCE AND ON-GOING SUPPORT SERVICES
1. TERM OF PART II
This Part II shall be effective beginning the date of initiation of
installation of the Program ("Effective Date") and shall remain in
force, except as otherwise provided herein, until termination in
accordance with the provisions of Part III. All invoices for Annual
License Fee, Maintenance and On-Going Support Service charges shall be
payable on the date specified on the invoice and if not paid when due,
shall be subject to a late payment charge of 1 1/2% per month or
portion thereof that such payment is in default.
2. SERVICES
DDI shall provide the services listed below in this Paragraph 2 to
Customer:
Office Hours:
Monday thru Friday 8:30 a.m. - 5:00 p.m.(Orlando, Florida time) except
on the following listed Holidays: New Years Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, Christmas Day, any Other
National or State Holidays observed by the majority of our customers.
A. Telephone Service
DDI provides an answering service outside of office hours to
provide 24 hour - 365 day response to all calls.
B. Local Service
If the Program as furnished and without customer modification,
fails to function due to Program error and Customer has
reasonably determined that the failure is not due to incorrect or
defective data entry or operator performance, Customer may
request the services at Customer's location of a DDI
representative to make any adjustments or corrections required to
maintain the Program free from errors and in good working
condition. DDI will use its best efforts to respond within
twenty-four(24) hours to any such request: however, time of
performance of the services is subject to availability of DDI
personnel. DDI shall have no obligation to correct any error or
defect unless the error or defect can be recreated with the
latest unaltered release of the Program. Error verification shall
be conducted at Customer's or DDI's place of business, as
determined by DDI. All other programming services or assistance
will be provided to Customer at charges established by DDI. DDI
shall have the right to make additional charges for any
additional effort required to provide programming services
resulting from Customer modifications to the Program or the use
of other than the latest available release of the Program.
C. Software Enhancements
DDI shall provide Customer with any Enhancement(s) to the Program
that DDI may acquire or develop and offer to other licensees of
the Program during the term of this Agreement. As used herein,
the term "Enhancement" means any software development announced
from time to time by DDI at its office in Orlando, Florida, as an
"Enhancement" to the Program. Customer agrees that any
Enhancement provided by DDI shall be held upon all of the terms
and subject to all of the conditions contained in this Agreement.
D. Exclusions
DDI shall not be required to provide any maintenance or support
services occasioned by (1) neglect or misuse of the Program or
Equipment, or (2) unauthorized alterations or modifications of
the Programs.
3. STANDARD OF PERFORMANCE
It is understood and agreed that the sole obligation of DDI under Part
II of this Agreement is to provide the services referred to in
Paragraph 2. Customer shall bear sole responsibility for supervision,
management and control of the program, including but not limited to,
assuring proper audit controls and operating methods, and implementing
sufficient procedures to satisfy its requirements for security and
accuracy of input and output.
DDI shall have no liability or obligation for any loss or expense
incurred or suffered by Customer by reason of DDI's delay in
furnishing, or failure to furnish, services due to causes beyond DDI's
control, including but not
19
<PAGE>
limited to, casualty, acts of God, acts of governmental or judicial
authority, acts of third parties or Customer negligence.
4. INCREASE IN CHARGES
Not less than sixty (60) days prior to any anniversary of the Effective
Date of this Part II, DDI may give notice to Customer of increase(s) in
the charges specified on page 1 hereof. Any such increase(s) in charges
will be effective as of the anniversary of the Effective Date
immediately following the giving of notice of increase.
5. CONFIDENTIALITY OF RECORDS
DDI shall neither use nor disclose to any other person, either during
the term of this Agreement or thereafter, without Customer's written
consent, any confidential information to which DDI is given access in
the course of performance of its service obligations hereunder. When
used herein, the term "confidential information" shall mean records,
account data and other information relating to the business affairs of
Customer and its customers which are not publicly available, but shall
not include any ideas, concepts or techniques relating to the Program
which DDI develops as a result of performance of this Agreement.
6. ESCROW AGREEMENT
It is understood and agreed that neither Part I of this Agreement nor
the terms of this Part II entitle Customer to access to the source code
related to the Program. DDI agrees, however, to deposit such source
code in escrow with National Bank of Commerce, Winter Park, Florida.
Upon the occurrence of any of the events listed below, Customer may
make written request to National Bank of Commerce for such source code
and, upon receipt of such written request from Customer and payment by
Customer of the costs of reproduction and shipment, National Bank of
Commerce shall deliver to Customer one copy of the source code in
machine readable form:
A. A petition in bankruptcy is filed by or against DDI, and remains
unstayed or unvacated for a period of thirty (30) days.
B. DDI makes a general assignment for the benefit of creditors.
C. DDI is adjudged insolvent by a court of competent jurisdiction.
D. A custodian, trustee, or receiver of all of or a substantial
portion of the property of the property of DDI is appointed.
7. LIMITATION OF REMEDY
Customer agrees that DDI's liability under this Part II for whatever
cause and/or whatever theory of recovery, including a theory of
negligence, shall be limited to making adjustments or corrections
required to maintain the program free from program error and in good
working condition. The foregoing limitation of remedies shall
specifically preclude, by way of illustration and not of limitation,
any recovery of incidental damages, consequential damages or lost
profits, or upon any claim or demand against customer by any other
party.
8. GENERAL
The provisions of this Part II set forth all of the rights and
responsibilities between DDI and Customer in connection with
maintenance and on-going support services. They take the place of and
supersede all warranties, whether of merchantability, fitness, or
otherwise. The remedy provided in Part II, Paragraph 7, is exclusive.
20
<PAGE>
PART III
TERMINATION
1. Notwithstanding any other provision of this Agreement to the contrary,
DDI may, at its option, terminate this Agreement upon the occurrence of
any of the following:
A. Customer's breach of any of the terms or conditions of this
Agreement.
B. Customer's failure or refusal to pay to DDI when due the charges
for Annual License Fee (Maintenance and On-Going Support
Services), subject to increase as provided in Part II, Paragraph
4 of this Agreement.
C. Unless DDI has given its prior written consent thereto,
Customer's alteration or modification of, addition or enhancement
to, or use of unauthorized hardware accessories with, the
Program.
2. Customer may terminate this Agreement upon notice to DDI not less than
thirty (30) days prior to any anniversary of the Effective Date.
3. Upon termination of this Agreement by Customer or DDI in accordance
with the foregoing provisions, Customer shall be obligated at
Customer's expense to return to DDI the Program and all documentation
provided or furnished to Customer by DDI and DDI shall have no further
obligation to Customer.
21
<PAGE>
PART IV
MISCELLANEOUS
1. This Agreement shall be construed and interpreted in accordance with
the laws of the State of Florida.
2. If, after this Agreement has been executed by both DDI and Customer,
Customer shall fail or refuse to pay for or accept delivery of the
Program and/or Equipment, it is agreed that DDI shall be entitled to
retain or recover from Customer, as the case may be, as liquidated
damages for Customer's breach of this Agreement an amount equal to the
sum of (a) the purchase price for the Program as shown on page 1, plus
(b) twenty percent (20% of the purchase price of any and all Equipment
covered by this Agreement (if any) referred to on page 1 and in
Addendum 1.
3. Any delivery date(s) given by DDI or its representatives are
approximate.
4. Customer is solely responsible for preparation of the location site for
any Equipment in accordance with the Equipment Manufacturer's
installation specifications. Environmental conditions complying with
such specifications shall be continuously maintained by Customer.
5. Customer shall use the Program in careful and proper manner and shall
comply with all laws, ordinances and regulations related to the
possession, use or maintenance thereof. If at any time DDI supplies
Customer with labels, plates or other markings stating that the Program
is owned by DDI, Customer shall affix and keep them in a prominent
place on the components of the Program.
6. No amendment to this Agreement shall be binding upon either party
hereto unless such amendment is reduced to writing, dated and executed
by or on behalf of both parties to this Agreement.
7. This Agreement may be executed in multiple counterparts. Each fully
executed counterpart shall be deemed to constitute an original of the
Agreement, all of such counterparts taken together shall constitute one
Agreement.
8. The captions used in this Agreement are solely for convenience and such
captions do not constitute a part of this Agreement.
9. Any notice required or permitted under this Agreement shall be in
writing and sent by registered or certified mail, return receipt
requested, first class postage prepaid, addressed as follows:
If to DDI: Data Dimensions, Inc
5025 South Orange Avenue
Orlando, Florida 32809
If to Customer, to the address shown on the first page hereof or such
other more recent address of the addressee of which the sending party
has received written notice delivered or mailed as provided in this
part IV, Paragraph 9.
10. If there are terms, conditions or understandings between DDI and
Customer with respect to the subject matter hereof not contained
herein, all such additional terms, conditions and/or understandings are
set forth on Addendum 2 attached to and forming a part hereof. This
Agreement with Addenda represents the entire Agreement between the
parties. All prior negotiations have been merged herein, and there are
not understandings, representations or agreements, oral or written,
express or implied, other than those set forth herein or in the Addenda
hereto.
11. Any waiver by either party of any requirement hereunder shall be deemed
to be a specific, limited waiver, and shall not be deemed to be a
continuing waiver not a waiver of any other requirement thereof.
12. It is recognized and agreed by and between the parties that this
Agreement is an arms-length transaction between parties of relatively
equal bargaining position. Customer agrees that the limitation of
warranties and of remedies contained in this Agreement is not
unconscionable.
22
<PAGE>
13. Customer acknowledges that its duly authorized officer who executes
this Agreement has, or and on behalf of Customer and with full
authority to do so, read this Agreement, which is the complete and
exclusive statement of the Agreement between the parties and supersedes
all proposals, written or otherwise, and all other communications
between the parties relating to the subject matter of this Agreement.
23
<PAGE>
Agreement No. 960112
MAINFRAME
Software and Professional Support
Agreement
<PAGE>
COASTAL SAVINGS BANK
WESTBROOK, MAINE
Hereinafter referred to as "Customer", and Data Dimensions, Inc., A Florida
Corporation, herein called "DDI", agree this _____________ day
of______________________, 19_______ as follows:
I. SERVICES
DDI will perform the services and/or provide the programs, as
described in Exhibit "A" of this agreement, for use by Customer in
connection with Customers' business as described in such Exhibit "A".
As part of its services, DDI will provide the documentation listed and
described in Exhibit "B" to this agreement.
II. FEES
Software Customer agrees to pay DDI the sum of $100,000.00 plus
any taxes that may be assessed. $20,000.00 is due upon
execution of contract and $80,000.00 is due upon
completion of conversion. Payment is due fifteen (15)
days from billing. Any unpaid balance will be service
charged at a rate of 1-1/2% per month.
Conversion Customer agrees to pay DDI CONVERSION FEE OF
$50,000.00. Payment is due fifteen (15) days from
billing. Any unpaid balance will be service charged at
a rate of 1-1/2% per month.
License Fee Customer agrees to pay DDI $18,000.00 (based on asset
size ) annually for the duration of the software use.
This fee will be billed on the anniversary month of
the conversion. The Customer will receive sixty (60)
days notice of any increase (not to exceed 5%
annually) in this fee. Payment is due within fifteen
(15) days from billing. Any unpaid balance will be
service charged at a rate of 1-1/2% per month. DDI
will guarantee this rate for 24 months from the date
of conversion.
III. NONDISCLOSURE
The Customer agrees that the systems and/or programs provided by DDI,
together with all documentation provided by DDI, are confidential
information and that Customer will not, directly or indirectly,
intentionally disclose, sell, lease, or make available such systems,
programs, information, and documentation, or any part thereof to any
third party. The Customer also agrees that upon termination of this
agreement, for any reason before final acceptance and payment of
balance due by Customer, right to possession and use of all said
systems and/or all of programs and documentation, will revert to DDI
and Customer agrees to promptly return all of said systems and/or
programs and documentation to DDI. DDI agrees that proprietary
information disclosed by the Customer to DDI for the purpose of this
agreement, and identified as proprietary, will be held in confidence
and not disclosed to any third party by DDI.
IV. COMPUTER USAGE
The Customer will provide adequate computer time, free of charge, to
DDI, on a regular and mutually agreed upon schedule at the Customers'
site, for the testing and implementation as referred to in this
agreement or in any schedule attached thereto, and in any change
orders executed by both parties.
V. EXCUSABLE DELAY
DDI will not be in default by reason of any failure performance of
this agreement according to its terms if such failure arises out of
causes beyond its control. Such causes may include, but are not
restricted to, acts of God or the public enemy, acts of government in
either its Sovereign or contractual capacity, fires, floods,
epidemics, quarantine restrictions, strikes, freight embargoes, and
weather.
VI. RISK OF LOSS
All work, including data, after delivery to the Customer, but before
acceptance, will become the responsibility of the Customer to protect
the same from risk of loss, damage or destruction. The Customer will
be liable for such loss, damage or destruction and replacement of the
items so lost, damaged, or destroyed will be at the sole expense of
the Customer.
-1-
<PAGE>
VII. LIMITATION OF LIABILITY
DDI's liability to the Customer for any losses or damages, whether
direct or indirect, arising out of this agreement not to exceed the
total amount billable to the Customer for the performance of the
particular work which led to the loss or damage. However, in no event
will DDI be liable for special, indirect, or consequential damages
incurred by the Customer. Further DDI will not be liable for any
damages caused by delay in delivery of the hardware.
VII. CHANGES
This agreement may be modified by the execution by both parties or a
change order. All change orders will be subject to the terms and
conditions set forth herein. Additional terms, conditions or clauses
concerning individual change orders will be included with and form a
part of this agreement. In the event the additional or negotiated
terms and conditions and/or clauses in this agreement, the terms of
the change order will govern as concerns that individual change order
only. The following procedure will be followed to initiate and
activate a change order under this agreement.
A. The Customer will prepare a change order request in duplicate
on the DDI change order form and submit this form, with all
necessary technical attachments, to DDI.
B. DDI will review the change order request, complete the
appropriate cost and/or price information on the change order
form, cause this form to be executed by a duly authorized DDI
representative, and return both copies of the change order to
the Customer.
C. The Customer upon acceptance of DDI's cost or price estimate
will execute the change order form in the space provided and
return one (1) fully executed copy to DDI.
IX. BREACH
In the event of a breach of this agreement by Customer, the Customer
agrees to pay all damages (not to exceed the value of this contract)
incurred by DDI because of such breach plus all costs, expenses, and
reasonable attorney's fees incurred by DDI in any action brought by
DDI to enforce or establish any of its rights herein any State or
Federal court, including any Appellate court.
X. SEVERABILITY
Each paragraph and provision of this agreement is severable from the
entire agreements, and if one provision thereof is declared invalid,
the remaining provisions thereof is declared invalid. The remaining
provisions will nevertheless remain in effect.
XI. BINDING EFFECT
This agreement will be binding upon the parties hereto, their
successors and assigns.
XII. ENTIRE AGREEMENT
It is expressly agreed that this agreement and any change order
hereunder, embodies the entire agreement of the parties in relation to
the subject matter hereof, and that no other agreement or
understandings verbal or otherwise, exist between the parties, except
as herein expressly set forth.
XIII. TERMINATION
Notwithstanding any other provision of this agreement to the contrary,
DDI may, at its option terminate this agreement upon the occurrence of
any of the following:
A. Customer's breach of any of the terms or conditions of this
agreement.
B. Customer's failure or refusal to pay to DDI when due the
charges for annual license fee (maintenance and on-going
support services), subject to increase as provided in Paragraph
2 of this agreement.
C. Unless DDI has given its prior written consent thereto,
Customer's alteration or modification of, addition or
enhancement to, or use of unauthorized hardware accessories
with the program.
Customer may terminate this agreement upon notice to DDI not less than
90 days prior to terminating use of software. Any advance payment of
license fee will be rebated.
-2-
<PAGE>
Upon termination of this agreement by Customer or DDI in accordance
with the foregoing provisions, Customer shall be obligated at
Customer's expense to return to DDI the programs and all documentation
provided or furnished to Customer by DDI and DDI shall have no further
obligation to Customer.
Customer, by signing below, acknowledges having read this agreement, understands
that it constitutes the entire agreement, understanding and representation,
express implied, between the Customer and DDI with respect to the program
products and support to be furnished hereunder and that this agreement
supersedes all prior communications between the parties including all oral or
written proposals. This agreement may be modified or amended only by a written
instrument signed by duly authorized representatives of the Customer and Data
Dimensions, Inc.
ACCEPTED DATA DIMENSIONS, INC. COASTAL SAVINGS BANK
--------------------- --------------------
Willie C. Moss Dennis D. Byrd
- ------------------------------- -----------------------------
Name Name
/s/Willie C. Moss /s/Dennis D. Byrd
- ------------------------------- -----------------------------
Signature Signature
President and Chief Executive Officer Executive Vice President
- ------------------------------------- -----------------------------------
Title Title
February 28, 1996 February 28, 1996
- ------------------------------- -----------------------------------
Date Date
QUOTE VALID THROUGH FEB. 15, 1996
-------------
-3-
<PAGE>
<TABLE>
<CAPTION>
CHANGE ORDER
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
CUSTOMER
- --------------------------------------------------------- -----------------------------------------------------------
CHANGE ORDER NO AGREEMENT NO.
- --------------------------------------------------------- -----------------------------------------------------------
EFFECTIVE DATE COMPLETION REQUIRED BY
- ---------------------------------------------------------------------------------------------------------------------
WORK REQUIRED:
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
CUSTOMER AUTHORIZATION:
- --------------------------------------------------------- -----------------------------------------------------------
NAME DATE
- ---------------------------------------------------------------------------------------------------------------------
SIGNATURE
- ---------------------------------------------------------------------------------------------------------------------
TITLE
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
COST PROPOSAL
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PROFESSIONAL SERVICES:
- --------------------------------------------------------- ------------------- ---------------------------------------
Number of days/weeks Daily Rate TOTAL
- --------------------------------------------------------- ------------------- ---------------------------------------
- --------------------------------------------------------- ------------------- ---------------------------------------
- --------------------------------------------------------- ------------------- ---------------------------------------
- --------------------------------------------------------- ------------------- ---------------------------------------
- ----------------------------------------------------------------------------- ---------------------------------------
TOTAL PROFESSIONAL SERVICES AUTHORIZED: $
- --------------------------------------------------------- ------------------- ---------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------- ---------------------------------------
Travel $
- --------------------------------------------------------- ------------------- ---------------------------------------
Number of days Daily Rate Total
- --------------------------------------------------------- ------------------- ---------------------------------------
$
- --------------------------------------------------------- ------------------- ---------------------------------------
$
- --------------------------------------------------------- ------------------- ---------------------------------------
$
- --------------------------------------------------------- ------------------- ---------------------------------------
$
- ---------------------------------------------------------------------------------------------------------------------
Expenses Authorized by:
- --------------------------------------------------------- -----------------------------------------------------------
Cost Proposal Submitted by: Proposal Accepted by:
- --------------------------------------------------------- -----------------------------------------------------------
DATA DIMENSIONS, Inc.
- --------------------------------------------------------- -----------------------------------------------------------
Name: Name:
- --------------------------------------------------------- -----------------------------------------------------------
Title: Title:
- --------------------------------------------------------- -----------------------------------------------------------
Date: Date:
- --------------------------------------------------------- -----------------------------------------------------------
</TABLE>
-5-
<PAGE>
AGREEMENT No. D/R 960205
DISASTER RECOVERY
Agreement
<PAGE>
SECTION I
DISASTER RECOVERY AGREEMENT
COASTAL SAVINGS BANK
WESTBROOK, MAINE
Hereinafter referred to as "Customer", and Data Dimensions, Inc., a Florida
Corporation, herein called "DDI", agree this ______ day of ______________
19____, as follows:
DATA DIMENSIONS, INC., ("DDI"), 5025 South Orange Avenue, Orlando, Florida
32809, agree that customer will purchase and DDI will render for customer, the
services set forth in this agreement, for the charges shown therein. All backup
services will be provided at the facility of Data Dimensions, Inc., 5025 South
Orange Avenue, Orlando, Florida 32809.
In the event that customer determines, in his sole judgment, that he has
experienced a disaster and so notifies DDI, customer has the immediate right to
use the services so outlined in this contract. Upon customer's declaration of a
disaster, DDI will assist in the implementation of customer's backup program.
ALL SERVICES RENDERED BY DDI ARE SUBJECT TO THE FOLLOWING TERMS:
All charges shall be paid as set forth in this agreement, unless specified all
charges shall be paid no later than fifteen (15) days after receipt of invoice.
For any late payment, customer shall pay a service charge computed at the rate
of one and one-half percent (1 1/2%) per month or the maximum rate permitted by
applicable law whichever is less, on the unpaid amounts for each calendar month
(or fraction thereof) that such payment is in default.
DDI shall not be liable to customer or any other person for any claim or damage
arising, directly or indirectly from the furnishing of services or equipment
pursuant to this agreement or from interruption or loss of use thereof, or from
any other cause except for the loss resulting from negligent or willful
misconduct of DDI or their employees. Under no circumstances shall DDI be liable
for consequential damages, including but not limited to, loss of anticipated
profits or other economic loss in connection with the services rendered
hereunder. DDI shall not be liable for any failure to perform its obligations
under this agreement if prevented from doing so by a cause or causes beyond its
control. In the event DDI fails to provide the services required hereunder as a
result of any cause beyond its control and such failure continues for a period
of thirty (30) days, customer shall have the right: to:
A. To terminate this agreement without any further liability resulting from
such termination and,
-7-
<PAGE>
B. To receive a refund of any unearned fees.
DDI will use reasonable security measures to safeguard the secrecy of customer's
proprietary information to which DDI obtains access by reason of this agreement.
As used herein, proprietary information means financial data, customer lists,
personnel data and any other information known exclusively to customer and so
identified in writing to DDI by customer.
DISASTER BACKUP INCLUDES THE FOLLOWING:
If customer determines, in its sole judgment, that it is unable to use its data
processing equipment and declares a "Disaster", customer shall have use of the
contracted computer backup capability for up to 12 consecutive hours per day
including:
o An installed UNISYS System equal to, or better than, that described in
Exhibit "A", for a period of up to six (6) weeks if that period is needed.
In addition, customer shall have use of the equipment configuration annually for
a testing period, the equivalent of one (1) day processing per test period for
testing of the initial or continuing efficiency of its backup program, software,
and where applicable, data communication configuration.
Additional test time or tests will be charged to customer at the rate of $750.00
per person, per day, for technical support and $150.00 per hour for computer
usage time.
-8-
<PAGE>
BACKUP CAPABILITY IS SUBJECT TO THE FOLLOWING:
Disaster notification may be delivered by any representative of customer who has
been previously designated to DDI. Any verbal disaster notification must be
immediately confirmed in writing.
Customer, in accordance with DDI's daily charges for backup use of the equipment
configuration stated below may continue to use all or part of the backup
capability beyond the prescribed periods, provided that such computer usage
shall be subject to:
A. Interruption in the event a computer user similarly under contract for the
backup capability experiences a disaster, and,
B. Scheduled interruptions to accommodate testing by new and existing DDI
customers.
All Testing Is Subject to Interruption or Rescheduling If Another Customer
Experiences a Disaster.
DDI shall assure that it maintains an operating environment for the equipment
configuration that meets UNISYS specifications and adheres to policies and
procedures for proper maintenance of said equipment as recommended by UNISYS.
DDI will not enter into any other contract for use of the equipment other than
for disaster backup. DDI will maintain the backup capability in a state of
readiness at all times commensurate with the obligations hereunder except for
inaccessibility of the equipment configuration due to normal outage or causes
beyond DDI's control.
DDI warrants that it will use reasonable security measures to exclude from its
premises persons whose presence is believed might be detrimental to the best
interest of DDI or of its customers. Customer will be fully responsible for the
actions of persons introduced by it and all consequences thereof.
Customer shall comply with all reasonable procedures and standards established
by DDI relating to access to and use of the backup capability.
DDI shall give customer at least sixty (60) days written notice of any
significant changes to the equipment configuration and will authorize no such
changes unless the resulting equipment configuration is technically equal to or
better than that specified in Exhibit "A".
The term of this agreement shall commence on the month following certification
and shall continue for one (1) year and will be billed on an annual basis and
thereafter until terminated by either party. Either party may terminate the
agreement by giving the other party six (6) months written notice of termination
to be effective as of the end of the initial
-9-
<PAGE>
period, or any year thereafter. Agreement renewal will be on a yearly basis.
Upon execution of this agreement there is a one time start-up fee of $2,000.00
due.
DDI warrants that customer shall have backup in no more than twenty-four hours
after a disaster notification. Based upon the twelve (12) hour usage limit
specified customer will pay $6,100.00 annual charge for backup capability. Any
increase in the annual charges will not exceed 5% per annum.
In the event that customer experiences a disaster and so notified DDI, DDI will
make every effort to mobilize its resources to assist customer in its backup. To
cover the cost of these efforts a $1,000.00 disaster notification fee will be
made. This disaster notification fee is payable, upon customer so notifying DDI,
whether or not customer actually makes use of the backup capability. For each
day that it will be necessary for customer to use the backup capability at DDI's
facility, customer will pay DDI $750.00 per day or any part of a day that the
facility is used. If customer deems it necessary for one or more DDI people to
be at customer's site any time during the disaster, customer will be charged the
then going daily rate plus expenses per each persons needed at customer's site.
All written notifications to be provided hereunder shall be addressed as
follows, or as may be later designated in writing.
Data Dimensions, Inc. Coastal Savings Bank
-----------------------------------
5025 South Orange Avenue 36 Thomas Drive
-----------------------------------
Orlando, Florida 32809 Westbrook, Maine 04092
-----------------------------------
407-857-4944 207-774-5000
-----------------------------------
In witness whereof, DDI and customer have executed this agreement on the dates
indicated below.
DATA DIMENSIONS, Inc. Coastal Savings Bank
------------------------------------
BY: /s/Willie C. Moss BY: /s/Dennis D. Byrd
----------------------- ---------------------------
TITLE: President and Chief Executive TITLE: Executive Vice President
----------------------- ---------------------------
Officer
-----------------------
DATE: February 28, 1996 DATE: February 28, 1996
----------------------- ---------------------------
-10-
<PAGE>
-11-
<PAGE>
EXHIBIT A
DATA DIMENSIONS, INC
BACKUP EQUIPMENT CONFIGURATION
UNISYS A-4FX MAINFRAME
TWENTY FOUR (24) MILLION BYTES OF MAIN MEMORY
SIX (6) 9493 - 280 MB SCSI DISK DRIVES
ONE (1) 2145 - QUAD DENSITY GCR/PE TAPE STREAMER
THREE (3) A-378-20 QUAD CHARACTER-ORIENTED LINE ADAPTER
(12 LINES)
ONE (1) 650 LPM LINE PRINTER
UNISYS A7-311 MAINFRAME
TWENTY FOUR (24) MILLION BYTES OF MAIN MEMORY
TWO (2) 805MB DISK DRIVE
ONE (1) 2145 - QUAD DENSITY GCR/PE TAPE STREAMER
EIGHT LINE MULTI-LINE CONTROL WITH ADAPTERS
ONE (1) 650 LPM PRINTER
-12-
<PAGE>
SECTION II
ELECTRONIC DATA PROCESSING
CONTINGENCY DISASTER PLAN
-----------------
DATE
I. EXECUTIVE OVERVIEW
A support agreement has been executed between (________________________________)
and Data Dimensions, Inc. (DDI) whereby DDI will provide on-line computer
back-up in a disaster or emergency condition. This is to be accomplished through
the use of special multiplex equipment and dial up telephone circuits. DDI has
established a hardware configuration which makes it possible to support our
association during regular business hours in an emergency situation.
Should an emergency or disaster occur rendering our computer system inoperative,
as determined by the damage assessment team, we would physically transfer our
files to the DDI site. The back-up computer would then be activated and control
our terminal network via the aforementioned telephone hook-up. This would allow
us to do business as usual until normal service could be restored at our own
data center.
Should the emergency result in damage to current files we would transfer our
back-up files, stored off-site at (________________________________________)
-13-
<PAGE>
to the DDI site. Transactions entered during current day prior to the disaster
would be lost. These transactions would be re-entered, using the transaction
tickets, once the back-up system was operational.
There would be additional considerations which relate to logistical matters,
including transfer of files, personnel and paperwork between our main office,
branches, and DDI.
FOLLOWING IS A DETAIL OF THE FULL EDP CONTINGENCY PLAN.
II. THE PLAN
A. EQUIPMENT CAPACITY
The computer equipment at DDI is comparable to the capacity of our
primary system. It is anticipated that any extra workload would then be
in the area of off-line operations such as extra print time during
evening hours. Listed below is our configuration requirement and the
capacities of the system at DDI which would be used by our association as
a back-up system.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
CONFIGURATION REQUIREMENTS
- ------------------------------- ----------------------------------- ------------------------------------------------
<S> <C> <C>
ASSOCIATION ASSOCIATION BACK-UP SITE
- ------------------------------- ----------------------------------- ------------------------------------------------
PROCESSOR
- ------------------------------- ----------------------------------- ------------------------------------------------
MEMORY
- ------------------------------- ----------------------------------- ------------------------------------------------
MAG TAPE
- ------------------------------- ----------------------------------- ------------------------------------------------
PRINTER
- ------------------------------- ----------------------------------- ------------------------------------------------
DISK
- ------------------------------- ----------------------------------- ------------------------------------------------
LADS
- ------------------------------- ----------------------------------- ------------------------------------------------
ASYNC
- ------------------------------- ----------------------------------- ------------------------------------------------
BYSYNC
- ------------------------------- ----------------------------------- ------------------------------------------------
SYNC
- ------------------------------- ----------------------------------- ------------------------------------------------
TDI
- ------------------------------- ----------------------------------- ------------------------------------------------
CANDE TERM
- ------------------------------- ----------------------------------- ------------------------------------------------
-14-
<PAGE>
B. COMMUNICATION EQUIPMENT
The DATACOM equipment at our association and DDI is configured to
accommodate each site. The equipment is provided by the RACAL-MALGO
Corporation who install, test and warrant the system components.
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------ ---------------------------- --------------------------------------------------------
BACK-UP SITE (DDI) ASSOCIATION ALTERNATE SITE:
ORLANDO, FLORIDA
- ------------------------------ ---------------------------- --------------------------------------------------------
<S> <C>
MULTIPLEXED (MUX) 1
- ------------------------------ ---------------------------- --------------------------------------------------------
CHANNEL 8
- ------------------------------ ---------------------------- --------------------------------------------------------
INPUT OUTPUT
ASYNC SYNC
- ------------------------------ ---------------------------- --------------------------------------------------------
SYNC MODEM 1
AGGREGATE LINK
(TWO WIRE)
- ------------------------------ ---------------------------- --------------------------------------------------------
TALK/DATA HANDSET 1
- ------------------------------ ---------------------------- --------------------------------------------------------
</TABLE>
All of the above equipment is designed to communicate from the
back-up site (DDI) to the alternate association site using the
public service telephone network (PSTN) (standard two-wire).
When the data center is severely damaged the back-up communications would be
invoked through the association alternate site. All association locations are
serviced by (_____) lines, which are terminated both at the data center and the
association alternate site (either location can be designated as master input to
the lines).
THE COMMUNICATIONS WOULD BE PROVIDED IN THE FOLLOWING MANNER:
1. The back-up system would have appropriate lines connected into the MUX.
2. The MUX would compress the data into one (1) two-wire line and pass it to
the 9600 BAUD SYNC MODEM.
-15-
<PAGE>
3. The data would be transmitted over the public service telephone network
(PSTN) to a comparable modem at the association alternate site.
4. The modem would pass the data to the association MUX which would split it
back into ( ) lines.
5. The lines would then operate the normal output data sets to service the
association network. The network would include all teller and screen
terminals.
6. Steps 2, 3 and 4 would be transparent to the back-up processor. The output
data sets would appear as if they were connected directly to the
processor.
ASSOCIATION LOCATIONS
CHART OMITTED
* Number and type of DATACOM line
** Association alternative site
-16-
<PAGE>
Exhibit 21
SUBSIDIARY OF THE REGISTRANT
Subsidiary State of Incorporation
___________ ______________________
Coastal Savings Bank Maine
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<S> <C>
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0
0
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</TABLE>
