[LETTERHEAD OF BENESCH, FRIEDLANDER, COPLAN & ARONOFF]
J. Devitt Kramer Writer's Direct Dial Number
(216) 363-4457
VIA ELECTRONIC TRANSMISSION
March 25, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, DC 20549
Attention: Filing Desk
Re: Comstock Bancorp
Registration Statement on Form S-4
Ladies and Gentlemen:
On behalf of Comstock Bancorp (the "Company"), transmitted herewith for filing
via EDGAR pursuant to the Securities Act of 1933 is the Company's Registration
Statement on Form S-4 (the "Registration Statement") and all exhibits stated as
being filed therewith. The Proxy Statement--Prospectus included in the
Registration Statement addresses certain matters to be voted upon by the
stockholders of Comstock Bank, including a proposal pursuant to which the
Company will become a single bank holding company for Comstock Bank. The Company
is filing the Registration Statement in compliance with General Instruction G to
Form S-4 and meets all of the requirements of Staff Accounting Bulletin No. 50.
The filing fee of $8,526.00 for the Registration Statement was paid via wire
transfer.
Please direct any comments or questions regarding the attached material to the
undersigned at (216/363-4457).
Very truly yours,
BENESCH, FRIEDLANDER,
COPLAN & ARONOFF LLP
/s/ J. Devitt Kramer
J. Devitt Kramer
Enclosures
cc: Peggy Fischer
<PAGE>
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------------------------------
Comstock Bancorp
(Exact name of Registrant as Specified in its Charter)
Nevada 6035 86-0856406
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification No.)
Incorporation or Classification Code
Organization) Number)
c/o Comstock Bank
6275 Neil Road
Reno, Nevada 89511
(702) 824-7100
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------------------------
ROBERT N. BARONE
Chairman and Chief Executive Officer
c/o Comstock Bank
6275 Neil Road
Reno, Nevada 89511
(702) 824-7100
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------------------------
with a copy to:
MICHAEL J. MEANEY
Benesch, Friedlander, Coplan & Aronoff LLP
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114-2378
------------------------------------------
Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable after the
effective date of this Registration Statement.
------------------------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [X]
CALCULATION OF REGISTRATION FEE
================================================================================
Title of each Proposed Maxi-
Class of Secur- Proposed Maximum mum Aggregate Amount of
ities to be Amount to be Offering Price Offering Registration
Registered Registered (1) Per Share (2) Price (2) Fee (3)
================================================================================
Common Stock,
$.01 par value 4,456,668 $6.3123 $28,132,717 $8,526
================================================================================
<PAGE>
(1) Based upon 4,456,668 shares of common stock, par value $.01 per share,
of Comstock Bancorp to be issued in exchange for 2,228,334 shares of
common stock, par value $.50 per share, of Comstock Bank as described
in the Proxy Statement--Prospectus. The number of shares of Comstock
Bancorp common stock being registered is based on the sum of 2,124,934
shares of Comstock Bank common stock outstanding on March 20, 1997 and
103,400 warrants outstanding which are expected to be exercised prior
to the effective date of the share exchange, multiplied by two to
adjust for the two-for-one exchange ratio set forth in Proposal (3) to
the Proxy Statement--Prospectus.
(2) The proposed maximum offering price per share reflects the market price
of the common stock of Comstock Bank to be converted and exchanged in
connection with the reorganization described in the Proxy
Statement--Prospectus, computed in accordance with Rule 457(f)(1) under
the Securities Act of 1933, as amended. It is based on the average of
the high and low prices of the Bank's common stock on March 19, 1997,
as reported on The Nasdaq Small Cap Stock Market, divided by two to
adjust for the two-for-one exchange ratio. The proposed maximum
aggregate offering price is estimated solely for the purpose of
calculating the registration fee.
(3) Calculated based on 1/33 of one percent of the proposed maximum
aggregate offering price.
This Registration Statement shall become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended.
<PAGE>
COMSTOCK BANCORP
Cross Reference Sheet Required by Item 501(b) of Regulation S-B
Caption Caption in Proxy Statement--Prospectus
- --------------------------------------------------------------------------------
A. INFORMATION ABOUT THE TRANSACTION Facing Page; Cross-Reference Sheet;
1. Forepart of Registration Notice of Annual Meeting of
Statement and Outside Front Stockholders; Outside Front Cover Page
Cover Page of Prospectus of Proxy Statement--Prospectus.
2. Inside Front and Outside Back Available Information;
Cover Pages of Prospectus Table of Contents.
3. Risk Factors, Ratio of Earnings Summary of Proxy Statement-Prospectus;
to Fixed Charges and Other General Information; Certain
Information Differences in Stockholder Rights.
4. Terms of the Transaction Summary of Proxy Statement-Prospectus;
General Information; Proposal (3):
Formation of Holding Company; Descrip-
tion of the Reorganization; Descrip-
tion of Bancorp Capital Stock; Certain
Differences in Stockholder Rights; Tax
Consequences of the Reorganization;
Accounting Treatment of the
Reorganization; Market for the Common
Stock; Appendix A--Agreement and Plan
of Reorganization.
5. Pro Forma Financial Information Pro Forma Consolidated Capitalization.
6. Material Contracts With the Proposal (1): Election of Directors;
Company Being Acquired Proposal (3): Formation of Holding
Company; Management of Comstock;
Appendix A--Agreement and Plan of
Reorganization.
7. Additional Information Required Not Applicable.
For Reoffering by Persons and
Parties Deemed to be Underwriters
8. Interests of Named Experts Legal Matters; Experts.
and Counsel
9. Disclosure of Commission Certain Differences in Stockholder
Position on Indemnification Rights.
for Securities Act Liabilities
<PAGE>
Caption Caption in Proxy Statement--Prospectus
- --------------------------------------------------------------------------------
B. INFORMATION ABOUT THE REGISTRANT
1. Information with Respect to Not Applicable.
S-3 Registrants
2. Incorporation of Certain Not Applicable.
Information by Reference
3. Information with Respect to Not Applicable.
S-2 or S-3 Registrants
4. Incorporation of Certain Not Applicable.
Information by Reference
5. Information with Respect to Proposal (3): Formation of Holding
Registrants Other Than S-3 Company;Parties to the Reorganization;
or S-2 Registrants Description of Bancorp Capital Stock;
Market for the Common Stock; Dividend
Policy;Business of Bancorp; Regulation
and Supervision;Management of Bancorp.
C. INFORMATION ABOUT THE COMPANY
BEING ACQUIRED
1. Information with Respect to Not Applicable.
S-3 Companies
2. Information with Respect to Not Applicable.
S-2 or S-3 Companies
3. Information with Respect to Proposal (3): Formation of
Companies Other Than S-3 or Holding Company; Parties to the
S-2 Companies Reorganization; Market for the Common
Stock; Dividend Policy; Business of
the Bank; Regulation and Supervision;
Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Management of Comstock.
<PAGE>
Caption Caption in Proxy Statement--Prospectus
- --------------------------------------------------------------------------------
D. VOTING AND MANAGEMENT INFORMATION
1. Information if Proxies, Consents Notice of Annual Meeting of Stock-
or Authorizations are to be holders; Summary of Proxy Statement--
Solicited Prospectus; General Information;
Proposal (1): Election of Directors;
Proposal (2): Ratification of Appoint-
ment of Independent Auditors; Proposal
(3): Formation of Holding Company;
Description of the Reorganization;
Management of Bancorp; Management of
Comstock; Appendix B--Dissenters'
Appraisal Rights.
2. Information if Proxies, Consents Not Applicable.
or Authorizations are Not to Be
Solicited, or in an Exchange Offer
<PAGE>
COMSTOCK BANK
6275 Neil Road
Reno, Nevada 89511
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held May 28, 1997
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its directors, the
Annual Meeting of stockholders of Comstock Bank (the "Bank") will be held at the
Administrative Headquarters Building, Second Floor Conference Center, 6275 Neil
Road, Reno, Nevada 89511 on Wednesday, May 28, 1997 at 4:00 p.m. Pacific Time
for purposes of considering and voting on the following matters:
1. Election of Directors:
The election of eight directors of the Bank in accordance with
the accompanying Proxy Statement--Prospectus to serve until
the 1998 Annual Meeting of stockholders or until their
successors are elected and qualified;
2. Ratification of Appointment of Independent Auditors:
Ratification of the appointment of Kafoury, Armstrong & Co. as
independent auditors of the Bank for the fiscal year ending
December 31, 1997;
3. Formation of a Holding Company:
A proposal to form a holding company for the Bank by the
adoption and approval of an Agreement and Plan of
Reorganization dated as of February 26, 1997 between the Bank
and Comstock Bancorp, a Nevada corporation ("Bancorp"),
pursuant to which each issued and outstanding share of common
stock, par value $.50 per share, of the Bank (other than
shares held by stockholders exercising dissenters' rights, if
any) will be exchanged for two shares of common stock, par
value $.01 per share, of Bancorp and the Bank will become a
wholly-owned subsidiary of Bancorp (the "Reorganization"); and
4. Other Business:
To transact such other business which may properly come before
the Annual Meeting or any adjournment or postponement thereof.
Only stockholders of the Bank of record as of the close of business on
April 7, 1997 are entitled to notice of, and to vote at, the meeting and any
adjournment or postponement thereof (the "Record Date"). A copy of the Bank's
Annual Report for the fiscal year ended December 31, 1996 is enclosed herewith.
<PAGE>
The Bank cordially invites all stockholders to attend the meeting in
person. Whether or not you expect to attend the meeting, please complete, sign
and date the enclosed proxy and return it in the envelope provided.
Nevada law provides that stockholders of record of the Bank on the
Record Date have the right to dissent from the Reorganization and, if the
Reorganization is consummated, to receive compensation equal to the fair value
of their shares. Stockholders of the Bank desiring to exercise their dissent and
appraisal rights must follow the procedures set forth in Sections 92A.300
through 92A.500 of the Nevada Revised Statutes, a copy of which is attached to
the accompanying Proxy Statement--Prospectus as Appendix B. Stockholders of the
Bank desiring to exercise their dissent and appraisal rights are urged to read
Appendix B in its entirety since failure to comply with the procedures set forth
therein may result in the loss of dissent and appraisal rights.
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY. PROXIES ARE REVOCABLE
BY WRITTEN NOTICE TO THE SECRETARY OF THE BANK AT ANY TIME PRIOR TO THEIR BEING
VOTED, BY GIVING A DULY EXECUTED PROXY HAVING A LATER DATE, OR BY APPEARANCE AT
THE MEETING TO VOTE IN PERSON. THE IMMEDIATE RETURN OF YOUR PROXY WILL BE OF
GREAT ASSISTANCE IN PREPARING FOR THE MEETING AND IS THEREFORE STRONGLY
REQUESTED.
By Order of the Board of Directors,
Reno, Nevada
April , 1997 ROBERT N. BARONE, Chairman and
Chief Executive Officer
LARRY A. PLATZ, Secretary
<PAGE>
PROXY STATEMENT
COMSTOCK BANK
6275 Neil Road
Reno, Nevada 89511
Annual Meeting of Stockholders
May 28, 1997
------------------------------------------
PROSPECTUS
COMSTOCK BANCORP
Common Stock, par value $.01 per share
This document serves as a Proxy Statement for the 1997 annual meeting
of stockholders of Comstock Bank ("Comstock" or the "Bank"), to be held on May
28, 1997 at 4:00 p.m. Pacific Time in the Bank's Conference Center on the second
floor of its Administrative Headquarters at 6275 Neil Road, Reno, Nevada 89511
and at any adjournment or postponement thereof (the "Annual Meeting"), and is
being used by the Board of Directors of the Bank to solicit the proxies of the
Bank's stockholders in connection therewith. This Proxy Statement--Prospectus,
with the accompanying proxy card, is first being sent or given to Comstock's
stockholders on or about April , 1997.
As more fully described in this Proxy Statement--Prospectus, the
purpose of the Annual Meeting is: (1) to elect eight directors to serve until
the 1998 meeting of stockholders of the Bank or until their successors are
elected and qualified; (2) to ratify the appointment of Kafoury, Armstrong & Co.
as independent auditors for the Bank for the fiscal year ending December 31,
1997; (3) to consider and vote upon a proposal to form a holding company for the
Bank by the adoption and approval of an Agreement and Plan of Reorganization
dated as of February 26, 1997 (the "Plan of Reorganization") between the Bank
and Comstock Bancorp, a Nevada corporation ("Bancorp"), pursuant to which each
issued and outstanding share of common stock, par value $.50 per share ("Bank
Common Stock"), of the Bank will be exchanged for two shares of common stock,
par value $.01 per share ("Bancorp Common Stock"), of Bancorp and the Bank will
become a wholly-owned subsidiary of Bancorp (the "Reorganization"); and (4) to
transact such other business as may properly come before the Annual Meeting or
any adjournment or postponement thereof.
This document also serves as a Prospectus in connection with the
issuance by Bancorp of up to 4,456,668 shares of Bancorp Common Stock. On the
effective date of the Plan of Reorganization (the "Effective Date"), all
outstanding shares of Bank Common Stock (other than shares held by stockholders
exercising dissenters' rights, if any) will be converted into and exchanged for,
on a two-for-one basis, shares of Bancorp Common Stock. Accordingly, if the
stockholders of the Bank approve the Reorganization, each stockholder of the
Bank will hold twice as many Bancorp shares as they currently own Bank shares.
<PAGE>
Under the Securities Act of 1933, as amended (the "Securities Act"),
and the rules and regulations of the Securities and Exchange Commission (the
"SEC"), the solicitation of stockholders of Comstock to approve the proposed
Plan of Reorganization constitutes an offering of Bancorp Common Stock. Bancorp
has filed with the SEC a registration statement on Form S-4 under the Securities
Act (the "Registration Statement") with respect to such offering, and this Proxy
Statement--Prospectus constitutes the prospectus of Bancorp filed as part of the
Registration Statement. This Proxy Statement--Prospectus does not contain all of
the information set forth in the Registration Statement and the related
exhibits, certain parts of which are omitted in accordance with the rules and
regulations of the SEC.
This Proxy Statement--Prospectus shall not constitute a prospectus for
a public reoffering of Bancorp Common Stock pursuant to the Plan of
Reorganization.
No person has been authorized to give any information or to make any
representation in connection with this offering other than those contained in
this Proxy Statement--Prospectus, and, if given or made, such information or
representation must not be relied upon as having been authorized. This Proxy
Statement--Prospectus shall not constitute an offer to sell or a solicitation of
an offer to buy any securities in any jurisdiction in which it would be unlawful
to make such offer or solicitation. Neither the delivery of this Proxy
Statement--Prospectus, nor any offer or solicitation made hereunder, shall,
under any circumstances, imply that the information set forth or incorporated
herein is correct as of any time subsequent to its date.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE NEVADA FINANCIAL INSTITUTIONS DIVISION OR ANY OTHER FEDERAL OR STATE AGENCY
OR ANY STATE SECURITIES COMMISSION, NOR HAS SUCH COMMISSION, OFFICE OR OTHER
AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROXY STATEMENT--PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT DEPOSITS AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THE SECURITIES ARE
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL INVESTED.
The date of the Proxy Statement--Prospectus is April , 1997.
<PAGE>
AVAILABLE INFORMATION
Comstock is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files periodic reports and other information with the
Federal Deposit Insurance Corporation (the "FDIC"). Such reports and other
information can be inspected and copied at the public reference facilities
maintained by the FDIC at 550 17th Street, N.W., Washington, D.C. 20429, and at
the FDIC's Western Regional Office located at 25 Ecker St. #2300, San Francisco,
California 94105.
Bancorp is not currently subject to the information reporting
requirements of the Exchange Act, and, accordingly, has not filed reports, proxy
statements or other information with the SEC. All outstanding shares of Bancorp
Common Stock are currently owned by Comstock, and there is, therefore, no public
trading market for Bancorp Common Stock. If the Reorganization is consummated,
Bancorp Common Stock will be registered under the Exchange Act, and Bancorp will
file periodic reports and other information with the SEC. In addition, in
accordance with the rules and regulations of the SEC with respect to annual
meetings of the stockholders of Bancorp, proxy statements accompanied or
preceded by annual reports to stockholders will be furnished to stockholders of
Bancorp. Such reports will contain financial information that has been examined
and reported upon, with an opinion expressed by an independent public accounting
firm.
This Proxy Statement--Prospectus does not contain all of the
information set forth in the Registration Statement and the related exhibits
which Bancorp has filed with the SEC, and to which reference is hereby made.
Reports, proxy and information statements and other information, including the
Registration Statement and exhibits thereto, can be inspected and copied at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, 7 World Trade Center, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies can be obtained at prescribed rates from the SEC Public
Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also
maintains a Web Site, http://www.sec.gov, that contains reports, proxy and
information statements and other information submitted by registrants, including
Bancorp.
Bancorp and the Bank have filed an application for approval of the Plan
of Reorganization, pursuant to Section 666.125 of the Nevada Revised Statutes
(the "NRS"), with the Nevada Division of Financial Institutions (the "Nevada
Division"). The non-confidential portions of the application can be inspected at
the office of the Nevada Division located at 406 E. 2nd Street, Carson City,
Nevada 89710. In addition, Bancorp has filed an application with the Board of
Governors of the Federal Reserve Bank (the "FRB") to become a bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHCA").
Finally, Bancorp has filed an application with The Nasdaq Small Cap Market to
list its shares on such exchange under the symbol "LODE," the same symbol
currently used by the Bank.
A copy of the Bank's Annual Report to stockholders for the fiscal year
ended December 31, 1996 (the "Annual Report") accompanies this Proxy
Statement--Prospectus. The Annual Report contains financial statements, prepared
in conformity with generally accepted accounting principles, for the years ended
December 31, 1996 and 1995 and certain other information and should be read
along with this Proxy Statement--Prospectus.
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION 10
SUMMARY OF THE PROXY STATEMENT--PROSPECTUS 15
Annual Meeting of Stockholders 15
Formation of Holding Company 16
SELECTED FINANCIAL AND OTHER DATA OF THE BANK 20
GENERAL INFORMATION 22
General 22
Record Date and Voting 22
Vote Required 23
Dissenters' Rights 23
Revocability of Proxies 23
Solicitation of Proxies 23
Security Ownership of Certain Beneficial Owners 24
PROPOSAL (1): ELECTION OF DIRECTORS 26
Vote Required 26
Information with Respect to Nominees 27
Committees of the Board of Directors 28
Remuneration of Directors 30
EXECUTIVE COMPENSATION 30
Employment Agreements 30
STOCK OPTION AND EMPLOYEE BENEFIT PLANS 31
Description of Incentive Plan 32
Federal Income Tax Consequences 33
Previous Grants 35
Description of Directors' Plan 37
401(k) Plan 39
Deferred Compensation 39
Life Insurance Arrangements 39
CERTAIN BUSINESS RELATIONSHIPS 40
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT 40
<PAGE>
Page
----
PROPOSAL (2): RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS 41
Vote Required 41
PROPOSAL (3): FORMATION OF HOLDING COMPANY 41
Vote Required 42
PARTIES TO THE REORGANIZATION 42
Comstock Bank 42
Comstock Bancorp 43
DESCRIPTION OF THE REORGANIZATION 44
Reasons for the Reorganization 44
Effective Date 44
Actions at the Effective Date 44
Conditions to the Reorganization 45
Amendment and Termination 45
Exchange of Stock Certificates 45
Effect of the Reorganization on Employee Benefit Plans
and Employment Agreements 46
DESCRIPTION OF BANCORP CAPITAL STOCK 46
General 46
Bancorp Common Stock 47
Anti-Takeover Provisions 48
DESCRIPTION OF COMSTOCK CAPITAL STOCK 48
General 48
Bank Common Stock 48
CERTAIN DIFFERENCES IN STOCKHOLDER RIGHTS 48
General 48
Anti-Takeover Provisions 49
Indemnification of Directors, Officers and Employees 50
Special Meetings of Stockholders 50
Payment of Dividends 51
Right to Repurchase Stock; Investments 51
Issuance of Shares of Common Stock 52
Stock Options 52
Inspection of Records 52
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE REORGANIZATION 53
ACCOUNTING TREATMENT OF THE REORGANIZATION 54
<PAGE>
Page
----
DISSENTERS' RIGHTS 54
MARKET FOR THE COMMON STOCK 56
DIVIDEND POLICY 58
PRO FORMA CONSOLIDATED CAPITALIZATION 59
BUSINESS OF BANCORP 59
General 59
Property 60
Competition 60
Employees 60
BUSINESS OF THE BANK 61
General 61
Competition and Market Area 61
Lending Activities 63
Investment Activities 69
Deposit Activity and Other Sources of Funds 72
Properties 73
Employees 76
Legal Proceedings 76
REGULATION AND SUPERVISION 77
General 77
Federal Banking Regulations 77
Transactions with Affiliates and Insiders 80
Real Estate Lending Policies 82
Standards for Safety and Soundness 82
Federal Home Loan Bank System 82
Federal Reserve System 83
Nevada Banking Laws and Supervision 83
Regulation of Holding Company 83
Federal Securities Laws 85
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 85
Overview 85
Capitalization 86
Capital Expenditures 88
Operations and Liquidity 90
Impact of Changing Interest Rates; Interest Rate Risk 92
Interest Margin 93
<PAGE>
Page
----
Other Assets 94
Income and Expense 95
Interest Income 96
Interest Expense 96
Non-Interest Income 96
Non-Interest Expenses 97
MANAGEMENT OF BANCORP 98
Directors 98
Executive Officers 98
Compensation 98
Employee Benefit Plans 99
MANAGEMENT OF COMSTOCK 99
Directors 99
Executive Officers 99
Compensation and Employee Benefit Plans 100
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING 100
LEGAL MATTERS 100
EXPERTS 100
OTHER BUSINESS 100
FINANCIAL STATEMENTS F-1
APPENDICES
Appendix A Agreement and Plan of Reorganization
Appendix B Dissenters' Appraisal Rights
Appendix C Bancorp Articles of Incorporation
Appendix D Bancorp Bylaws
<PAGE>
SUMMARY OF THE PROXY STATEMENT--PROSPECTUS
This Summary is qualified in its entirety by the detailed information
contained in this Proxy Statement--Prospectus, the Appendices hereto, and the
documents referred to herein.
Annual Meeting of Stockholders
Time and Place of the The Annual Meeting will be held on
Annual Meeting............... Wednesday, May 28, 1997 at 4:00 p.m. Pacific
Time in the Conference Center on the second
floor of the Bank's Administrative
Headquarters Building at 6275 Neil Road,
Reno, Nevada 89511. See "General Information
--General."
Purpose of the Annual The purpose of the Annual Meeting is to:
Meeting...................... (1) elect eight directors, each to serve
until the 1998 annual meeting of
stockholders of the Bank or until their
successors are elected and qualified; (2)
ratify the appointment of Kafoury, Armstrong
& Co. as independent auditors for the Bank
for the fiscal year ending December 31, 1997
(3) consider and vote upon the Plan of
Reorganization pursuant to which each
outstanding share of Bank Common Stock
(other than shares held by stockholders
exercising dissenters' rights, if any) will
be converted into and exchanged for two
shares of Bancorp Common Stock and Comstock
will become a wholly-owned subsidiary of
Bancorp; and (4) transact such other
business as may properly come before the
Annual Meeting or any adjournment or
postponement thereof. See "General
Information;" "Proposal (1): Election of
Directors;" "Proposal (2): Ratification of
Appointment of Independent Auditors;" and
"Proposal (3):Formation of Holding Company."
Record Date.................... The Board of Directors of Comstock has fixed
the close of business on April 7, 1997 as
the record date (the "Record Date") for the
determination of stockholders entitled to
notice of and to vote at the Annual Meeting
and at any adjournment or postponement
thereof. See "General Information--Record
Date and Voting."
Beneficial Ownership On March 31, 1997 the directors and
by Directors and executive officers of Comstock beneficially
Executive Officers........... owned an aggregate of 364,523 shares of Bank
Common Stock. See "General Information--
Security Ownership of Certain Beneficial
Owners."
<PAGE>
Additional Information......... For additional information, telephone Robert
N. Barone, Chief Executive Officer of the
Bank, at (702) 824-7100.
Formation of Holding Company
The Parties to the
Reorganization............... Comstock Bank and Comstock Bancorp.
Comstock Bank.................. Comstock is a state chartered bank organized
under the rules and regulations of the State
of Nevada. Comstock conducts its business
through four full service offices and two
lending centers with its Main Office and
Administrative Headquarters Building
located at 6275 Neil Road, Reno, Nevada
89511, and its telephone number is (702)
824-7100.
The Bank's stock has traded on The Nasdaq
Small Cap Market under the symbol "LODE"
since March 4, 1993.
Comstock Bancorp............... Bancorp is a business corporation
incorporated as a wholly-owned subsidiary of
Comstock under the General Corporation Law
of the State of Nevada. Bancorp was
organized at the direction of Comstock to
become a bank holding company with Comstock
as its wholly-owned subsidiary. Bancorp will
acquire all of the issued and outstanding
shares of the Bank Common Stock in
connection with the Reorganization.
Bancorp's telephone number and address is
the same as that given for Comstock above.
Reasons for the The Board of Directors believes that a
Reorganization............... holding company structure will better
position the Bank to compete in the markets
that it serves by providing Comstock with
greater flexibility to conduct its banking
business. The formation of a holding
company will permit management greater
flexibility with respect to the enhancement
of stockholder value through, among other
things, the ability to acquire or organize
other operating subsidiaries should such an
opportunity present itself, including other
bank and non-bank financial institutions,
without merging such institutions with the
Bank itself. In addition, Bancorp will be
better able to control its capital leverage,
and thus stockholder value through, among
other things, the implementation of stock
repurchase programs. See "Proposal (3):
Formation of Holding Company;" and
"Description of the Reorganization--Reasons
for the Reorganization."
<PAGE>
Description of the Under the Plan of Reorganization, each out-
Reorganization . . . . . . . . standing share of Bank Common Stock (other
than shares held by stockholders exercising
dissenters' rights, if any) will be
automatically converted into and exchanged
for two shares of Bancorp Common Stock and
Comstock will become a wholly-owned
subsidiary of Bancorp. Comstock will
continue its current business and operations
as a Nevada chartered commercial bank using
its current name. Certificates representing
shares of Bank Common Stock will auto-
matically represent shares of Bancorp Common
Stock. Stockholders will not need to
exchange their Comstock stock certificates
for Bancorp stock certificates. Additional-
ly, Bancorp's transfer agent will issue one
share of Bancorp Common Stock for each out-
standing share of Bank Common Stock to
holders of Bank Common Stock at the
Effective Date. The Plan of Reorganization
is incorporated by reference into this
Proxy Statement--Prospectus and attached
hereto as Appendix A. See "Proposal (3):
Formation of Holding Company;" and "Descrip-
tion of the Reorganization--Conditions to
the Reorganization."
Conditions and Required The consummation of the Reorganization is
Regulatory Approvals......... subject to the satisfaction of a number of
conditions, including: (1) the adoption and
approval of the Plan of Reorganization by
the holders of at least a majority of the
outstanding shares of Bank Common Stock; (2)
the approval of the Plan of Reorganization
by the Nevada Division; (3) the approval of
the Plan of Reorganization by the FRB; and
(4) the receipt by Comstock of a favorable
opinion of counsel as to certain federal
income tax consequences of the
Reorganization. There is no assurance that
these conditions will be satisfied. See
"Description of the Reorganization--
Conditions to the Reorganization;" and "Tax
Consequences of the Reorganization.'
Comparison of The Articles of Incorporation of Bancorp,
Stockholder Rights........... attached hereto as Appendix C, and the
Bylaws of Bancorp, attached hereto as
Appendix D, are similar in many respects to
the current Articles of Incorporation and
Bylaws of Comstock. However, certain
differences will exist following the
Reorganization between the rights of the
stockholders of Bancorp and those of
Comstock. These differences include such
matters as stockholder nominations of
directors, stockholder requests for a
special meeting of stockholders,
indemnification of officers, directors and
employees, and stockholder rights to inspect
Bancorp's stock ledger. See "Proposal (3):
Formation of Holding Company;" "Certain
Differences in Stockholder Rights;" Appendix
C--Bancorp Articles of Incorporation; and
Appendix D--Bancorp Bylaws.
<PAGE>
Anti-takeover Effects.......... Certain differences in Federal and state law
applicable to Bancorp and the Bank may make
it more difficult to purchase a controlling
interest of Bancorp Common Stock than it is
to purchase a controlling interest of Bank
Common Stock. See "Certain Differences in
Stockholder Rights--Anti-Takeover
Provisions."
Federal Income Tax The Plan of Reorganization is intended to
Consequences................. qualify as a tax-free transaction for
federal income tax purposes. As a condition
to the Reorganization, Comstock will receive
an opinion of counsel as to certain federal
income tax consequences of the
Reorganization. All stockholders should
read the section of this Proxy Statement--
Prospectus entitled "Tax Consequences of the
Reorganization."
Accounting Treatment of It is expected that the Reorganization will
the Reorganization .......... be characterized as, and treated similarly
to, a "pooling of interests" for financial
reporting and related purposes. See "Accoun-
ting Treatment of the Reorganization."
Regulation and After the Effective Date, Bancorp will be
Supervision.................. subject to regulation by (i) the SEC, and
(ii) as a bank holding company by the FRB
under the BHCA and the Nevada Division.
Comstock will continue to be subject to
regulation by the Nevada Division and by the
FDIC. See "Regulation and Supervision."
Market for Stock............... The Bank Common Stock is currently traded on
The Nasdaq Small Cap Market under the symbol
"LODE." Following the Reorganization, it is
expected that Bancorp Common Stock will be
traded on The Nasdaq Small Cap Market under
the same symbol. See "Market for the Common
Stock;" and "Dividend Policy."
Effective Date................. The Effective Date will be the date of the
consummation of the Plan of
Reorganization. See "Description of the
Reorganization-- Effective Date;" and
"--Conditions to the Reorganization."
<PAGE>
Rights of Dissenting Holders of shares of Bank Common Stock are
Stockholders................. entitled to dissent from the Plan of
Reorganization and to receive the fair value
of their shares if they follow certain
statutory procedures under Nevada law. See
"General Information--Dissenters' Rights;"
"Dissenters' Rights;" and Appendix B --
Dissenters' Appraisal Rights.
Stockholder Vote Required Approval of the Plan of Reorganization will
for Approval ................ require the vote of holders of a majority
of the outstanding shares of Bank Common
Stock entitled to vote thereon.
Recommendation of The Board of Directors of Comstock
Management................... unanimously recommends that stockholders
vote for the adoption of the Plan of
Reorganization.
<PAGE>
SELECTED FINANCIAL AND OTHER DATA OF THE BANK
The selected consolidated financial and other data of the Bank set
forth below is derived, in part, from, and should be read in conjunction with,
the audited financial statements of the Bank and notes thereto presented
elsewhere in this Proxy Statement--Prospectus.
As of, and for, the years ended
December 31,
------------------------------------------------
1996 1995 1994 1993 1992
(In thousands of dollars,
except per share data)
Summary of Earnings:
Total Interest Income $14,868 $12,814 $9,134 $7,665 $5,668
Total Interest Expense 4,434 3,811 2,296 1,621 1,533
------- ------- ------ ------ ------
Net Interest Income 10,434 9,003 6,938 6,044 4,135
Provision for loan losses 250 270 105 43 55
------- ------- ------ ------ ------
Net Income after provision
for loan losses 10,184 8,733 6,733 6,001 4,080
Other Operating Income 414 278 407 453 (1) 190 (2)
Non-Interest Expense (7,603) (6,637) (5,724) (4,424)(3) (2,905)(4)
BigHorn Joint-Venture (net) 0 0 0 233 (5) 583 (5)
Provision for taxes (903) (769) (422) (631) (656)
-------- ------- ------- -------- ----------
Net Income $2,092 $1,605 $994 $1,632 $1,292
======== ======= ======= ======== ===========
Shares:
Outstanding (000's)(7) 2,118 2,116 1,819 1,680 1,612
Earnings per Share(6) $.94 $.85 $.57 $.98 $.88
Cash Dividends Declared
Per Share $.00 $.00 $.26 $.18 $.00
Book Value per Share Outstanding $6.14 $5.15 $4.14 $3.88 $3.14
(1)Excludes $2,265,000 of Joint-Venture Revenues.
(2)Excludes $5,262,000 of Joint-Venture Revenues.
(3)Excludes $2,064,000 of Joint-Venture Expenses.
(4)Excludes $4,522,000 of Joint-Venture Expenses.
(5)Nets Joint-Venture revenue and expense.
(6)Adjusted for 10% stock dividend declared in February, 1995.
<PAGE>
As of, and for, the years ended
December 31,
------------------------------------------------
1996 1995 1994 1993 1992
(In thousands of dollars,
except per share data)
Selected Assets and
Liabilities:(1)
Average Total Assets $144,980 $122,805 $103,073 $84,045 $58,599
Average Total Deposits $131,303 $111,169 $93,006 $76,955 $52,533
Average Gross Loans $96,524 $86,743 $69,999 $53,394 $35,031
Average Stockholders'
Equity $13,009 $10,884 $7,531 $6,522 $5,064
Selected Financial
Ratios (%):
Reserves for Loan Losses
to End of Period Loans .89% .77% .62% .75% 1.01%
Net Charge-Offs to End of
Period Loans (Recoveries) .06% .04% .11% (.01%) .02%
Non-Accruing Loans to Total
End of Period Loans 3.3% .2% .2% .3% .5%
Net Income to Average
Stockholders' Equity 17.7% 18.6% 14.7% 28.6% 31.7%
Net Income to Average
Total Assets 1.56% 1.41% 1.14% 2.45% 2.62%
Dividend Payout Ratio 0.0% 0.0% 41.4% 18.2% 0.0%
(1)Average stockholders' equity is calculated using end of month data because
the Bank only computes its income on a monthly basis. However, average total
assets, average total deposits and average gross loans are calculated using
daily figures.
<PAGE>
GENERAL INFORMATION
General
This Proxy Statement--Prospectus is being furnished to stockholders of
Comstock in connection with the solicitation of proxies by the Board of
Directors of Comstock to be used at the Annual Meeting to be held on May 28,
1997, at 4:00 p.m. Pacific Time in the Conference Center on the second floor of
the Bank's Administrative Headquarters Building at 6275 Neil Road, Reno, Nevada
89511, and at any adjournment or postponement thereof.
Holders of Bank Common Stock are requested to promptly sign, date and return
the accompanying proxy card to Comstock in the enclosed postage-paid envelope.
Failure to return a properly executed proxy card or to vote at the Annual
Meeting will have the same effect as a vote against Proposal (3).
Record Date and Voting
The Board of Directors of Comstock has fixed the close of business on April
7, 1997 as the Record Date for the determination of the holders of Bank Common
Stock entitled to receive notice of and to vote at the Annual Meeting. Only
holders of record of Bank Common Stock at the close of business on that date
will be entitled to vote at the Annual Meeting and at any adjournment or
postponement thereof. At the close of business on the Record Date, there were
shares of Bank Common Stock outstanding.
Each holder of shares of Bank Common Stock outstanding on the Record Date
will be entitled to one vote for each share held of record upon each matter
properly submitted at the Annual Meeting and at any adjournment or postponement
thereof. The presence, in person or by proxy, of the holders of at least a
majority of the total number of outstanding shares of Bank Common Stock entitled
to vote at the Annual Meeting is necessary to constitute a quorum at the Annual
Meeting. If a quorum is not obtained, or if fewer shares of Bank Common Stock
are voted in favor of Proposal (3) than the number required for approval, it is
expected that the Annual Meeting will be postponed or adjourned for the purpose
of allowing additional time for obtaining additional proxies or votes. At any
subsequent reconvening of the Annual Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the Annual Meeting except for any proxies which have heretofore effectively been
revoked or withdrawn.
If the enclosed proxy card is properly executed and received by Comstock in
time to be voted at the Annual Meeting, the shares represented thereby will be
voted in accordance with the instructions marked on the proxy card. Executed
proxy cards without voting instructions will be voted FOR each of the proposals
and FOR each director as set forth in the accompanying Notice of Annual Meeting
of stockholders.
<PAGE>
Management is not aware of any matters other than those set forth in the
Notice of Annual Meeting of stockholders that may be brought before the Annual
Meeting. If any other matters properly come before the Annual Meeting,
including, among other things, a motion to adjourn or postpone the Annual
Meeting to another time or place or both for the purpose of soliciting
additional proxies or otherwise, the persons named in the accompanying proxy
will vote the shares represented by all properly executed proxies on such
matters in such manner as shall be determined by a majority of the Board of
Directors of Comstock.
Vote Required
The vote required for each proposal is set forth in the discussion of such
proposal under the caption "Vote Required."
Dissenters' Rights
Nevada law provides that stockholders of record of the Bank on the Record
Date have the right to dissent from the Reorganization and, if the
Reorganization is consummated, to receive compensation equal to the fair value
of their shares. Stockholders of the Bank desiring to exercise their dissent and
appraisal rights must follow the procedures set forth in Sections 92A.300
through 92A.500 of the NRS, a copy of which is attached to this Proxy
Statement--Prospectus as Appendix B. Stockholders ofthe Bank desiring to
exercise their dissent and appraisal rights are urged to read Appendix B in its
entirety since failure to comply with the procedures set forth therein may
result in the loss of dissent and appraisal rights. See "Dissenters' Rights."
Revocability of Proxies
The presence of a stockholder at the Annual Meeting will not automatically
revoke such stockholder's proxy. However, a stockholder may revoke a proxy at
any time prior to its exercise by (i) delivering to the Secretary of the Bank a
written notice of revocation prior to the Annual Meeting, (ii) delivering to the
Secretary of the Bank prior to the Annual Meeting a duly executed proxy bearing
a later date, or (iii) attending the Annual Meeting, filing a written notice of
revocation with the Secretary of the Bank, and voting in person.
Solicitation of Proxies
In addition to solicitation by mail, directors, officers and employees of
Comstock may solicit proxies for the Annual Meeting from Comstock stockholders
personally or by telephone without additional remuneration therefor. Comstock
will also provide persons, firms, banks and corporations holding shares in their
names or in the names of nominees, which in either case are beneficially owned
by others, proxy material for transmittal to such beneficial owners and will
reimburse such record owners for their expenses in doing so. The cost of
solicitation of proxies for the Comstock Annual Meeting will be borne by
Comstock. Stockholders of the Bank may authorize another person or persons to
act for them as proxy by transmitting or authorizing the transmission of a
telegram, cablegram or other means of electronic transmission to the Secretary
<PAGE>
of the Bank, provided that any such telegram, cablegram or other means of
electronic transmission must either set forth or be submitted with information
from which it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder.
Security Ownership of Certain Beneficial Owners
The following table sets forth information as of March 1, 1997 pertaining to
beneficial ownership of Bank Common Stock by persons known to the Bank to own 5%
or more of such stock, current directors of the Bank, certain executive officers
and all directors and executive officers of the Bank as a group. Other than the
beneficial owners listed below, the Bank is not aware of any person or group
that beneficially owns more than 5% of the outstanding shares of Bank Common
Stock as of March 1, 1997.
The table should be read with the understanding that more than one person
may be the beneficial owner or possess certain attributes of beneficial
ownership with respect to the same securities.
Beneficial Ownership of 5% or More of
Bank Common Stock; Ownership of Directors and Executive Officers
Shares of
Bank Common Percent of
Beneficial Owner Stock(1)(2) Class
- --------------------------------------------------------------------------------
Stockholders owning
5% or more:
- -------------------
Umberto Fedeli 210,000 9.88%
5005 Rockside Rd., 5th Floor
Independence, OH 44131
Resource Management, Inc. 200,000 9.41%
28601 Chagrin Blvd., Ste. 500
Cleveland, OH 44122
Richard Barone 200,000(3) 9.41%
28601 Chagrin Blvd., Ste. 500
Cleveland, OH 44122
N. Lee Deitrich 193,660 9.11%
7090 Morley Road
Painesville, OH 44077
Lawrence Loxterman 185,230 8.72%
270 Barrington Ridge Road
Painesville, OH 44077
William Loxterman 175,230 8.25%
1010 Hoose Road
Mentor, OH 44060
<PAGE>
Shares of
Bank Common Percent of
Beneficial Owner Stock(1)(2) Class
- --------------------------------------------------------------------------------
Directors and Officers:
- ------------------------
Robert Barone 179,409(4) 8.01%
Larry Platz 131,302(5) 5.86%
Michael Dyer 27,987(6) 1.31%
John Coombs 8,799(7) *
Mervyn Matorian 7,566(8) *
Edward Allison 5,765(9) *
Samuel McMullen 3,595(10) *
Stephen Benna 100(11) *
Executive Officers and 364,523(12) 15.26%
Directors as a group
(8 persons)
- ------------------------
* Less than 1%
(1) Unless otherwise noted, the persons shown have sole voting and
investment power over the shares listed.
(2) Bank Common Stock includes all outstanding Bank Common Stock plus, as
required for the purpose of determining beneficial ownership with
respect to the named person, all Bank Common Stock subject to any right
of acquisition, through the exercise or conversion of any security,
within 60 days.
(3) Richard A. Barone is the controlling stockholder of Resource
Management, Inc. ("RMI") and is Chairman of the Board of Directors and
President of RMI. Mr. Barone may be deemed to own beneficially the
shares owned by RMI. Mr. Barone disclaims beneficial ownership of all
shares owned by RMI.
(4) Consists of (i) 64,184 shares held by The Barone Family 1988 Trust of
which Mr. Robert Barone is a trustee; and (ii) 115,225 shares subject
to currently exercisable options held by Mr. Barone. Does not include
options to purchase 20,625 shares of Bank Common Stock that do not
become fully vested within the next 60 days.
(5) Consists of (i) 16,077 shares held by Mr. Platz; and (ii) 115,225
shares subject to currently exercisable options. Does not include
options to purchase 20,625 shares of Bank Common Stock that do not
become fully vested within the next 60 days.
(6) Consists of (i) 12,871 shares held by Mr. Dyer; and (ii) 16,116 shares
subject to currently exercisable options.
(7) Consists of (i) 2,309 shares held by The Coombs Living Trust of which
Dr. Coombs is a trustee; (ii) 590 shares held in a self directed
rollover IRA; and (iii) 5,900 shares subject to currently exercisable
options held by Dr. Coombs.
(8) Consists of (i) 2,666 shares held by Mr. Matorian; and (ii) 4,900
shares subject to currently exercisable options.
(9) Consists of (i) 2,065 shares held by Mr. Allison; and (ii) 3,700 shares
subject to currently exercisable options.
(10) Consists of (i) 295 shares held by Mr. McMullen; and (ii) 3,300 shares
subject to currently exercisable options.
(11) Consists of 100 shares held by Mr. Benna.
(12) Consists of (i) an aggregate of 101,157 shares held by directors and
executive officers as a group; and (ii) an aggregate of 263,366 shares
subject to currently exercisable options. Does not include non-vested
options held by Mr. Barone and Mr. Platz to purchase an aggregate of
41,250 shares.
<PAGE>
PROPOSAL (1): ELECTION OF DIRECTORS
The Bank's Bylaws provide that the Bank shall have a Board of Directors
comprised of not less than five (5) and not more than nine (9) directors in one
class. The Bylaws allow the Board of Directors to appoint directors to fill
positions that were vacated or for which there was no nominee during the period
between the annual meetings of stockholders. Directors who are elected will
serve until the 1998 Annual Meeting or until their successors have been elected
and qualified or have been appointed by the Board of Directors.
The persons designated in the accompanying proxy intend to vote for the
election of the eight nominees for director set forth below. If, for any reason,
any nominee is unable to accept such nomination or to serve as a director, an
event not currently anticipated, the persons named as proxies reserve the right
to exercise their discretionary authority to substitute such other person or
persons, as the case may be, as a management nominee, or to reduce the number of
management nominees to such extent as they shall deem advisable. Set forth below
is certain information with respect to the nominees. All of the nominees are
currently directors of the Bank.
The following directors have been nominated by the Board of Directors
to succeed themselves: Edward Allison, Robert Barone, Stephen Benna, John
Coombs, Michael Dyer, Mervyn Matorian, Samuel McMullen, and Larry Platz.
Vote Required
The favorable vote of a majority of the shares of Bank Common Stock
represented at the Annual Meeting is required for the election of directors.
<PAGE>
Information with Respect to Nominees
The following table provides information with respect to each director
and principal officer of the Bank.
Name Age Director Since Position(s) Business Experience
with Bank During Past 5 Years
- --------------------------------------------------------------------------------
Edward Allison 57 November, 1993 Director Self-employed;
government rela-
tions/investments.
Robert Barone 52 March, 1984 Chairman, Chief Chairman, Chief
Executive Officer Executive Officer
and Treasurer and Treasurer of
the Bank.
Stephen Benna 44 June, 1996 Director Manager of CB
Concrete Co., a
manufacturer of
concrete.
John Coombs 51 April, 1982 Director Orthodontist;
private practice.
Michael Dyer 49 December, 1984 Director and Partner in the law
Counsel firm of Dyer, Law-
rence & Cooney.
Mervyn Matorian 52 March, 1983 Director State Farm
insurance agent.
Samuel McMullen 47 September, 1993 Director Self-employed;
governmental law
and political
strategy.
Larry Platz 58 March, 1984 President, President,
Secretary and Secretary and
Director Director of the
Bank.
There are no family relationships between any of the directors or
principal officers. None of such persons was selected or serves pursuant to any
arrangement or understanding with any other person. Directors are elected at
each annual meeting of the stockholders of the Bank. Each officer serves at the
discretion of the Board of Directors. Each of the directors listed above has had
the same employment for more than the past five years.
<PAGE>
Committees of the Board of Directors
The Bank's Board of Directors has established the following committees,
the members of which are appointed annually by the Board of Directors. As a
general rule, if a committee member cannot make a committee meeting, any other
director may serve as a substitute.
Loan Committee: This committee met 15 times in 1996. It reviews and
approves all residential real estate loans over $500,000, all subdivision and
acquisition and development loans over $1,000,000, all commercial real estate
loans over $1,500,000, all commercial loans secured by other than real estate
over $500,000, and all other loans over $150,000. The committee consisted of the
following four members from January 1, 1996 through April 30, 1996: Messrs.
Barone, Dyer, Matorian, and Platz. Beginning May 1, 1996, the Loan Committee was
expanded to five members and consisted of the four members listed above plus Mr.
Allison.
Investment Committee: This committee met twice in 1996. It reviews and
approves the investment policy and sets forth the general guidelines and
strategies to be followed by the investment portfolio manager. The committee
consisted of the following four members: Messrs. Barone, Benna, Coombs, and
Platz. Mr. Benna replaced Mr. Allison in June, 1996.
CRA Committee: This committee met three times in 1996. Its function is
to oversee the Bank's efforts in meeting its community reinvestment obligations
including the identification of areas of need and design of products to meet
such needs. The committee consisted of three members as follows: Messrs. Barone,
McMullen and Platz. Many of the Bank's managers also attend the meetings.
Audit/Compliance Committee: This committee met once in 1996 on its
audit function which is to review the findings of the outside auditor or any
internal control findings. The committee consisted of four members: Messrs.
Allison, Benna, Dyer, and McMullen. The Compliance function is to review the
findings of any regulatory examination involving compliance. Because the Bank
signed a Memorandum of Understanding regarding consumer compliance with the FDIC
in January, 1994, the Board as a whole reviewed compliance issues three times in
1996.
Personnel/Compensation Committee: This committee met three times in
1996. Its function is to review the compensation of the Bank's senior executives
and all vice-presidents. It is composed of three members as follows: Messrs.
Matorian, Allison, and Platz.
Options Committee: This committee met twice in 1996. Its function is to
review executive and management performance for the purpose of awarding the
senior executives and other Bank managers stock, options or other benefits
available under the 1992 Incentive Plan of Comstock Bank. This committee was
composed of four members as follows: Messrs. Allison, Coombs, Matorian, and
McMullen. In June, 1996, Mr. Benna was placed on this committee increasing its
membership to five.
<PAGE>
Management Committee: This committee is composed of Messrs. Barone and
Platz, the Bank's executive officers who also hold Board seats. The committee
meets informally and without compensation at least twice each month and
sometimes as often as four times. One set of minutes per month are created to
inform the Board of important executive actions taken in the day to day
operations of the Bank. The minutes of this committee are reviewed at the
regular monthly Board of Directors' meeting.
Asset/Liability Management Committee: This committee met twice in 1996.
Its function is to monitor interest rate risk and the cash flow needs of the
Bank, and to review the activities of the management Asset/Liability Committee.
This committee was composed of four members as follows: Messrs. Barone, Coombs,
McMullen, and Platz. In May, 1996, Mr. McMullen replaced Mr. Allison.
The Board of Directors has no formal nominating committee; the Board as
a whole acts in nominations for Board positions. Section 2.3 of the Bylaws of
the Bank requires the following paragraph regarding nominations for directors be
set forth in the notice of a stockholders' meeting at which the election of
directors is to be considered:
Nominations for election of members of the Board of Directors may be
made by the Board of Directors or by any stockholder of any outstanding
class of voting stock of the Corporation entitled to vote for the
election of directors. Notice of intention to make any nominations,
other than by the Board of Directors, shall be made in writing, signed
and received by the President of the Corporation no more than 60 days
prior to any meeting of the stockholders called for the election of
directors, and no more than 10 days after the date the notice of such
meeting is sent to stockholders pursuant to Section 2.2 of the bylaws;
provided, however, that if only 10 days notice of the meeting is given
to stockholders, such notice of intention to nominate shall be received
by the President of the Corporation not later than the time fixed in
the notice of the meeting for the opening of the meeting. Such
notification shall contain the following information to the extent
known to the notifying stockholder: (a) the name, address and the term
of office of each proposed nominee; (b) the principal occupation of
each proposed nominee; (c) the number of shares of voting stock of the
Corporation owned by each proposed nominee; (d) the name and residence
address of the notifying stockholder; (e) the number of shares of
voting stock of the Corporation owned by the notifying stockholder; and
(f) with the written consent of the proposed nominee, whether the
proposed nominee has ever been convicted of or pleaded nolo contendere
to any criminal offense involving dishonesty or breach of trust, filed
a petition of bankruptcy or has been adjudged bankrupt. Nominations not
made in accordance herewith shall be disregarded by the then chairman
of the meeting, and the inspectors of elections shall then disregard
all votes cast for each nominee.
In 1996, the Bank's Board of Directors met 12 times (all regularly
scheduled monthly meetings). No director attended fewer than 75% of the
<PAGE>
aggregate number of meetings of the Board of Directors or meetings of a
Committee to which he was assigned except as follows: Mr. McMullen missed two of
the three CRA Committee meetings; Mr. Dyer missed five of the 15 Loan Committee
meetings; but in accordance with policy, another director substituted for him
two of those five times; Mr. Allison missed three of the 11 Loan Committee
meetings to which he was assigned.
Remuneration of Directors
In 1996, directors received the sum of $600 for each regular Board
meeting attended (raised to $650 for 1997). In addition, each Board Committee
meeting attended entitled the non-employee director to compensation of $50,
except the Loan Committee, which set compensation of $150 to attending
non-employee directors. These fees have been raised to $100 and $250,
respectively, for 1997.
THE BOARD OF DIRECTORS OF THE BANK RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" EACH NOMINATED DIRECTOR
EXECUTIVE COMPENSATION
The following tables show information with respect to the annual
compensation for services in all capacities to the Bank for the fiscal years
ended December 31, 1996, 1995, and 1994 for the chief executive officer and the
president of the Bank. No other officer of the Bank received compensation in
excess of $100,000 during 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Compensation
-----------------------------------
Awards
Annual Compensation Securities Payouts
- -------------------------------------------------------------- -------------------------- -------
Name and Prin- ($) ($) ($) ($) ($) ($) ($)
cipal Position Year Salary Bonus Other All Other Restricted Underlying LTIP
Annual Compensation Stock Awards Options/SARS Payouts
- -------------------------------------------------------------- -------------------------- -------
Robert Barone 1996 174,000 96,308 10,249 0 0 0 0
Chairman of the 1995 162,000 59,660 9,746 25,000 0 0 0
Board of Direc- 1994 150,000 59,083 8,848 0 0 0 0
tors and Chief
Executive
Officer
Larry Platz 1996 174,000 116,308 10,249 0 0 0 0
President 1995 162,000 99,660 9,746 0 0 0 0
1994 150,000 59,083 8,848 25,000 0 0 0
</TABLE>
Employment Agreements
The Bank has entered into substantially similar employment agreements
dated as of December 14, 1992 with each of Robert Barone and Larry Platz (the
"Employment Agreements"). The initial term of the Employment Agreements is for a
period of five years, unless terminated for cause (as defined therein). The term
of each Employment Agreement is automatically extended for one additional year
on each anniversary date of the Employment Agreement, unless the Board of
Directors gives 30 days prior written notice that the term will not be extended.
<PAGE>
The Employment Agreements provide for an annual base salary of $132,000
to each of Mr. Barone and Mr. Platz, plus an annual bonus of at least 5% of
after-tax profits unless economic conditions or the financial condition of the
Bank dictate that such incentives be suspended. The annual base salary is
subject to renegotiation every six months but changes, if any, may only result
in an increase in the annual base salary. Historically, Mr. Barone and Mr. Platz
have each received a bonus equal to 5% of the Bank's after-tax profits. This was
increased to 6% on December 20, 1993 for years beginning after December 31, 1993
as part of the consideration for their agreement to eliminate the tax benefits
from options already granted. The Employment Agreements also provide that Mr.
Barone and Mr. Platz are entitled to participate in all benefit plans and
programs of the Bank available to executives and salaried employees.
Each Employment Agreement provides that following a change of control
the Bank may terminate the Employment Agreement; provided, however, in such
event the Bank must continue to pay to Mr. Barone or Mr. Platz, as the case may
be, his then current annual base salary for a period of four years from the date
of termination.
The Employment Agreements also provide for a split-dollar life
insurance arrangement. See "--Life Insurance Arrangements" below. In December,
1996, the Board of Directors agreed to a supplemental retirement plan ("SERP")
for both Mr. Barone and Mr. Platz to bring their retirement income to an
estimated 60% of their estimated salaries at retirement. At his 65th birthday,
Mr. Platz will receive $44,700 per year for a 15-year period. At his 65th
birthday, Mr. Barone will receive $66,900 per year for a 15-year period.
If the stockholders of the Bank approve the Reorganization set forth in
Proposal (3) to this Proxy Statement--Prospectus, the Bank will assign to
Bancorp and Bancorp will assume the Employment Agreements on the same terms as
described above, except that for purposes of the Employment Agreements a "change
of control" will be deemed to have occurred if (i) Bancorp is involved in a
merger or other acquisition in which Bancorp is not the surviving entity, (ii)
shares representing greater than or equal to forty percent of the voting power
of Bancorp are acquired by a person, entity or group (as such term is used in
Rule 13d-5 of the Exchange Act) through a transaction or series of transactions,
or (iii) a majority of the members of Bancorp's Board of Directors elected at an
annual meeting of the stockholders of Bancorp are replaced, are removed without
cause or resign during the period commencing at the annual meeting of
stockholders at which the directors were elected and ending after the next
annual meeting of stockholders at which directors of Bancorp are elected. See
"Management of Bancorp--Compensation."
STOCK OPTION AND EMPLOYEE BENEFIT PLANS
In the following discussions, all shares and prices have been adjusted
to reflect the 10% stock dividend declared on February 22, 1995 to holders of
record of Bank Common Stock on March 29, 1995.
<PAGE>
Description of Incentive Plan
On February 5, 1992, the Bank adopted the 1992 Incentive Plan of
Comstock Bank (the "Incentive Plan") for officers and key employees
("Participants"). The stockholders approved the Plan on March 25, 1992. The
Incentive Plan is intended to encourage officers and other key employees of the
Bank to acquire or increase their ownership of Bank Common Stock on reasonable
terms, to foster in Participants a strong incentive to put forth maximum effort
for the success and growth of the Bank, to aid in retaining individuals who put
forth such efforts, and to assist in attracting the best available individuals
to the Bank in the future. The Incentive Plan provides for the grant of stock
options, restricted stock and stock bonus awards (collectively "Awards"). The
aggregate number of shares of Bank Common Stock which may be delivered under the
Incentive Plan may not exceed 400,000 shares. No Awards may be granted after
February 5, 2002.
The Incentive Plan provides for granting incentive as well as
non-qualified options. Unless the Stock Option Committee (the "Committee") or
the Board in its discretion, determines otherwise, non-qualified stock options
will be granted with an option price equal to the fair market value of the
shares of Bank Common Stock on the date of grant. Incentive stock options must
be granted at not less than the fair market value of the shares of Bank Common
Stock on the date of grant. In the case of certain ten percent stockholders,
incentive stock options must be granted at not less than 110% of the fair market
value of the shares on the date of grant.
Restricted stock awards are rights granted to an employee to receive
shares of Bank Common Stock without payment but subject to forfeiture and other
restrictions as set forth in the Incentive Plan. Generally, the restricted stock
awarded, and the right to vote such stock or to receive dividends thereon, may
not be sold, exchanged or otherwise disposed of during the restricted period.
The Committee in its discretion, will determine the restrictions and the
forfeiture provisions applicable to restricted stock awards. Stock bonus awards
are outright grants of Bank Common Stock to a Participant with no restrictions
or risks of forfeitures.
The Incentive Plan is administered by the Committee (or the Board as a
whole) which determines the Participants to whom Awards will be granted, the
provisions applicable to each Award and the time periods during which the Awards
may be exercised. Each option granted under the Incentive Plan may be
exercisable for a term of not more than ten years after the date of grant (or
five years in the case of incentive stock options granted to certain ten percent
stockholders). Certain other restrictions apply in connection with the timing of
exercise. In the event of an unusual corporate event, the Board, in its
discretion, may determine, on a case by case basis, to terminate Awards under
the Incentive Plan. Any Awards which the Board decides to terminate will
generally terminate 90 day s after such unusual corporate event in which case,
if it is an option, it will become immediately exercisable at least five days
prior to such date and, if it is a restricted stock award, any restrictions will
immediately lapse on that date.
The Incentive Plan may be amended at any time and from time to time by
the Board of Directors, but no amendment without the approval of stockholders of
the Bank may be made if stockholder approval under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), (or any successor provision) or
<PAGE>
Section 335.411 of the Code (or any successor provision) would be required. In
the event that the stockholders of the Bank approve the Reorganization, the
Incentive Plan will be assumed by Bancorp and all the options issued to purchase
shares of Bank Common Stock under the Incentive Plan will become options to
purchase Bancorp Common Stock with the same terms, conditions and exercise price
as the original options granted, as adjusted for the two-for-one share exchange
ratio set forth in the Plan of Reorganization. See "Proposal (3): Formation of
Holding Company."
Federal Income Tax Consequences
Incentive Stock Options. For regular tax purposes, neither receipt nor
exercise of an Incentive Stock Option is a taxable event to the Participant, and
if the recipient Participant does not dispose of the shares of Bank Common Stock
acquired under an Incentive Stock Option prior to the expiration of the
requisite holding periods described below, any gain resulting from the sale of
such shares is long-term capital gain. In such case, the Bank is not entitled to
any tax deduction with respect to the grant or exercise of the options. The
difference between the fair market value of the shares of Bank Common Stock on
the date of exercise and the option price is a tax preference item which may
cause the Participant to incur an alternative minimum tax in the year of
exercise. The minimum statutory holding periods are two years from the date the
option is granted and one year from the date the Participant receives his shares
of Bank Common Stock pursuant to the exercise. The statutory holding period for
Incentive Stock Options is waived in the event of the Participant's death.
For regular tax purposes, if the shares of Bank Common Stock are
disposed of before the end of either of such statutory holding periods (a
"disqualifying disposition"), the lesser of (i) the difference between the
option price and the fair market value of such shares onthe date of exercise, or
(ii) the total amount of gain realized on the sale must be reported by the
Participant as ordinary income and the Bank would be entitled to a tax deduction
in that amount. The remaining gain, if any, would be taxed to the Participant as
capital gain.
Notwithstanding the foregoing, if the Participant is subject to Section
16(b) of the Exchange Act ("Section 16") at the time of a disqualifying
disposition, the acquisition date of the shares and the time of recognition of
income will be postponed as long as the sale of shares underlying the exercised
option could subject the Participant to suit under the "short swing profit"
provisions of Section 16, unless the Participant elects to be taxed immediately.
In addition, if the Participant does not elect to be taxed immediately, the
amount of income recognized will be the lesser of (i) the difference between the
option price and the fair market value of the shares at the end of the
postponement period (rather than at the date of exercise), or (ii) the total
amount of gain realized on the sale.
Non-Qualified Stock Options. The issuance of a Non-Qualified Stock
Option under the Incentive Plan will not result in any taxable income to the
recipient Participant or a tax deduction to the Bank at the time it is granted.
Generally, a Participant to whom a Non-Qualified Stock Option has been granted
will recognize ordinary income at the time the Participant exercises the option
<PAGE>
and receives shares of Bank Common Stock in an amount equal to the excess of the
fair market value of such shares on the date of exercise over the option price.
Notwithstanding the foregoing, upon the exercise of a Non-Qualified
Stock Option by a Participant of the Bank who is subject to Section 16, the
acquisition date of the shares for federal income tax purposes and the time of
recognition of income will be postponed as long as sale of the shares could
subject the Participant to suit under the "short swing profit" provisions of
Section 16, unless the Participant elects to be taxed on the date of exercise.
Furthermore, the amount of income recognized by the Participant in such case
will be the excess of the fair market value of such shares at the end of the
postponement period (rather than at the date of exercise) over the option price.
The Bank is entitled to a tax deduction corresponding to the amount of
income recognized by the Participant for the year in which the Participant
recognizes such income for Federal income tax purposes.
Restricted Stock Awards. Generally, a Participant to whom a restricted
stock award is made will recognize ordinary income for Federal income tax
purposes in an amount equal to the excess of the fair market value of such
shares of Bank Common Stock received at the time the shares first become
transferable or are no longer subject to forfeiture over the purchase price, if
any, paid by the Participant for such Bank Common Stock, and such amount will
then be deductible for Federal income tax purposes by the Bank. For tax
purposes, in addition to other restrictions, the Bank Common Stock is considered
to be subject to a substantial risk of forfeiture as long as the sale of the
shares could subject the Participant to suit under the "short swing profit"
provisions of Section 16. Alternatively, if the recipient of a restricted stock
award so elects, he will recognize ordinary income on the date of grant in an
amount equal to the excess of the fair market value of the shares of Bank Common
Stock (without taking into account any lapse restrictions) on the date of grant
over the purchase price, if any, paid by the Participant for such Bank Common
Stock, and such amount will then be deductible by the Bank. In the event of the
forfeiture of the Bank Common Stock included in a restricted stock award, the
Participant will not be entitled to any deduction except to the extent the
Participant paid for such Bank Common Stock. Upon sale of the Bank Common Stock
included in the restricted stock award, the Participant will recognize capital
gain or loss, as the case may be, equal to the difference between the amount
realized from such sale and the Participant's tax basis for such shares of Bank
Common Stock.
<PAGE>
Stock Bonus Awards. Generally, a Participant to whom a stock bonus
award is granted will recognize ordinary income for federal tax purposes in an
amount equal to the excess (if any) of the fair market value of the Bank Common
Stock received over the price, if any, paid by the Participant for the shares.
Such amount is then deductible by the Bank for Federal income tax purposes.
Taxation will be delayed, as discussed previously, for any period of time that
sale of such Bank Common Stock would subject a Participant to suit under Section
16 for short swing profit liability, unless the Participant elects to be taxed
earlier.
Previous Grants
On February 22, 1988, options to purchase 27,500 shares of Bank Common
Stock were granted to each of Robert Barone and Larry Platz which had an option
exercise price of $1.14 per share and which expired on March 1, 1995. On March
25, 1992, these options were replaced with substantially similar options granted
under the Incentive Plan for the same number of shares with the same exercise
price and expiration date. In addition, on the same date, additional options of
1,100 shares each were granted under the Incentive Plan to Mr. Barone and Mr.
Platz with an exercise price of $2.73 per share and an expiration date of March
25, 1997. The Board determined under the provisions of the Incentive Plan that
$2.73 per share was the fair market value of the Bank Common Stock on March 25,
1992.
On December 14, 1992, the Committee granted options to purchase 82,500
shares of Bank Common Stock to each of Mr. Barone and Mr. Platz at an exercise
price of $3.41 per share. The options expire ten years from the date of grant,
subject to earlier termination. The options initially vested as follows: 25%
after the fifth anniversary of the date of grant; 50% after the sixth
anniversary of the date of grant; 75% after the seventh anniversary of the date
of grant; and 100% after the eighth anniversary of the date of grant. On October
25, 1993, the Committee approved the following revised vesting schedule with
respect to these options: 25% beginning in December 1994; 50% in December 1995;
75% in December 1996; and 100% in December 1997. This revised vesting schedule
was approved by a special stockholders meeting of February 24, 1994. On May 19,
1993, the Committee granted options to purchase 5,500 shares of Bank Common
Stock to each of Mr. Barone and Mr. Platz at an exercise price of $6.70 per
share. On October 25, 1993, the Committee also granted additional options to
purchase 47,850 shares of Bank Common Stock to each of Mr. Barone and Mr. Platz
at an exercise price of $6.87 per share. In the event of termination of his
employment without cause, the option holder has the right to exercise his
options in full without regard to any vesting limitations. In the event of the
option holder's voluntary termination of employment, retirement or termination
of employment by reason of disability, he has the right to exercise any options
which have vested as of the date his employment terminates for the remaining
term of the option and all non-vested options as of such date will terminate. In
the event of death, the option holder's successor has the right to exercise any
options which have vested as of the date of death within the later of the
original term of the option or one year after death and all non-vested options
as of such date will terminate. In the event the option holder's employment
terminates for cause, he has the right to exercise any options which have vested
as of the date his employment terminates at any time within 30 days after the
later of the date of such termination or the date an arbitrator determines he
was properly terminated for cause. Any remaining non-vested options as of such
<PAGE>
date will terminate. In the event of an unusual corporate event, the option will
become exercisable in full no later than the earlier of (i) seven business days
prior to the record date for a stockholder to receive consideration of any kind
with respect to such unusual corporate event, or (ii) 30 days prior to such
unusual corporate event. The Board may elect to terminate the option 90 days
following such unusual corporate event as provided for in the Incentive Plan. If
the Board does not terminate the option and the Bank ceases to exist as a result
of such unusual corporate event, the Board is required to cause the surviving
entity to assume the option by granting an option for shares of the surviving
entity on substantially similar terms and conditions.
The following table shows transactions through March 1, 1997, as to the
executive officers named in the Summary Compensation Table, as to all current
executive officers of the Bank as a group, as to all other current officers who
are not executive officers as a group, and as to all other employees as a group,
information with respect to options granted or exercised under the Incentive
Plan since its adoption in 1992 (non-employee directors are not eligible to
participate in the Incentive Plan). No options were granted to executive
officers of the Bank under the Incentive Plan during 1996. In the event that the
stockholders of the Bank approve the Reorganization, the Incentive Plan will be
assumed by Bancorp and all the options issued to purchase shares of Bank Common
Stock under the Incentive Plan will become options to purchase Bancorp Common
Stock with the same terms, conditions and exercise price as the original options
granted, as adjusted for the two-for-one share exchange ratio set forth in the
Plan of Reorganization. See "Proposal (3): Formation of Holding Company."
================================================================================
Average
Name of Individual Per Share
or Number of Options Exercise Options Net Value
Persons in Group Granted Price Exercised Realized (1)
- --------------------------------------------------------------------------------
Robert Barone 164,450 $4.14 28,600 $177,000
- --------------------------------------------------------------------------------
Larry Platz 164,450 $4.14 28,600 $177,375
- --------------------------------------------------------------------------------
All executive officers
as a group (2 persons) 328,900 $4.14 57,200 $354,375
- --------------------------------------------------------------------------------
All other officers
as a group (8 people) 39,250 $8.21 7,300 $37,475
- --------------------------------------------------------------------------------
All other employees
as a group (2 people) 4,000 $8.75 0 NA
================================================================================
(1) Net value realized (if greater than zero) is the difference between the
market price on the date of exercise and the exercise price, multiplied
by the number of shares acquired through the exercise of the options.
On the date of exercise, the average between the closing bid and asked
prices was used as the market price to calculate the net value
realized, unless the actual transaction price was known.
<PAGE>
Description of Directors' Plan
The 1992 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan") was also adopted on February 5, 1992 and approved by stockholders of the
Bank on March 25, 1992. The Directors' Plan is intended to encourage
non-employee directors of the Bank to acquire or increase their ownership of
Bank Common Stock on reasonable terms, to foster a strong incentive to put forth
maximum effort for the continued success and growth of the Bank, to aid in
retaining individuals who put forth such efforts and to assist in attracting the
best individuals to the Bank in the future. The aggregate number of shares of
Bank Common Stock which may be delivered under the Directors' Plan may not
exceed 165,000 shares.
Under the Directors' Plan, options are automatically granted to each
non-employee director of the Bank on the following terms, at the Board meeting
immediately following the annual meeting of the stockholders of the Bank each
year, provided the director was a director for at least three full months during
the preceding fiscal year and provided he has not been an employee or officer of
the Bank or any of its affiliates nor been eligible to receive any award under
any other benefit plan of the Bank or its affiliates during the 12 months
preceding such date:
(1) each director shall be permitted to purchase, from the shares
available under the Directors' Plan, up to 2,750 shares at the
fair market value on that date;
(2) each director shall be granted on such date, without further
action by the Board or the Committee, an option to purchase 1,100
shares at fair market value on the date of grant; and
(3) for each share a director purchases under paragraph (1) above, he
will be granted, on the same date, an additional option to
purchase an equal number of shares at the same price.
Notwithstanding the foregoing, during the term of the Directors' Plan
no director shall be granted rights to purchase shares and options to purchase
shares which in the aggregate equal more than 55,000 shares under the Directors'
Plan. If the number of shares available to grant under the Directors' Plan on a
scheduled date of grant is insufficient to make all automatic grants required to
be made pursuant to the Directors' Plan on such date, then each eligible
Director shall receive the right to purchase shares, the corresponding option to
purchase shares and the annual, automatic options to purchase 1,100 shares
pursuant to the Directors' Plan equal, in the aggregate, to a pro rata number of
the remaining shares available under the Directors' Plan.
The exercise price of such options will be the fair market value on the
date of grant. The options granted under the Directors' Plan are exercisable for
a term of ten years from the date of grant.
<PAGE>
In the event that a director ceases to be a member of the Board (other
than by reason of death or disability), an option may be exercised by the
director at any time within three months after he ceases to be a member of the
Board, but not beyond the term of the option. If a director dies or becomes
disabled while he is a member of the Board, an option may be exercised by the
director's successor, in the event of death, or by him or by his personal
representative, in the event of disability, at any time within one year after
his death or disability, but not beyond the term of the option.
The administration and the term of the Directors' Plan are consistent
with the above described Incentive Plan. In the event of an unusual corporate
event, each option outstanding under the Directors' Plan will terminate 90 days
after the occurrence of such unusual corporate event.
The Directors' Plan may be amended at any time and from time to time by
the Board of Directors of the Bank but no amendment without the approval of
stockholders of the Bank may be made if stockholder approval under Section 422
of the Code (or any successor provision) or Section 335.411 of the Code (or any
successor provision) would be required. In the event the stockholders of the
Bank approve the Plan of Reorganization, the Directors' Plan will be assumed by
Bancorp and all the options issued to purchase shares of Bank Common Stock under
the Directors' Plan will become options to purchase Bancorp Common Stock with
the same terms, conditions and exercise price as the original options granted,
as adjusted for the two-for-one share exchange ratio set forth in the Plan of
Reorganization.
The following table shows, as to each current non-employee director,
and as to all current non-employee directors, information with respect to
options granted or exercised since adoption of the Directors' Plan in 1992.
================================================================================
Average
Name of Individual Per Share
or Number of Options Exercise Options Net Value
Persons in Group Granted Price Exercised Realized (1)
- --------------------------------------------------------------------------------
Edward Allison 3,700 7.90 0 NA
- --------------------------------------------------------------------------------
John Coombs 5,900 $6.66 0 NA
- --------------------------------------------------------------------------------
Michael Dyer 15,116 $6.15 0 NA
- --------------------------------------------------------------------------------
Mervyn Matorian 6,000 $6.59 1,100 $5,125
- --------------------------------------------------------------------------------
Samuel McMullen 3,300 $7.65 0 NA
- --------------------------------------------------------------------------------
All non-employee directors
as a group (5 people) 26,416 $5.90 1,100 $5,125
================================================================================
(1) Net value realized is the difference (if greater than zero) between the
market price on the date of exercise and the exercise price, multiplied
by the number of shares acquired through the exercise of the options.
On the date of exercise, the average between the closing bid and asked
prices was used as the market price to calculate the net value
realized, unless the actual transaction price was known.
<PAGE>
401(k) Plan
On September 25, 1991, the Board of Directors adopted the Comstock Bank
401(k) Plan (the "401(k) Plan") which became effective on January 1, 1992. The
401(k) Plan allows eligible employees to contribute, as deferred compensation,
up to 15% of their salary (up to a maximum of $9,500 in 1996 and 1997) to a
trust established pursuant to such plan. The Bank matches one-half of employee
contributions, up to a maximum of 3% of each participant's compensation.
Contributions by the Bank vest in accordance with the number of years of
continuous employment at the Bank, with 100% vesting occurring when the employee
has 5 years of such continuous service. In the event that the stockholders of
the Bank approve the Plan of Reorganization, the employees of Bancorp will
become eligible for the 401(k) Plan.
Deferred Compensation
In December, 1996, the Bank's Board of Directors adopted a Deferred
Compensation Plan (the "Deferred Plan") for the Directors and key Bank
employees. The Deferred Plan allows the participants to defer up to 100% of
their income from the Bank. Under the Deferred Plan, the Bank will match the
first $12,000 of employee contributions as follows: 25% for directors and
Executive Officers; 20% for Senior Vice-Presidents; 15% for Vice-Presidents; 10%
for other key employees. The deferred funds become a liability of the Bank, and
the participants become general creditors of the Bank. The funds earn interest
at a rate set annually by the Board of Directors. The Bank must count the
deferred compensation as an expense, but may not deduct the expense from its
income taxes. When the Deferred Compensation is paid out, the Bank may then
deduct the compensation from its income tax return.
Life Insurance Arrangements
The Employment Agreements call for the Bank to pay the premiums for two
$2,300,000 split-dollar life insurance policies insuring the life of Robert
Barone (individually, a "Policy" and, together, the "Policies"), one owned by
Larry Platz and the other owned by Robert Barone. The Bank expects to pay annual
premiums of approximately $163,000 for each Policy for a period of five years
beginning in October, 1992, after which a nominal annual payment will be paid
for a period of two years. The total amount of premiums to be paid by the Bank
for each Policy is expected to be approximately $829,614.
The Bank will be entitled to receive the aggregate of the premium
payments made by the Bank with respect to each Policy (less any borrowings and
less accrued interest thereon) no later than (i) the death of Robert Barone, or
(ii) the seventeenth anniversary date of the Policies; provided, however, the
Bank will be entitled to and will accept early repayment with respect to the
Policy owned by Mr. Barone or Mr. Platz, as the case may be (individually, the
"Officer"), if the split-dollar insurance agreement is terminated by written
notice from the Officer or by mutual consent of the parties or if the Officer
terminates employment under certain specified circumstances, but the amount of
any such early repayment will not exceed the cash surrender value of the
relevant Policy at such time. The Policies have been assigned to the Bank as
collateral security for repayment of the premiums paid with respect to the
Policies.
<PAGE>
CERTAIN BUSINESS RELATIONSHIPS
During fiscal 1996, the Bank paid to the law firm of Dyer, Lawrence &
Cooney, a firm in which Mr. Dyer, a director of the Bank, is a partner, the sum
of $72,992 for legal services rendered. During fiscal 1996, the Bank paid State
Farm Insurance the sum of $590 for insurance. Mr. Matorian, a director, is the
State Farm agent through whom the insurance was placed.
Some of the directors and officers of the Bank, as well as firms and
companies with which they are associated, are and have been customers of the
Bank and as such have had banking transactions with the Bank in 1996. Loan
transactions with these persons were made in the ordinary course of business on
substantially the same terms, including interest rate and collateral, prevailing
at the time for comparable transactions with others, and did not present more
than a normal risk of collectibility or other unfavorable features.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Bank's directors and
executive officers, and persons who own more than 10% of a registered class of
the Bank's equity securities, to file with the FDIC initial reports of ownership
and reports of changes in ownership of Bank Common Stock and other equity
securities of the Bank. Officers, directors and greater than 10% beneficial
owners are required by FDIC regulations to furnish the Bank with copies of all
Section 16(a) forms which they file with the FDIC.
To the Bank's knowledge, based solely on review of the copies of such
reports furnished to the Bank and written representations to the Bank, during
the fiscal year ended December 31, 1996 all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with.
<PAGE>
PROPOSAL (2): RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Kafoury, Armstrong & Co. as
independent public accountants for the fiscal year ending December 31, 1997.
Vote Required
The favorable vote of a majority of the shares of Bank Common Stock
represented at the meeting is required to ratify the appointment of Kafoury,
Armstrong & Co. It is expected that a representative of Kafoury, Armstrong & Co.
will be present at the meeting to respond to appropriate questions.
THE BOARD OF DIRECTORS OF THE BANK RECOMMENDS
THAT STOCKHOLDERS VOTE "FOR" PROPOSAL (2)
PROPOSAL (3): FORMATION OF HOLDING COMPANY
Bancorp and Comstock entered into the Plan of Reorganization as of
February 26, 1997, pursuant to which Bancorp will become a bank holding company
with Comstock as its wholly-owned subsidiary. A copy of the Plan of
Reorganization is set forth as Appendix A to this Proxy Statement--Prospectus
and is incorporated herein by reference. The discussion below is qualified in
its entirely by such reference. Bancorp is a newly formed Nevada business
corporation that was organized by Comstock for the purpose of effecting the
Reorganization and, therefore, has no operating history. If the Reorganization
is approved by the stockholders of Comstock, subject to the satisfaction of all
other conditions set forth in the Plan of Reorganization, including receipt of
all required regulatory approvals, on the Effective Date, all of the outstanding
shares of Bank Common Stock (other than shares held by stockholders exercising
dissenters' rights, if any) will be converted into and exchanged for, on a
two-for-one basis, shares of Bancorp Common Stock.
After the Effective Date, Comstock will continue its existing business
and operations as a wholly-owned subsidiary of Bancorp. The consolidated assets,
liabilities, stockholder's equity and income of Bancorp immediately following
the Effective Date will be the same as those of Comstock immediately prior to
the Effective Date. The Board of Directors of Bancorp is, and upon the Effective
Date will continue to be, comprised of the current members of the Board of
Directors of Comstock. The executive officers of Bancorp are, and upon the
Effective Date will continue to be, the current executive officers of Comstock.
See "Management of Bancorp." Comstock will continue to operate under the name
"Comstock Bank" and its deposit accounts will continue to be insured by the Bank
Insurance Fund ("BIF") of the FDIC. The corporate existence of Comstock will
continue unaffected and unimpaired by the Reorganization, except that all of the
outstanding shares of Bank Common Stock (other than shares held by stockholders
exercising dissenters' rights, if any) will be owned by Bancorp. Comstock's
stockholders prior to the Effective Date will, in turn, own all of the
outstanding shares of Bancorp Common Stock, having received that stock in
exchange for their shares of Bank Common Stock as part of the Reorganization.
<PAGE>
Vote Required
Approval of the Plan of Reorganization requires the approval of a
majority of the issued and outstanding shares of Bank Common Stock. The required
vote of stockholders on the Plan of Reorganization is based upon the number of
outstanding shares of Bank Common Stock, and not the number of those shares that
are actually voted. Accordingly, the failure to submit a proxy card or to vote
in person at the Annual Meeting or an abstention from voting will have the same
effect as a "NO" vote with respect to this proposal. Broker non-votes will not
be counted as having been voted in person or by proxy at the Annual Meeting and
will have the same effect as a "NO" vote with respect to this proposal.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED
REORGANIZATION AND UNANIMOUSLY RECOMMENDS A VOTE "FOR" ADOPTION OF THE PLAN OF
REORGANIZATION
AN ABSTENTION WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL.
PARTIES TO THE REORGANIZATION
Comstock Bank
The Bank was incorporated as a Nevada banking corporation under the
laws of the State of Nevada in May, 1979. During its first three years of
operation, the Bank experienced significant operating problems due to poor
management, substantial overhead and a poor economic climate, resulting in
severe financial problems. In early 1984, under a regulatory order, the Board of
Directors retained new management and procured additional capital. In 1988, the
Bank turned profitable and has remained so ever since.
The Bank conducts a general banking business, including the acceptance
of demand, savings and time deposits and the making of real estate, commercial,
consumer and other term loans. Deposit accounts are insured to the maximum legal
limit by the FDIC. The Bank offers a full range of deposit account products and
most traditional types of loans including residential real estate, commercial
real estate, commercial and residential construction loans, commercial and
accounts receivable lending, and consumer loans (including credit cards).
The Bank's main office, along with its administrative headquarters, is
located at Neil Road and So. Virginia St. in the southeast quadrant of Reno,
Nevada. There is a full service office at the Caughlin Ranch Shopping Center in
the southwest quadrant of Reno, and at the Galena Junction Shopping Center on
the Mount Rose Highway in Reno. A full service office also exists in Carson
City, Nevada. In addition, the Bank operates loan production offices in Las
Vegas, Nevada and in the Minden/Gardnerville area of Nevada. An additional full
service branch is under construction in the Spanish Springs Shopping Center on
the corner of Disc Drive and Sparks Blvd. in Sparks, Nevada which is expected to
open in the late summer of 1997.
<PAGE>
The Bank provides its range of services primarily to businesses and
individuals in the northern Nevada area and began lending in southern Nevada in
1993. While deposits are gathered primarily from Reno and Carson City, the
Bank's lending area extends throughout all of northern Nevada, including all of
Reno, Sparks, Carson City, Minden/Gardnerville, Dayton, Incline Village and
other communities at Lake Tahoe, and in the greater Las Vegas area. The Bank's
primary lending business has traditionally been real estate construction and
development loans, and first mortgages on existing single family homes. In 1996,
the Bank began to finance the acquisition and development of multifamily
dwellings. The Bank has also begun a secondary focus on more traditional
commercial lending to the area's small businesses.
Executive management of the Bank, in the persons of Mr. Barone, the
Bank's Chairman and Chief Executive Officer, and Mr. Platz, the Bank's
President, have been with the Bank since 1984 when the Bank's assets were less
than $10 million. At the end of 1996, the Bank's assets had grown to $145
million.
The Bank is publicly traded on The Nasdaq Small Cap Market under the
symbol "LODE." On April 7, 1997 shares of Bank Common Stock were issued and
outstanding. On March 10, 1997, warrants ("Warrants") to purchase 103,400 shares
of Bank Common Stock at $7.73 per share (the "Exercise Price") were outstanding
which expire September 30, 1999. On March 10, 1997 the Bank issued notices of
redemption to the holders of the Warrants pursuant to which the Bank will redeem
all Warrants outstanding on May 13, 1997 (the "Redemption Date") for $.10 per
share. The holders of the Warrants have until May 12, 1997 to exercise the
Warrants and purchase shares of Bank Common Stock or, in the alternative,
execute an Assignment of and First Amendment to Warrant Agreement pursuant to
which a warrantholder will, adjusted for the two-for-one share exchange ratio
set forth in the Plan of Reorganization, have the right to purchase shares of
Bancorp Common Stock on substantially the same terms and conditions set forth in
the Warrants except that the shares of Bancorp Common Stock would be restricted
stock and subject to restrictions on disposition imposed by Rule 144 under the
Securities Act. Because shares of Bank Common Stock are trading above the
Exercise Price, the Bank expects the holders of the Warrants to exercise the
Warrants prior to the Redemption Date and receive shares of Bancorp Common Stock
at the Effective Date if the stockholders of the Bank approve the
Reorganization.
Comstock Bancorp
Bancorp was organized on February 21, 1997 at the direction of the
Board of Directors of the Bank to become a bank holding company with Comstock as
its wholly-owned subsidiary. Bancorp, upon receiving the approval of the Nevada
Division to acquire the Bank and the approval of the FRB of Bancorp's
application to become a bank holding company, will be subject to regulation by
the Nevada Division and the FRB. See "Regulation and Supervision--Regulation of
the Holding Company." Upon consummation of the Reorganization, Bancorp will have
no significant assets other than the shares of Bank Common Stock acquired in the
Reorganization, and will have no significant liabilities. The management of
Bancorp is set forth under "Management of Bancorp." Initially, Bancorp will
neither own nor lease any property, but will, instead, use the premises,
equipment and furniture of the Bank. At the present time, Bancorp does not
intend to employ any persons other than certain executive officers, but will
<PAGE>
utilize the support staff of the Bank from time to time. Additional employees
will be hired as appropriate, to the extent Bancorp expands its business in the
future.
Bancorp's executive office is located at 6275 Neil Road, Reno, Nevada
89511 and its telephone number is (702) 824-7100.
DESCRIPTION OF THE REORGANIZATION
Reasons for the Reorganization
The Board of Directors believes that a holding company structure will
better position the Bank to compete in the markets that it serves by providing
Comstock with greater flexibility to conduct its banking business. The formation
of a holding company will permit management greater flexibility with respect to
the enhancement of stockholder value through, among other things, the ability to
acquire or organize other operating subsidiaries should such an opportunity
present itself, including other bank and non-bank financial institutions,
without merging such institutions with the Bank itself. In addition, Bancorp
will be better able to control its capital leverage, and thus stockholder value
through, among other things, the implementation of a stock repurchase program.
Under Section 661.125 of the NRS, the Bank cannot repurchase its own shares.
Effective Date
The Effective Date will be the date on which the Articles of Share
Exchange are filed with the Secretary of State of the State of Nevada, expected
to be shortly after approval by the stockholders of the Bank is obtained at the
Annual Meeting, provided all conditions precedent to the Plan of Reorganization
are satisfied.
Actions at the Effective Date
The Reorganization will be accomplished through the following steps:
1. Bancorp has been incorporated as a wholly-owned subsidiary of the
Bank. The primary purpose of Bancorp is to become the holding
company for the Bank.
2. At the Effective Date, Bancorp automatically will acquire all
shares of the Bank Common Stock issued and outstanding immediately
prior to the Effective Date.
3. At the Effective Date, the holders of the shares of Bank Common
Stock issued and outstanding immediately prior to the Effective
Date automatically will become owners of two shares of Bancorp
Common Stock for each share of Bank Common Stock held by them
immediately prior to the Effective Date.
<PAGE>
4. All shares of Bank Common Stock acquired by the Bank as a result
of the exercise of dissenters' rights will be canceled upon
receipt.
After consummation of the Reorganization, the Bank expects to make a
distribution to Bancorp to allow Bancorp to conduct such business activities as
described in "Reasons for the Reorganization." See "Dividend Policy." There can
be no assurances that the Bank will obtain regulatory approval for the
Reorganization or that, if the Reorganization is consummated, Bancorp will
conduct such activities.
Conditions to the Reorganization
The Plan of Reorganization provides that the obligations of Comstock
and Bancorp to consummate the Reorganization are subject to the satisfaction of
the following conditions: (i) the approval of the Plan of Reorganization by the
affirmative vote of the holders of a majority of the outstanding shares of Bank
Common Stock; (ii) the approval by the Nevada Division of the application of the
Bank and Bancorp for approval of the Plan of Reorganization; (iii) the approval
by the Board of Governors of the Federal Reserve System of Bancorp's application
to become a holding company under the BHCA; (iv) the receipt of a favorable
opinion of counsel as to certain federal income tax consequences of the
Reorganization; (v) the registration with the SEC of Bancorp Common Stock under
the Securities Act; (vi) compliance with all applicable state securities or
"blue sky" laws relating to the issuance and distribution of Bancorp Common
Stock; and (vii) the receipt of all other consents and approvals and the
satisfaction of all other requirements necessary to the consummation of the
Reorganization. There can be no assurances that these conditions will be
satisfied and that the Reorganization will be consummated.
Amendment and Termination
The Plan of Reorganization provides that it may be amended by the
parties thereto in whole or in part at any time.
The Plan of Reorganization further provides that it may be terminated
at any time prior to the Effective Date (whether before or after approval by the
stockholders of Comstock) if the Reorganization becomes inadvisable in the
opinion of the Board of Directors of Comstock or Bancorp due to (i) an action,
suit, proceeding or claim that has been made or threatened relating to the Plan
of Reorganization that would make the consummation of the transactions
contemplated by the Plan of Reorganization inadvisable, (ii) the payment of fair
value forshares of Bank Common Stock by Bancorp due to the exercise of
dissenters' rights by holders of Bank Common Stock causing, in the reasonable
judgment of the Bank and Bancorp, a material diminution in the surplus capital
of the Bank, or (iii) any other reason.
Exchange of Stock Certificates
In connection with the exchange of Bank Common Stock for Bancorp Common
Stock, it will not be necessary for stockholders of Comstock to exchange their
certificates for certificates representing shares of Bancorp Common Stock. On
<PAGE>
the Effective Date, non-dissenting stockholders of Comstock automatically will
become stockholders of Bancorp and each outstanding certificate representing
shares of Bank Common Stock will automatically represent, and will be deemed for
all purposes to evidence ownership of, the same number of shares of Bancorp
Common Stock. At the same time, Nevada Agency and Trust, the registrar and
transfer agent for Bank Common Stock and Bancorp Common Stock (the "Transfer
Agent"), will issue an additional certificate of Bancorp Common Stock to each
holder of Bank Common Stock of record on the Effective Date evidencing ownership
of an equal number of shares as those held of record.
After the Effective Date, as currently outstanding certificates of Bank
Common Stock are presented for transfer, or, upon the request of any holder of
Bank Common Stock, the Transfer Agent will, for its usual and customary fee,
issue new stock certificates representing the same number of shares of Bancorp
Common Stock as the number of shares of Bank Common Stock surrendered therefor.
Upon surrender, each certificate representing Bank Common Stock will be
canceled. After the Effective Date, there will be no further registration or
transfers of shares of Bank Common Stock on the records of Comstock.
Effect of the Reorganization on Employee Benefit Plans and Employment Agreements
On the Effective Date, Bancorp will adopt and assume sponsorship of the
Incentive Plan and the Directors' Plan (together, the "Plans"). All outstanding
options to purchase shares of Bank Common Stock granted pursuant to the Plans
prior to the Reorganization will become options to purchase shares of Bancorp
Common Stock with the same terms, conditions, and exercise price, as adjusted
for a two-for-one share exchange ratio set forth in the Plan of Reorganization.
In addition, Bancorp will adopt and assume sponsorship of the Comstock Payroll
Deduction Stock Purchase Plan.
The Reorganization will not trigger any change in control provisions
contained in any of the employment agreements with the Bank's officers. All
other employee benefit plans of Comstock will be unchanged by the
Reorganization. See "Management of Comstock--Compensation and Employee Benefit
Plans."
DESCRIPTION OF BANCORP CAPITAL STOCK
General
The Articles of Incorporation of Bancorp authorize the issuance of
capital stock consisting of 15,000,000 shares of common stock, par value $.01
per share. There are 100 shares of Bancorp Common Stock currently issued and
outstanding, all of which are owned by Comstock. Assuming all the outstanding
Warrants are exercised prior to the Redemption Date, on the Effective Date, the
existing 100 shares of Bancorp Common Stock will be cancelled, and there will
be, subject to the exercise of dissenters' rights, _________ issued and
outstanding shares of Bancorp Common Stock as a result of the exchange of two
shares of Bancorp Common Stock for each share of Bank Common Stock.
Additionally, 949,468 shares
<PAGE>
of Bancorp Common Stock will be reserved for issuance pursuant to the exercise
of stock options under the Plans. Because all of the issued and outstanding
shares of Bancorp Common Stock are owned by Comstock, there is currently no
established public trading market for Bancorp Common Stock.
In the future, the authorized but unissued and unreserved shares of
Bancorp Common Stock will be available for issuance for general corporate
purposes, including, but not limited to, possible issuance as stock dividends or
stock splits, future mergers or acquisitions, or future private placements or
public offerings. Except as otherwise may be required to approve a merger or
other transaction in which the additional authorized shares of Bancorp Common
Stock would be issued, no stockholder approval will be required for the issuance
of those shares. See "Certain Differences in Stockholder Rights" for a
discussion of the rights of the holders of Bancorp Common Stock as compared to
the holders of Bank Common Stock. In addition, Bancorp may be restricted in its
ability to register additional shares of capital stock after completion of the
Reorganization due to certain requirements of the SEC related to financial
statement disclosures and related disclosures. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Bancorp Common Stock
General. Each share of Bancorp Common Stock has the same relative
rights as, and is identical in all respects to, each other share of Bancorp
Common Stock. Until such time as other types of voting stock are approved by the
stockholders and issued, if ever, the holders of shares of Bancorp Common Stock
will possess all rights, including exclusive voting rights, pertaining to the
capital stock of Bancorp. The relative rights of shares of Bancorp Common Stock
do not differ materially from the relative rights of shares of Bank Common
Stock.
Dividend Rights. The holders of Bancorp Common Stock will be entitled
to the payment of dividends when, as, and if declared by Bancorp's Board of
Directors out of funds legally available therefor. The payment of dividends by
Bancorp will depend on Bancorp's net income, financial condition, regulatory
requirements and other factors, including the results of Comstock's operations.
See "Dividend Policy" for restrictions on the payment of dividends on Bancorp
Common Stock.
Voting Rights. Each share of Bancorp Common Stock will entitle the
holder thereof to one vote on all matters upon which stockholders have the right
to vote. At the present time, each member of the Board of Directors of Bancorp
is elected to a one year term. Stockholders of Bancorp will not be entitled to
cumulate their votes for the election of directors.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of Bancorp, the holders of shares of Bancorp Common Stock will be
entitled to receive, after payment of all debts and liabilities of Bancorp, all
remaining assets of Bancorp available for distribution in cash or in kind. In
<PAGE>
the event of any liquidation, dissolution or winding up of Comstock, Bancorp, as
the holder of all shares of Bank Common Stock, upon completion of the
Reorganization, would be entitled to receive payment of all debt and liabilities
of Comstock (including all deposits and accrued interest thereon) and all
remaining assets of Comstock available for distribution in cash or in kind.
Preemptive Rights; Redemption. Holders of shares of Bancorp Common
Stock will not be entitled to preemptive rights with respect to any shares that
may be issued. Without preemptive rights, a stockholder's ownership position in
Bancorp is subject to dilution if additional shares of capital stock are issued
by Bancorp. Shares of Bancorp Common Stock are not subject to call or
redemption.
Anti-Takeover Provisions
See "Certain Differences in Stockholder Rights--Anti-Takeover
Provisions" for a description of certain provisions that may have the effect of
delaying, deferring or preventing a change in control of Bancorp.
DESCRIPTION OF COMSTOCK CAPITAL STOCK
General
The Bank's Articles of Incorporation, as amended, authorize the
issuance of up to 6,000,000 shares of common stock, par value $.50 per share, of
Bank Common Stock.
Bank Common Stock
The holders of Bank Common Stock are entitled to one vote per share on
all matters requiring stockholder action and to participate equally with the
other holders of Bank Common Stock in any dividends, when, as and if declared by
the Board of Directors of the Bank from funds legally available therefor. See
"Dividend Policy." Each share of Bank Common Stock is entitled to equal rights
in the event of liquidation. Stockholders of Comstock do not have the right to
cumulate their votes for the election of directors.
The holders of Bank Common Stock have no preemptive or other rights to
subscribe for additional shares of any class of capital stock of the Bank.
Without preemptive rights, a stockholder's ownership position in the Bank is
subject to dilution if additional shares of capital stock are issued by the
Bank. Shares of Bank Common Stock are not subject to call or redemption.
CERTAIN DIFFERENCES IN STOCKHOLDER RIGHTS
General
The rights of holders of Bank Common Stock are governed by the Articles
of Incorporation and Bylaws of the Bank, sections of the NRS applicable to
Nevada-chartered banks and the regulations of the FDIC applicable to
state-chartered banks. The rights of holders of Bancorp Common Stock are or will
be governed by the Articles of Incorporation and Bylaws of Bancorp, sections of
the NRS applicable to bank holding companies, Nevada Division, the BHCA and the
FRB. The following discussion summarizes certain material differences in the
rights of holders of Bank Common Stock and Bancorp Common Stock and is not
intended to be a complete statement of all differences affecting the rights of
<PAGE>
stockholders. This discussion is qualified in its entirety by reference to
Bancorp's Articles of Incorporation and Bylaws, copies of which are attached
hereto as Appendix C and Appendix D, respectively. If the Reorganization is not
consummated, any action affecting the rights of stockholders of Comstock,
including any change in control, will continue to be subject to the relevant
provisions of Comstock's Articles of Incorporation and Bylaws, sections of the
NRS applicable to Bank and the Nevada Division.
Anti-Takeover Provisions
The following discussion is a summary of certain provisions of Nevada
and Federal banking law and regulations and Nevada corporate law, as well as the
Articles of Incorporation and Bylaws of the Bank and Bancorp, relating to stock
ownership and transfers, the Board of Directors and business combinations, all
of which may be deemed to have "anti-takeover" effects. The description of these
provisions is necessarily general and reference should be made to the actual law
and regulations and to the Articles of Incorporation and Bylaws of Bancorp.
Nevada and Federal Banking Law. The Federal Change in Bank Control Act
of 1978 prohibits a person or group of persons "acting in concert" from
acquiring "control" of a bank holding company unless the FRB has been given 60
days' prior written notice of such proposed acquisition and within that time
period the FRB has not issued a notice disapproving the proposed acquisition or
extending for up to another 30 days the period during which such a disapproval
may be issued. An acquisition may be made prior to the expiration of the
disapproval period if the FRB issues written notice of its intent not to
disapprove the action. Under a rebuttable presumption established by the FRB,
the acquisition of more than ten percent of a class of voting stock of a bank
with a class of securities registered under Section 12 of the Exchange Act (such
as Bancorp Common Stock), would, under the circumstances set forth in the
presumption, constitute the acquisition of control. In addition, any "company"
would be required to obtain the approval of the FRB under the BHCA, before
acquiring twenty-five percent (five percent in the case of an acquiror that is,
or is deemed to be, a bank holding company) or more of the outstanding Bancorp
Common Stock of, or such lesser number of shares as constitute control over,
Bancorp.
Under the NRS, the Commissioner of the Nevada Division (the "Nevada
Bank Commissioner") must approve in advance any transfer of (i) an amount equal
to or in excess of twenty percent of the voting control of a bank holding
company if acquired by a natural person, and (ii) an amount equal to five
percent of the voting control of a bank holding company if acquired by a
business entity. Additionally, no person may acquire, directly or indirectly, a
Nevada deposit taking institution or bank holding company without the prior
written consent of the Nevada Bank Commissioner. The Bank is required to report
any change in ownership of five percent or more of the Bank Common Stock to the
Nevada Bank Commissioner within twenty-four hours of discovering the change in
ownership. The Nevada Bank Commissioner must also approve of any acquisition of
twenty-five percent or more of the voting control of the Bank. Both the Bank and
Bancorp are subject to the Nevada restrictions on combinations with interested
stockholders and control share acquisition provisions.
<PAGE>
Bank Anti-Takeover Provisions. Stockholders of the Bank wishing to
submit a nomination or nominations for director of the Bank must submit a
written nomination to the President of the Bank not more than sixty days prior
to any meeting of stockholders of the Bank calledfor the election of directors
and no more than ten days after notice of such meeting is sent to stockholders
of the Bank. It may be easier for stockholders of Bancorp to nominate a director
to Bancorp's Board of Directors than that of the Bank, and therefore assert
influence over the operations of Bancorp, because Bancorp's Bylaws do not
contain a similar provision restricting director nominations.
Indemnification of Directors, Officers and Employees
Bancorp's Articles of Incorporation require Bancorp to indemnify its
officers, directors, employees and agents to the fullest extent permitted by the
NRS. Additionally, the Bylaws of Bancorp provide that Bancorp will pay the
expenses of its officers and directors incurred in defending a criminal or civil
action, suit or proceeding as they are incurred and in advance of the final
disposition of the action, suit or proceeding upon receipt of an undertaking by
the officer or director to repay the amount if it is ultimately determined that
the officer or director is not entitled to be indemnified by Bancorp. The Bank
is also permitted to indemnify its officers, directors and employees pursuant to
the NRS but is not required to do such. The Bylaws of the Bank provide that the
Bank may indemnify its agents against expenses, judgments, fines, settlements
and other amounts actually and reasonably incurred and may advance expenses
reasonably expected to be incurred by the agent upon receipt of an appropriate
undertaking to repay advanced amounts as required by the NRS.
Under the Federal Deposit Insurance Act, as amended ("FDIA"), both
Comstock and Bancorp are prohibited from indemnifying their directors, officers,
or employees from liability or legal expense incurred as a result of an action
or proceeding by a federal banking agency resulting in a civil money penalty or
certain other remedies against such person. Additionally, the SEC has taken the
position that indemnification of officers, directors and control persons of an
issuer of publicly held securities such as the Bank (or Bancorp if the
Reorganization is approved by the stockholders of the Bank) is against the
public policy expressed in the Securities Act and is therefore unenforceable.
Special Meetings of Stockholders
Bancorp's Bylaws permit holders of not less than ten percent of the
voting power of Bancorp to call a special meeting of stockholders while the
Bank's Bylaws require not less than one-third of the voting power of the Bank to
call a special meeting of stockholders. The smaller percentage of stockholders
of Bancorp required to call a special meeting of stockholders has the effect of
making it easier for stockholders of Bancorp to demand votes on issues requiring
stockholders approval, such as mergers involving Bancorp ora sale of
substantially all of the assets of Bancorp, more easily than stockholders of the
Bank who would be required to wait until the next annual meeting of stockholders
to vote on the same issues if the directors or President of the Bank do not call
a special meeting of stockholders.
<PAGE>
Payment of Dividends
The Bank is required to maintain a cash surplus fund of twenty percent
of its capital (the "Surplus Fund") and is not permitted to declare any
dividends if the Surplus Fund falls below such twenty percent minimum. Until the
Surplus Fund equals or exceeds the Bank's common capital, the Bank is not
permitted to declare or pay any dividends unless at least ten percent of the
profit from the prior fiscal year has been paid to the Surplus Fund.
Additionally, the Bank is prohibited from declaring a dividend in excess of its
undivided profits unless the Nevada Bank Commissioner and holders of at least
two-thirds of the issued and outstanding shares of Bank Common Stock approve the
dividend prior to its declaration. Bancorp is not subject to the Nevada banking
statutes which regulate the payment of dividends to its stockholders. However,
because substantially all of the funds available for Bancorp to declare
dividends will come from the Bank, future dividends will depend on the earnings
of the Bank, its financial condition, its need for funds (including the
maintenance of the SurplusFund) and applicable government policies and
regulations. Although Bancorp's ability to pay dividends will not be subject to
these restrictions, such restrictions will indirectly affect Bancorp because
dividends from Comstock will be a primary source of funds for Bancorp. See
"Dividend Policy."
Right to Repurchase Stock; Investments
The Bank is prohibited under the NRS from purchasing or making a loan
secured by Bank Common Stock unless the purchase or security is necessary to
prevent a loss to the Bank from a debt which was previously entered into in good
faith. Any shares of Bank Common Stock so acquired or used as collateral must be
disposed of by the Bank within twelve months of the date of acquisition.
Bancorp, on the other hand, will be permitted to purchase its own stock in the
open market subject to applicable law and the availability of funds. Under
certain circumstances, stock repurchases by Bancorp will require the prior
approval of the FRB of San Francisco. Bancorp currently has no plans to purchase
any shares of Bancorp Common Stock after the Reorganization. Additionally, there
can be no assurance that Bancorp will repurchase any shares of Bancorp Common
Stock in the future. See "Regulation and Supervision--Regulation of Holding
Company."
The Bank is prohibited under the NRS from investing in securities on
its own behalf other than (i) "public securities," which generally include
obligations of the United States, its agencies, obligations guaranteed by the
Federal government of the United States, stock in national mortgage
associations, government and municipal bonds and bonds, debentures, securities
and other instruments issued pursuant to certain Federal acts, and (ii) "private
securities," which generally include bonds, notes or debentures issued by
private companies which the Bank determines the issuer will be able to repay and
that the Bank will be able to sell at a fair value with reasonable promptness.
There are no similar restrictions on the purchase of investment securities by
Bancorp under the NRS.
<PAGE>
Issuance of Shares of Common Stock
The Articles of Incorporation of Bancorp authorize the issuance of
15,000,000 shares of Bancorp Common Stock, while the Bank is only authorized to
issue 6,000,000 shares of Bank Common Stock. Assuming all the outstanding
Warrants are exercised prior to the Redemption Date, shares of Bancorp Common
Stock will be approved but not issued or reserved for issuance pursuant to
options issued by the Bank under the Plans. The shares of Bancorp Common Stock
were authorized in an amount greater than required to be issued in the
Reorganization to provide Bancorp's Board of Directors with as much flexibility
as possible to effect, among other transactions, financings, acquisitions, stock
dividends, stock splits and the exercise of stock options. The issuance of
additional shares of Bancorp Common Stock would have the effect of diluting the
percentage ownership of current holders of Bank Common Stock. Bancorp's Board of
Directors has no present plans to issue additional shares of Bancorp Common
Stock, other than the issuance of shares in connection with the Reorganization
and upon the exercise of stock options assumed by Bancorp in connection with the
Reorganization or issued by Bancorp pursuant to the Plans after the Effective
Date.
Section 661.035 of the NRS requires the Bank to obtain the approval of
the Nevada Bank Commissioner and at least two-thirds of the issued and
outstanding shares of Bank Common Stock to amend its Articles of Incorporation
to increase the authorized number of shares of capital stock. The vote of a
majority of the issued and outstanding shares of Bancorp Common Stock is
required to similarly amend its Articles of Incorporation to increase the
authorized number of shares of capital stock.
Stock Options
The Bank is prohibited under the NRS from granting options to purchase
shares of Bank Common Stock to its officers and employees for less than (i) the
fair market value of shares of Bank Common Stock on the date of grant, or (ii)
eighty-five percent of the fair market value of shares of Bank Common Stock on
the date of grant if the option is granted pursuant to a stock purchase plan
adopted by the Bank's Board of Directors and approved by at least two-thirds of
the issued and outstanding shares of Bank Common Stock. The Incentive Plan and
the Directors' Plan were approved by greater than two-thirds of the outstanding
shares of Bank Common Stock. There are no similar restrictions for options
granted to purchase shares of Bancorp Common Stock.
Inspection of Records
The Bylaws of Bancorp contain no restrictions on the rights of
stockholders to review Bancorp's stock ledger in addition to those imposed by
the NRS, which permit inspection upon five days' prior written notice by any
person who has been a stockholder of record for six months or who has received
written authorization to inspect the stock ledger by the holders of at least
five percent of a corporation's outstanding shares of capital stock. The Bank's
stock ledger may only be reviewed by (i) stockholders representing fifteen
percent of the issued and outstanding shares of Bank Common Stock, and (ii) a
stockholder or stockholders holding at least one percent of the issued and
outstanding shares of Bank Common Stock who has or have filed a Form F-6 with
the FDIC.
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
The Bank has received an opinion of counsel substantially to the effect
that the material federal income tax consequences of the Reorganization to the
Bank and its stockholders will be as follows:
(a) no gain or loss will be recognized by Bancorp upon its receipt of
shares of Bank Common Stock in exchange for shares of Bancorp
Common Stock;
(b) no gain or loss will be recognized by a stockholder of the Bank
upon the exchange (by automatic conversion) of shares of Bank
Common Stock for Bancorp Common Stock;
(c) the aggregate adjusted tax basis of the Bancorp Common Stock
received (or deemed received) by a stockholder of the Bank
pursuant to the Reorganization will be the same as the aggregate
adjusted tax basis of the shares of Bank Common Stock exchanged
therefor; and
(d) the holding period of the Bancorp Common Stock received (or deemed
received) by a stockholder of the Bank as a result of the
Reorganization will include the holding period of the shares of
Bank Common Stock exchanged therefor, provided that such Bank
Common Stock is held as a capital asset by the Bank stockholder at
the consummation of the Reorganization.
The above described tax opinion is based upon certain representations
and assumptions referred to in such tax opinion and assumes that the
Reorganization will be completed in the manner described in this Proxy
Statement--Prospectus. Any change in the facts, representations or assumptions
could affect the anticipated federal income tax consequences of the
Reorganization. Moreover, it should be pointed out that an opinion of counsel is
not binding on the Internal Revenue Service or the courts. Neither the Bank nor
Bancorp intend to obtain a ruling from the Internal Revenue Service as to the
tax consequences of the Reorganization.
Any cash payment to a Bank stockholder who exercises his dissenters'
rights will be a taxable event to such stockholder.
THE FOREGOING DISCUSSION OF THE ANTICIPATED MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE REORGANIZATION TO THE COMPANY AND ITS STOCKHOLDERS IS BASED
ON THE LAW IN EFFECT AS OF THE DATE HEREOF, INCLUDING THE CODE, THE TREASURY
REGULATIONS PROMULGATED THEREUNDER, AND ADMINISTRATIVE AND JUDICIAL
INTERPRETATIONS THEREOF, ALL OF WHICH ARE SUBJECT TO CHANGE (POSSIBLY ON A
RETROACTIVE BASIS). NEITHER THIS DISCUSSION NOR THE TAX OPINION ADDRESSES ANY
ASPECT OF STATE, LOCAL OR FOREIGN TAXATION. NEITHER THIS DISCUSSION NOR THE TAX
OPINION ADDRESSES ALL ISSUES THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF BANK
<PAGE>
COMMON STOCK IN LIGHT OF SUCH HOLDER'S PERSONAL CIRCUMSTANCES, NOR DO THEY APPLY
TO HOLDERS SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS OR TO
HOLDERS OF WARRANTS. FURTHER, NEITHER THIS DISCUSSION NOR THE TAX OPINION MAY
APPLY TO A HOLDER OF BANK COMMON STOCK WHO ACQUIRED HIS BANK COMMON STOCK
PURSUANT TO THE EXERCISE OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS
COMPENSATION. ACCORDINGLY, EACH HOLDER OF BANK COMMON STOCK SHOULD CONSULT SUCH
HOLDER'S OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF
THE REORGANIZATION, INCLUDING THE EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS.
ACCOUNTING TREATMENT OF THE REORGANIZATION
The Reorganization is expected to be characterized as, and treated
similarly to, a "pooling of interests" (rather than a "purchase") for financial
reporting and related purposes, with the result that the accounts of Comstock
and Bancorp will be combined.
DISSENTERS' RIGHTS
Stockholders of the Bank who comply with the provisions of Chapter 92A
of the NRS have the right to receive payment for their Bank Common Stock instead
of receiving Bancorp Common Stock. The following summary of the provisions of
Chapter 92A is not intended to be a complete statement of such provisions and is
qualified in its entirety by reference to the full text of Chapter 92A, a copy
of which is attached to this Proxy Statement--Prospectus as Appendix B. Under
the terms of the Plan of Reorganization, either the Bank or Bancorp may
terminate the Plan of Reorganization if the payment for fair value of shares of
Bank Common Stock by Bancorp due to the exercise of dissenters' rights by
holders of Bank Common Stock would cause, in the reasonable judgment of the Bank
or Bancorp, a material diminution in the capital surplus of the Bank. See
"Description of the Reorganization--Amendment and Termination."
Stockholders of a Nevada corporation have the right, in certain
circumstances, to dissent from certain corporate actions, including the
consummation of a plan of share exchange such as the Plan of Reorganization, by
a Nevada corporation which requires the approval of such corporation's
stockholders. Stockholders who are entitled to dissent are also entitled to
obtain payment in the amount of the fair value of their shares.
Pursuant to Section 92A.410 of the NRS, the notice of the Annual
Meeting must state that the stockholders of the Bank are or may be entitled to
dissenters' rights under Section 92A.300 to 92A.500 of NRS and be accompanied by
a copy of those sections. Stockholders of the Bank who wish to assert
dissenters' rights must (i) deliver to the Bank, before the vote is taken at the
Annual Meeting, written notice of their intent to demand payment for their Bank
Common Stock if the Plan of Reorganization is effectuated, and (ii) not vote
their shares in favor of the Plan of Reorganization. Stockholders failing to
satisfy these requirements will not be entitled to dissenters' rights under
Chapter 92A of the NRS. Bancorp (the "Subject Corporation") must send a written
<PAGE>
dissenter's notice (the "Dissenter's Notice") within ten days of effectuation of
the Plan of Reorganization to all stockholders of the Bank who satisfied these
requirements. The Dissenter's Notice must include: (i) a statement of where the
demand for payment is to be sent and where and when certificates for Bank Common
Stock are to be deposited; (ii) a statement informing the holders of Bank Common
Stock not represented by certificates to what extent the transfer of such shares
will be restricted after the demand for payment is received; (iii) a form for
demanding payment that requires stockholders asserting dissenters' rights to
certify whether or not they acquired beneficial ownership of the shares before
the date when the terms of the Reorganization were announced to the news media
or the stockholders (the "Announcement Date"); (iv) a date by which the Subject
Corporation must receive the demand for payment, which may not be less than 30
or more than 60 days after the date the Dissenter's Notice was delivered; and
(v) a copy of Sections 92A.300 to 92A.500 of the NRS.
Stockholders of the Bank who wish to obtain payment for their shares of
Bank Common Stock must demand payment, certify whether they acquired beneficial
ownership of Bank Common Stock before the Announcement Date, and deposit the
certificates, if any, in accordance with the terms of the Dissenter's Notice.
Stockholders for whom dissenters' rights are asserted will retain all other
rights of a stockholder until those rights are cancelled or modified by the
Reorganization. The Subject Corporation may restrict the transfer of any shares
not represented by a certificate from the date the demand for payment is
received. Pursuant to Section 92A.440 of the NRS, stockholders of the Bank who
fail to demand payment or deposit their certificates where required by the dates
set forth in the Dissenters' Notice will not be entitled to payment for the
shares as provided under Chapter 92A of the NRS.
Pursuant to Section 92A.460 of the NRS, within 30 days of receipt of a
demand for payment, the Subject Corporation will pay each dissenter who became
beneficial owner of Bank Common Stock prior to the Announcement Date and
complied with Section 92A.440 of the NRS the amount that the Subject Corporation
estimates to be the fair value of the shares, plus accrued interest. The payment
must be accompanied by (i) copies of the Subject Corporation's balance sheet,
statement of income, and statement of changes in stockholder's equity, (ii) a
statement of the Subject Corporation's estimate of the fair value of the shares,
(iii) an explanation of how the interest was calculated, (iv) a statement of the
dissenter's rights to demand payment under Section 92A.480 of the NRS, and (v) a
copy of Sections 92A.300 to 92A.500 of the NRS.
Pursuant to Section 92A.470 of the NRS, the Subject Corporation may
elect to withhold payment from dissenters who became the beneficial owners of
shares of Bank Common Stock on or after the Announcement Date. After
consummation of the Reorganization, however, the Subject Corporation is required
to estimate the fair value of such shares, plus accrued interest, and offer to
pay this amount to each dissenter in full satisfaction of demand. The Subject
Corporation will send this offer with a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated and a
statement of the dissenter's rights to demand payment under Section 92A.480 of
the NRS.
<PAGE>
Pursuant to Section 92A.480 of the NRS, dissenters who believe that the
amount paid pursuant to Section 92A.460 of the NRS or offered pursuant to
Section 92A.470 of the NRS is less than the full value of their shares of Bank
Common Stock or that the interest due is incorrectly calculated, may, within 30
days after the Subject Corporation made or offered payment for the shares,
either (i) notify the Subject Corporation in writing of their own estimate of
the fair value of their shares and the amount of interest due and demand payment
of this estimate less any payments made under Section 92A.460 of the NRS, or
(ii) reject the offer for payment made by the Subject Corporation under Section
92A.470 of the NRS and demand payment of the fair value of their shares and
interest due.
If a demand for payment remains unsettled, the Subject Corporation must
commence a court proceeding within 60 days after receiving a demand and petition
the court to determine the fair value of the shares of Bank Common Stock and
accrued interest. All dissenters whose demands remain unsettled would be made a
party to such proceeding. Dissenters are entitled to a judgment for the fair
value of their shares, plus accrued interest, less any amount paid pursuant to
Section 92A.460 of the NRS. The court would assess the costs of the proceedings
against the Subject Corporation unless the court finds that all or some of the
dissenters acted arbitrarily, vexatiously or not in good faith in demanding
payment, in which case the court may assess the costs in the amount the court
finds equitable against some or all of the dissenters. The court may also assess
the fees and expenses of the counsel and experts for the respective parties, in
the amount the court finds equitable, against the Subject Corporation or the
dissenters. If the Subject Corporation does not commence a proceeding within the
60-day period, it must pay each dissenter whose demand remains unsettled the
amount demanded.
MARKET FOR THE COMMON STOCK
Shares of Bank Common Stock are quoted on The Nasdaq Small Cap Market
under the symbol "LODE." There currently is no established market for Bancorp
Common Stock. Bancorp has applied for the listing of Bancorp Common Stock on The
Nasdaq Small Cap Market in connection with the Reorganization. It is expected
that Bancorp Common Stock will be at least as liquid as Bank Common Stock after
the Reorganization since the number of outstanding shares of Bancorp Common
Stock, following the Reorganization, will be double the number of shares of Bank
Common Stock prior to the Reorganization due to the two-for-one share exchange
ratio set forth in the Plan of Reorganization. However, there can be no
assurance that an active and liquid trading market for Bancorp Common Stock will
be maintained.
At March 20, 1997, there were 2,124,934 shares of Bank Common Stock
outstanding which were held of record by approximately 468 stockholders, not
including persons or entities who hold the stock in nominee or "street" name
through various brokerage firms. The following table shows the high and low per
share sales prices of Bank Common Stock as reported on The Nasdaq Small Cap
Market since the inception of trading on that market.
<PAGE>
High Low
------------------ ------------------
1993 Bid Asked Bid Asked
- -------------- ----- ----- ----- -----
First Quarter $7.00 $7.25 $5.00 $5.75
Second Quarter $7.00 $7.75 $7.00 $7.25
Third Quarter $7.25 $7.50 $6.75 $7.25
Fourth Quarter $8.25 $8.75 $7.25 $7.50
High Low
------------------- ------------------
1994 Bid Asked Bid Asked
- -------------- ----- ----- ----- -----
First Quarter $8.50 $9.00 $7.75 $8.50
Second Quarter $7.75 $8.50 $6.50 $7.25
Third Quarter $6.75 $7.50 $6.50 $7.25
Fourth Quarter $7.00 $7.75 $6.25 $7.00
High Low
------------------- ------------------
1995 Bid Asked Bid Asked
- -------------- ----- ----- ----- -----
First Quarter $6.00 $6.625 $6.00 $6.625
Second Quarter $6.50 $7.25 $6.50 $7.25
Third Quarter $6.50 $7.25 $5.75 $6.25
Fourth Quarter $7.00 $7.50 $6.50 $7.50
High Low
------------------- ------------------
1996 Bid Asked Bid Asked
- -------------- ----- ----- ----- -----
First Quarter $9.375 $10.25 $7.00 $7.50
Second Quarter $9.375 $10.25 $8.375 $9.50
Third Quarter $9.00 $9.75 $8.00 $8.50
Fourth Quarter $10.50 $11.375 $8.25 $9.125
High Low
------------------- ------------------
1997 Bid Asked Bid Asked
- -------------- ----- ----- ----- -----
First Quarter
On April __, 1997, the last reported sale price of Bank Common Stock was
$__________ per share. The current market makers for Bank Common Stock are:
Herzog, Heine, Geduld, Inc.; McDonald & Co.; Torrey Pines Securities; and Hoefer
& Arnett.
The Plan of Reorganization provides that each outstanding share of Bank
Common Stock (other than shares held by stockholders exercising dissenters'
rights, if any) will be exchanged for two shares of Bancorp Common Stock.
Although the impact on the market price for shares of Bancorp Common Stock
cannot be predicted with certainty, it is likely that the two-for-one share
<PAGE>
exchange ratio will initially result in the market price of each share of
Bancorp Common Stock being approximately one-half of the currently prevailing
price per share of Bank Common Stock, and that the aggregate market price for
all shares of Bancorp Common Stock held by an individual stockholder will remain
approximately the same.
Management of the Bank believes that this two-for-one exchange ratio
will result in a decrease in the market price of Bancorp Common Stock to a level
at which it will be more readily tradeable and accessible to a broader base of
investors. A lower per share price will enable investors to purchase "round
lots" of Bancorp Common Stock for a lower total price than currently exists for
Bank Common Stock. Additionally, the two-for-one share exchange ratio may result
in a relative decrease in the gap between the bid and asked price for shares of
Bancorp Common Stock which would result in lower broker's commissions paid by
stockholders of Bancorp when buying or selling shares of Bancorp Common Stock.
Stockholders should be aware, however, that any applicable transfer taxes on
sales and transfers of shares would be higher after the Reorganization on the
same relative interest in the Bank because the interest in the Bank would be
represented by a greater number of shares.
Proportionate voting rights and other rights of stockholders would not
be altered by the two-for-one share exchange ratio. In addition, the number of
shares of Bancorp Common Stock subject to outstanding options granted pursuant
to the Plans, and the number of shares of Bancorp Common Stock reserved for
issuance under the Plans, would be doubled, and the exercise price of
outstanding options would be decreased by one-half.
DIVIDEND POLICY
The Board of Directors of Bancorp will have the authority to declare
dividends on Bancorp Common Stock, subject to statutory and regulatory
requirements. The Board of Directors plans to continue Comstock's current
dividend policy for the Bancorp Common Stock. Currently, the Board of Directors
of Comstock has adopted a policy that, due to the rapid growth experienced by
the Bank, the need for capital to support the growth, the relatively high level
of returns generated on the capital, and the dilution of such returns by federal
and state taxes on any dividends declared, cash dividends are unlikely to be
declared. In general, future declarations of dividends by the Board of Directors
will depend upon a number of factors, including investment opportunities
available to Bancorp or Comstock, capital requirements, regulatory limitations,
Bancorp's and Comstock's results of operations, financial and tax considerations
and general economic conditions. After consummation of the Reorganization,
management of Comstock expects to make distributions to Bancorp of cash and/or
fixed assets and investments.
Unlike Comstock, Bancorp is not subject to the banking statutes which
regulate the payment of dividends to its stockholders. However, because
substantially all of the funds available for Bancorp to declare dividends will
come from the Bank, future dividends will depend on the earnings of the Bank,
its financial condition, its need for funds (including the maintenance of the
Surplus Fund) and applicable governmental policies and regulations. Bancorp is
subject to the requirements of Nevada Corporation Law which generally limit
dividends to an amount equal to the excess of the net assets of Bancorp (the
<PAGE>
amount by which total assets exceed total liabilities) over its statutory
capital, or, if there is no such excess, to its net profits for the current
and/or immediately preceding fiscal year.
PRO FORMA CONSOLIDATED CAPITALIZATION
The following table presents the capitalization of Comstock as of
December 31, 1996 and the pro forma consolidated capitalization of Bancorp and
its subsidiary, Comstock, as of December 31, 1996, as adjusted to give effect to
the Reorganization as described in this Proxy Statement--Prospectus.
STOCKHOLDERS' PRO FORMA EQUITY
Comstock Bancorp and Comstock
-------- --------------------
Shares Amount Shares Amount
------ ------ ------ ------
(in thousands of dollars except shares)
Common stock, par value $.01
per share for Bancorp; par
value $.50 per share for
Comstock
Authorized 6,000,000 15,000,000
Issued and Outstanding 4,235,268 $1,059 4,249,868 $42
Paid in Surplus 7,167 8,184
Unrealized loss on
securities available (23) (23)
for sale, net of tax
Retained Earnings 4,805 4,783
----- -----
Total Stockholders' Equity $13,009 $12,986
======= =======
BUSINESS OF BANCORP
General
Bancorp is a business corporation organized under the laws of the State
of Nevada on February 21, 1997. The only office of Bancorp, and its principal
place of business, is located at the administrative offices of Comstock at 6275
Neil Road, Reno, Nevada 89511. Bancorp's telephone number is (702) 824-7100.
Bancorp was organized for the purpose of becoming the holding company
of Comstock. On the Effective Date, Comstock will become a wholly-owned
subsidiary of Bancorp, which thereby will become a bank holding company, and
each stockholder of Comstock, subject to the exercise of dissenters' rights, if
any, will become a stockholder of Bancorp without any change in each
<PAGE>
stockholder's relative ownership percentage, provided, however, that on the
Effective Date each holder of Bank Common Stock will receive two shares of
Bancorp Common Stock for each share of Bank Common Stock now owned.
Bancorp has not yet undertaken any operating business activities and
does not currently propose to do so other than those contemplated by the
Reorganization. In the future, Bancorp may become an operating company and/or
acquire other financial institutions, mortgage companies, or engage in or
acquire such other activities or businesses as may be permitted by applicable
law, although there are no active plans to do so.
After consummation of the Reorganization, management of Comstock
expects to make distributions to Bancorp of cash and/or fixed assets and
investments. See "Proposal (3): Formation of Holding Company; Description of the
Reorganization--Reasons for the Reorganization." There can be no assurances that
Comstock will obtain regulatory approval for the Reorganization or that, if the
Reorganization is consummated, Bancorp will conduct such activities.
Property
Initially, Bancorp will neither own nor lease any real or personal
property but will utilize the premises and property of Comstock without the
payment of any rental fees to Comstock.
Competition
It is expected that, for the near future, the primary business of
Bancorp will be the ongoing business of Comstock. Therefore, the competitive
conditions to be faced by Bancorp will be the same as those faced by Comstock.
In addition, many banks and financial institutions have formed, or are in the
process of forming, holding companies. It is likely that these holding companies
will attempt to acquire banks, thrift institutions or companies engaged in
bank-related activities. Thus, Bancorp will face competition in undertaking any
such acquisitions and in operating subsequent to any such acquisitions. Bancorp
has no present active plans or intentions to undertake any such acquisitions.
See "Business of the Bank--Competition and Market Area."
Employees
At the present time, Bancorp does not intend to have any employees
other than its management. See "Management of Bancorp." If the stockholders of
the Bank approve the Reorganization, the Bank will assign, and Bancorp will
assume, the employment agreement between (i) the Bank and Robert Barone, and
(ii) the Bank and Larry Platz. See "Executive Compensation-Employment
Agreements." Additionally, Bancorp will utilize the support staff of Comstock
from time to time without the payment of any fees. If Bancorp acquires other
financial institutions or pursues other lines of business, it may, at such time,
hire additional employees.
<PAGE>
BUSINESS OF THE BANK
General
The Bank conducts a general banking business, including the acceptance
of demand, savings, and time deposits and the making of commercial, real estate,
installment and other term loans. The Bank's deposit accounts are insured up to
the maximum legal limits by the FDIC. The Bank is not a member of the Federal
Reserve System, having determined that the advantages of membership, which are
largely available without membership, are outweighed by the costs and
restrictions. The Bank offers checking and savings accounts, certificates of
deposit, money market and NOW accounts and commercial real estate, residential
real estate, residential construction, commercial loans, and installment loans.
The Bank operates ATM machines at each deposit taking branch, night depository
services, and bank-by-mail. In September, 1991, the Bank began to issue its own
Visa cards through a program sponsored by the Independent Bankers' Association
of America ("IBAA"). The Bank opened a fourth full service branch (including ATM
and night depository) in February, 1997. A fifth full service branch is under
construction and is anticipated to open in the late summer of 1997.
The Bank provides its range of services primarily to businesses and
individuals in the northern Nevada area and began lending in southern Nevada in
August, 1993. Deposits are gathered primarily from the Reno and Carson City
areas. However, the Bank's lending area extends throughout all parts of northern
Nevada including Reno, Sparks, Carson City, Minden/Gardnerville, Dayton, Incline
Village and other communities at Lake Tahoe. In 1996, the Bank, whose assets
averaged $134 million for the year, originated $308 million of loans, of which
$139 million (45%) were sold in the secondary market.
As a result of unusually dry weather conditions during the late 1980s
and early 1990s and continued population growth, northern Nevada experienced a
severe drought. Since the winter of 1994-95, however, the area has experienced
above normal precipitation culminating in what experts believe to have been at
least a 100 year flood in the first few days of 1997. Should drought conditions
return, governmental authorities may take actions intended to alleviate the
drought including, without limitation, restrictions on the issuance of building
permits. Because the majority of the Bank's lending is to the real estate
industry, such governmental actions, if taken, could have a material adverse
effect on the financial condition and earnings of the Bank. Because of recent
precipitation levels and the "Flood of 97," management does not expect
governmental authorities to take actions which would impact the Bank's business
in 1997, but it does expect that, as a result of the "Flood of 97," real estate
lending will be slower in 1997's first quarter which may have an adverse impact
on earnings.
Competition and Market Area
The Bank's deposit service area, Carson City, Reno and Sparks (Washoe
County) contains approximately 87 deposit taking offices of other banks and
savings institutions. In addition, there are approximately 116 mortgage lenders
in the Bank's primary lending area Washoe County, 36 in Carson City, and 54 in
<PAGE>
Douglas County which contains the Bank's Minden/Gardnerville mortgage lending
office. The financial institution business in the Bank's primary service areas
is highly competitive with respect to both loans and deposits. In the last
quarter of 1995, Norwest Bank purchased two local institutions, American Federal
Savings Bank and Primerit Savings Bank. Norwest had already been a competitor in
the local area with real estate lending offices. In early 1996, Wells Fargo
became the successful bidder for First Interstate Bank (now the state's second
largest bank). The future lending activities of these new institutions is not
certain. Recent activity indicates an increased focus in commercial and SBA
lending.
Management believes that competition has increased significantly as a
result of bank merger activity in Nevada since 1991. The resulting larger banks
have services which the Bank does not offer, including international banking and
trust services and cash and vault services. In addition, the large banks have
significantly higher dollar capitalizations and, thus, significantly higher
lending limits than the Bank. Generally, larger financial institutions are able
to operate with lower non-interest expenses as a percentage of earning assets
than the Bank, enabling them to operate profitably at lower net interest
margins. Finally, the larger institutions are often able to portfolio loans and
may offer "below market" rates to attract volume as well as offering low or no
fee loan options. As 1996 progressed, management noted that its lending net
interest margins were shrinking.
In operating its business, the Bank relies upon personal contacts by
its lending officers, directors, and its employees to establish and maintain
relationships with Bank customers. The Bank also uses various advertising media
to promote its lending business since, for the most part, the Bank's lending
customers are different from its deposit customers.
The Bank's lending customers are generally individual homeowners,
building contractors and developers, while the Bank's deposit customers are
generally local businesses and individual consumers.
In the past, the principal competition for deposits and loans were
banks, savings and loan associations and credit unions. To a lesser extent,
thrift and loan companies, mortgage brokerage companies and insurance companies
also have provided competition. In the 1980s, both federal and state legislation
increased competition by expanding the authority of savings and loan
associations to make consumer and commercial loans. Of more concern is the fact
that other institutions have been permitted to offer products and services that
traditionally had been offered by banks. Institutions such as credit unions,
brokerage houses, mutual funds, and insurance companies now offer checking
accounts, money market funds and various consumer loans. Other entities, both
public and private, seeking to raise capital through the issuance and sale of
debt or equity securities are also competitors with banks in the acquisition of
deposits. For the past several years, but especially in 1995 and 1996 with
significant increases in stock prices in the U.S., consumers have increasingly
put their savings into mutual funds rather than in more traditional interest
bearing bank deposits.
It is management's opinion that future competition for deposits will
come primarily from credit unions, brokerage houses, mutual funds, and insurance
companies and to a lesser extent from its traditional competitors, large banks
<PAGE>
and savings and loan associations. In addition, the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994, which permits interstate branch
banking, may disrupt the deposit market and/or significantly increase deposit
costs.
Significant technological developments continue in the realm of
electronic banking (bank from home or office). The increasing trend toward
electronic customer services has required banks to change the way both deposit
and consumer lending products are offered and serviced. An increased investment
in data processing assets and personnel will result in changes in delivery
costs. The Bank has a very large capital budget for 1997 which may reduce the
Bank's realized returns on assets and equity during the implementation and
start-up phases in 1997 and 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Capital Expenditures."
Lending Activities
General. The Bank's primary lending business is real estate
construction and development loans, and first mortgages on existing single
family homes. The majority (approximately 67%) of the Bank's lending is to the
real estate industry (both individual homeowners and developers), primarily in
northern Nevada. In August, 1993, a new lending office was opened in Las Vegas,
in southern Nevada. Because the majority of the Bank's lending is to the real
estate industry, a decline in the real estate market could have a material
adverse effect on the financial condition and earnings of the Bank.
In addition to loans on existing dwellings, the Bank also makes
construction loans. These loans remain on the Bank's books until either paid off
at maturity, or until occupancy occurs and a permanent loan is placed on the
dwelling. At that point, such loans are sold in the secondary market. Most
construction loans are made for pre-sold or custom homes. While there are some
speculative loans to builders/developers, the Bank closely monitors its
portfolio volumes and economic conditions in the lending areas. Construction
lending involves additional risk due to reliance upon projected rather than
historical data during the loan underwriting process, as well as the inherent
risk that repayment of the loan is often dependent upon the full and
satisfactory completion of the project. Corresponding to the greater lending
risk is a generally higher interest rate, with a shorter maturity, compared to
residential mortgage lending.
Commercial Loans. Commercial loans are made for shorter terms, and
often at higher interest rates but with less fee income, than are conventional
real estate loans, but at lower rates than many consumer loans. However, because
of the larger average size of commercial loans, the non-interest cost of
originating and servicing such loans per dollar of loan balance is often lower
than for consumer loans. Management believes that the shorter maturities of
commercial loans provide greater liquidity and protection to the Bank against
increases in market interest rates. However, in many cases, the Bank and/or the
borrower anticipate that the loan will be renewed at maturity if the borrower's
condition has not deteriorated and a suitable principal reduction is made.
Often, such loans have variable rates which are tied to an appropriate rate
index.
<PAGE>
The Bank's commercial loans are generally secured, usually by real
property. Infrequently, the Bank will collateralize the loan with equipment,
inventory or marketable securities. Most of the Bank's commercial loans are
amortizing with monthly payments. The notes on the loans usually are for a term
of one to five years. Often, the amortization schedule is for a term longer than
the note, thus giving rise to a balloon payment when the note matures.
Real Estate Loans. The Bank's portfolio real estate loans consist
primarily of loans for construction and land development. The Bank has
established relationships with a number of Nevada developers and builders,
primarily developers of residential properties. Real estate development loans
are made for a much shorter term, and often at higher interest rates, than other
longer-term (i.e., "permanent") real estate loans. The cost of administering
such loans is often higher than for other real estate loans, as principal is
drawn on periodically as development progresses. The Bank's builders' control
unit provides inspection, voucher, check writing, and accounting services both
to the Bank and to the contractor/builder/developer. In the table below, these
loans are identified as "Construction and Development" loans. The reduction in
the loan balance in 1996 over 1995 is a result of several factors including (i)
increased market competition in both northern and southern Nevada, (ii) changes
in programs as a result of compliance issues, and (iii) more conservative
underwriting standards.
The Bank also makes real estate loans secured by first deeds of trust
on single family residential properties. Most of the loans the Bank originates
on such properties (approximately 82% in 1996) are sold in the secondary market,
all on a non-recourse basis. The Bank may or may not retain the servicing rights
on the loans it sells. As a general rule, the Bank has a "take out source," a
secondary market purchaser, for all of the residential loans that it originates.
In the table below, the category entitled "Loans Held for Sale" consists of
loans that the Bank has funded which are in various stages of document shipping
and approval awaiting monies from the final secondary market purchasers.
In the table, the "Other Mortgages" line consists of conventional real
estate (1-4 family) and multi-family home loans held for one year or longer. The
increase in 1996 is largely due to an increase in multi-family lending generated
by both the addition of a lending officer specializing in this area and by the
increased demand for multi-family housing in the northern Nevada area.
Consumer Loans. The Bank has never had a large portfolio of consumer
loans. In 1994 the Bank increased lending in this category. In 1991, through its
trade group, the IBAA, the Bank began issuing its own Visa cards. In 1993, the
Bank canceled its agency relationship with Marine Midland Bank which issued
MasterCard with the Bank's name on the card but kept the lion's share of income
and took the credit risk. At December 31, 1996, the Bank had $212,000
outstanding in its own credit card program. Consumer loans (with terms generally
ranging from 12 to 60 months) make up the remaining portion of "Installment"
loans.
The following table shows the composition of the Bank's loan portfolio
as of December 31, 1996, 1995, and 1994:
LOAN PORTFOLIO MIX
As of December 31,
----------------------------------------------
1996 1995 1994
------ ------ ------
(In thousands of dollars)
Commercial and Industrial $69,334 $54,970 $37,517
Real Estate:
Construction and Development 13,390 18,925 18,712
Loans Held for Sale 7,806 9,088 3,346
Other Mortgages 3,934 1,912 8,731
Consumer 2,060 1,848 1,693
------ ------ ------
Gross Loans(1) 96,524 86,743 69,999
Allowance for credit losses (857) (665) (428)
------ ------ ------
Net Loans $95,667 $86,078 $69,571
====== ====== ======
(1) Excludes deferred fees of $306,000, $261,000 and $200,000 in 1996,
1995, and 1994, respectively.
Consistent with the Bank's philosophy, there are no foreign loans or
energy related loans.
The following table shows the amounts of certain loans outstanding as
of December 31, 1996 which, based on remaining scheduled repayments of
principal, are due in the periods indicated. Demand and other loans having no
stated maturity and no stated schedule of repayments are reported as due in one
year or less.
LOAN PORTFOLIO MATURITY
Commercial Real
and Industrial Estate Consumer Total(1)
-------------- ------ -------- --------
(In thousands of dollars)
In 1 year or less $50,826 $14,850 $944 $66,620
Over 1 year -- 5 years $5,374 $ 662 $203 $6,239
Over 5 years $9,245 $13,812(2) $913 $23,970
(1) Totals include deferred fees of $306,000.
(2) $9 million are construction loans that will roll to permanent
loans when construction is completed and will be sold in the
secondary market.
<PAGE>
At December 31, 1996, of the approximately $30,209,000 of loans due
after one year, approximately $16,171,000 had fixed interest rates and
approximately $14,038,000 had floating or adjustable interest rates.
Commitments and Lines of Credit. In the normal course of business, the
Bank makes commitments (including lines of credit and letters of credit) to
extend credit to be called upon at the option of the borrower. As of December
31, 1996, the Bank had $55,612,000 of such commitments outstanding. In addition,
as of December 31, 1996, the Bank had issued commitments of approximately
$9,142,000 to individuals to purchase single family residential properties which
the Bank, in turn, had committed to sell in the secondary market. The Bank
expects that substantially all of such commitments will be drawn upon in the
ordinary course of business. Many of the commitments are the unfunded portion of
construction loans. The evaluation of a commitment that is not a construction
loan is made on an individual basis similar to that required for a loan. It is
standard practice to require the potential borrower to pay a fee and/or maintain
a depository or borrowing relationship regardless of whether or not the
commitment is used by the borrower.
Non-Performing and Non-Accrual Loans. The Bank generally determines a
loan to be "non-performing" when interest or principal is past due 90 days or
more. If it appears doubtful that the loan will be repaid, management may
consider the loan to be "non-performing" before the lapse of 90 days. If,
however, a workable program for the return of the loan to a current condition
has been established with the borrower, this period may exceed 90 days.
Classification of a loan as "non-performing" does not necessarily indicate a
future charge-off, although the Bank generally charges off all past due
unsecured loans after 90 days.
It is current Bank policy to cease accruing interest on loans which are
past due as to principal or interest 90 days or more, except for loans which are
well secured and in the process of collection. When a loan is placed on
"non-accrual," previously accrued and unpaid interest is generally reversed out
of income unless adequate collateral from which to collect the principal and
interest on the loan appears to be available.
The following table presents information with respect to loans which,
as of the dates indicated, were "non-performing" and were on "non-accrual"
status:
NON-PERFORMING AND
NON-ACCRUING LOANS
As of December 31,
---------------------------
1996 1995 1994
(In thousands of dollars)
Past Due:
- ---------
Still Accruing:
90 days or more $420 $0 $600
Not Accruing: $3,184 $142 $170
<PAGE>
As of December 31, 1996 the non-accrual loans consisted of two
construction and development projects, a commercial loan and a second mortgage.
The commercial loan had a previous balance of $170,000 but was reduced by
$28,000 as a result of an arbitration hearing. See "Legal Proceedings." The
second mortgage for $30,000 was charged-off in January, 1997, after the
principle filed bankruptcy. The two construction and development projects
include one project in northern Nevada, with an outstanding balance of
$2,009,000, for which the principles filed bankruptcy (chapter 11) subsequent to
the Bank filing notice of default, and a second project in southern Nevada, with
an outstanding balance of $1,003,000, for which the principals are attempting to
sell three condo units and eleven lots to work out payment with the Bank. The
Bank believes its collateral position to be secure.
<PAGE>
Summary of Loan Loss Experience. The following chart is an analysis of
the Bank's loan loss experience for the years ended December 31, 1996, 1995, and
1994:
LOAN LOSS EXPERIENCE
Years ended December 31,
----------------------------------------
1996 1995 1994
----------------------------------------
(In thousands of dollars except ratios)
Average Loans Outstanding $88,646 $79,621 $52,522
======= ======= =======
Allowance, beginning of period 665 428 404
Charge-Offs:
Commercial and Industrial 50 28 81
Real Estate--Construction and
Development -- -- --
Real Estate--Mortgages Held For Sale -- -- --
Real Estate--Other Mortgages -- -- --
Installment 11 7 6
Cash Reserve -- -- --
------- ------- -------
Total Charge-Offs $61 $35 $88
======= ======= =======
Recoveries:
Commercial and Industrial 2 2 7
Real Estate--Construction and
Development -- -- --
Real Estate--Mortgages Held For Sale -- -- --
Real Estate--Other Mortgages -- -- --
Installment 1 -- 2
Cash Reserve -- -- --
------- ------- -------
Total Recoveries $3 $2 $8
======= ======= =======
Net Charge-Offs 59 33 80
Additions to Allowance 250 270 105
Allowance, end of period $857 $665 $428
======= ======= =======
Ratio of net charge-offs
to average loans outstanding 0.07% 0.04% 0.15%
Ratio of Allowance to total
loans at end of period 0.89% 0.76% 0.61%
Management and the Loan Committee of the Board of Directors use both a
numeric rule and judgment in formulating the allowance. In 1994 additions to the
allowance were $104,000. In 1995 and 1996 additions to the allowance were
$270,000 and $250,000, respectively.
<PAGE>
The following table sets forth a breakdown of the allowance for loan losses
for the year ended December 31, 1996:
ALLOWANCE FOR LOAN LOSSES
Anticipated
Amount of Charge- Charge-Offs
offs for the Percent of loans for the year
year ended in each category ended December
December 31, 1996 to total loans 31, 1997
- --------------------------------------------------------------------------------
(In thousands of dollars except percentages)
Commercial and Industrial $50 67.59% 50
Real Estate -- Construction
and Development 0 13.89% 30
Real Estate -- Mortgages
Held for Sale 0 7.57% 0
Real Estate -- Other
Mortgages 0 8.82% 0
Installment 11 2.13% 10
--- ------- -----
Total $61 100.00% $90
=== ======= ===
As of January 1, 1996, the Bank adopted Statement of Accounting Standards
("SFAS") No. 114, "Accounting By Creditor For Impairment Of A Loan." This change
in accounting practice will require the Bank to mark "impaired" loans to the
lower of book value, or (i) the discounted value of the estimated cash flow,
(ii) the value of the collateral, or (iii) an observable market price. A loan is
considered by the Bank to be "impaired" if (i) it has been placed in a
non-accrual status, (ii) it is unlikely that the Bank will collect all amounts
due under the loan contract, and (iii) it remains in impaired status if it is
currently performing but is not showing a consistent payment practice. At
December 31, 1996 impaired loans had a carrying value of $3,184,000 with an
allowance for losses of $75,084.
Investment Activities
The Bank uses the investment portfolio as a secondary source of liquidity
and for income. The Bank's liquidity ratio, defined as the value of marketable
assets divided by volatile liabilities, stood at 28% as of December 31, 1996 as
compared to 24% as of December 31, 1995. As of December 31, 1996, the Bank had
$13.6 million in overnight funds, $18.7 million in marketable securities and
time deposits, and borrowing capacity at the Federal Home Loan Bank of San
Francisco in excess of $43 million (30% of its assets). Such borrowing capacity
is subject to quarterly review and must be collateralized. As of December 31,
1996, the Bank had no borrowed funds outstanding and had pledged approximately
$20 million in loans and securities to the Federal Home Loan Bank as collateral
for the borrowing line.
On January 1, 1994, the Bank officially adopted SFAS 115, an accounting
rule which requires the Bank to segregate its investment portfolio into accounts
of "Held to Maturity," "Trading," and "Available for Sale" ("AFS"). The
accounting treatment of each such class is different. In anticipation of SFAS
115, in 1992 the Bank established an "Available for Sale" portfolio consisting
of items which the Bank did not intend to hold to maturity, and a "Trading"
portfolio. Items in the AFS portfolio also include investments in mutual funds
of "bank qualified" assets as well as securities purchased with the intent to
resell prior to maturity. The "Trading" portfolio includes investments which are
intended to be held for speculative purposes and FNMA mortgage backed securities
which the Bank originates. These FNMA pools reside in the "Trading" account
until sold. The AFS portfolio is carried on the Bank's books at market value.
The securities in the "Trading" portfolio are carried at market value. The
Bank's investment portfolio has no so-called "Junk Bonds." During 1995, the
Financial Accounting Standards Board ("FASB") offered a one time opportunity to
reclassify securities among the held-to-maturity, available-for-sale, and
trading categories in conjunction with adopting a new implementation guide.
Following the FASB's announcement, the Bank reclassified securities with a book
value of approximately $1,691,000 from its Held-To-Maturity portfolio to its AFS
portfolio.
As of December 31, 1996, the "Trading" portfolio consisted of $28,000 of
two pools of Interest Only ("IO") securities. IO's represent the interest
portion of a mortgage pool and give the holder the interest payment (but not the
principal payment) stream. The faster the pools pay off, the less the value of
the interest stream to the IO holders. The IO pools have final maturity dates of
2019, but have been paying off rapidly. The Bank is carrying the IO pools at
market value.
In late September, 1994, one of the mutual funds in which the Bank had
invested its overnight liquid funds, Community Assets Management ("CAM") "broke
the buck," i.e., had its net asset value fall below 100% of book value. CAM's
problems resulted from heavy investment in so called "derivative" securities.
The rapid fire rise in interest rates in 1994 depreciated the market value of
the assets in the fund to such an extent that the CAM Board of Directors
determined that CAM could no longer redeem overnight funds at par and liquidated
the fund. The Bank lost approximately $25,000 on a $630,000 investment. By legal
process, the Bank has recovered $12,000 of the original loss.
<PAGE>
The following table sets forth the book and market values of the Bank's
investment portfolio as of December 31st of each of the designated years:
INVESTMENT PORTFOLIO MIX
INCLUDING DOMESTIC BANK DEPOSITS
As of December 31,
------------------------------------------------------
1996 1995 1994
------ ------ ------
(In thousands of dollars)
Amort Market Amort Market Amort Market
Cost Value Cost Value Cost Value
------------------------------------------------------
Deposits in Domestic
Banks $1,497 $1,513 $1,785 $1,815 $1,500 $1,427
U.S. Treasury and Agency
Notes and Bonds 8,733 8,645 9,837 9,779 12,903 12,219
U.S. Government Mortgage
Backed 5,201 5,200 2,187 2,154 2,705 2,635
Corporate and Other
Securities 3,303 3,299 2,491 2,472 650 636
------- ------- ------- ------- ------- -------
Total $18,734 $18,657 $16,300 $16,220 $17,758 $16,917
======= ======= ======= ======= ======= =======
The following table summarizes the maturity of the Bank's investment
securities and their estimated weighted average yield at December 31, 1996:
INVESTMENT PORTFOLIO MATURITY INCLUDING DOMESTIC BANK DEPOSITS(1)
<TABLE>
<S> <C> <C> <C> <C> <C>
U.S. Treasury
Deposits in and Agency U.S. Govt. Corporate and
Domestic Banks Notes and Bonds Mortgage Backed Other Securities Total
- -------------------------------------------------------------------------------------------------------
(In thousands of dollars except percentages)
In 1 year or less $297 $1,998 $40 $467 $ 2,802
Yield 6.70% 5.95% 5.24% 4.36% 5.75%
Over 1 year to 5 years $1,200 $6,481 $3,448 $1,206 $12,335
Yield 6.54% 5.87% 6.70% 4.82% 6.07%
Over 5 years to 10 years $0 $254 $1,227 $1,373 $2.854
Yield 0 6.25% 6.68% 4.68% 5.68%
Over 10 years $0 0 $486 $257 $743
Yield 0 0 5.81% 5.00% 5.53%
Total Amortized Cost $1,497 $8,733 $5,201 $3,303 $18,734
Weighted Average Yield 6.57% 5.90% 6.60% 4.75% 5.95%
</TABLE>
(1) Excludes funds held in overnight accounts. The "Available for Sale"
securities are represented in this table at their amortized cost. In
the financial statements, they are reflected at their market value.
<PAGE>
Deposit Activity and Other Sources of Funds
General. Deposits are the primary source of Comstock's funds for lending
and other investment purposes. In addition to deposits, Comstock derives funds
from principal repayments and interest payments on loans and investments as well
as other sources arising from operations in the production of net earnings. Loan
repayments and interest payments are a relatively stable source of funds, while
deposit inflows and outflows are significantly influenced by general interest
rates and money market conditions. Borrowings may be used on a short-term basis
to compensate for reductions in the availability of funds from other sources, or
on a longer term basis for general business purposes.
Deposits. Deposits are attracted principally from within Comstock's primary
market area through the offering of a broad selection of deposit instruments,
including demand deposits, money market accounts, NOW accounts, savings
accounts, and certificates of deposits. Deposit account terms vary, with the
principal differences being the minimum balance required, the time periods the
funds must remain on deposit and the interest rate.
The Bank's policies are designed primarily to attract deposits from local
residents and businesses rather than to solicit deposits from areas outside its
primary market. The Bank does not accept deposits from brokers due to the
volatility and rate sensitivity of such deposits. Interest rates paid, maturity
terms, service fees and withdrawal penalties are established by the Bank on a
periodic basis. Determination of rates and terms are predicated upon funds
acquisition and liquidity requirements, rates paid by competitors, growth goals
and federal regulations.
The following table sets forth the Bank's average balances of deposits and
the average rate paid on each for the years ended December 31, 1996, 1995 and
1994:
DEPOSITS
Year Ended December 31,
---------------------------------------------------------
1996 1995 1994
------ ------ ------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
---------------------------------------------------------
(In thousands of dollar except percentages)
Non-interest bearing $18,089 -- $16,518 -- $13,134 --
demand deposits (IPC)
Official checks, etc. 3,028 -- 3,025 -- 2,529 --
Interest bearing
demand deposits 38,678 3.4% 31,078 3.4% 24,457 2.9%
Savings deposits 9,983 2.7% 12,814 3.2% 16,570 3.4%
Time deposits 51,154 5.4% 39,461 5.7% 22,544 4.3%
-------- -------- -------
Total $120,932 3.6% $102,896 3.6% $79,234 2.8%
======== ======== =======
<PAGE>
The following table summarizes the maturity of the Bank's time deposits of
$100,000 or more as of December 31, 1996:
DEPOSIT MATURITIES
Time Deposits
$100,000 or more
-------------------------
(In thousands of dollars)
3 months or less $5,154
Over 3 months through 12 months 11,758
Over 12 months 2,387
-------
Total $19,299
=======
Properties
The Bank completed construction on the new corporate headquarters building
located on 2.2 acres in the Sierra Executive Center in November, 1995. The
building is approximately 26,000 square feet and houses the main branch office,
the executive and administrative offices and the real estate and commercial
lending functions. The Bank exercised its option to purchase a one acre adjacent
parcel for $174,240 in March, 1995 to facilitate future expansion of the
corporate headquarters facility. In November, 1996, the Bank signed a lease on
approximately 7,000 square feet of office/warehouse space approximately one mile
from the administrative headquarters to house a computer facility and other back
office administrative functions. The Board made the decision to bring the main
frame data processing operations in-house upon receipt of notification of
cancellation by the current service provider. In addition, removal of the
administrative functions from the head office facility will allow for the
expansion of the commercial and residential lending origination functions within
that facility. Facility renovations of and department relocations to the new
leased property are anticipated to be completed in March, 1997 and a full data
processing center is anticipated to be operational in September, 1997. Facility
renovations of and department relocations within the administrative office to
expand the commercial and residential lending departments are expected to be
completed in May, 1997.
The Bank owns the two story building and property located at 901 N. Stewart
St., Carson City, Nevada 89701. The building consists of approximately 7,360
square feet on a parcel of approximately .80 acres on the corner of N. Stewart
St. and E. Washington St. A branch office, and real estate and commercial
lending representatives occupy this facility.
In August, 1993, the Bank opened a 3,600 square foot lending office in Las
Vegas and exercised an option on an additional 1,800 square feet adjacent to the
existing space in March, 1994.
In January, 1996, the Bank signed a lease for a branch site located in
south Reno in a shopping center anchored by a Raleys Supermarket. The branch
opened in February, 1997. The location, approximately seven miles from the
nearest existing Comstock branch, is in a rapidly growing area at the end of a
new freeway extension.
<PAGE>
In January, 1997, the Bank signed a lease for a branch site located in
north Sparks, in an area known as Spanish Springs, in a shopping center anchored
by a Scolari's Supermarket. The branch is scheduled to open in late summer. This
location will service another rapidly growing area where the Bank currently has
no branch coverage.
In March, 1997, the Bank purchased a parcel located in a rapidly developing
commercial/industrial area. The parcel will be used for a future branch site.
<PAGE>
The following table sets forth summary information with respect to property
presently leased by the Bank:
Current
Approximate Monthly
Address Square Feet Expiration Rental
----------------------------------------------
4780 Caughlin Parkway(1)
Reno, Nevada 4,140 4-30-2012 $3,625
Galena Junction Shopping Center(2) 3,000 2-15-07 $4,800
Washoe County, Nevada
Spanish Springs(3) 3,200 8-01-17 $7,600
Sparks, Nevada
1662 Hwy 395 South #101(4)
Minden, Nevada 800 6-30-98 $1,047
333 N. Rancho Rd. #810(5)
Las Vegas, Nevada 5,493 7-31-98 $7,416
5450 Riggins Court #3(6)
Reno, Nevada 89511 7,130 1-31-02 $3,922
(1) Consists of a parcel of land in a regional shopping center in Reno on
which the Bank has constructed a branch facility (the "Caughlin
branch"). The Bank has three 5-year renewal options. The land lease
terms are as follows:
Years 1-5 $3,625 per month (through April, 1997)
Years 6-10 $4,250 per month
Years 11-15 $5,000 per month
Years 16-20 $5,833 per month
(2) Consists of a branch facility in a regional shopping center in south
Reno that was completed in February, 1997 (the "Galena branch"). The
Bank has four 5-year renewal options. The lease terms include $4,800
per month for the first two years with increases based on the CPI index
for Urban Wage Earners and Clerical Workers, West Coast Area.
(3) Consists of a branch facility in a regional shopping center north of
Sparks that is estimated to be completed in the summer of 1997 (the
"Spanish Springs branch"). The Bank has one 10-year renewal option. The
lease terms include $7,600 per month for the first two years with
increases based on 75% of the CPI index for Urban Wage Earners and
Clerical Workers, West Coast Area.
<PAGE>
(4) This facility houses a lending office. Minden is located approximately
15 miles south of Carson City. The Bank exercised an option on June 30,
1996 to renew for a two year period.
(5) This facility is a space in a large office complex that houses the
Bank's Las Vegas lending office and its southern Nevada Builders'
Control Unit. The Bank has one 3-year option to renew.
(6) This facility will house the Finance, Branch Central Support and
Management Information Systems Departments when renovations are
completed. The Bank expects to complete the renovations in March, 1997.
The space was previously a warehouse unit in a small office/warehouse
center. The current lease is fixed at $.55 per square foot for a five
year period. The Bank has one 5-year option at $.75 per square foot for
the first year and annual increases, based on the Consumer Price Index
for All Western States, not to exceed $.80 per square foot.
Employees
As of December 31, 1996, the Bank employed 124 persons, 112 on a full time
basis and 12 on a part time basis, or the full time equivalent of 118 employees.
Legal Proceedings
On November 19, 1991, the Bank filed an action against Raymond B. Graber,
II (the "Defendant") in the First Judicial District Court of the State of Nevada
in and for Carson City seeking a declaratory judgment permitting the Bank to
enforce the Defendant's personal guaranty of the debt of Outdoor Posters, Inc.
The Defendant filed his answer on June 19, 1992, admitting execution of the
guaranty but raising numerous affirmative defenses. Also, on June 19, 1992, the
Defendant filed a counterclaim against the Bank alleging, among other things,
intentional misrepresentation, fraudulent nondisclosure, negligent
misrepresentation and fraud. In February, 1993, the District Court ordered the
dispute into arbitration. The arbitration hearing was held in November, 1993. In
December, 1993, the arbitrator awarded Graber an offset of $28,443.24, but he
affirmed that Graber's personal guaranty was enforceable and that Graber
remained liable for the balance of the amount owing on the loan which Graber had
guaranteed (in excess of $170,000.00 plus interest). Graber disputed the
interpretation of the arbitrator's award, claiming he had been released from any
further liability. The Bank filed a motion to confirm the arbitration award with
the District Court, and requested the District Court to remand the award to the
arbitrator to clarify any ambiguity. The court remanded the award to the
arbitrator for clarification. The arbitrator reaffirmed that the personal
guaranty of Graber was enforceable and that he remained liable for the amount
owing on the loan. The arbitration award was then confirmed in District Court.
Graber appealed the District Court's decision to the Nevada Supreme Court which
reversed and remanded to the District Court. In the fall of 1996, the District
Court in turn remanded the matter to the arbitrator for answers to specific
questions as to the basis for his determination. Graber objected to the remand
to the arbitrator and sought an order from the Supreme Court prohibiting the
District Court from remanding the matter to the arbitrator for further
clarification. In early 1997, the Supreme Court dismissed Graber's petition. The
District Court has remanded the case to the arbitrator for specific
clarifications.
<PAGE>
In 1996, two former employees filed wrongful termination claims. Each claim
alleges damages in excess of $125,000. One action was filed in Federal District
Court and remanded to binding arbitration as required by an employment agreement
between the former employee and the Bank. The claimant has yet to file a demand
for arbitration with the American Arbitration Association. The other action was
scheduled for an arbitration hearing in December, 1996, but was dismissed
because the claimant failed to pay required pre-arbitration fees. Bank counsel
does not believe any damages will be paid as of result of either of these
wrongful termination claims.
Except for the above, there are no other pending legal proceedings, other
than ordinary routine litigation incidental to the business, to which the Bank
is a party.
REGULATION AND SUPERVISION
General
As a state chartered bank in Nevada whose deposits are insured by the BIF
of the FDIC, the Bank is subject to regulation under state law which is
administered by the Nevada Division. In addition, the FDIC levies deposit
insurance premiums and is vested with authority to supervise the Bank and to
exercise a broad range of enforcement powers. Finally, the Bank is required to
maintain reserves against deposits according to a schedule established by the
FRB. As a general rule, the federal regulation is much more extensive and
onerous than that of the state.
The following references to the laws and regulations under which the Bank
is regulated are brief summaries thereof, and do not purport to be complete and
are qualified in their entirety by reference to such laws and regulations.
Federal Banking Regulations
Capital Requirements. Under FDIC regulations, insured state-chartered banks
that are not members of the Federal Reserve System ("state non-member banks")
are required to maintain minimum levels of capital. State non-member banks must
satisfy a leverage capital ratio of Tier 1 capital to total assets of at least
3% if the FDIC determines that the institution is not anticipating or
experiencing significant growth and has well diversified risk, including no
undue interest rate risk exposure, excellent asset quality, high liquidity, good
earnings and is in general a strong banking organization, rated composite 1
under the Uniform Financial Institutions Ranking System (the "CAMELS" rating
system) established by the Federal Financial Institutions Examination Council.
For all but the most highly rated institutions meeting the conditions set forth
above, the minimum leverage capital ratio is 3% plus an additional "cushion"
amount of at least 100 to 200 basis points. Tier 1 capital is the sum of common
stockholders' equity, noncumulative perpetual preferred stock (including any
related surplus) and minority investments in certain subsidiaries, less most
intangible assets.
<PAGE>
In addition to the leverage ratio, state non-member banks must maintain a
minimum ratio of qualifying total capital to risk-weighted assets of at least
8.0%, of which at least 50% must be Tier 1 capital. Qualifying total capital
consists of Tier 1 capital plus Tier 2 or supplementary capital items, which
includes allowances for loan losses in an amount of up to 1.25% of risk-weighted
assets, cumulative perpetual preferred stock and long-term preferred stock
(original maturity of over 20 years) and certain other capital instruments. The
includable amount of Tier 2 capital cannot exceed the amount of the bank's Tier
1 capital. Qualifying total capital is reduced by the amount of the bank's
investments in banking and finance subsidiaries that are not consolidated for
regulatory capital purposes, reciprocal cross-holdings of capital securities
issued by other banks and certain other deductions.
The risk-based minimum capital requirement is measured against total
risk-weighted assets, which equals the sum of each on-balance-sheet asset and
the credit-equivalent amount of each off-balance-sheet item after being
multiplied by an assigned risk weight. Under the FDIC's risk-weighting system,
cash and securities backed by the full faith and credit of the U.S. Government
are given a 0% risk weight. Mortgage-backed securities that are issued, or fully
guaranteed as to principal and interest, by the FNMA or FHLMC and certain
municipal securities, are assigned a 20% risk weight. Single-family first
mortgages not more than 90 days past due with loan-to-value ratios under 80%,
multi-family mortgages (maximum 36 dwelling units) with loan-to-value ratios
under 80% and average annual occupancy rates over 80%, and certain qualifying
loans for the construction of one-to-four-family residences pre-sold to home
purchasers, are assigned a risk weight of 50%. Consumer loans and commercial
real estate loans, repossessed assets and assets more than 90 days past due, as
well as all other assets not specifically categorized, are assigned a risk
weight of 100%.
The Federal Deposit Insurance Corporation Improvements Act of 1991
("FDICIA") required each federal banking agency to revise its risk-based capital
standards for insured institutions to ensure that those standards take adequate
account of interest-rate risk ("IRR"), concentration of credit risk, and the
risk of nontraditional activities, as well as to reflect the actual performance
and expected risk of loss on multi-family residential loans. Effective September
1, 1995, the FDIC, together with the other federal banking agencies, amended
their capital standards to require consideration of IRR and other financial and
operational risks (in addition to credit risk) as factors to be considered in
evaluating capital adequacy. The new standards require consideration of the
quality of a bank's process of managing its IRR, the overall condition of the
bank and the level of the bank's other risks for which capital is needed.
Institutions with significant IRR may be required to hold additional capital.
The FDIC, together with the other federal banking agencies, issued a joint
policy statement, effective June 26, 1996, providing guidance on management of
IRR, including a discussion of the critical factors affecting the agencies'
evaluation of IRR in connection with capital adequacy. The agencies also
determined not to proceed with a previously issued proposal to develop a
supervisory framework for measuring IRR and to impose an explicit capital
component for IRR.
<PAGE>
The following table shows the Bank's leverage capital ratio, its Tier 1
risk-based capital ratio, and its total risk-based capital ratio, at December
31, 1996 along with the minimum requirements:
Minimum
Bank Requirements
------ ------------
Tier I (core capital) 12.62% 4.0%
Total capital 13.45% 8.0%
Leverage ratio 9.16% 3.0%
Enforcement. Under the FDIA, the FDIC has enforcement responsibility over
state non-member banks, such as Comstock, and has the authority to bring
enforcement action against all "institution-related parties," including
controlling stockholders, officers, directors and any attorneys, appraisers and
accountants who knowingly or recklessly participate in wrongful action likely to
have an adverse effect on a bank. Civil penalties cover a wide range of
violations and actions and range from up to $5,000 per day at the First Tier,
$25,000 per day at the Second Tier, and when a finding of the greatest
culpability is made, up to $1 million per day at the Third Tier. Criminal
penalties for most financial institution crimes include fines of up to $1
million and imprisonment for up to 30 years. In addition, regulators have
substantial discretion to take enforcement action against an institution that
fails to comply with its regulatory requirements, particularly with respect to
the capital requirements. Possible enforcement actions range from the imposition
of a capital plan and capital directive to receivership, conservatorship or the
termination of deposit insurance.
The Bank is charged an annual assessment by the FDIC for insurance of
deposit accounts up to applicable statutory limits. Under the risk-based system
for deposit insurance premiums that has been in effect since 1994, the
assessment rate for an insured depository institution depends on the assessment
risk classification assigned to the institution by the FDIC, which is determined
by the institution's capital level and supervisory evaluations. Institutions are
assigned to one of three capital groups, well capitalized, adequately
capitalized, or undercapitalized, based on the data reported to regulators for
the date closest to the last day of the seventh month preceding the semi-annual
assessment period. Well capitalized institutions are institutions satisfying the
following capital ratio standards: (i) total risk-based capital ratio of 10.0%
or greater; (ii) Tier 1 risk-based capital ratio of 6.0% or greater; and (iii)
Tier 1 leverage ratio of 5.0% or greater. Adequately capitalized institutions
are institutions that do not meet the standards for well capitalized
institutions but which satisfy the following capital ratio standards: (i) total
risk-based capital ratio of 8.0% or greater; (ii) Tier 1 risk-based capital
ratio of 4.0% or greater; and (iii) Tier 1 leverage ratio of 4.0% or greater.
Undercapitalized institutions consist of institutions that do not qualify as
either "well capitalized" or "adequately capitalized." Within each capital
group, institutions will be assigned to one of three subgroups on the basis of
supervisory evaluations by the institution's primary supervisory authority and
such other information as the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit insurance
fund. Subgroup A will consist of financially sound institutions with a few minor
weaknesses. Subgroup B consists of institutions that demonstrate weaknesses
which, if not corrected, could result in significant deterioration of the
institution and increased risk of loss to the deposit insurance fund. Subgroup C
consists of institutions that pose a substantial probability of loss to the
deposit insurance fund unless effective corrective action is taken.
<PAGE>
On September 30, 1996, the Deposit Funds Insurance Act of 1996 (the "1996
Act") was enacted into law, and it amended the FDIA in several ways to
recapitalize the Savings Association Insurance Fund ("SAIF"), which primarily
insures the deposits of savings associations, and to reduce the disparity in the
assessment rates for the BIF and the SAIF that had develop in 1995. The 1996 Act
authorized the FDIC to impose a special assessment on all institutions with
SAIF-assessable deposits in the amount necessary to recapitalize the SAIF. In
addition, the 1996 Act expanded the assessment base for the payments on the FICO
bonds, which were issued in the late 1980s by the Financing Corporation to
recapitalize the now defunct Federal Savings & Loan Insurance Corporation, to
include the deposits of both BIF- and SAIF-insured institutions beginning
January 1, 1997. Until December 31, 1999, or such earlier date on which the last
savings association ceases to exist, the rate of assessment for BIF-assessable
deposits shall be one-fifth of the rate imposed on SAIF-assessable deposits. It
has been estimated that the rate of assessments for the payments on the FICO
bonds will be 0.0129% for BIF-assessable deposits and 0.0644% for
SAIF-assessable deposits beginning on January 1, 1997.
The 1996 Act also provides for the merger of the BIF and SAIF on January 1,
1999, with such merger being conditioned upon the prior elimination of the
thrift charter. The Secretary of the Treasury is required to conduct a study of
relevant factors with respect to the development of a common charter for all
insured depository institutions and abolition of separate charters for banks and
thrifts and to report the Secretary's conclusions and findings to the Congress
on or before March 31, 1997.
FDIC regulations provide that any insured depository institution with a
ratio of Tier 1 capital to total assets of less than 2.0% will be deemed to be
operating in an unsafe or unsound condition, which would constitute grounds for
the initiation of termination of deposit insurance proceedings. The FDIC,
however, will not initiate termination of insurance proceedings if the
depository institution has entered into and is in compliance with a written
agreement with its primary regulator, and the FDIC is a party to the agreement,
to increase its Tier 1 capital to such level as the FDIC deems appropriate.
Insured depository institutions with Tier 1 capital equal to or greater than
2.0% of total assets may also be deemed to be operating in an unsafe or unsound
condition notwithstanding such capital level.
Transactions with Affiliates and Insiders
Transactions between state non-member banks and any affiliate are governed
by Sections 23A and 23B of the Federal Reserve Act. An affiliate of a bank is
any company or entity which controls, is controlled by or is under common
control with the bank but does not include a subsidiary of the bank. Generally,
Section 23A (i) limits the extent to which the bank or its subsidiaries may
engage in "covered transactions" with any one affiliate to an amount equal to
10% of such bank's capital and surplus, and contains an aggregate limit on all
such transactions with all affiliates to an amount equal to 20% of such capital
<PAGE>
and surplus, and (ii) requires that all such transactions be on terms that are
consistent with safe and sound banking practices. The term "covered transaction"
includes the making of loans, purchase of assets, issuance of guarantees and
similar other types of transactions. In addition, most extensions of credit by a
bank to any of its affiliates must be secured by collateral in amounts ranging
from 100 to 130 percent of the loan amounts, depending on the type of
collateral. Section 23B requires that any covered transaction, and certain other
transactions, including the bank's sale of assets and purchase of services from
an affiliate must be on terms that are substantially the same, or at least as
favorable to the institution, as those that would prevail in comparable
transactions with a non-affiliate.
Banks are also subject to the restrictions contained in Section 22(h) of
the Federal Reserve Act and the FRB's Regulation O thereunder on loans to
executive officers, directors and principal stockholders. Under Section 22(h),
loans to a director, an executive officer or a holder of more than 10% of the
shares of a bank, as well as certain affiliated interests of such persons, may
not exceed, together with all other outstanding loans to such person and
affiliated interest, the loans-to-one-borrower limit applicable to national
banks (generally 15% of an institution's unimpaired capital and surplus) and all
loans to all such persons in the aggregate may not exceed an institution's
unimpaired capital and unimpaired surplus. Regulation O also prohibits the
making of loans in an amount greater than the lesser of $25,000 or 5% of capital
and surplus but in any event over $500,000, to a director, executive officer and
greater than 10% stockholder of a bank, and the respective affiliates of such
person, unless such loans are approved in advance by a majority of the board of
directors of the bank, with any "interested" director not participating in the
voting. Further, the FRB, pursuant to Regulation O, requires that loans to
directors, executive officers and principal stockholders (a) be made on terms
substantially the same as those that are offered in comparable transactions to
persons not affiliated with the bank and (b) follow credit underwriting
procedures not less stringent than those prevailing for comparable transactions
with persons not affiliated with the bank. Regulation O also prohibits a
depository institution from paying, with certain exceptions, an overdraft of any
of the executive officers or directors of the institution or any of its
affiliates unless the overdraft is paid pursuant to written pre-authorized
extension or interest-bearing extension of credit or transfer of funds from
another account at the bank.
State chartered non-member banks are further subject to the requirements
and restrictions against certain tying arrangements and on extensions of credit
involving correspondent banks. Specifically, a depository institution is
prohibited from extending credit to or offering any other service, or fixing or
varying the consideration for such extension of credit or service, on the
condition that the customer obtain some additional service from the institution
or certain of its affiliates or not obtain services of a competitor of the
institution subject to certain exceptions. In addition, a depository institution
with a correspondent banking relationship with another depository institution is
prohibited from extending credit to the executive officers, directors and
holders of more than 10% of the stock of the other depository institution,
unless such extension of credit is on substantially the same terms as those
prevailing at the time for comparable transactions with other persons and does
not involve more than the normal risk of repayment or present other unfavorable
features.
<PAGE>
Real Estate Lending Policies
Under FDIC regulations which became effective March 19, 1993,
state-chartered non-member banks must adopt and maintain written policies that
establish appropriate limits and standards for extensions of credit that are
secured by liens or interest in real estate or are made for the purpose of
financing permanent improvements to real estate. These policies must establish
loan portfolio diversification standards, prudent underwriting standards,
including loan-to-value limits, that are clear and measurable, loan
administration procedures and documentation, approval and reporting
requirements. The real estate lending policies must reflect consideration of the
Interagency Guidelines for Real Estate Lending Policies (the "Interagency
Guidelines") that have been adopted by the federal bank regulators.
The Interagency Guidelines, among other things, call upon a depository
institution to establish internal loan-to-value limits for real estate loans
that are not in excess of the following supervisory limits: (i) for loans
secured by raw land, the supervisory loan-to-value limit is 65% of the value of
the collateral; (ii) for land development loans (i.e., loans for the purpose of
improving unimproved property prior to the erection of structures), the
supervisory limit is 75%; (iii) for loans for the construction of commercial,
multi-family or other nonresidential property, the supervisory limit is 80%;
(iv) for loans for the construction of one-to-four-family properties, the
supervisory limit is 85%; and (v) for loans secured by other improved property
(e.g., farmland, completed commercial property and other income-producing
property including non-owner-occupied one-to-four-family property), the limit is
85%. Although no supervisory loan-to-value limit has been established for
owner-occupied, one-to-four-family and home equity loans, the Interagency
Guidelines state that for any such loan with a loan-to-value ratio that equals
or exceeds 90% at origination, an institution should require appropriate credit
enhancement in the form of either mortgage insurance or readily marketable
collateral.
Standards for Safety and Soundness
Under FDICIA, each federal banking agency is required to prescribe, by
regulation, safety and soundness standards for institutions under its authority.
The federal banking agencies, including the FDIC, have adopted standards
covering internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
employee compensation, fees and benefits, asset quality and earnings
sufficiency. These standards are in the form of broad guidelines for performance
that generally leave to each institution the methods for achieving the
objectives. The Bank believes it meets the FDIC's safety and soundness
standards.
Federal Home Loan Bank System
The Bank is a member of the FHLB System, which consists of twelve regional
Federal Home Loan Banks subject to supervision and regulation by the Federal
Housing Finance Board ("FHFB"). The Federal Home Loan Banks provide a central
credit facility primarily for member institutions. As a member of the FHLB of
San Francisco, the Bank is required to acquire and hold shares of capital stock
in the FHLB of San Francisco in an amount at least equal to 5% of its advances
(borrowings).
<PAGE>
The FHLB of San Francisco serves as a reserve or central bank for its
member institutions within its assigned region. It is funded primarily from
proceeds derived from the sale of consolidated obligations of the FHLB System.
It offers policies and procedures established by the FHFB and the Board of
Directors of the FHLB of San Francisco. Long-term advances may only be made for
the purpose of providing funds for residential housing finance.
Federal Reserve System
Pursuant to regulations of the FRB, a bank must maintain average daily
reserves equal to 3.0% of the first $52 million of net transaction accounts,
above an exempt amount of $4.3 million, plus 10% on the remainder. This
percentage is subject to adjustment by the FRB. Because required reserves must
be maintained in the form of vault cash or in a non-interest bearing account at
a Federal Reserve bank, the effect of the reserve requirement is to reduce the
amount of the institution's interest-earning assets. As of December 31, 1996,
the Bank met its reserve requirements.
Nevada Banking Laws and Supervision
Nevada state-chartered banks, such as the Bank, are also regulated and
supervised by the Nevada Division. The Nevada Division is required to regularly
examine each state-chartered bank. The approval of the Nevada Division is
required to establish or close branches, to merge with another bank, to form a
bank holding company, to issue stock, or to undertake many other activities. As
a general rule, Nevada law permits a state-chartered bank to perform the
activities of a nationally-chartered bank.
Regulation of Holding Company
Following consummation of the Reorganization, Bancorp will be subject to
examination, regulation and periodic reporting under the BHCA, as administered
by the FRB. The FRB has adopted capital adequacy guidelines for bank holding
companies on a consolidated basis substantially similar to those of the FDIC for
the Bank.
Bancorp will be required to obtain the prior approval of the FRB to acquire
all, or substantially all, of the assets of any bank or bank holding company.
Prior FRB approval will be required for Bancorp to acquire direct or indirect
ownership or control of any voting securities of any bank or bank holding
company if, after giving effect to such acquisition, it would, directly or
indirectly, own or control more than 5% of any class of voting shares of such
bank or bank holding company.
<PAGE>
Bancorp will be required to give the FRB prior written notice of any
purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of Bancorp's consolidated net worth. The FRB may
disapprove such a purchase or redemption if it determines that the proposal
would constitute an unsafe and unsound practice, or would violate any law,
regulation, FRB order or directive, or any condition imposed by, or written
agreement with, the FRB. Such notice and approval is not required for a bank
holding company that would be treated as "well capitalized" under applicable
regulations of the FRB, that has received a composite "1" or "2" rating at its
most recent bank holding company inspection by the FRB, and that is not the
subject of any unresolved supervisory issues.
The status of Bancorp as a registered bank holding company under the BHCA
will not exempt it from certain federal and state laws and regulations
applicable to corporations generally, including, without limitation, certain
provisions of the federal securities laws.
In addition, a bank holding company is prohibited generally from engaging
in, or acquiring 5% or more of any class of voting securities of any company
engaged in non-banking activities. One of the principal exceptions to this
prohibition is for activities found by FRB to be so closely related to banking
or managing or controlling banks as to be a proper incident thereto. Some of the
principal activities that the FRB has determined by regulation to be so closely
related to banking as to be a proper incident thereto are: (1) making or
servicing loans; (ii) performing certain data processing services; (iii)
providing discount brokerage services; (iv) acting as fiduciary, investment or
financial advisor; (v) leasing personal or real property; (vi) making
investments in corporations or projects designed primarily to promote community
welfare; and (vii) acquiring a savings and loan association.
Under the Financial Institutions Reform, Recovery and Enforcement Act of
1989, depository institutions are liable to the FDIC for losses suffered or
anticipated by the FDIC in connection with the default of a commonly controlled
depository institution or any assistance provided by the FDIC to such an
institution in danger of default. This law would have potential applicability if
Bancorp ever acquired, as a separate subsidiary, a depository institution in
addition to the Bank. There are no current plans for such an acquisition.
Subsidiary banks of a bank holding company are subject to certain
quantitative and qualitative restrictions imposed by the Federal Reserve Act on
any extension of credit to, or purchase of assets from, or letter of credit on
behalf of, the bank holding company or its subsidiaries, and on the investment
in or acceptance of stock or securities of such holding company or its
subsidiaries as collateral for loans. In addition, provisions of the Federal
Reserve Act and FRB regulations limit the amounts of, and establish required
procedures and credit standards with respect to, loans and other extensions of
credit to officers, directors and principal stockholders of the Bank, Bancorp,
any subsidiary of Bancorp and related interests of such persons. Moreover,
subsidiaries of bank holding companies are prohibited from engaging in certain
tie-in arrangements (with the holding company or any of its subsidiaries) in
connection with any extension of credit, lease or sale of property or furnishing
of services.
<PAGE>
Federal Securities Laws
Bancorp has filed a registration statement with the SEC under the
Securities Act for the registration of the shares of Bancorp Common Stock to be
exchanged pursuant to the Reorganization. Upon completion of the Reorganization,
the outstanding shares of Bancorp Common Stock will be registered with the SEC
under the Exchange Act. Bancorp will then be subject to the information, proxy
solicitation, insider trading restrictions and other requirements under the
Exchange Act.
The registration under the Securities Act of shares of Bancorp Common Stock
to be exchanged in the Reorganization does not cover the resale of such shares.
Shares of Bancorp Common Stock purchased by persons who are not affiliates of
Bancorp may be resold without registration. Shares purchased by an affiliate of
Bancorp will be subject to the resale restrictions of Rule 144 under the
Securities Act. If Bancorp meets the current public information requirements of
Rule 144 under the Securities Act, each affiliate of Bancorp who complies with
the other conditions of Rule 144 (including those that require the affiliate's
sale to be aggregated with those of certain other persons) would be able to sell
in the public market, without registration, a number of shares not to exceed, in
any three-month period, the greater of (i) 1% of the outstanding shares of
Bancorp, or (ii) the average weekly volume of trading in such shares during the
preceding four calendar weeks. Provision may be made in the future by Bancorp to
permit affiliates to have their shares registered for sale under the Securities
Act under certain circumstances.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion reviews and analyzes the consolidated operating
results and financial condition of the Bank. This discussion should be read in
conjunction with the consolidated financial statements and the other financial
data presented elsewhere herein.
Overview
The Bank's total assets and deposits continued to grow at a significant
rate in 1996 as they had in 1994 and 1995. Management believes that asset and
deposit totals have increased for the last three years as a result of an
aggressive lending posture on the part of the Bank, especially in commercial
real estate lending, and the addition of a new branch in 1995.
Net income for the year ended December 31, 1996 was $2,092,000 ($.94 per
share) compared to: $1,605,000 ($.85 per share) in 1995; $994,000 ($.57 per
share) in 1994; $1,632,000 ($.98 per share) in 1993; and $1,292,000 ($.88 per
share) for the year ended December 31, 1992.
The Bank did not declare a dividend until February 24, 1993 because, under
the NRS, the Bank could not pay a dividend until its undivided profit account
became positive. As of December 31, 1991, that account had a deficit of
$978,000. On December 31, 1992, the deficit had been erased and there was
$315,000 in the account. On December 31, 1993, the undivided profit account
<PAGE>
stood at $1.408 million and the Board declared an aggregate of $224,000 in
dividends for 1993 ($.182 per share). On December 31,1994, the undivided Profit
Account reflected a balance of $1.984 million and the Board declared an
aggregate of $411,000 in dividends for 1994 ($.236 per share). In February,
1995, the Board declared a 10% stock dividend. No dividends were declared in
1996.
Capitalization
As of December 31, 1993, the Bank's Leverage Ratio was 8.32%; it fell to
7.72% as of December 31, 1994. The addition to capital resulting from a stock
purchase rights offering in 1995 increased the Leverage Ratio as of December 31,
1995 to 8.57%. For the year ending December 31, 1996, due to the increase in
retained earnings, the Bank's Leverage Ratio increased to 9.16%. As of December
31, 1996, the Bank's capital structure was as follows (excluding warrants and
outstanding options to purchase Bank Common Stock):
Shares outstanding 2,117,634
Stockholder equity $13,008,966
Loan loss reserves $857,427
Total equity and reserves $13,866,392
Book value/share (stockholder equity) $6.14
Book value/share (total equity and reserve) $6.55
As of December 31, 1996, the following options and warrants were outstanding:
1) Robert Barone, the Bank's Chief Executive Officer, Board Chairman
and Treasurer, and Larry Platz, the Bank's President and
Secretary, each hold options to purchase 5,500 shares of Bank
Common Stock at $6.705 per share expiring May 18, 2000 and 47,850
shares at an exercise price of $6.873 per share expiring October
25, 2003. In addition, on December 14, 1992, Mr. Barone and Mr.
Platz were each granted options to purchase 82,500 shares of Bank
Common Stock at an exercise price of $3.409 per share expiring ten
years from the date of grant. These options are currently vested
or will vest as follows: 75% vested as of December, 1996; and the
remaining 25% will vest in December, 1997. Under certain
circumstances, vesting of the options may be accelerated.
2) As of December 31, 1996 warrants to purchase 103,400 shares of
Bank Common Stock at $7.73 per share expiring September 30, 1999
were held as follows: John Quagliata held warrants to purchase
35,200 shares, Bruno Berardi held warrants to purchase 26,400
shares, John A. and Elma Loxterman held warrants to purchase
16,500 shares, Edward Rosenthal held warrants to purchase 7,700
shares, Michael D. Friedman held warrants to purchase 6,600
shares, Victor Pascucci Jr. and Rose Ann Pascucci held warrants to
purchase 5,500 shares and Sanford A. Fox Pension Trust held
warrants to purchase 5,500 shares.
<PAGE>
3) On December 31, 1996 non-employee directors held options to
purchase 4,766 shares of Bank Common Stock for $2.727 per share
expiring March 25, 2002; options to purchase 6,050 shares of Bank
Common Stock for $6.705 per share expiring May 18, 2003; options
to purchase 4,950 shares of Bank Common Stock for $6.818 per share
expiring May 25, 2004; options to purchase 9,550 shares of Bank
Common Stock for $6.875 per share expiring April 26, 2005; and
options to purchase 7,600 shares of Bank Common Stock for $9.25
per share expiring May 01, 2006.
4) Marilyn Ferguson, a Senior Vice-President of the Bank, held
options to purchase a) 1,100 shares of Bank Common Stock at a
price of $6.705 expiring May 18, 2000; b) 2,200 shares of Bank
Common Stock at a price of $6.818 expiring May 25, 2004; c) 2,000
shares of Bank Common Stock at a price of $6.875 per share
expiring April 26, 2005; d) 2,000 shares of Bank Common Stock at a
price of $7.00 per share expiring December 20, 2005; and e) 2,000
shares of Bank Common Stock at a price of $10.50 per share
expiring on December 23, 2006. In January, 1997, Mrs. Ferguson
announced her retirement, effective March 1, 1997, and exercised
options a) through d) above (7,300 shares). Mrs. Ferguson retains
the right to exercise the options set forth in (e) above for ten
years. Robert Hemsath, a Senior Vice President of the Bank, held
options to purchase a) 2,200 shares of Bank Common Stock at a
price of $6.818 per share expiring May 25, 2004; b) 2,000 shares
of Bank Common Stock at a price of $6.875 per share expiring April
26, 2005; c) 2,000 shares of Bank Common Stock at a price of $7.00
per share expiring December 19, 2005; and d) 2,000 shares of Bank
Common Stock at a price of $10.50 per share expiring on December
23, 2006. Lisa Milke, a Vice President of the Bank, held options
to purchase a) 1,000 shares of Bank Common Stock at a price of
$6.875 per share expiring April 26, 2005; b) 2,000 shares of Bank
Common Stock at a price of $7.00 per share expiring December 20,
2005, and c) 1,500 shares of Bank Common Stock at a price of
$10.50 per share expiring on December 23, 2006. Jacqueline
Entrekin, a Senior Vice President of the Bank, held options to
purchase a) 1,000 shares of Bank Common Stock at a price of $6.875
per share expiring April 26, 2005; b) 2,000 shares of Bank Common
Stock at a price of $7.00 per share expiring December 20, 2005;
and c) 2,000 shares of Bank Common Stock at a price of $10.50 per
share expiring on December 23, 2006. Craig Lorman, a Vice
President of the Bank, held option to purchase a) 1,000 shares of
Bank Common Stock at a price of $7.00 per share expiring December
20, 2005; and b) 1,500 shares of Bank Common Stock at a price of
$10.50 per share expiring on December 23, 2006. Pamela Robinson, a
Vice President of the Bank, held options to purchase a) 1,000
shares of Bank Common Stock at a price of $7.00 per share expiring
December 20, 2005; and b) 1,250 shares of Bank Common Stock at a
price of $10.50 per share expiring December 23, 2006. Ty Nebe, a
Vice President of the Bank, held options to purchase a) 1,000
shares of Bank Common Stock at a price of $7.00 per share expiring
December 19, 2005; and b) 1,250 shares of Bank Common Stock at a
price of $10.50 per share expiring December 23, 2006. Cheryl
Parino, a Residential Real Estate Lending Officer, held options to
purchase a) 1,000 shares of Bank Common Stock at a price of $7.00
<PAGE>
per share expiring December 20, 2005; and b) 1,000 shares of Bank
Common Stock at a price of $10.50 per share expiring December 23,
2006. Lawrence Evans, a Residential Real Estate Lending Manager,
held options to purchase a) 1,000 shares of Bank Common Stock at a
price of $7.00 per share expiring December 20, 2005; and b) 1,000
shares of Bank Common Stock at a price of $10.50 per share
expiring December 23, 2006.
5) In June, 1996, the following non-employee directors purchased
2,100 shares of Bank Common Stock at $9.25 per share; Michael Dyer
1,000 shares, Edward Allison 500 shares, John Coombs 400 shares
and Mervyn Matorian 200 shares. For each share of Bank Common
Stock acquired, options to purchase an equal number of shares at
$9.25 per share, expiring April 26, 2005 were issued and are
included in the totals in number 3 above.
If all of the above-discussed options and warrants to purchase Bank
Common Stock were exercised, the pro forma capital structure of the Bank at
December 31, 1996 would be as follows:
Shares Outstanding (including non-vested options) 2,564,900
Shares Outstanding (excluding non-vested options) 2,523,650
Aggregate Per
Amount Share
----------- -----
Stockholder equity
(including non-vested options) $15,649,691 $6.10
Stockholder equity
(excluding non-vested options) $15,509,070 $6.15
Total equity and reserve
(including non-vested options) $16,507,117 $6.44
Total equity and reserve
(excluding non-vested options) $16,366,496 $6.49
Capital Expenditures
In August, 1993, the Bank leased space on a 5 year lease term for lending
operations in Las Vegas. In March, 1994, additional space was leased for an
expansion of the Las Vegas facility. The total tenant improvement cost was
$30,000 and the furniture, fixture and equipment cost was $183,000. In December,
1993, the Bank purchased land (2.2 acres) for $381,000 and has exercised its
option to purchase an adjacent parcel (1 acre) for $174,240 in the southeast
quadrant of Reno. The Bank took occupancy in November, 1995, of its headquarters
building which consolidated all of the Reno area operations except for the
Caughlin branch facility. The facility includes a 2,000 square foot branch and
24,000 square feet designated for loan origination and support functions. The
total cost approximated $3 million. In November, 1996, the Bank leased
approximately 7,000 square feet of office/warehouse space to accommodate the
development of an in-house data processing center and to relocate administrative
<PAGE>
functions from the headquarters facility. The anticipated cost includes $500,000
for data processing equipment and $300,000 for tenant improvements and
additional furniture and fixtures. Lease payments began in February, 1997 on
this facility. The Bank opened its fourth branch in south Reno, the Galena
Branch, in February, 1997. The project was budgeted for approximately $200,000
for tenant improvements and $225,000 for furniture, fixture and equipment. A
fifth branch in north Sparks, the Spanish Springs Branch, is expected to be
completed in late summer with an anticipated cost of $10,000 in tenant
improvements and $225,000 in furniture, fixture and equipment. In March, 1997,
the Bank purchased a 1.0 acre parcel in south Reno in an
industrial/commercial/residential area for approximately $436,000. The Bank
plans to construct a branch on the parcel but has not determined the time frame
for the construction and opening of the new branch.
The cash flow necessary to finance the above described capital expenditures
came from existing liquid assets.
<PAGE>
Operations and Liquidity
Total post-tax profits for 1996 were $2,092,000, an increase of 30.3% from
the $1,605,000 earned in 1995. The following table shows the overall reasons for
the change in the Bank's profitability.
1996 1995 %Change
---------- ---------- -------
Total loan income $8,870,875 $7,729,474 14.8%
Total fee income 4,305,502 3,773,558 14.1
Overnight and
investment income 1,692,110 1,263,236 34.0
Service charges and
non-interest income 382,343 321,179 19.0
---------- ---------- -----
15,250,830 13,987,447 16.5
Total interest expense 4,433,801 3,811,427 16.3
Salaries and benefits
(excluding management
bonus) 4,338,050 3,548,037 22.3
Occupancy expenses 528,206 502,349 5.1
Furniture, fixtures and
equipment 464,163 373,408 24.3
1,829,879 1,853,524 (1.3)
Other operating ---------- ---------- -----
expenses 11,594,099 10,088,745 14.9
Loan loss provision 250,000 270,000 (8.0)
---------- ---------- -----
Income from bank 3,406,731 2,728,702 24.8
operations
Management bonus 442,930 357,886 23.8
accrual
Taxes 902,960 769,049 17.4
Other income 31,267 3,355 932.0
---------- ---------- ------
Net income $2,092,108 $1,605,125 30.3%
========== ========== =====
The table shows that net income increased by 30.3% ($486,983) over 1995.
The largest contributing factor, in terms of dollars, to the increase in income
was a 14.8% ($1,141,401) increase in loan income, which primarily consisted of
interest income on loans in the Bank's portfolio. Interest income on loans was
augmented by the receipt of "additional" interest from a development loan in the
Bank's portfolio for which the Bank collects monthly interest payments plus an
additional $2,100 for each lot the developer sells. In 1996, 128 lots were sold
and closed which added $268,800 in "additional" interest to Bank revenue. Of the
total 811 lots, 683 remained to be sold at December 31, 1996. An additional 30
lots has been sold and closed through February 28, 1997.
The total increase in gross income was 16.5% (2,163,383). This increase
combined with a smaller increase in interest expense (primarily the cost of
deposits) of 16.3% ($622,374) and non-interest expenses of 14.9% (1,505,354)
resulted in the increase in net income. Loan fee income increased by 14.1%
($531,944), primarily due to increased commercial lending volume. Income on
investment securities and overnight investments increased by 34.0% (428,874) as
a result of larger portfolio holdings and increased liquidity levels. Salaries
and benefits increased by 22.3% ($790,013), occupancy expenses rose by 5.1%
($25,857) and furniture, fixture and equipment expense grew 24.3% ($90,755).
Other operating expenses decreased by 1.3% ($23,645) primarily due to economics
realized from consolidation of operations into the administrative headquarters
facility in November, 1995 and a reduction of FDIC deposit insurance premiums
during 1996.
In 1993, the Bank originated $206 million in real estate loans and sold
$176 million of this product in the secondary market. Due to rapidly rising
rates in 1994, the market for mortgage refinancing all but disappeared. This
phenomenon, accompanied by a re-emergence of competition from the larger
financial institutions, caused real estate loan originations to fall by 19.6% to
$165 million, and secondary market sales to fall to $147 million. In 1995, the
Bank originated $160 million in real estate loans and sold $153 million the
secondary market, including $3.8 million in adjustable rate mortgages held in
the Bank's portfolio from 1993, a decrease of 3.0% in loans originated and an
increase of 4.1% in loans sold, respectively. In 1996, the Bank originated $170
million in real estate loans and sold $139 million in the secondary market,
representing an increase of 6.3% and a decrease of 10.1% from 1995,
respectively. By region, northern Nevada originations were $141 million in 1996,
$124 million in 1995, $131 million in 1994 and $196 million in 1993, while
southern Nevada originations were $29 million in 1996, $37 million in 1995, $34
million in 1994 and $9 million in 1993. As a result of a focused effort,
commercial lending activity rose from $26 million in 1993 to $68 million in
1995, and doubled again to $136 million in 1996. Total fee income on loans
increased by 14.1% in 1996 primarily due to the bank's increase in commercial
loan originations. Overall, loan originations (including commercial loans) rose
34.5% from $229 million in 1995 to $308 million in 1996.
Real estate loan originations were impacted by the return to the
marketplace of the large portfolio lender banks, Bank of America and Norwest
Bank. These portfolio players often underprice the secondary market and retain
mortgage loans in their own portfolios. Because the Bank is not a mortgage
portfolio lender and must sell in the secondary market, it cannot underprice the
secondary market without either a loss on the transaction or a razor thin
margin. Finally, the Bank was adversely impacted by the ability of the larger
institutions to offer future rate guarantees to contractors and developers. The
Bank could not make such guarantees without, in the opinion of management,
subjecting the Bank to significant interest rate risk.
The Bank's liquidity ratio, defined as the value of marketable assets
divided by volatile liabilities, stood at 28% as of December 31, 1996 as
compared to 24% as of December 31, 1995. As of December 31, 1996, the Bank had
$13.6 million in overnight funds, $18.7 million in marketable securities and
time deposits, and borrowing capacity at the FHLB of San Francisco in excess of
$43 million (30% of its assets). Such borrowing capacity is subject to quarterly
review and must be collateralized. As of December 31, 1996, the Bank had no
borrowed funds outstanding and had pledged approximately $20 million in loans
and securities to the FHLB of San Francisco as collateral for the borrowing
line.
<PAGE>
The primary income generating activity of the Bank is lending, related to
the real estate industry, either residential or commercial. During 1996, the
Bank originated $308 million in loans ($170 million of which were single family
mortgage loans), of which approximately $139 million were sold in the secondary
market (non-recourse). The 1995 figures were $229 million, $160 million and $153
million, respectively. The Bank's policy is to sell most of the single family
mortgage loans that it originates.
In order to generate such lending volumes, the Bank has higher personnel
and overhead expenses than most banks in its peer group. At the beginning of
1993, the Bank had approximately 50 full time equivalent ("FTE") employees. By
the end of 1993, with the expansion of lending to Las Vegas and the gear up for
the planned growth in commercial lending, the Bank employed 97 FTE employees. At
the end of 1994 and 1995 FTE employees numbered 108. By the end of 1996 the Bank
employed 118 FTE employees. The increase included the addition of a Compliance
Officer, expansion of the commercial lending functions and partial staffing for
the additional branch office which opened in February, 1997.
The income generated from the Bank's high volume of lending activity
usually puts the Bank's net interest margin in the top 10% of the peer group
analysis. Because of the personnel and expense generated in the mortgage
operation which are not found in peer group comparative numbers, as a general
rule, management does not rely on peer group analysis of its specific overhead
expense ratios or its net interest margins when analyzing performance. Rather,
management relies on other productivity measures such as analysis of loan
representative lending volumes and on overall profitability measures including
return on assets and return on stockholders' equity.
Loan income increased 14.5% in 1996 as compared to 1995 (see table above).
Year-end total loans (excluding the loan loss reserve) were 11.3% higher ($96.5
million versus $86.7 million). An increase in the commercial lending portfolio
played a large role in these results. The increase in loan, investment and
liquid assets was financed by an increase in deposits from $111.2 million at the
end of 1995 to $131.3 million at year's end 1996, an 18.1% increase. As a result
of rising balances and stable rates, total interest expenses rose by 16.3% in
1996, from $3.81 million in 1995 to $4.43 million. The Bank experienced an
increase in retail time deposits and deposits in general as a result of the new
headquarters branch, the addition of a business development officer, additional
commercial calling officers, and as a result of customer dissatisfaction with
the larger institutions in the area. At December 31, 1995 and 1996, time
deposits totaled $39 million and $51 million, respectively.
Impact of Changing Interest Rates; Interest Rate Risk
The impact of changing interest rates (and inflation) on banks differs from
the impact on other companies. As financial intermediaries, banks have assets
and liabilities which may move in concert with interest rates. This is
especially true for banks with a high percentage of rate sensitive interest
<PAGE>
earning assets and interest bearing liabilities. A bank can reduce the impact of
changing interest rates on its interest margin if it can manage its interest
rate sensitivity gap (the "gap") (also known as "Interest Rate Risk"). The gap
for any period is the volume difference between the assets and the liabilities
which reprice to market conditions in that period. Management's goal is to
adjust the gap so that the impact of falling or rising interest rates has a
neutral impact on the Bank's interest margin. To do this, it is necessary for
management to anticipate the general movement of interest rates. Thus, there is
no guarantee that the Bank will always be able to maintain its current interest
margins.
Interest Margin
The table below shows the sources of the Bank's earnings. The relatively
high yields on loans and receivables are a result of the high volume and rapid
turnover in the loan portfolio. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Operations and Liquidity."
Loan yields, including the fees, decreased between 1994 and 1995 and
increased only slightly between 1995 and 1996, largely due to increased
competition from other institutions. Yields, excluding fees, increased between
1994 and 1995 and remained constant between 1995 and 1996. In 1994, originations
were $223 million. In 1995, that figure rose slightly to $229 million. In 1996
originations rose to $308 million. The mix of the loan originations continues to
include more commercial loans on which fee income is generally lower than the
fee income earned on mortgage loans and on which market competition is stronger.
Peer group analysis and other private and regulator generated analyses of the
Bank include the fee income in the loan yields. In such analyses, the Bank's
portfolio yields are at the upper end of the peer group spectrum. At the same
time, the Bank utilizes more personnel to produce such high loan yields. See
"Management's Discussion and Analysis of Financial Condition and results of
Operations--Non-Interest Expenses."
All other portfolio yields had only slight movement between 1995 and 1996,
mirroring the general movement of national interest rates. Because the cost of
funds yields increased slightly, the net interest margin, excluding fees,
declined to 4.9% from 5.1% in 1996. When fee income is included, the net
interest margin fell 20 basis points in 1996, mirroring the 20 basis points fall
in 1995. Both years showed the effects of increased competition on net margins.
Investments yielded the same return in 1995 as in 1994 but increased by 20 basis
points in 1996, as a result of slightly higher interest rates.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Balances, Yields and Rates of Earning Assets and Borrowed Funds
1996 1995 1994
-------------------------- --------------------------- ----------------------------
Interest Interest Interest Yield/
Average Earned/ Yield/ Average Earned/ Yield/ Average Earned/ Rate
Balance Paid Rate Balance Paid Rate Balance Paid (%)
($000s) ($000s) (%) ($000s) ($000s) (%) ($000s) ($000s)
Assets:
Loans and Receivables $88,890 $79,621 $52,522
Include fees $13,176 14.5% $11,485 14.4% $7,935 15.1%
Exclude fees 4,306 9.7 7,729 9.7 4,615 8.8
Investments 17,738 985 5.6 17,651 954 5.4 17,357 943 5.4
Fed Funds Sold 13,181 708 5.4 6,127 356 5.8 9,108 356 3.9
------- ------- ------
Total Earning Assets 119,809 103,399 78,887
======= ======= ======
Include fees 14,868 12.2 12,795 12.42 9,234 11.7
Exclude fees 10,562 8.6 9,040 8.7 5,914 7.5
Loan Loss Allowance 794 528 394
Non-Earnings Assets 14,623 11,159 8,968
------ -------
Total Assets $133,638 $114,030 $87,461
======== ======== =======
Liabilities and Stockholders' Equity:
Interest Transaction $38,678 $1,298 3.4% $31,078 $1,043 3.4% $24,457 $718 2.9%
Savings Accounts 9,983 268 2.7 12,814 405 3.2 16,570 556 3.4
Time Deposits 51,154 2,852 5.4 39,461 2,250 5.7 22,545 970 4.3
------ ----- ------ ----- ------
Total Int. Deposits 99,815 4,418 4.4 83,353 3,697 4.4 63,572 2,244 3.5
Subordinated Debt 251 16 6.3 1,719 114 6.6 0 0 0.0
------- ----- --- ----- ------ -----
Total Int. Liab. 100,066 4,434 4.4 85,072 3,811 4.5 63,572 2,244 3.5
======= ===== ====== ===== ====== =====
Non-Int IPC Deposits 21,118 0 19,544 0 15,664 0
------- ----- ------ -----
Total Deposits and
Debt Liabilities 121,184 4,434 3.7 104,616 3,811 3.6 79,236 2,244 2.8
======= ===== ======= ===== ====== =====
Other Liabilities 652 785 1,444
Stockholder Equity 11,802 8,629 6,781
------- ----- -----
Total Liabilities and
Stockholder Equity $133,638 $114,030 $87,461
======== ======== =======
Net Interest Margin
Includes fees: 8.5% 8.7% 8.9%
Exclude fee: 4.9% 5.1% 4.7%
</TABLE>
Other Assets
In 1995, the Bank had one property classified as other real estate owned
("OREO") with a book value of $134,000. The property, a single family residence
with an appraised value of $183,000, was sold in 1996 for a net gain of
approximately $25,000. There were no OREO properties at the end of 1996.
The Bank services a portfolio of loans for the Federal Home Loan Mortgage
Corporation ("FHLMC") and the Federal National Mortgage Corporation ("FNMA") as
well as for others. As of December 31, 1996, the portfolio amounted to $52.0
million. For performing this servicing function, the Bank earns a fee of
approximately .52% of the aggregate principal balance of the loans in the
portfolio.
<PAGE>
Income and Expense
The table below shows the major income and expense categories. Several
of the categories are discussed and detailed in tables that follow.
INCOME AND EXPENSE
Years ended December 31
-------------------------------------------------
1996 1995 1994
------ ------ ------
(In thousands of dollars)
Interest income:
Interest income $8,871 $7,729 $4,616
Fee income 4,305 3,774 3,319
Interest and fees on loans 13,176 11,503 7,935
Investments and deposits 984 955 843
Interest on fed funds sold 708 356 356
------- ------- ------
Total interest income $14,868 $12,814 $9,134
======= ======= ======
Provision for credit losses 250 270 105
Interest expense:
Interest on deposits 4,418 3,697 2,244
Interest on other borrowings 16 114 52
------ ------ ------
Total interest expense $4,434 $3,811 $2,296
====== ====== ======
Non-interest income 414 278 407
Non-interest expense 7,603 6,637 5,724
Income before income taxes, 2,995 2,374 1,416
minority interest, and
extraordinary items
Provision for taxes 903 769 422
------ ------ ----
Post-tax income $2,092 $1,605 $994
====== ====== ====
<PAGE>
Interest Income
Interest income increased by 14.8% in 1996 ($1,142,000). In 1994, as a
result of a softening in the Nevada single-family mortgage market, the Bank made
a focused effort to increase commercial lending. As a result, in 1995, interest
income increased by 67.4% ($3,113,000), as increased commercial portfolio levels
combined with increased rates to produce increased interest income. In 1996
portfolio levels continued to increase while rates remained constant. The growth
of fee income was 14.1% ($531,000) for 1996. For 1995, it was 13.7% ($455,000).
The growth in fee income in 1996 occurred because commercial loan originations
grew to $136 million in 1996 from $68 million in 1995.
In 1994, investment levels increased moderately and loan levels were up
significantly. The liquidity for this was provided by deposit growth and
marginally by increased borrowings. In 1995, deposit growth and the sale of
approximately $5 million previously held in the loan portfolio provided
liquidity for additional loan fundings. In 1996, deposit growth provided ample
liquidity for loan growth.
Interest Expense
In 1994, both deposit levels and interest rates rose rapidly. Interest
rates began to decline in 1995, but the Bank's deposit costs, in dollar terms,
were up due to increased deposit levels. In 1996, interest rates remained fairly
steady, while costs rose due to deposit level increases.
Non-Interest Income
The table below shows non-interest income for the years 1994, 1995, and
1996. In 1994, as a result of both an increase in the number of accounts and a
repricing of the service products service charges rose by $73,000, remained at
that level for 1995 and increased by another $4,000 in 1996.
The line item "Gain on Sale, Investments and Trading Account" reflected the
impact of marking the trading account to market and the sale of held for sale
securities.
From time to time the Bank acquires real estate in a foreclosure proceeding
and attempts to dispose of the real estate in the marketplace. Any property
which is not used or planned for use as a banking site is considered to be OREO
in the Bank's regulatory Call Report. The gains from these dispositions are
recognized in the line item "Other Income." In 1995 the Bank foreclosed on one
single family residence with a book value of $134,000 and an appraised value of
$183,000. The property was sold in 1996 at a net gain of approximately $25,000.
Prior to this property, the last piece of foreclosed real estate was disposed of
in 1991.
Also included in "Other Income" are gains on the sale of Bank fixed assets
and recoveries of losses (other than loan losses) realized in previous periods.
In 1996, the Bank realized $47,000 in income from cash value increases in life
insurance policies on the life of Robert Barone.
<PAGE>
The following table summarizes the Bank's non-interest income for 1996,
1995 and 1994.
NON-INTEREST INCOME
Years ended December 31,
-------------------------------------
1996 1995 1994
------ ------ ------
(In thousands of dollars)
Account service charges $265 $261 $260
Gain on sale, investments
and trading account (13) (47) 77
Other income 162 64 70
---- ----
$414 $278 $407
==== ==== ====
Non-Interest Expenses
Almost all of the non-interest expenses appear high when compared to the
Bank's peer group. In order to support its mortgage banking business the Bank
has a loan center in the new headquarters building in Reno which handles real
estate loan origination, houses loan representatives and secondary market
personnel, loan processing, loan servicing, and a builders' control unit. The
Carson City office also houses real estate loan representatives and a real
estate loan processing unit. There is also a real estate mortgage loan office in
Minden, a community south of Carson City. The Las Vegas office houses real
estate loan representatives, a real estate loan processing unit, and a builders'
control group. The facilities, equipment and personnel support for the mortgage
lending operation make the non-interest expenses much higher than those of most
other banks in the Bank's "peer group" which generally do not have extensive
mortgage lending units. The fee income generated from the mortgage lending
operations more than offsets the added expenses. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Interest Margin."
The following table summarizes the Bank's non-interest expense for 1996,
1995 and 1994.
NON-INTEREST EXPENSE
Years ended December 31,
-------------------------------------
1996 1995 1994
------ ------ ------
(In thousands of dollars)
Salaries and benefits $4,781 $3,906 $3,346
Occupancy expenses 528 502 473
Furniture and equipment expenses 464 373 303
Other operating expense 1,830 1,856 1,602
------ ------ ------
$ 7,603 $6,637 $5,724
======= ====== ======
<PAGE>
MANAGEMENT OF BANCORP
Directors
The Board of Directors of Bancorp currently consists of the eight current
directors of Comstock, all of which have been nominated for re-election at the
Annual Meeting. See "Proposal (1): Election of Directors." There is only one
class of directors for Bancorp. Each director serves a one year term until the
next annual meeting or until their successors are duly elected and qualified or
have been appointed by the Board of Directors. Approval of the Plan of
Reorganization by the holders of Bank Common Stock at the Annual Meeting will be
deemed to be approval of such persons as the directors of Bancorp without
further action. There are no arrangements or understandings between Bancorp and
any person pursuant to which such person was elected as a director.
Executive Officers
The Executive Officers of Bancorp are: Robert N. Barone, Chairman of the
Board of Directors, Chief Executive Officer and Treasurer; and Larry A. Platz,
President and Secretary.
Compensation
It is expected that, until such time as the officers and directors of
Comstock devote significant time to the separate management of Bancorp's
affairs, which is not expected to occur until Bancorp becomes actively involved
in additional businesses, no separate compensation will be paid for their
services to Bancorp. However, Bancorp may determine that such compensation is
appropriate in the future and may, at such time, enter into employment contracts
with certain key executive officers. See "Management of Comstock--Compensation
and Employee Benefit Plans."
If the stockholders of the Bank approve the Reorganization set forth in
Proposal (3) to this Proxy Statement--Prospectus, Bancorp will assume the Bank's
Employment Agreements with Robert Barone and Larry Platz on substantially the
same terms as now in effect, except that a "change of control" will be deemed to
have occurred if (i) Bancorp is involved in merger or other acquisition in which
Bancorp is not the surviving entity, (ii) shares representing greater than or
equal to forty percent of the voting power of Bancorp are acquired by a person,
entity or group (as such term is used in Rule 13d-5 of the Exchange Act) through
a transaction or series of transactions, or (iii) a majority of the members of
Bankcorp's Board of Directors elected at an annual meeting of the stockholders
of Bancorp are replaced, are removed without cause or resign during the period
commencing at the annual meeting of stockholders at which the directors were
elected and ending after the next annual meeting of stockholders at which
directors of Bancorp are elected. See "Executive Compensation--Employment
Agreements."
<PAGE>
Employee Benefit Plans
Under the terms of the Plan of Reorganization, the Incentive Plan, the
Directors' Plan and the Comstock Bank Payroll Deduction Stock Purchase Plan will
be assumed by Bancorp. All outstanding options to purchase shares of Bank Common
Stock granted pursuant to the Incentive Plan or the Directors' Plan will become,
as adjusted for the two-for-one share exchange ratio set forth in the Plan of
Reorganization, options to purchase the same number of shares of Bancorp Common
Stock on the same terms, conditions and exercise price as the original options
granted. See "Proposal (1): Election of Directors;" Executive
Compensation--Employment Agreements;" "Stock Option and Employee Benefit
Plans--401(k) Plan;" "--Deferred Compensation;" and "--Life Insurance
Arrangements."
MANAGEMENT OF COMSTOCK
Directors
For information with respect to nominees for election as directors of the
Bank at the Annual Meeting, including their age, business experience,
compensation paid by the Bank, stock ownership, and service on committees of the
Board of Directors, see "Proposal (1): Election of Directors."
Executive Officers
The Reorganization will not result in any change of the officers of
Comstock. The age at December 31, 1996 and position held with the Bank of each
person currently serving as an Executive Officer of Comstock is set forth below.
In addition, a brief biography of each individual is provided.
Name Age Position
- ---------------- --- -----------------------------------------------
Robert N. Barone 52 Chairman, Chief Executive Officer and Treasurer
Larry A. Platz 58 President and Secretary
Robert N. Barone, age 52, has served as Chairman, CEO, and Treasurer of the
Bank since March, 1984. Prior to that, he was a First Vice-President and CFO for
American Federal Savings & Loan of Nevada (now Norwest), Associate Professor of
Finance in the College of Business at the University of Nevada, Reno, and a
vice-president at a savings and loan association, and prior to that at a large
commercial bank in Cleveland, Ohio. Mr. Barone holds a Ph.D. in Economics from
Georgetown University, Washington, D.C.
Larry A. Platz, age 58, has served as President and Secretary of the Bank
since March, 1984. Prior to that, he was a Vice-President of American Federal
Savings & Loan of Nevada (subsequently purchased by Norwest Bank) and President
of one of that institution's subsidiaries. In the 1970's Mr. Platz was a
vice-president for World Savings & Loan of California. Mr. Platz holds a
Master's degree from the University of Southern California.
<PAGE>
Compensation and Employee Benefit Plans
For a discussion of the compensation paid to certain Executive Officers of
Comstock, employment agreements, and a description of the material benefit plans
and programs with respect to these Executive Officers, see "Proposal (1):
Election of Directors;" "Executive Compensation--Employment Agreements;" "Stock
Option Plans and Employee Benefits--401(k) Plan;" "--Deferred Compensation;" and
"--Life Insurance Arrangements."
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Bancorp plans to hold its 1998 annual meeting in April, 1998. In order for
a stockholder proposal to be included in next year's proxy statement, it must be
received by the Secretary of Bancorp at its offices at 6275 Neil Road, Reno,
Nevada, 89511 by November 29, 1997. If the Reorganization is not consummated,
such proposals must be received by the Secretary of the Bank at the above
address.
LEGAL MATTERS
The validity of the shares of Bancorp Common Stock to be issued in
connection with the Reorganization will be passed upon for Bancorp by the law
firm of Benesch, Friedlander, Coplan & Aronoff LLP, Cleveland, Ohio.
Additionally, certain of the tax consequences of the Merger to holders of
Bank Common Stock will be passed upon by Benesch, Friedlander, Coplan & Aronoff
LLP, on behalf of the Bank. See "Certain Federal Income Tax Consequences."
EXPERTS
The financial statements of the Bank as of December 31, 1996 and 1995 and
for each of the three years in the period ended December 31, 1996, included in
this Proxy Statement--Prospectus, which are referred to and made a part of this
Proxy Statement--Prospectus, have been audited by Kafoury, Armstrong & Co.,
independent auditors, as stated in their report appearing herein and in the
Proxy Statement--Prospectus, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
OTHER BUSINESS
The Board of Directors of the Bank knows of no other business which may be
presented for consideration at the Annual Meeting. However, if any other matters
come before such meeting, the persons named in the enclosed proxy may vote in
their discretion on such matters.
<PAGE>
FINANCIAL STATEMENTS
A copy of the Annual Report containing financial statements at December 31,
1996 and 1995 and for each of the three years in the period ended December 31,
1996, along with the opinion of Kafoury, Armstrong & Co., accompanies this Proxy
Statement--Prospectus. An additional copy of the Annual Report will be furnished
without charge to stockholders upon request.
The Bank has filed an annual report on Form F-2 for its fiscal year ended
December 31, 1996 with the FDIC. Stockholders may obtain, free of charge, a copy
of such annual report (excluding exhibits) by writing to Robert N. Barone,
Comstock Bank, 6275 Neil Road, Reno, Nevada 89511.
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, PLEASE
SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE POSTAGE PAID
ENVELOPE PROVIDED.
By Order of the Board of Directors
Robert N. Barone, Chairman of the
Board of Directors and Chief
Executive Officer
Reno, Nevada
April , 1997 Larry A. Platz, President
<PAGE>
COMSTOCK BANK
DECEMBER 31, 1996, 1995, AND 1994
INDEX TO FINANCIAL STATEMENTS
Page No.
--------
INDEPENDENT AUDITOR'S REPORT F-1
FINANCIAL STATEMENTS
Statements of Financial Condition F-2
Statements of Income F-3
Statements of Changes in Stockholders' Equity F-4 - F-6
Statements of Cash Flows F-6 - F-7
Notes to Financial Statements F-8 - F-25
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
of Comstock Bank
We have audited the accompanying statements of financial condition of
Comstock Bank as of December 31, 1996 and 1995, and the related statements of
income, changes in stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Bank'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 financial statements referred to above present fairly,
in all material respects, the financial position of Comstock Bank as of December
31, 1996 and 1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ Kafoury, Armstrong & Co.
Carson City, Nevada
January 10, 1997
F-1
<PAGE>
COMSTOCK BANK
STATEMENTS OF FINANCIAL CONDITION
December 31, 1996 and 1995
ASSETS
1996 1995
Cash and due from banks $ 6,738,000 $ 9,610,000
(non-interest bearing)
Federal funds sold 13,593,000 1,472,000
Interest-bearing deposits in domestic
financial institutions 1,498,000 1,785,000
Trading account securities - Note 3 28,000 35,000
Investment securities (market value of
$17,146,000 and $14,404,000 in 1996
and 1995, respectively) - Note 4 17,223,000 14,483,000
Federal Home Loan Bank stock 378,000 320,000
Loans held for sale - Note 5 7,806,000 9,546,000
Loans, net of allowance for credit losses
of $857,000 and $665,000 in 1996 and 1995,
respectively - Note 5 87,861,000 76,532,000
Premises and equipment, net - Note 6 6,447,000 5,960,000
Accrued interest receivable 840,000 752,000
Other assets - Note 7 2,568,000 2,310,000
------------ ------------
Total Assets $144,980,000 $122,805,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand deposits (non-interest bearing) $ 26,334,000 $ 24,097,000
Savings, money market and NOW accounts 51,717,000 44,987,000
Time deposits, under $100,000 33,958,000 28,930,000
Time deposits, $100,000 and over 19,295,000 13,155,000
----------- -----------
Total Deposits 131,304,000 111,169,000
Accrued interest payable 189,000 162,000
Accounts payable and accrued expenses 478,000 541,000
Income taxes payable - 48,000
Line of credit payable - Note 8 - -
----------- -----------
Total Liabilities 131,971,000 111,920,000
----------- -----------
Stockholders' equity:
Common stock, $.50 par value; 6,000,000
shares authorized, 2,117,634 and
2,115,534 shares issued and outstanding
at December 31, 1996 and 1995, respectively 1,059,000 1,058,000
Paid-in surplus 7,167,000 7,148,000
Unrealized gain (loss) on securities
available-for-sale, net of applicable
deferred income taxes (9,000) (21,000)
Retained earnings 4,792,000 2,700,000
----------- ----------
Total Stockholders' Equity 13,009,000 10,885,000
---------- ----------
Total Liabilities and
Stockholders' Equity $144,980,000 $122,805,000
============ ============
The accompanying notes are an integral
part of these financial statements.
F-2
<PAGE>
COMSTOCK BANK
STATEMENTS OF INCOME
Years Ended December 31, 1996, 1995, and 1994
1996 1995 1994
Interest income:
Interest and fees on loans $13,176,000 $11,503,000 $7,935,000
Interest on investment and
trading securities:
Taxable 751,000 754,000 653,000
Exempt from federal income tax 124,000 85,000 69,000
Interest on federal funds sold 708,000 356,000 356,000
Interest on deposits with banks 109,000 116,000 121,000
---------- ---------- ---------
Total Interest Income 14,868,000 12,814,000 9,134,000
---------- ---------- ---------
Interest expense:
Interest on deposits 4,418,000 3,697,000 2,247,000
Interest on line of credit 16,000 114,000 49,000
--------- --------- ---------
Total Interest Expense 4,434,000 3,811,000 2,296,000
--------- --------- ---------
Net interest income 10,434,000 9,003,000 6,838,000
Provision for credit losses (250,000) (270,000) (105,000)
---------- --------- ---------
Net interest income after
provision for credit losses 10,184,000 8,733,000 6,733,000
---------- --------- ---------
Other income:
Service charges on deposit accounts 265,000 261,000 260,000
Gain (loss) on sale of
investment securities (19,000) (6,000) (28,000)
Gain (loss) on sale of
trading securities 6,000 (41,000) 104,000
Other 162,000 64,000 71,000
------- ------- -------
Total Non-Interest Income 414,000 278,000 407,000
------- ------- -------
Other expense:
Salaries and employee benefits 4,781,000 3,906,000 3,346,000
Occupancy expenses 528,000 502,000 473,000
Furniture and equipment expense 464,000 373,000 303,000
Other operating expenses - Note 9 1,830,000 1,856,000 1,602,000
--------- --------- ---------
Total Non-Interest Expense 7,603,000 6,637,000 5,724,000
--------- --------- ---------
Income before income taxes 2,995,000 2,374,000 1,416,000
Income tax expense - Note 10 903,000 769,000 422,000
--------- --------- ---------
Net income $ 2,092,000 $ 1,605,000 $ 994,000
=========== =========== ==========
Primary earnings per share
- Note 12 $ .94 $ .85 $ .57
=========== =========== ==========
The accompanying notes are an integral
part of these financial statements.
F-3
<PAGE>
COMSTOCK BANK STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1996,
1995, and 1994
Common Stock
------------------ Paid-In
Shares Amount Surplus
--------- -------- ----------
Balances, December 31, 1993 1,527,771 $764,000 $4,109,000
Net income - - -
Sale of common stock 126,500 63,000 612,000
Dividends declared - - -
Change in unrealized gain (loss)
on securities available-for-sale,
net of applicable deferred income
taxes of $128,000 - - -
--------- ------- ---------
Balances, December 31, 1994 1,654,271 827,000 4,721,000
Net income - - -
Sale of common stock 295,868 148,000 1,373,000
Stock dividends declared - Note 11 165,395 83,000 1,054,000
Change in unrealized gain (loss)
on securities available-for-sale,
net of applicable deferred income
taxes of $117,000 - - -
--------- --------- ---------
Balances, December 31, 1995 2,115,534 1,058,000 7,148,000
Net income - - -
Sale of common stock 2,100 1,000 19,000
Change in unrealized gain (loss)
on securities available-for-sale,
net of applicable deferred income
taxes of $6,000 - - -
--------- --------- ----------
Balances, December 31, 1996 2,117,634 1,059,000 $7,167,000
========= ========= ==========
F-4
<PAGE>
Unrealized Gain (Loss)
on Securities
Available-For-Sale,
Net of Total
Retained Applicable Deferred Stockholders'
Earnings Income Taxes Equity
- --------------------------------------------------------------------------------
$ 1,650,000 $ - $ 6,523,000
994,000 - 994,000
- - 675,000
(412,000) - (412,000)
- (248,000) (248,000)
- ----------- ------------- -----------
2,232,000 (248,000) 7,532,000
1,605,000 - 1,605,000
- - 1,521,000
(1,137,000) - -
- 227,000 227,000
- ----------- ------------- ----------
2,700,000 (21,000) 10,885,000
2,092,000 - 2,092,000
- - 20,000
- 12,000 12,000
- ----------- ---------- -----------
$ 4,792,000 $ (9,000) $13,009,000
=========== ========== ===========
The accompanying notes are an integral
part of these financial statements.
F-5
<PAGE>
COMSTOCK BANK
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996,
1995, and 1994 (Page 1 of 2)
1996 1995 1994
----------- ----------- ----------
Cash flows from operating activities:
Net income $ 2,092,000 $ 1,605,000 $ 994,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for credit losses 250,000 270,000 105,000
Depreciation and amortization 568,000 321,000 303,000
Net (gain)loss on sales of
investment securities 19,000 6,000 28,000
Net (gain) loss on sales of
trading securities (6,000) 41,000 (104,000)
Increase (decrease) in deferred taxes
due to change in unrealized loss on
securities available-for-sale (6,000) (117,000) 128,000
Purchases of trading securities - (3,885,000) (6,235,000)
Proceeds from sales of
trading securities 13,000 3,869,000 6,329,000
Net (increase) decrease in:
Accrued interest receivable (88,000) (235,000) (243,000)
Other assets (259,000) (616,000) (591,000)
Loans held for sale 2,777,000 1,816,000 6,940,000
Net increase (decrease) in:
Accrued interest payable 27,000 48,000 30,000
Accounts payable and accrued
expenses (63,000) 258,000 (46,000)
Income taxes payable (48,000) 16,000 32,000
Deferred gain on sale of
real estate - - (78,000)
---------- ---------- ----------
Net Cash Provided (Used) By
Operating Activities 5,276,000 3,397,000 7,592,000
---------- ---------- ----------
Cash flows from investing activities:
Net change in interest bearing deposits
in domestic financial institutions 287,000 (285,000) 845,000
Proceeds from sales of available-
for-sale securities 4,647,000 3,486,000 1,992,000
Proceeds from maturities of
available-for-sale securities 4,029,000 2,350,000 507,000
Purchases of available-for-sale
securities (8,768,000) (3,661,000) (5,946,000)
Purchases of held-to-maturity
securities (3,157,000) (655,000) (1,038,000)
Proceeds from maturities of
held-to-maturity securities 506,000 218,000 -
Net change in loans held to maturity (12,616,000) (18,593,000) (23,626,000)
Purchases of premises and
equipment, net (1,052,000) (3,560,000) (419,000)
Purchase of Federal Home
Loan Bank stock (58,000) (20,000) (121,000)
---------- ---------- ----------
Net Cash Provided (Used) By
Investing Activities (16,182,000) (20,720,000) (27,806,000)
------------ ------------ ------------
F-6
<PAGE>
COMSTOCK BANK
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996,
1995, and 1994 (Page 2 of 2)
1996 1995 1994
----------- ----------- ----------
Cash flows from financing activities:
Net change in demand deposits,
savings, money market and
NOW accounts $ 8,967,000 $10,272,000 $ 931,000
Net change in time deposits 11,168,000 7,893,000 15,118,000
Proceeds of line of credit payable - - 2,000,000
Payments on line of credit payable - (2,000,000) -
Proceeds from sale of common stock, net 20,000 1,521,000 675,000
Dividends paid - (108,000) (380,000)
---------- ----------- ----------
Net Cash Provided (Used) By
Financing Activities 20,155,000 17,578,000 18,344,000
---------- ----------- -----------
Increase (Decrease) In Cash
and Cash Equivalents 9,249,000 255,000 (1,870,000)
Cash and cash equivalents:
Beginning of year 11,082,000 10,827,000 12,697,000
---------- ---------- -----------
End of year $ 20,331,000 $ 11,082,000 $ 10,827,000
============ ============ ============
The accompanying notes are an integral
part of these financial statements.
F-7
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
NOTE 1 - Summary of Significant Accounting Policies:
Nature of Operations
Comstock Bank is a Nevada State chartered bank. The Bank provides a
variety of financial services to individuals and corporate customers through
its branches in Reno, Carson City, and Las Vegas, Nevada. The Bank's primary
deposit products are non-interest-bearing and interest-bearing checking
accounts, savings, money market, NOW accounts, and certificates of deposit.
Its primary lending products are commercial loans related to the development
of single family homes and commercial properties, and single family
residential loans. Accordingly, its revenues are derived primarily from
these products. The accounting and reporting policies of Comstock Bank
conform with generally accepted accounting principles and with general
practice within the banking industry. The following is a summary of the most
significant of these policies.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for credit losses on
loans and the valuation of real estate acquired in connection with
foreclosures or in satisfaction of loans. In connection with the
determination of the allowances for losses on loans and foreclosed real
estate, management obtains independent appraisals for significant
properties.
While management uses available information to recognize losses on loans
and foreclosed real estate, future additions to the allowances may be
necessary based on changes in local economic conditions. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowances for losses on loans and foreclosed
real estate. Such agencies may require the Bank to recognize additions to
the allowances based on their judgments about information available to them
at the time of their examination. Because of these factors, it is reasonably
possible that the allowances for losses on loans and foreclosed real estate
may change materially in the near term.
Investment Securities
Management adopted Financial Accounting Standards Board (FASB) 115 on
January 1, 1994; and, therefore, determines the appropriate classification
of securities at the time of purchase. If management has the intent and the
ability at the time of purchase to hold securities until maturity, they are
classified as held to maturity and carried at amortized historical cost.
Securities to be held for indefinite periods of time and not intended to be
held to maturity are classified as available for sale and carried at fair
F-8
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
value. Securities held for indefinite periods of time include securities
that management intends to use as part of its asset and liability management
strategy and that may be sold in response to changes in interest rates,
resultant prepayment risk and other factors related to interest rate and
resultant prepayment risk changes.
Realized gains and losses on dispositions are based on the net proceeds
and the adjusted book value of the securities sold, using the specific
identification method. Unrealized gains and losses on investment securities
available for sale are based on the difference between book value and fair
value of each security. These gains and losses are credited or charged to
stockholders' equity, whereas realized gains and losses are charged to
operations. Premiums and discounts are recognized in interest income using
the interest method over the period to maturity.
Loans
Loans, including the unamortized balance of loan origination,
commitment, and other fees and costs are stated at the principal amounts
outstanding. Loans held for sale are stated at the lower of cost or market
value. Current market value is based on quoted market prices for similar
loans.
Loan Origination Fees
Loan origination fees, net of certain related costs, are being deferred
and amortized over the expected lives of the related loans using methods
that approximate the simple interest method.
Allowance for Credit Losses
An allowance for credit losses is provided through charges to operations
in the form of a provision for credit losses. Loans which management
believes are uncollectible, together with any accrued income, are charged
against this account with subsequent recoveries, if any, credited to the
account.
The amount of the current provision for credit losses charged to
operations is determined by management's evaluation of the quality and
inherent risks in the loan portfolio, economic conditions, and other factors
which warrant current recognition.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation
and amortization, which is determined using the straight line method over
estimated useful lives ranging from three to forty years.
Nonperforming Assets
Nonperforming assets are defined by the Bank as:
Nonaccrual Loans - Loans on which the accrual of interest income and
amortization of loan origination fees has been suspended. A loan is
placed on nonaccrual status when, in the opinion of management, the
future collectibility of interest and principal is in serious doubt.
F-9
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
Other Real Estate Owned - Real estate acquired in full or partial
settlement of loan obligations. When property is acquired, any
excess of the Bank's recorded investment in the loan balance and
accrued income over the estimated net realized value of the property
is charged against the allowance for credit losses. Other real
estate owned is carried at the lower of cost or net realizable
value.
Income Taxes
Provisions for income taxes are based on amounts reported in the
statements of income (after exclusion of non-taxable income and inclusion of
expenses deductible for federal income tax purposes which are not expenses
for financial reporting purposes) and include deferred taxes on temporary
differences in the recognition of income and expense for tax and financial
statement purposes.
Interest Income on Loans
Interest on loans is accrued and credited to income based on the
principal amount outstanding. The accrual of interest on loans (including
unamortized fees) is discontinued when, in the opinion of management, there
is an indication that the borrower may be unable to meet payments as they
come due. Upon such discontinuance, all unpaid accrued interest is reversed.
Dividends
In accordance with Nevada Revised Statutes, the Bank's dividend policy
prohibits payments of dividends in excess of its retained earnings.
Cash Flow Information
Cash and cash equivalents for purposes of the cash flow statements
include cash and due from banks and federal funds sold.
Prior Years' Reclassification
The prior years' financial statements have been reclassified where
applicable to conform to the current year's presentation.
NOTE 2 - Mortgage Contracts Serviced for Others :
Mortgage contracts with unpaid balances of approximately $52,004,000 and
$50,830,000 were being serviced for others at December 31, 1996 and 1995,
respectively.
NOTE 3 - Trading Account Securities:
Trading account securities consist of U.S. Treasury and hedging
securities with varying maturity dates. The investments are carried at
market value.
F-10
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
NOTE 4 - Investment Securities:
The carrying amounts of investment securities as shown in the Statements
of Financial Condition of the Bank and their approximate fair values at
December 31 were as follows:
Available-for-Sale Securities
-------------------------------------------
Gross Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------
December 31, 1996:
U.S. Treasury and Agency Securities $7,542,000 $11,000 $27,000 $7,526,000
State and Municipal Securities 668,000 5,000 2,000 671,000
Collateralized Mortgage Obligations
and Mortgage-backed Securities 3,537,000 13,000 14,000 3,536,000
Other Debt Securities - - - -
----------- ------- ------- -----------
$11,747,000 $29,000 $43,000 $11,733,000
=========== ======= ======= ===========
December 31, 1995:
U.S. Treasury and Agency Securities $8,678,000 $25,000 $15,000 $8,688,000
State and Municipal Securities 810,000 6,000 14,000 802,000
Collateralized Mortgage Obligations
and Mortgage-backed Securities 2,187,000 4,000 36,000 2,155,000
Other Debt Securities - - - -
----------- ------- ------- -----------
$11,675,000 $35,000 $65,000 $11,645,000
=========== ======= ======= ===========
Held-to-Maturity Securities
-------------------------------------------
Gross Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------
December 31, 1996:
U.S. Treasury and Agency Securities $1,190,000 $ - $70,000 $1,120,000
State and Municipal Securities 2,458,000 18,000 17,000 2,459,000
Collateralized Mortgage Obligations
and Mortgage-backed Securities 1,842,000 5,000 13,000 1,834,000
Other Debt Securities - - - -
---------- ------- -------- ----------
$5,490,000 $23,000 $100,000 $5,413,000
========== ======= ======== ==========
December 31, 1995:
U.S. Treasury and Agency Securities $1,158,000 $ - $ 68,000 $1,090,000
State and Municipal Securities 1,325,000 4,000 14,000 1,315,000
Collateralized Mortgage Obligations
and Mortgage-backed Securities 355,000 - 1,000 354,000
Other Debt Securities - - - -
---------- ------- -------- ----------
$2,838,000 $ 4,000 $ 83,000 $2,759,000
========== ======= ======== ==========
F-11
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
The amortized cost and approximate market value of securities
held-tomaturity and available-for-sale at December 31, 1996, by contractual
maturity, are shown below.
Held-to-Maturity Available-for-Sale
----------------------- -----------------------
Approximate Approximate
Amortized Market Amortized Market
Cost Value Cost Value
Due within one year $220,000 $221,000 $2,285,000 $2,286,000
Due after one year
through five years 2,770,000 2,694,000 8,364,000 8,349,000
Due after five years
through ten years 1,970,000 1,960,000 883,000 878,000
Due after ten years 530,000 538,000 215,000 220,000
---------- ---------- ----------- -----------
$5,490,000 $5,413,000 $11,747,000 $11,733,000
========== ========== =========== ===========
Maturities of mortgage-backed securities are classified in accordance
with the contractual repayment schedules. Expected maturities will differ
from the contractual maturities reported above, because debt security
issuers may have the right to call or prepay obligations with or without
call or prepayment penalties.
During 1995, the Financial Accounting Standards Board (FASB) offered a
one time opportunity to reclassify securities among the held-to-maturity,
available-for-sale, and trading categories in conjunction with adopting a
new implementation guide. Following the FASB's announcement, the Bank
reclassified securities with a book value of approximately $1,691,000 from
its held-to-maturity portfolio to its available-for-sale portfolio. No gains
or losses were recognized on the transfer.
Securities held-to-maturity with a carrying value of approximately
$2,853,790 and $1,158,000 and securities available-for-sale with a carrying
value of approximately $10,913,381 and $9,471,000 were pledged to FHLB and
Federal Reserve Bank at December 31, 1996 and 1995, respectively.
Gross proceeds, gross realized gains, and gross realized losses on sales
of available-for-sale Securities were:
1996 1995
---------- ----------
Gross proceeds:
U.S. Treasury and Agency Securities $2,627,000 $3,011,000
State and Municipal Securities 820,000 125,000
Collateralized Mortgage Obligations
and Mortgage-backed Securities 1,200,000 350,000
Other Debt Securities - -
---------- ----------
$4,647,000 $3,486,000
========== ==========
F-12
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
1996 1995
---------- ----------
Gross realized gains:
U.S. Treasury and Agency Securities $14,000 $11,000
State and Municipal Securities - -
Collateralized Mortgage Obligations
and Mortgage-backed Securities - -
Other Debt Securities - -
------- -------
$14,000 $11,000
======= =======
Gross realized losses:
U.S. Treasury and Agency Securities $2,000 $7,000
State and Municipal Securities 5,000 3,000
Collateralized Mortgage Obligations
and Mortgage-backed Securities 26,000 7,000
Other Debt Securities - -
------- -------
$33,000 $17,000
======= =======
The net realized losses of $19,000 and $6,000 on the sale of securities
resulted in income tax savings of approximately $7,000 and $2,000 for 1996
and 1995, respectively.
NOTE 5 - Loans:
Loans held for sale were as follows at December 31:
1996 1995
---------- ----------
Commercial and industrial $ - $457,000
Real estate mortgages 7,806,000 9,089,000
---------- ----------
$7,806,000 $9,546,000
========== ==========
The Bank funded and subsequently sold approximately $139,506,000 and
$153,000,000 of loans held for sale in 1996 and 1995, respectively. The
resulting gain and loss was insignificant in both years.
Major loan classifications are as follows at December 31:
1996 1995
---------- ----------
Commercial and industrial $69,579,000 $54,513,000
Real estate:
Construction and land development 13,449,000 18,925,000
Mortgages 3,936,000 2,173,000
Installment 2,060,000 1,847,000
---------- ----------
Subtotal 89,024,000 77,458,000
Deferred loan fees, net (306,000) (261,000)
Allowance for credit losses (857,000) (665,000)
------------ ------------
Net Loans $87,861,000 $76,532,000
=========== ===========
F-13
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Loans with a carrying value of approximately $8,733,000 and $6,382,000
at December 31, 1996 and 1995, respectively, were pledged to secure the line
of credit with FHLB (see Note 8).
The Bank's business activity is with customers primarily located within
Northern Nevada. The Bank grants commercial, real estate, and installment
loans to these customers. Although the Bank has a diversified loan
portfolio, a significant portion of its customers' ability to repay the
loans is dependent upon the economic health of commercial and residential
real estate development. Generally, the loans are secured by real estate.
The loans are expected to be repaid from cash flow or proceeds from the sale
of the real estate of the borrower. The Bank's policy is to require adequate
real estate and improvement collateral for all commercial and residential
real estate development credit extended. The bank may be required to take
legal action to enforce its rights to pledged collateral.
A summary of the changes in the allowance for credit losses for the
years ended December 31 is as follows:
1996 1995 1994
-------- -------- --------
Beginning balance $665,000 $428,000 $404,000
Loans charged off (61,000) (35,000) (88,000)
Loan recoveries 3,000 2,000 7,000
-------- -------- --------
Net Recoveries
(Charge-Offs) (58,000) (33,000) (81,000)
Provision charged to operations 250,000 270,000 105,000
-------- -------- --------
Ending Balance $857,000 $665,000 $428,000
======== ======== ========
Impairment of loans having carrying values of $3,184,000 and $226,000 at
December 31, 1996 and 1995, respectively, have been recognized in conformity
with FASB Statement No. 114, Accounting by Creditors for Impairment of a
Loan. The total allowance for credit losses related to those loans was
$75,000 and $20,000, respectively. For impairment recognized in conformity
with FASB Statement No. 114, the entire change in present value of expected
cash flows is reported as provision for credit losses in the same manner in
which impairment initially was recognized or as a reduction in the amount of
provision for credit losses that otherwise would be reported.
The average recorded investment in impaired loans was $739,000 and
$519,000 during 1996 and 1995, respectively. The amount of interest income
recognized during 1996 and 1995 was approximately $71,000 and $47,000,
respectively, which was approximately the same amount that would have been
recognized on a cash basis. If an impaired loan is placed on nonaccrual
status, all future collections while on nonaccrual status are recognized as
a reduction of the loan investment. For impaired loans not on nonaccrual
status, interest income is recognized when earned.
F-14
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
At December 31, 1996, 1995, and 1994, the Bank's significant credit risk
was in commercial and industrial, and construction and land development
loans. Of the total allowance for credit losses at the end of each of those
three years, approximately 80 percent of the allowance was for loans in
those two categories. No significant charge-offs are currently anticipated
for the next year of operation.
NOTE 6 - Premises and Equipment:
Premises and equipment consist of the following at December 31:
1996 1995
---------- ----------
Land $934,000 $934,000
Buildings 4,710,000 4,351,000
Furniture, fixtures, and equipment 2,685,000 2,115,000
--------- ---------
8,329,000 7,400,000
Less: Accumulated depreciation
and amortization (1,882,000) (1,440,000)
---------- ----------
$6,447,000 $5,960,000
========== ==========
Depreciation and amortization expense was approximately $568,000,
$321,000, and $303,000 for the years ended December 31, 1996, 1995, and
1994, respectively.
NOTE 7 - Other Assets:
Other assets consist of the following at December 31:
1996 1995
---------- ----------
Cash surrender value, Officers' Life
Insurance $1,952,000 $1,546,000
Other 616,000 764,000
---------- ----------
$2,568,000 $2,310,000
========== ==========
NOTE 8 - Credit Arrangement:
The Bank has a credit agreement with the Federal Home Loan Bank of San
Francisco (FHLB) whereby the Bank may borrow up to 30 percent of the Bank's
assets, with terms up to 240 months. The above line of credit requires the
Bank to maintain certain collateral maintenance, credit, and other
requirements as set forth by FHLB. The line is secured by securities and
mortgage loans pledged to the FHLB which amounted to approximately
$20,957,000 and $15,526,000 at December 31, 1996 and 1995, respectively.
At December 31, 1996 and 1995, no amounts were owed to FHLB.
The Bank also has an uncollateralized credit line with Union Bank of
California, whereby the Bank may borrow federal funds up to $2,000,000. This
agreement expires May 31, 1997 and requires a compensating balance of
$200,000. There were no borrowings on this line at December 31,1996 or 1995.
F-15
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 9 - Other Operating Expenses:
The major categories of other operating expenses for the years ended
December 31 are as follows:
1996 1995 1994
-------- -------- --------
Data processing fees $235,000 $259,000 $202,000
Legal and consulting fees 226,000 185,000 122,000
Insurance 56,000 68,000 68,000
Telephone 121,000 98,000 78,000
Office supplies 359,000 328,000 297,000
Advertising 253,000 239,000 211,000
Assessments 16,000 110,000 169,000
Other operating expenses 564,000 569,000 455,000
---------- ---------- ----------
$1,830,000 $1,856,000 $1,602,000
========== ========== ==========
All advertising costs are expensed as incurred.
NOTE 10 - Income Taxes:
The components of the provision for income taxes are as follows:
1996 1995 1994
-------- -------- --------
Current federal income tax expense $990,000 $898,000 $432,000
Deferred federal income tax expense (87,000) (129,000) (10,000)
--------- --------- ---------
$903,000 $769,000 $422,000
======== ======== ========
A reconciliation of income tax at the statutory rate to the Bank's
effective rate is as follows:
1996 1995 1994
-------- -------- --------
Statutory rate 34.0% 34.0% 34.0%
Tax-exempt life insurance income -0.8% -0.3% -0.6%
Tax loss in excess of book loss on
sale of investment securities -0.8% -0.5% 0.0%
Compensation on stock options 0.0% 0.0% -0.2%
Tax-exempt interest income -1.4% -1.2% -1.7%
Other, net -0.8% 0.4% -1.7%
----- ----- -----
30.2% 32.4% 29.8%
===== ===== =====
F-16
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Deferred income taxes result from temporary differences in the basis of
assets and liabilities for financial reporting and income taxes. The source
of these temporary differences and their resulting effect on income tax
expense are as follows:
1996 1995 1994
-------- -------- --------
Depreciation $6,000 $5,000 $11,000
Provision for loan losses (85,000) (92,000) (36,000)
Loan fees (15,000) (21,000) (12,000)
Valuation of loans held for sale - (20,000) 20,000
Deferred gain - - 26,000
Other, net 7,000 (1,000) (19,000)
--------- ---------- ---------
$(87,000) $(129,000) $(10,000)
========= ========== =========
Significant components of the deferred tax liabilities and assets at
December 31 are as follows:
1996 1995
------- -------
Deferred tax liabilities:
Depreciation $70,000 $58,000
------- -------
Deferred tax assets:
Valuation of available-for-sale securities 5,000 11,000
Excess of financial reporting provision
for credit losses over tax basis 245,000 150,000
Deferred fee income 99,000 89,000
------- -------
349,000 250,000
------- -------
Net deferred tax asset $279,000 $192,000
======== ========
NOTE 11 - Stock Dividend:
On February 22, 1995, the Bank declared a 10% stock dividend to holders
of record as of March 29, 1995. All references to number of shares, number
of stock options, and per share information, except for authorized shares,
have been adjusted to reflect the stock dividend on a retroactive basis to
all prior periods presented.
NOTE 12 - Primary Earnings Per Share:
Primary earnings per share amounts are computed based on the weighted
average number of shares actually outstanding plus the shares that would be
outstanding assuming conversion of the options which are considered to be
common stock equivalents. Primary earnings per share have been restated
retroactively for the year ended December 31, 1994 to reflect the 10% stock
dividend (Note 11).
F-17
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Earnings per common share have been computed based on the following:
Year Ended December 31
----------------------------------
1996 1995 1994
-------- -------- --------
Net income $2,092,000 $1,605,000 $994,000
Weighted average number of
common shares outstanding 2,117,000 1,852,000 1,724,000
Weighted average number of
common and common equivalent
shares outstanding 2,233,000 1,882,000 1,734,000
NOTE 13 - Stock Options:
The Bank has stock option plans which provide for the grant of
non-qualified stock options to certain directors, officers, and key
employees. At December 31, 1996, there were 138,168 shares of common stock
available for future grant or award and 406,016 of the outstanding options
were exercisable. Options are granted at prices not less than fair market
value at the date of grant and for terms of up to ten years.
Activity in the stock option plans were as follows:
Weighted
Average
Number Per Share
of Shares Option Price
--------- ------------
Outstanding at December 31, 1993 289,666 4.77
Granted 9,900 6.82
Exercised 2,750 6.40
Cancelled 3,850 6.70
------- ----
Outstanding at December 31, 1994 292,966 4.85
Granted 31,600 6.930
Exercised 4,050 6.875
Cancelled - -
------ -----
Outstanding at December 31, 1995 320,516 5.03
Granted 23,350 10.07
Exercised - -
Cancelled - -
------- -----
Outstanding at December 31, 1996 343,866 5.36
======= =====
The Bank has also issued stock options to shareholders in connection
with the issuance of stock. The activity of those stock options was as
follows:
Outstanding at December 31, 1993 33,000 2.95
Granted 103,400 7.73
Exercised 33,000 2.95
Cancelled - -
------- ----
F-18
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Weighted
Average
Number Per Share
of Shares Option Price
--------- ------------
Outstanding at December 31, 1994 103,400 7.73
Granted - -
Exercised - -
Cancelled - -
------- ----
Outstanding at December 31, 1995 103,400 7.73
Granted - -
Exercised - -
Cancelled - -
------- ----
Outstanding at December 31, 1996 103,400 7.73
======= ====
The Bank applies APB Opinion 25 in accounting for its fixed and
performance-based stock compensation plans. Accordingly, no compensation
cost has been recognized in 1996 or 1995. Had compensation cost been
determined on the basis of fair value pursuant to FASB Statement No. 123,
net income and earnings per share would have been reduced as follows:
1996 1995
---------- ----------
Net income:
As reported $2,092,000 $1,605,000
========== ==========
Pro forma $2,008,000 $1,530,000
========== ==========
Primary earnings per share:
As reported $.94 $.85
Pro forma $.90 $.81
The fair value of each option grant is estimated on the date of grant
using an option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995: dividend yield of 0.0 percent
for both years; expected volatility of 30.45 percent, risk-free interest
rate of 6.68 percent; and expected lives of 10 years.
NOTE 14 - Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for: 1996 1995 1994
---------- ---------- ----------
Interest $4,407,000 $3,763,000 $2,266,000
========== ========== ==========
Income Taxes $1,054,000 $ 883,000 $ 371,000
========== ========== ==========
NOTE 15 - Profit Sharing Plan:
Effective January 1, 1992, the Bank established a 401(K) Profit Sharing
Plan and Trust that covers all eligible employees. The Bank makes
discretionary matching contributions based on 50 percent of the amount of
salary deferral elected by the employee, up to 6 percent of the employee's
salary. Contributions to the plan charged to operations were approximately
$79,000, $65,000, and $53,000 for the years ended December 31, 1996, 1995,
and 1994, respectively.
F-19
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 16 - Operating Leases:
The Bank leases premises and equipment under operating leases expiring
through 2011. The aggregate future minimum annual rental commitment as of
December 31, 1996, under operating leases having noncancelable lease terms
in excess of one year are as follows:
1997 $ 342,000
1998 305,000
1999 248,000
2000 239,000
2001 195,000
Thereafter 915,000
----------
$2,244,000
==========
Rent expense for the years ended December 31, 1996, 1995, and 1994
amounted to approximately $202,000, $318,000, and $302,000, respectively.
Certain operating leases provide for renewal options for periods of 5 to 15
years at the fair rental value at the time of renewal. In the normal course
of business, operating leases are generally renewed or replaced by other
leases.
NOTE 17 - Financial Instruments with Off-Balance Sheet Risk:
In the ordinary course of business, the Bank enters into various types
of transactions which involve financial instruments with off-balance sheet
risk. These instruments include commitments to extend credit and standby
letters of credit and are not reflected in the accompanying balance sheet.
These transactions may involve, to varying degrees, credit and interest rate
risk in excess of the amount, if any, recognized in the balance sheet.
Management does not anticipate any loss to result from these
commitments; however, in case of default, legal action may be required to
enforce its rights to collateral pledged to secure these commitments. The
Bank's off-balance sheet credit risk exposure is the contractual amount of
commitments to extend credit and standby letters of credit. The Bank applies
the same credit standards to these contracts as it uses in its lending
process.
1996 1995 1994
Financial instruments whose ----------- ----------- -----------
contractual amount
represented risk:
Commitments to extend credit $56,716,000 $55,788,000 $53,041,000
=========== =========== ===========
Standby letters of credit $ 3,729,000 $ 3,980,000 $ 1,408,000
=========== =========== ===========
Commitments to extend credit are arrangements to lend to customers.
These commitments have specified interest rates and generally have fixed
expiration dates, but may be terminated by the Bank if certain conditions of
the contract are violated. These commitments are normally collateralized by
real estate.
F-20
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Standby letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. Credit risk
arises in these transactions from the possibility that a customer may not be
able to repay the Bank upon default of performance. Collateral held for
standby letters of credit is based on an individual evaluation of each
customer's credit worthiness, but may include cash and securities.
NOTE 18 - Commitments and Contingencies:
Because of the nature of its business, the Bank is often a defendant in
legal actions. Based upon advice of counsel, management does not anticipate
that the final outcome of any litigation in process, or anticipated, will
have a materially adverse effect on the Bank's operations or financial
condition.
NOTE 19 - Related Party Transactions:
The Bank has entered into transactions (including loans and deposits)
with its directors, officers, and significant shareholders. Such
transactions were made in the ordinary course of business on substantially
the same terms and conditions, including interest rates and collateral, as
those prevailing at the same time for comparable transactions with other
customers, and did not, in the opinion of management, involve more than
normal credit risk or present other unfavorable features.
The following is a summary of the aggregate loan activity involving
related party loans during 1994, 1995, and 1996.
Balance, December 31, 1993 $1,257,000
Additions 582,000
Repayments (982,000)
-----------
Balance, December 31, 1994 857,000
Additions 437,000
Repayments (809,000)
-----------
Balance, December 31, 1995 485,000
Additions 358,000
Repayments (416,000)
-----------
Balance, December 31, 1996 $ 427,000
===========
NOTE 20 - Regulatory Matters:
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory--and possibly additional
discretionary--actions by regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices.
The Bank's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings,
and other factors.
F-21
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set forth
in the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December
31, 1996, that the Bank meets all capital adequacy requirements to which it
is subject.
As of December 31, 1996, the most recent notification from federal
banking agencies categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. There are
no conditions or events since that notification that management believes
have changed the institution's category.
The Bank's actual capital amounts and ratios are presented in the
following table.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 1996:
Total Capital
(to Risk Weighted Assets) $13,872,000 13.5% *$8,250,000 *8.0% *$10,312,000 *10.0%
Tier I Capital
(to Risk Weighted Assets) 13,015,000 12.6% *4,125,000 *4.0% *6,187,000 *6.0%
Tier I Capital
(to Average Assets) 13,015,000 9.2% *5,684,000 *4.0% *7,105,000 *5.0%
As of December 31, 1995:
Total Capital
(to Risk Weighted Assets) 11,176,000 12.6% *7,081,000 *8.0% *8,851,000 *10.0%
Tier I Capital
(to Risk Weighted Assets) 10,559,000 11.9% *3,540,000 *4.0% *5,311,000 *6.0%
Tier I Capital
(to Average Assets) 10,559,000 8.6% *4,926,000 *4.0% *6,157,000 *5.0%
</TABLE>
* Denotes the symbol greater than or equal to.
NOTE 21 - Fair Value of Financial Instruments:
SFAS No. 107, "Disclosures about Fair Values of Financial Instruments,"
requires disclosure of information about the fair value of financial
instruments for which it is practicable to estimate a value, whether or not
recognized in the statement of condition. Whenever possible, quoted market
prices are used to estimate fair values. In cases where quoted market prices
F-22
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
are not available, fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future
cash flows. Therefore, in many cases, the estimated fair values may not be
realized in an immediate sale of the instruments.
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate of
the estimated fair value amounts is not intended to represent the underlying
value of the Corporation.
The carrying amounts and the estimated fair values are as follows:
December 31, 1996
-------------------------
Carrying Estimated
Amount Fair Value
Assets: ----------- -----------
Cash and cash equivalents $20,331,000 $20,331,000
Interest-bearing deposits 1,498,000 1,498,000
Trading account securities 28,000 28,000
Investment securities 17,223,000 17,146,000
Federal Home Loan Bank Stock 378,000 378,000
Loans receivable 95,667,000 98,603,000
Accrued interest receivable 840,000 840,000
---------- ----------
Total Asset Financial
Instruments $135,965,000 $138,824,000
============ ============
Liabilities:
Deposits $131,304,000 $131,341,000
Accrued interest payable 189,000 189,000
Accounts payable and accrued
expenses 479,000 479,000
------------ ------------
Total Liability Finan-
cial Instruments $131,972,000 $132,009,000
============ ============
December 31, 1995
-------------------------
Carrying Estimated
Amount Fair Value
Assets: ----------- -----------
Cash and cash equivalents $11,082,000 $11,082,000
Interest-bearing deposits 1,785,000 1,785,000
Trading account securities 35,000 35,000
Investment securities 14,483,000 14,404,000
Federal Home Loan Bank Stock 320,000 320,000
Loans receivable 86,078,000 88,919,000
Accrued interest receivable 752,000 752,000
------------ ------------
Total Asset Financial
Instruments $114,535,000 $117,297,000
============ ============
F-23
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
December 31, 1995
-------------------------
Carrying Estimated
Amount Fair Value
Liabilities: ------------ -----------
Deposits $111,169,000 $111,905,000
Accrued interest payable 162,000 162,000
Accounts payable and accrued
expenses 542,000 542,000
Income taxes payable 48,000 48,000
------------ ------------
Total Liability Finan-
cial Instruments $111,921,000 $112,657,000
============ ============
The following methods and assumptions were used by the Bank in
estimating its fair value disclosures for financial instruments:
Cash and Cash Equivalents
The carrying amounts reported in the statement of condition for cash and
cash equivalents approximate those assets' fair values.
Interest-Bearing Deposits
Fair values for interest-bearing deposits in domestic financial
institutions are based on quoted market prices, where available. If quoted
market prices are not available, fair values are based on quoted market
prices of comparable instruments.
Trading Account Securities
Fair values for the Bank's trading account assets, which also are the
amounts recognized in the statement of condition, are based on quoted market
prices.
Investment Securities
Fair values for investment securities are based on quoted market prices,
where available. If quoted market prices are not available, fair values are
based on quoted market prices of comparable instruments.
Federal Home Loan Bank Stock
Fair values for federal home loan bank stock is based on cost which
approximates market.
Loans Receivable
For variable-rate loans that reprice frequently and with no significant
change in credit risk, fair values are based on carrying amounts. The fair
values of fixed-rate mortgage loans are based on quoted market prices of
similar loans sold, adjusted for differences in loan characteristics. The
fair values of other fixed-rate loans are estimated using discounted cash
flow analysis, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality.
F-24
<PAGE>
COMSTOCK BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Accrued Interest Receivable
The carrying amount reported in the statement of condition for accrued
interest receivable approximates its fair value.
Deposit Liabilities
The carrying amounts for interest-bearing and non-interest-bearing
demand, savings, money market, and NOW accounts approximate those
liabilities' fair values. Fair values for fixed-rate certificates of deposit
are estimated using a discounted cash flow calculation that applies interest
rates currently being offered on certificates to a schedule of aggregated
expected monthly maturities on time deposits.
Accrued Interest Payable
The carrying amount reported in the statement of condition for accrued
interest payable approximates its fair value.
Accounts Payable, Accrued Expenses, and Other Short-Term Liabilities
The carrying amount reported in the statement of condition for accounts
payable and accrued expenses, and income taxes payable, approximates those
liabilities' fair values.
NOTE 22 - Quarterly Financial Data (Unaudited):
Provision
Net for
Interest Interest Interest Credit
Three Months Ended Income Expense Income Losses
March 31, 1996 $3,441,000 $1,028,000 $2,413,000 $90,000
June 30, 1996 3,512,000 1,108,000 2,405,000 60,000
September 30, 1996 3,972,000 1,148,000 2,824,000 40,000
December 31, 1996 3,943,000 1,150,000 2,792,000 60,000
----------- ---------- ----------- --------
$14,868,000 $4,434,000 $10,434,000 $250,000
=========== ========== =========== ========
March 31, 1995 $2,694,000 $850,000 $1,844,000 $30,000
June 30, 1995 3,207,000 948,000 2,260,000 60,000
September 30, 1995 3,332,000 1,018,000 2,314,000 90,000
December 31, 1995 3,581,000 995,000 2,585,000 90,000
---------- --------- ---------- --------
$12,814,000 $3,811,000 $9,003,000 $270,000
=========== ========== ========== ========
Gain
(Loss) on
Available-
for-Sale
Investment Net Earnings
Securities Income Per Share
- ---------- ---------- ---------
$14,000 $409,000 $.19
(8,000) 383,000 .17
23,000 653,000 .29
(48,000) 647,000 .29
- --------- ---------- ----
$(19,000) $2,092,000 $.94
========= ========== ====
$2,000 $221,000 $.12
(16,000) 400,000 .22
(28,000) 467,000 .25
36,000 517,000 .26
- -------- ---------- ----
$(6,000) $1,605,000 $.85
======== ========== ====
F-25
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated as
of February 26, 1997, is made by and between Comstock Bank, a Nevada banking
corporation having a business address of 6275 Neil Road, Reno, Nevada 89511 (the
"Bank"), and Comstock Bancorp, a Nevada bank holding company having a business
address of 6275 Neil Road, Reno, Nevada 89511 ("Bancorp").
W I T N E S S E T H:
WHEREAS, as of the date of this Agreement, the authorized capital stock
of the Bank consists of 6,000,000 shares of common stock, par value of $.50 per
share ("Bank Common Stock"), of which _____________ shares are issued and
outstanding.
WHEREAS, as of the date of this Agreement, the authorized capital stock
of Bancorp consists of 15,000,000 shares of common stock, par value $.01 per
share ("Bancorp Common Stock"), of which 100 shares are issued and outstanding
and held of record by the Bank.
WHEREAS, the respective Boards of Directors of the Bank and Bancorp
have determined that it is in the best interests of the Bank and Bancorp and
their respective stockholders that Bancorp acquire all of the issued and
outstanding shares of Bank Common Stock in exchange for shares of Bancorp Common
Stock pursuant to the terms of this Agreement and that Bank shall become a
wholly-owned subsidiary of Bancorp (the "Exchange").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained, the Bank
and Bancorp do hereby agree as follows:
ARTICLE I
APPROVAL AND FILING OF PLAN
1.1 Approval. This Agreement shall be submitted for approval by the
holders of Bank Common Stock at a meeting to be duly called and held in
accordance with the By-Laws of the Bank and all applicable laws and regulations.
1.2 Effective Time of the Exchange. The Exchange shall become effective
when a properly executed certificate of share exchange and any necessary
attachments thereto has been duly filed with the Secretary of State of the State
of Nevada, which filing shall be made as soon as practicable upon satisfaction
or waiver of the conditions set forth in Article IV hereof. When used in this
Agreement, the term "Effective Time" shall mean the date and time at which such
certificate of share exchange has been so filed.
<PAGE>
1.3 Reservation of Shares. Bancorp will make available a sufficient
number of shares of Bancorp Common Stock to effect the Exchange and the exercise
of options and warrants to purchase shares of Bank Common Stock issued upon
conversion of options and warrants to purchase Bank Common Stock outstanding at
the Effective Time.
ARTICLE II
ACTIONS AT THE EFFECTIVE TIME
2.1 Bank Common Stock. At the Effective Time, Bancorp shall, without
any further action on its part or on the part of the holders of Bank Common
Stock, automatically and by operation of law acquire and become the owner for
all purposes of all shares of Bank Common Stock issued and outstanding
immediately prior to the Effective Time, and Bancorp shall be entitled to have
issued to it by the Bank a certificate or certificates representing such shares.
Thereafter, Bancorp shall have full and exclusive power to vote such shares of
Bank Common Stock, to receive dividends thereon and to exercise all rights of an
owner thereof.
2.2 Bancorp Common Stock. At the Effective Time, any shares of Bancorp
Common Stock which may have been previously issued and are outstanding
immediately prior to the Effective Time shall be redeemed and retired and shall
thereafter constitute authorized and unissued shares of Bancorp Common Stock.
2.3 Holders of Bank Common Stock. At the Effective Time, the holders of
the shares of Bank Common Stock issued and outstanding immediately prior to the
Effective Time shall, without any further action on their part or on the part of
Bancorp, automatically and by operation of law cease to own such shares and
shall instead become owners of two shares of Bancorp Common Stock for each share
of Bank Common Stock held by them immediately prior to the Effective Time.
Thereafter, such persons shall have full and exclusive power to vote such shares
of Bancorp Common Stock, to receive dividends thereon and to exercise all rights
of an owner thereof.
2.4 Share Certificates. At the Effective Time, all previously issued
and outstanding certificates representing shares of Bank Common Stock shall
automatically and by operation of law cease to represent shares of Bank Common
Stock or any interest therein and each certificate shall instead represent the
ownership by the holder thereof of an equal number of shares of Bancorp Common
Stock. No holder of a certificate shall be entitled to vote the shares of Bank
Common Stock formerly represented by such certificate, or to receive dividends
thereon, or to exercise any other rights of ownership in respect thereof.
2.5 Dissenting Stockholders. Notwithstanding anything to the contrary
in Article II, any stockholder of the Bank properly exercizing dissenters rights
under Section 92A.380 of the Nevada Revised Statutes (the "NRS") shall have such
rights as provided in Section 3.2 of this Agreement and by the laws of the State
of Nevada.
<PAGE>
ARTICLE III
ACTIONS AFTER THE EFFECTIVE TIME
3.1 Bank Common Stock Share Certificates. In connection with the
exchange of the issued and outstanding shares of Bank Common Stock for shares of
Bancorp Common Stock, it shall not be necessary for holders of Bank Common Stock
to exchange their existing certificates of Bank Common Stock for certificates of
Bancorp Common Stock. At the Effective Time, holders of Bank Common Stock shall
automatically become holders of Bancorp Common Stock, and their stock
certificates shall automatically represent the same number and type of shares of
Bancorp Common Stock. Additionally, Bancorp shall instruct its registrar and
transfer agent to issue one share of Bancorp Common Stock for each issued and
outstanding share of Bank Common Stock to the holders of record of Bank Common
Stock at the Effective Time. After the Effective Time, as outstanding
certificates of Bank Common Stock are presented for transfer, or upon the
request of any holder of certificates of Bancorp Common Stock, new certificates
of Bancorp Common Stock shall be issued by the registrar and transfer agent for
Bank Common Stock. Any certificate presented for transfer to a name other than
that in which the surrendered certificate is registered must be properly
endorsed and otherwise in proper form for transfer and accompanied by evidence
of payment of any applicable stock transfer or other taxes.
3.2 Rights to Fair Value of Shares. If a holder of shares of Bank
Common Stock elects to dissent from the Exchange and demands payment of fair
value of his, her or its shares of Bank Common Stock in accordance with the
provisions of Sections 92A-300 through 92A-500 of the NRS concerning the right
of holders of Bank Common Stock to dissent from the Exchange (a "Dissenting
Holder"), any Bank Common Stock held by such Dissenting Holder as to which
payment of fair value has been so demanded ("Excluded Shares") shall not be
converted as described in Article II, but shall, from and after the Effective
Time, represent only the right to receive such consideration as may be
determined to be due to such Dissenting Holder pursuant to the NRS; provided,
however, that each share of Bank Common Stock held by a Dissenting Holder who
shall, after the Effective Time, withdraw demand for payment of fair value or
lose the right of payment of fair value with respect to his shares of Bank
Common Stock pursuant to the NRS shall not be deemed Excluded Shares but shall
be deemed to be converted, as of the Effective Time, into the right to receive
shares of Bancorp Common Stock in accordance with Article II.
<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT TO THE EXCHANGE
This Agreement and the transactions provided for herein shall not
become effective unless all of the following shall have occurred:
4.1 Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the affirmative vote of the
holders of a majority of the outstanding shares of Bank Common Stock at a
meeting of such stockholders duly called and held for such purpose in accordance
with the By-Laws of the Bank and all applicable laws and regulations.
4.2 Approval of the Commissioner. Bancorp's acquisition of all the
issued and outstanding shares of Bank Common Stock shall have been approved by
the State of Nevada Commissioner of Financial Institutions (the "Bank
Commissioner") in accordance with Title 55, Chapter 666, Section 125 of the
State of Nevada Revised Code.
4.3 Notice to Federal Reserve Bank. Bancorp shall have provided notice
of this Agreement to the Federal Reserve Bank of San Francisco (the "Reserve
Bank") in accordance with 12 C.F.R. Section 225.15 and the Reserve Bank shall
not have objected to the parties' consummation of the transactions contemplated
hereby within thirty days after the date of the Reserve Bank's receipt of such
notice or, alternatively, the Reserve Bank or the Board of Governors of the
Federal Reserve System, acting pursuant to Section 3(a)(1) of the Bank Holding
Company Act of 1956, as amended, shall have approved an application of Bancorp
to become a bank holding company upon the consummation of the transactions
contemplated by this Agreement and a period of thirty days shall have elapsed
after the date of such approval.
4.4 Registration Statement. To the extent legally required, the shares
of Bancorp Common Stock to be issued to the holders of Bank Common Stock
pursuant to this Agreement shall have been registered or qualified for such
issuance under the Securities Act of 1933, as amended, and all applicable state
securities laws pursuant to an effective registration statement or otherwise.
4.5 Tax Opinion. The Bank shall have received a favorable opinion from
its counsel, satisfactory in form and substance to the Bank, with respect to
certain federal income tax consequences of the transactions contemplated by this
Agreement.
4.6 Other Consents and Approvals. The Bank and Bancorp shall have
obtained all other consents, permissions and approvals and taken all actions
required by law and agreement, or otherwise deemed necessary or appropriate by
the Bank or Bancorp, prior to the consummation of the transactions provided for
by this Agreement and Bancorp's having and exercising all rights of ownership
with respect to all of the outstanding shares of Bank Common Stock to be
acquired by it hereunder.
<PAGE>
ARTICLE V
TERMINATION OF PLAN
5.1 Termination by the Bank or Bancorp. This Agreement may be
terminated by either the Bank or Bancorp at any time before the Effective Time
in the event that:
(a) Any action, suit, proceeding or claim has been
instituted, made or threatened relating to this
Agreement which shall make consummation of the
transactions contemplated by this Agreement inadvisable
in the opinion of the Bank or Bancorp;
(b) The payment of fair value for shares of Bank Common
Stock by Bancorp to holders of Bank Common Stock
exercising dissenters' rights would, in the reasonable
judgment of either the Bank or Bancorp, cause a material
diminution to the Bank's surplus capital; or
(c) For any other reason consummation of the transactions
contemplated by this Agreement is inadvisable in the
opinion of the Bank or Bancorp.
Such termination shall be effected by written notice by either the Bank or
Bancorp to the other of them, and shall be authorized or approved by the Board
of Directors of the party giving such notice. Upon the giving of such notice,
this Agreement shall be terminated and shall be of no further force or effect
and there shall be no liability hereunder or on account of such termination on
the part of the Bank or Bancorp or the Directors, officers, employees, agents or
stockholders of either of them. In the event of such termination of this
Agreement, the Bank and Bancorp shall each be responsible for their own fees and
expenses incurred in connection with this Agreement and the proposed
transactions contemplated hereby. If either party hereto gives written notice of
termination to the other party pursuant to this Article V, the party giving such
written notice shall simultaneously furnish a copy thereof to the Bank
Commissioner.
ARTICLE VI
COMPENSATION AND BENEFIT PLANS
6.1 Adoption of Benefit Plans. At the Effective Time, Bancorp shall
adopt and assume sponsorship of any stock option plan or restricted stock plan
of the Bank in effect at the Effective Time, including all of the Bank's
obligations with respect to any outstanding options, stock or restricted stock
granted pursuant to such plans, including, without limitation, the 1992
Incentive Stock Option Plan of Comstock Bank, the 1992 Non-Employee Directors'
Stock Option Plan and the Comstock Bank Employee Stock Purchase Plan.
Notwithstanding anything to the contrary in this Agreement, Bancorp shall not
adopt and assume sponsorship of the Comstock Bank 401(k) Plan. All outstanding
options to purchase Bank Common Stock granted pursuant to any stock option plan
of the Bank prior to the Effective Time will become, subject to the adjustment
for the two-for-one exchange ratio set forth in this Agreement, options to
purchase the same number of shares of Bancorp Common Stock with the same terms,
conditions and exercise price as the original options granted, and all grants of
restricted shares of Bank Common Stock granted pursuant to any restricted stock
plan of the Bank prior to the Effective Time will, subject to the two-for-one
share exchange ratio set forth in this Agreement, become grants of restricted
shares of Bancorp Common Stock.
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
7.1 Expenses. The Bank and Bancorp shall pay the fees and expenses of
its respective counsel, accountants and other experts and shall pay all other
costs and expenses incurred by it in connection with the negotiation,
preparation and execution of this Agreement and the consummation of the
transactions contemplated hereby.
7.2 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Nevada without reference to choice
of law principles.
7.3 Notices. Notices, requests, permissions, waivers, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if signed by the respective persons giving them (in the case of any
corporation the signature shall be by an officer thereof) and delivered by hand,
deposited in the United States mail (registered or certified, return receipt
requested), properly addressed and postage prepaid, or delivered by confirmed
facsimile:
If to the Bank, to:
Comstock Bank
6275 Neil Road
Reno, Nevada 89511
Attention: Robert Barone
Facsimile: (702) 828-0377
with a copy to:
Benesch, Friedlander, Coplan & Aronoff LLP
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Attention: Michael J. Meaney
Facsimile: (216) 363-4588
<PAGE>
If to Bancorp, to:
Comstock Bancorp
6275 Neil Road
Reno, Nevada 89511
Attention: Robert Barone
Facsimile: (702)828-0377
with a copy to:
Benesch, Friedlander, Coplan & Aronoff LLP
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Attention: Michael J. Meaney
Facsimile: (216) 363-4588
Such names and addresses may be changed by notice given in accordance with this
Section 7.3.
7.4 Entire Agreement. This Agreement contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein, supersedes and cancels all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
respecting such subject matter. There are no restrictions, promises,
representations, warranties, agreements or undertakings of any party hereto with
respect to the transactions contemplated by this Agreement other than those set
forth herein or made hereunder.
7.5 Headings; References. The Article, Section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All references
herein to "Articles" or "Sections" shall be deemed to be references to Articles
or Sections hereof unless otherwise indicated.
7.6 Counterparts. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all of
which shall constitute one and the same original.
7.7 Parties in Interest; Assignment. Neither this Agreement nor any of
the rights, interest or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other party. Subject to
the preceding sentence this Agreement shall inure to the benefit of and be
binding upon the Bank and Bancorp and shall inure to the sole benefit of the
Bank and Bancorp and their respective successors and permitted assigns. Nothing
in this Agreement, express or implied, is intended to confer upon any other
person any rights or remedies under or by reason of this Agreement.
<PAGE>
7.8 Severability; Enforcement. The invalidity of any portion of this
Agreement shall not affect the validity, force or effect of the remaining
portions hereof. If it is ever held that any restriction hereunder is too broad
to permit enforcement of such restriction to its fullest extent, each party
agrees that a court of competent jurisdiction may enforce such restriction to
the maximum extent permitted by law, and each party hereby consents and agrees
that such scope may be judicially modified accordingly in any proceeding brought
to enforce such restriction.
7.9 Amendments. This Agreement may only be amended or modified at any
time in writing by the Boards of Directors of the Bank and Bancorp.
IN WITNESS WHEREOF, the Bank and Bancorp have each caused this
Agreement and Plan of Reorganization to be executed on their behalf.
COMSTOCK BANK
/s/ Robert N. Barone
-------------------------------
By: Robert N. Barone
Its: Chairman and Chief
Executive Officer
COMSTOCK BANCORP
/s/ Robert N. Barone
-------------------------------
By: Robert N. Barone
Its: Chairman and Chief
Executive Officer
<PAGE>
APPENDIX B
DISSENTERS' APPRAISAL RIGHTS
92A.300 DEFINITIONS. -- As used in Nevada Revised Statutes ("NRS")
92A.300 to 92A.500, inclusive, unless the context otherwise requires, the words
and terms defined in NRS 92A.305 to 92A.335, inclusive, have the meanings
ascribed to them in those sections.
92A.305 "BENEFICIAL STOCKHOLDER" DEFINED. -- "Beneficial stockholder"
means a person who is a beneficial owner of shares held in a voting trust or by
a nominee as the stockholder of record.
92A.310 "CORPORATE ACTION" DEFINED. -- "Corporate action" means the
action of a domestic corporation.
92A.315 "DISSENTER" DEFINED. -- "Dissenter" means a stockholder who is
entitled to dissent from a domestic corporation's action under NRS 92A.380 and
who exercises that right when and in the manner required by NRS 92A.410 to
92A.480, inclusive.
92A.320 "FAIR VALUE" DEFINED. -- "Fair value," with respect to a
dissenter's shares, means the value of the shares immediately before the
effectuation of the corporate action to which he objects, excluding any
appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable.
92A.325 "STOCKHOLDER" DEFINED. -- "Stockholder" means a stockholder of
record or a beneficial stockholder of a domestic corporation.
92A.330 "STOCKHOLDER OF RECORD" DEFINED. -- "Stockholder of record"
means the person in whose name shares are registered in the records of a
domestic corporation or the beneficial owner of shares to the extent of the
rights granted by a nominee's certificate on file with the domestic corporation.
92A.335 "SUBJECT CORPORATION" DEFINED. -- "Subject corporation" means
the domestic corporation which is the issuer of the shares held by a dissenter
before the corporate action creating the dissenter's rights becomes effective or
the surviving or acquiring entity of that issuer after the corporate action
becomes effective.
92A.340 COMPUTATION OF INTEREST. -- Interest payable pursuant to NRS
92A.300 to 92A.500, inclusive, must be computed from the effective date of the
action until the date of payment, at the average rate currently paid by the
entity on its principal bank loans or, if it has no bank loans, at a rate that
is fair and equitable under all of the circumstances.
<PAGE>
92A.350 RIGHTS OF DISSENTING PARTNER OF DOMESTIC LIMITED PARTNERSHIP.
- -- A partnership agreement of a domestic limited partnership or, unless
otherwise provided in the partnership agreement, an agreement of merger or
exchange, may provide that contractual rights with respect to the partnership
interest of a dissenting general or limited partner of a domestic limited
partnership are available for any class or group of partnership interests in
connection with any merger or exchange in which the domestic limited partnership
is a constituent entity.
92A.360 RIGHTS OF DISSENTING MEMBER OF DOMESTIC LIMITED- LIABILITY
COMPANY. -- The articles of organization or operating agreement of a domestic
limited-liability company or, unless otherwise provided in the articles of
organization or operating agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the interest of a dissenting
member are available in connection with any merger or exchange in which the
domestic limited-liability company is a constituent entity.
92A.370 RIGHTS OF DISSENTING MEMBER OF DOMESTIC NONPROFIT CORPORATION.
1. Except as otherwise provided in subsection 2 and unless otherwise
provided in the articles or bylaws, any member of any constituent domestic
nonprofit corporation who voted against the merger may, without prior notice,
but within 30 days after the effective date of the merger, resign from
membership and is thereby excused from all contractual obligations to the
constituent or surviving corporations which did not occur before his resignation
and is thereby entitled to those rights, if any, which would have existed if
there had been no merger and the membership had been terminated or the member
had been expelled.
2. Unless otherwise provided in its articles of incorporation or
bylaws, no member of a domestic nonprofit corporation, including, but not
limited to, a cooperative corporation, which supplies services described in
chapter 704 of NRS to its members only, and no person who is a member of a
domestic nonprofit corporation as a condition of or by reason of the ownership
of an interest in real property, may resign and dissent pursuant to subsection
1.
92A.380 RIGHT OF STOCKHOLDER TO DISSENT FROM CERTAIN CORPORATE ACTIONS
AND TO OBTAIN PAYMENT FOR SHARES. --
1. Except as otherwise provided in NRS 92A.370 to 92A.390, a
stockholder is entitled to dissent from, and obtain payment of the fair value of
his shares in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the domestic
corporation is a party:
(1) If approval by the stockholders is required for
the merger by NRS 92A.120 to 92A.160, inclusive,
or the articles of incorporation and he is
entitled to vote on the merger; or
<PAGE>
(2) If the domestic corporation is a subsidiary and
is merged with its parent under NRS 92A.180.
(b) Consummation of a plan of exchange to which the
domestic corporation is a party as the corporation
whose subject owner's interests will be acquired, if he
is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the
stockholders to the event that the articles of
incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting
stockholders are entitled to dissent and obtain payment
for their shares.
2. A stockholder who is entitled to dissent and obtain payment under
NRS 92A.300 to 92A.500, inclusive, may not challenge the corporate action
creating his entitlement unless the action is unlawful or fraudulent with
respect to him or the domestic corporation.
92A.390 LIMITATIONS ON RIGHT OF DISSENT: STOCKHOLDERS OF CERTAIN
CLASSES OR SERIES; ACTION OF STOCKHOLDERS NOT REQUIRED FOR PLAN OF MERGER. --
1. There is no right of dissent with respect to a plan of merger or
exchange in favor of stockholders of any class or series which, at the record
date fixed to determine the stockholders entitled to receive notice of and to
vote at the meeting at which the plan of merger or exchange is to be acted on,
were either listed on a national securities exchange, included in the national
market system by the National Association of Securities Dealers, Inc., or held
by at least 2,000 stockholders of record, unless:
(a) The articles of incorporation of the corporation
issuing the shares provide otherwise; or
(b) The holders of the class or series are required under
the plan of merger or exchange to accept for the shares
anything except:
(1) Cash, owner's interests or owner's interests and
cash in lieu of fractional owner's interests of:
(I) The surviving or acquiring entity; or
(II) Any other entity which, at the effective
date of the plan of merger or exchange,
were either listed on a national
securities exchange, included in the
national market system by the National
Association of Securities Dealers, Inc.,
or held of record by at least 2,000
holders of owner's interests of record;
or
<PAGE>
(2) A combination of cash and owner's interests of
the kind described in sub-subparagraphs (I) and
(II) of subparagraph (1) of paragraph (b).
2. There is no right of dissent for any holders of stock of the
surviving domestic corporation if the plan of merger does not require action of
the stockholders of the surviving domestic corporation under NRS 92A.130.
92A.400 LIMITATIONS ON RIGHT OF DISSENT: ASSERTION AS TO PORTIONS ONLY
TO SHARES REGISTERED TO STOCKHOLDER; ASSERTION BY BENEFICIAL STOCKHOLDER. --
1. A stockholder of record may assert dissenter's rights as to fewer
than all of the shares registered in his name only if he dissents with respect
to all shares beneficially owned by any one person and notifies the subject
corporation in writing of the name and address of each person on whose behalf he
asserts dissenter's rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which he dissents and his other
shares were registered in the names of different stockholders.
2. A beneficial stockholder may assert dissenter's rights as to shares
held on his behalf only if:
(a) He submits to the subject corporation the written
consent of the stockholder of record to the dissent not
later than the time the beneficial stockholder asserts
dissenter's rights; and
(b) He does so with respect to all shares of which he is the
beneficial stockholder or over which he has power to
direct the vote.
92A.410 NOTIFICATION OF STOCKHOLDERS REGARDING RIGHT OF DISSENT. --
1. If a proposed corporate action creating dissenters' rights is
submitted to a vote at a stockholders' meeting, the notice of the meeting must
state that stockholders are or may be entitled to assert dissenters' rights
under NRS 92A.300 to 92A.500, inclusive, and be accompanied by a copy of those
sections.
2. If the corporate action creating dissenters' rights is taken without
a vote of the stockholders, the domestic corporation shall notify in writing all
stockholders entitled to assert dissenters' rights that the action was taken and
send them the dissenter's notice described in NRS 92A.430.
92A.420 PREREQUISITES TO DEMAND FOR PAYMENT FOR SHARES.--
1. If a proposed corporate action creating dissenters' rights is
submitted to a vote at a stockholders' meeting, a stockholder who wishes to
assert dissenter's rights:
<PAGE>
(a) Must deliver to the subject corporation, before the vote
is taken, written notice of his intent to demand payment
for his shares if the proposed action is effectuated;
and
(b) Must not vote his shares in favor of the proposed
action.
2. A stockholder who does not satisfy the requirements of subsection 1
is not entitled to payment for his shares under this chapter.
92A.430 DISSENTER'S NOTICE: DELIVERY TO STOCKHOLDERS ENTITLED TO ASSERT
RIGHTS; CONTENTS.--
1. If a proposed corporate action creating dissenters' rights is
authorized at a stockholders' meeting, the subject corporation shall deliver a
written dissenter's notice to all stockholders who satisfied the requirements to
assert those rights.
2. The dissenter's notice must be sent no later than 10 days after the
effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and
where and when certificates, if any, for shares must be
deposited:
(b) Inform the holders of shares not represented by
certificates to what extent the transfer of the shares
will be restricted after the demand for payment is
received;
(c) Supply a form for demanding payment that includes the
date of the first announcement to the news media or to
the stockholders of the terms of the proposed action
and requires that the person asserting dissenter's
rights certify whether or not he acquired beneficial
ownership of the shares for that date;
(d) Set a date by which the subject corporation must
receive the demand for payment, which may not be less
than 30 nor more than 60 days after the date the notice
is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500,
inclusive.
92A.440 DEMAND FOR PAYMENT AND DEPOSIT OF CERTIFICATES; RETENTION OF
RIGHTS OF STOCKHOLDER.--
1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the
dissenter's notice for this certification; and
<PAGE>
(c) Deposit his certificates, if any, in accordance with the
terms of the notice.
2. The stockholder who demands payment and deposits his certificates,
if any, retains all other rights of a stockholder until those rights are
canceled or modified by the taking of the proposed corporate action.
3. The stockholder who does not demand payment or deposit his
certificates where required, each by the date set forth in the dissenter's
notice, is not entitled to payment for his shares under this chapter.
92A.450 UNCERTIFICATED SHARES: AUTHORITY TO RESTRICT TRANSFER AFTER
DEMAND FOR PAYMENT; RETENTION OF RIGHTS OF STOCKHOLDER.--
1. The subject corporation may restrict the transfer of shares not
represented by a certificate from the date the demand for their payment is
received.
2. The person for whom dissenter's rights are asserted as to shares not
represented by a certificate retains all other rights of a stockholder until
those rights are canceled or modified by the taking of the proposed corporate
action.
92A.460 PAYMENT FOR SHARES: GENERAL REQUIREMENTS.--
1. Except as otherwise provided in NRS 92A.470, within 30 days after
receipt of a demand for payment, the subject corporation shall pay each
dissenter who complied with NRS 92A.440 the amount the subject corporation
estimates to be the fair value of his shares, plus accrued interest. The
obligation of the subject corporation under this subsection may be enforced by
the district court:
(a) Of the county where the corporation's registered office
is located; or
(b) At the election of any dissenter residing or having its
registered office in this state, of the county where the
dissenter resides or has its registered office. The
court shall dispose of the complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of
a fiscal year ending not more than 16 months before the
date of payment, a statement of income for that year, a
statement of changes in the stockholders' equity for
that year and the latest available interim financial
statements, if any:
(b) A statement of the subject corporation's estimate of the
fair value of the shares;
<PAGE>
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment
under NRS 92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive.
92A.470 PAYMENT FOR SHARES: SHARES ACQUIRED ON OR AFTER DATE OF
DISSENTER'S NOTICE.--
1. A subject corporation may elect to withhold payment from a dissenter
unless he was the beneficial owner of the shares before the date set forth in
the dissenter's notice as the date of the first announcement to the news media
or to the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold payment,
after taking the proposed action, it shall estimate the fair value of the
shares, plus accrued interest, and shall offer to pay this amount to each
dissenter who agrees to accept it in full satisfaction of his demand. The
subject corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated, and
a statement of the dissenters' right to demand payment pursuant to NRS 92A.480.
92A.480 DISSENTER'S ESTIMATE OF FAIR VALUE: NOTIFICATION OF SUBJECT
CORPORATION; DEMAND FOR PAYMENT OF ESTIMATE.--
1. A dissenter may notify the subject corporation in writing of his own
estimate of the fair value of his shares and the amount of interest due, and
demand payment of his estimate, less any payment pursuant to NRS 92A.460, or
reject the offer pursuant to NRS 92A.470 and demand payment of the fair value of
his shares and interest due, if he believes that the amount paid pursuant to NRS
92A.460 or offered pursuant to NRS 92A.470 is less than the fair value of his
shares or that the interest due is incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant to this
section unless he notifies the subject corporation his demand in writing within
30 days after the subject corporation made or offered payment of his shares.
92A.490 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: DUTIES OF SUBJECT
CORPORATION; POWERS OF COURT; RIGHTS OF DISSENTER.--
1. If a demand for payment remains unsettled, the subject corporation
shall commence a proceeding within 60 days after receiving the demand and
petition the court to determine the fair value of the shares and accrued
interest. If the subject corporation does not commence the proceeding within the
60-day period, it shall pay each dissenter whose demand remains unsettled the
amount demanded.
<PAGE>
2. A subject corporation shall commence the proceeding the district
court of the county where its registered office is located. If the subject
corporation is a foreign entity without a resident agent in the state, it shall
commence the proceeding in the county where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
entity was located.
3. The subject corporation shall make all dissenters, whether or not
residents of Nevada, whose demands remain unsettled, parties to the proceeding
as in an action against their shares. All parties must be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
4. The jurisdiction of the court in which the proceeding is commenced
under subsection 2 is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend a decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or any amendment thereto. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding is entitled to
a judgment:
(a) For the amount, if any, by which the court finds the
fair value of his shares, plus interest, exceeds the
amount paid by the subject corporation; or
(b) For the fair value, plus accrued interest, of his
after-acquired shares for which the subject corporation
elected to withhold payment pursuant to NRS 92A.470.
92A.500 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: ASSESSMENT OF COSTS
AND FEES.--
1. The court in a proceeding to determine fair value shall determine
all of the costs of the proceeding, including the reasonable compensation and
expenses of any appraisers appointed by the court. The court shall assess the
costs against the subject corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment.
2. The court may also assess the fees and expenses of the counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the subject corporation and in favor of all
dissenters if the court finds the subject corporation
did not substantially comply with the requirements of
NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in
favor of any other party, if the court finds that the
party against whom the fees and expenses are assessed
acted arbitrarily, vexatiously or not in good faith with
respect to the rights provided by NRS 92A.300 to
92A.500, inclusive.
<PAGE>
3. If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the subject corporation,
the court may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the court may
assess the costs against the subject corporation, except that the court may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court finds
that such parties did not act in good faith in instituting the proceeding.
5. This section does not preclude any party in a proceeding commenced
pursuant to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P. 68
or NRS 17.115.
<PAGE>
APPENDIX C
ARTICLES OF INCORPORATION
OF
COMSTOCK BANCORP
I, the undersigned, for the purpose of incorporating and organizing a
corporation under Chapter 78 of the Nevada Revised Statutes, do hereby certify
as follows:
First: The name of the corporation (hereinafter called the Corporation)
is:
Comstock Bancorp
Second: The address of the Corporation's Resident Agent in the State of
Nevada is 6275 Neil Road, Reno, Nevada 89511. The name of the Corporation's
Resident Agent at such address is Robert Barone.
Third. The nature of the business or purposes of the Corporation is as
follows:
To engage in any lawful act or activity for which the
corporation may be organized under the Nevada Revised Statutes.
Fourth. The Corporation shall have authority to issue Fifteen Million
(15,000,000) shares of Common Stock, $.01 par value per share. Each share of the
Common Stock shall have identical powers, preferences and rights, including
rights in liquidation.
Fifth. The name and mailing address of the Incorporator is Robert
Barone of 6275 Neil Road, Reno, Nevada 89511. The powers and liabilities of the
Incorporator terminate upon the filing of these Articles of Incorporation.
Sixth. The first Board of Directors shall consist of 8 members and the
names and addresses are as follows of the persons who are to serve as the
initial directors of the Corporation until their successors are elected as
provided by law and the Corporation's By-laws:
Edward Allison Michael Dyer
145 Brinkby Avenue, Suite B 2805 N. Mountain Street
Reno, Nevada 89509 Carson City, Nevada 89703
Robert Barone Mervyn Matorian
6275 Neil Road 311 W. Washington
Reno, Nevada 89511 Carson City, Nevada 89701
<PAGE>
Stephen Benna Samuel McMullen
3025 Mill Street 165 W. Liberty Street
Reno, Nevada 89502 Reno, Nevada 89501
John Combs Larry Platz
525 W. Washington 6275 Neil Road
Carson City, Nevada 89701 Reno, Nevada 89511
Seventh. The Corporation shall have perpetual existence.
Eighth. The stockholders, officers or directors of the Corporation
shall not be personally liable for the payment of the Corporation's debts except
as they may be liable by reason of their own conduct or acts.
Ninth. The Board of Directors is expressly authorized and empowered to
make, alter and repeal the By-Laws of the Corporation, subject to the power of
the stockholders of the Corporation to alter or repeal any By-Laws of the
Corporation.
Tenth. The Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in the Articles
of Incorporation and add or insert any other provision authorized by the laws of
the State of Nevada in the manner now or hereafter prescribed by law. All
rights, preferences or privileges of whatever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to these
Articles of Incorporation in its present form or as hereafter amended are
granted subject to the rights now reserved in this Article.
Eleventh. The Corporation expressly elects to be governed by Sections
78.411 - 78.444, inclusive, of the Nevada Revised Statutes, as the same may be
amended or supplemented from time to time.
Twelfth. No director or officer shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty, provided
that this Article shall not eliminate or limit the liability of a director or
officer for (i) acts or omissions which involve intentional misconduct, fraud or
a knowing violation of law or (ii) the payment of distributions in violation of
Section 78.300 of the Nevada Revised Statutes.
Thirteenth. Meetings of stockholders may be held within or without the
State of Nevada, as the By-Laws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Nevada at such place or places as
may be designated from time to time by the Board of Directors or in the By-Laws
of the Corporation, except as otherwise required by the Nevada Revised Statutes.
Election of directors need not be by written ballot unless the By-Laws of the
Corporation so provide.
<PAGE>
Fourteenth. The Corporation shall, to the fullest extent permitted by
Section 78.751 of the Nevada Revised Statutes, as the same may be amended or
supplemented from time to time, indemnify any and all persons whom it shall have
power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said Section
78.751, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Laws, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to Chapter 78 of the Nevada
Revised Statutes, do hereby make this certificate, hereby declaring and
certifying that this is the act and deed of the undersigned and that the facts
stated herein are true, and accordingly have hereunto set my hand on the _____
day of February, 1997.
/s/ Robert Barone
-------------------------------
Robert Barone, Incorporator
This instrument was acknowledged before me on February 20, 1997, by
Robert Barone as incorporator of Comstock Bancorp.
/s/ Heidi C. Warde
-------------------------------
Notary Public Signature
(affix notary stamp or seal)
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT OF RESIDENT AGENT
Robert Barone hereby accepts appointment as Resident Agent for the
above-named corporation.
/s/ Robert Barone
-----------------
Robert Barone
<PAGE>
APPENDIX D
COMSTOCK BANCORP
BY-LAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be in the County of Washoe,
State of Nevada.
Section 2. The corporation may also have offices at such other places
both within and without the State of Nevada as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors, shall be held in the City of Reno, State of Nevada, at such place as
may be fixed from time to time by the Board of Directors, or at such other place
either within or without the State of Nevada as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting. Meetings
of stockholders for any other purpose may be held at such time and place within
or without the State of Nevada, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. The Annual Meeting of Stockholders, commencing with the year
1998, shall be held each year on the last Wednesday of April if not a legal
holiday, and if a legal holiday, then on the next secular day following at 10:00
a.m. or at such other date and time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which the
stockholders shall elect a Board of Directors and transact such other business
as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
<PAGE>
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, 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 stockholder who is
present.
Section 5. Special meetings of the stockholders for any purpose or
purposes unless otherwise prescribed by the Nevada Revised Statutes or by the
Articles of Incorporation, may be called by the Chairman of the Board of
Directors or President or at the request in writing of a majority of the Board
of Directors, or at the request in writing of stockholders owning at least ten
percent (10%) of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. 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 ten or more than sixty days before the date
of the meeting, to each stockholder entitled to vote at such meeting. Business
transacted at any special meeting of stockholders shall be limited to the
purposes in the notice.
Section 7. The holders of a majority of the 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 stockholders for the
transaction of business, except as otherwise provided by the Nevada Revised
Statutes or by the Articles of Incorporation. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting unless 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 notified.
Section 8. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any questions brought before such meeting,
unless the question is one upon which, by express provision of the Nevada
Revised Statutes or of the Articles of Incorporation, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
Section 9. Unless otherwise provided in the Articles of Incorporation,
each stockholder who holds capital stock with voting power shall at every
meeting of the stockholders be entitled to vote in person or by proxy the number
of votes provided in the Articles of Incorporation (unless the stockholder holds
Preferred Stock, in which case the stockholder will be entitled to the number of
votes provided by a resolution of the Board of Directors) for each share of such
capital stock.
<PAGE>
Section 10. Any action required by Chapter 78 of the Nevada Revised
Statues to be taken at any annual or special meeting of the stockholders, or any
action which may be taken at any annual or special meeting of the stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board of Directors shall be not less than five nor more than twenty. The first
Board of Directors shall consist of eight directors. Thereafter, within the
limits above specified, the number of directors shall be determined by
resolution of the Board of Directors or by the stockholders at the Annual
Meeting. The directors shall be elected at the Annual Meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
qualify, provided, however, that any director may be removed with or without
cause by the vote of stockholders representing a majority of the issued and
outstanding stock of the corporation entitled to voting power.
Section 3. The business of the corporation shall be managed by or under
the direction of its Board of Directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not prohibited by
the Nevada Revised Statutes or by the Articles of Incorporation or by these
By-Laws.
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, in Reno, Nevada or such other place either within or
without the State of Nevada as shall be designated from time to time by the
Board of Directors.
Section 5. All meetings of newly elected Board of Directors, shall be
held immediately following the election of such directors at the regularly
scheduled Annual Stockholders Meeting or immediately following any such special
meeting of the stockholders provided a quorum shall be present. Regular meetings
of the Board of Directors shall be held on such day and at such time as set by
resolution of the Board of Directors. Notice of all such regular meetings is
dispensed with.
<PAGE>
Section 6. Special meetings of the Board of Directors may be called by
the Chairman of the Board of Directors or President on twelve hours notice to
each director, either personally or by mail, telegram or confirmed facsimile
transmission. Special meetings shall be called by the Chairman or President or
Secretary in like manner and on like notices on the written request of a
majority of the directors.
Section 7. At all meetings of the Board of Directors a majority of the
directors 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, except as may be otherwise
specifically provided by the Nevada Revised Statutes or by the Articles of
Incorporation. 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 8. The Board of Directors may, by resolution passed by a
majority of the whole Board of Directors, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee.
Any such committee, to the extent provided in the resolution of the
Board of Directors, 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, but no such committee shall have the power or
authority in reference to amending the Articles of Incorporation or these
By-Laws.
Section 9. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors at the next scheduled Board
Meeting.
Section 10. Unless otherwise restricted by the Articles of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of directors and the executive officers of the
corporation. The directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as a
director.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the Nevada Revised
Statutes or of the Articles of Incorporation or of these By-Laws, notice is
required to be given to any director or stockholder, it shall not be construed
to mean personal notice but such notice may be given in writing, by mail,
<PAGE>
addressed to such director or stockholder, 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. Notice to directors may also be given by telegram or by confirmed
facsimile transmission.
Section 2. Whenever any notice is required to be given under the
provisions of the Nevada Revised Statues or of the Articles of Incorporation or
of these By-Laws, a waiver thereon 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.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board
of Directors and shall be the Chairman of the Board of Directors, President,
Secretary and Treasurer. The Board of Directors may also choose Vice Presidents,
and one or more Assistant Secretaries and Assistant Treasurers. Any number of
offices may be held by the same person, unless the Articles of Incorporation or
these By-Laws otherwise provide.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 3. The salaries of all executive officers of the corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
Section 5. The Chairman of the Board of Directors shall be the Chief
Executive Officer of the corporation, shall preside at all meetings of the
stockholders and the Board of Directors.
Section 6. The Chairman of the Board of Directors shall execute bonds,
mortgages, promissory notes and any other contracts requiring a seal, under the
seal of the corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the corporation.
<PAGE>
Section 7. In the absence of the Chairman or in the event of his
inability or refusal to act, the President shall perform the duties of the
Chairman, and when so acting, shall have all the powers of and be subject to all
the restrictions upon the Chairman. In the absence of both the Chairman and the
President, the Board of Directors shall appoint a Vice President who shall
perform such duties and have such powers as the Board of Directors may from time
to time prescribe.
Section 8. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or the Chairman.
Section 9. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 10. The Treasurer shall disburse the funds of the corporation
as may be ordered by the Board of Directors taking proper vouchers for such
disbursements, and shall render to the Chairman and the Board of Directors, at
its regular meeting, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by the Chairman or President of the corporation
and by the Secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Section 2. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 3. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders 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 sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action.
<PAGE>
Section 4. 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 to hold liable for calls and
assessments a person registered on its books as the owner of shares, 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 it shall have
express or other notice thereof, except as otherwise provided by the laws of the
State of Nevada.
ARTICLE VII
INDEMNIFICATION
Section 1. Every person who was or is a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or a
person of whom he is the legal representative is or was a director or officer of
the corporation or is or was serving at the request of the corporation or for
its benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
the General Corporation Law of the State of Nevada from time to time against all
expenses, liability and loss (including attorneys fees, judgments, fines and
amounts paid or to be paid in settlement) reasonably incurred or suffered by him
in connection therewith. The Board of Directors shall cause the expenses of
officers and directors incurred in defending a civil or criminal action, suit or
proceeding to be paid by the corporation as they are incurred and in advance of
the final disposition of the action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if it
is ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. Any right of indemnification
shall not be exclusive of any other right which such directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any by-law, agreement, vote of stockholders, provision
of law or otherwise, as well as the rights under this Article.
Section 2. The Board of Directors may cause the corporation to purchase
and maintain insurance on behalf of any person who is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation , or as its
representative in a partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the corporation would
have the power to indemnify such person.
<PAGE>
Section 3. The Board of Directors may from time to time adopt further
By-Laws with respect to indemnification and may amend these and such By-Laws to
the full extent permitted by the General Corporation Law of the State of Nevada.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
Section 2. 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. The fiscal year of the corporation shall be the calendar
year unless so fixed by resolution of the Board of Directors.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by a majority vote of either the stockholders or the
Board of Directors, when such power is conferred upon the Board of Directors by
the Articles of Incorporation, at any regular meeting of the stockholders or of
the Board of Directors or at any special meeting of the stockholders or of the
Board of Directors if notice of such alteration, amendment, repeal or adoption
of new By-Laws be contained in the notice of such special meeting. If the power
to adopt, amend or repeal By-Laws is conferred upon the Board of Directors by
the Articles of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-Laws.
<PAGE>
COMPOSITE
ARTICLES OF INCORPORATION
OF
COMSTOCK BANK
a Nevada Banking Corporation
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned have this day
voluntarily associated ourselves together for the purpose of forming a
corporation under the laws of the State of Nevada, relating to banking
corporations:
AND WE DO HEREBY CERTIFY:
FIRST: That the name of this corporation is COMSTOCK BANK. The
principal office of the corporation is fixed and located at 6275 Neil Road,
Reno, Nevada 89511, effective, May 1, 1996.
SECOND: The principal office or place of business of the corporation in
this State is to be at 400 West King Street, Carson City, Nevada, but this
corporation may maintain an office or offices elsewhere, within or without the
State of Nevada, at such place or places as the Board of Directors may designate
or as may be designated in the By-Laws of the corporation.
THIRD: The nature of the business, object and purpose proposed to be
transacted, promoted and carried on by the corporation are to engage in any
activity in which banking corporations may engage under the provisions of Title
55 of Nevada Revised Statutes, being Chapters 657 through 671. The powers of
said corporation shall be all of the lawful powers necessary to carry on the
said business and accomplish the object and purpose of this corporation.
<PAGE>
FOURTH: The corporation shall have the power to issue one (1) class of
stock to be designated as common stock with a par value of FIFTY CENTS ($.50)
per share. The authorized capital stock of the corporation shall consist of SIX
MILLION (6,000,000) SHARES of said common stock, or a total authorized capital
of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00); provided, however,
that said corporation shall not be authorized to commence the banking business
until such time as there has been a total of ONE MILLION FIVE HUNDRED THOUSAND
DOLLARS ($1,500,000.00) paid into the capital accounts of the corporation in
such manner as may be required by the Superintendent of Banks of the State of
Nevada. No stock of the corporation shall have preemptive rights.
Changes in the capital stock structure shall be made in accordance with
the applicable laws of the State of Nevada.
FIFTH: The members of the governing board of this corporation shall be
styled "Directors", and they shall be not less than five (5) nor more than
twenty-five (25) in number as fixed either by (1) an amendment to the Articles
of Incorporation, or (2) the adoption of By-Laws, and, from time to time,
amendments thereto increasing or decreasing the number of directors. The names
and addresses of the five (5) persons who are appointed to serve as the first
Board of Directors are as follows:
G. STEPHEN BILYEU, 621 Highlands St., Carson City, Nevada 89701
PAUL M. CHALK, 706 Ivy St., Carson City, Nevada 89701
KEITH W. MACDONALD, 707 Hillcrest St., Carson City, Nevada 89701
THEODORE H. STOKES, 4400 Kings Canyon Road, Carson City, Nevada 89701
WENDLE H. TARKINGTON, 670 W. Arroyo St., Reno, Nevada
SIXTH: The capital stock of the corporation shall be issued only when
fully paid.
SEVENTH: The names and post office addresses of the incorporators
signing these Articles of Incorporation shall be the same as the first Board of
Directors set forth in paragraph FIFTH above.
<PAGE>
EIGHTH: The names and post office addresses of subscribers for stock
with the number of shares and the amount of each subscription are as follows:
SUBSCRIBED
NO. OF PURCHASE
NAME: ADDRESS: SHARES: PRICE:
- --------------------------------------------------------------------------------
G. STEPHEN BILYEU 621 Highlands St. 100 $1,250.00
Carson City, NV 89701
PAUL M. CHALK 706 Ivy St. 100 $1,250.00
Carson City, NV 89701
KEITH W. MACDONALD 707 Hillcrest St. 100 $1,250.00
Carson City, NV 89701
THEODORE H. STOKES 4400 Kings Canyon Rd. 100 $1,250.00
Carson City, NV 89701
WENDLE H. TARKINGTON 670 W. Arroyo St. 100 $1,250.00
Reno, Nevada
NINTH: This corporation shall have perpetual existence.
TENTH: The private property of the stockholders of this corporation
shall not be subject to the payment of the debts of said corporation to any
extent whatever.
ELEVENTH: The Board of Directors of this corporation may from time to
time fix the consideration for which any and all of stock shall be sold and
consideration of such sale, and the terms fixed shall, in the absence of fraud,
be binding and conclusive upon the corporation and its stockholders and any and
all shares issued upon compliance with said terms and upon payment of the
consideration so fixed and the amount subscribed therefore, shall be deemed and
held to be fully paid but subject to assessment by the Board of Directors upon
order of the Superintendent of the Banks of the State of Nevada for the purpose
of restoring an impairment or reduction of capital in the manner and to the
extent provided for in Nevada Revised Statutes 661.085 and 661.095.
<PAGE>
TWELFTH: The Board of Directors shall have power from time to time to
determine and vary the amount of the working capital of the corporation; to
determine whether any, and if any, what part of the accumulated profits shall be
declared in dividends and paid to the stockholders; to determine the times for
the declaration and the payment of dividends; and to direct and to determine the
use and disposition of any surplus or net profits over and above the capital
stock paid in.
From time to time, to determine whether, and to what extent, and at
what times and places, and under what conditions and regulations, the accounts
and books of this corporation (other than the original or duplicate stock
ledger), or any of them, shall be open to inspection of stockholders, and no
stockholder shall have any right of inspection of any account, book or document
of this corporation except as conferred by statute, unless authorized by a
resolution of the stockholders or directors.
By resolution or resolutions, passed by a majority of the whole board,
to designate one or more committees, each committee to consist of two or more of
the directors of the corporation, which, to the extent provided in said
resolution or resolutions, or in the By-Laws of the corporation, shall have, and
may exercise the power of the Board of Directors in the management of the
business of the corporation. Such committee or committees shall have such name
or names as may be stated in the By-Laws of the corporation, or as may be
determined by resolution adopted by the Board of Directors.
<PAGE>
In carrying on the business of the corporation the Board of Directors
is hereby authorized and empowered to sell, exchange, mortgage, bond or
otherwise dispose of, deal with and encumber any or all of the property of the
corporation, upon such terms and conditions as such Board of Directors may deem
just and proper and for the best interests of the corporation, subject to the
applicable laws of the State of Nevada.
This corporation may, in its By-Laws, confer powers upon its Board of
Directors in addition to the foregoing, and in addition to the powers and
authorities expressly conferred upon them by statute.
THIRTEENTH: This corporation reserves the right to amend, alter, change
or repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by statute, or by these Articles of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
FOURTEENTH: Meetings of the stockholders and/or directors may be held
at any office of the corporation either in or out of the State of Nevada, in any
place in the world.
FIFTEENTH: A director or officer shall not be liable to the
corporation, nor to any stockholder or stockholders of the corporation, for
damages which result from the breach of any fiduciary duty by the director or
officer, unless the breach of fiduciary duty is the result of:
(a) acts or omissions which involve intentional misconduct,
fraud or a knowing violation of the law; or
<PAGE>
(b) the payment of dividends in violation of NRS 78.300.
IN WITNESS WHEREOF, we have hereunto set our hands this 11th day of
May, 1979.
/s/ G. Stephen Bilyeu
-------------------------
G. STEPHEN BILYEU
/s/ Paul M. Chalk
-------------------------
PAUL M. CHALK
/s/ Keith W. MacDonald
-------------------------
KEITH W. MACDONALD
/s/ Theodore H. Stokes
-------------------------
THEODORE H. STOKES
/s/ Wendle H. Tarkington
-------------------------
WENDLE H. TARKINGTON
<PAGE>
PART II. INFORMATION NOT REQUIRED
IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Subsection 1 of Section 78.751 of the NRS empowers a corporation to
indemnify 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, whether
civil, criminal, administrative 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, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding 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 by judgment, order, settlement or
conviction or upon a plea of nolo contendre or its equivalent does not, of
itself, create a presumption that the person did not act in good faith or in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation or that, with respect to any criminal action or
proceeding, he had reasonable cause to believe his actions were unlawful.
Subsection 2 of Section 78.751 of the NRS empowers a corporation to
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 such
person acted in any of the capacities set forth above against 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 under similar
standards to those described above except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation or for amounts paid in settlement to
the corporation unless and only to the extent that the court in which such
action or suit was brought determines that, despite the adjudication of
liability, such person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
Section 78.751 of the NRS further provides that to the extent a
director or officer of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (1) and (2) or in the
defense of any claim, issue or mater therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that any indemnification provided for by Section 78.751 of
the NRS (by court order or otherwise) shall not be deemed exclusive of any other
rights to which the indemnified party may be entitled; and that the scope of
indemnification shall continue as to directors, officers, employees or agents
who have ceased to hold such positions, and to their heirs, executors and
administrators. Section 78.752 empowers the corporation to purchase and maintain
insurance on behalf of a director, officer, employee or agent of the corporation
against any liability asserted against him or incurred by him in any such
capacity or arising out of his status as such whether or not the corporation
would have the power to indemnify him against such liabilities under Section
78.751.
<PAGE>
Article Fourteenth of Bancorp's Articles of Incorporation and Article
VII of Bancorp's Bylaws provide that Bancorp shall provide indemnification for
all persons, including its officers and directors, that it has the power to
indemnify in substantially the same scope to that permitted under Section 78.751
of the NRS. The Bylaws provide, pursuant to Subsection 5 of Section 78.751 of
the NRS, that the expenses of officers and directors incurred in defending any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, must be paid by Bancorp as they are incurred and in advance of
the final disposition of the action, suit or proceeding, upon receipt of any
undertaking by or on behalf of the director or officer to repay such amounts
unless it is ultimately determined that he is not entitled to be indemnified by
Bancorp pursuant to Article IX of the Bylaws.
Item 21. Exhibits and Financial Statement Schedules
The exhibits and financial statement schedules filed as part of this
Registration Statement are as follows:
(a) List of Exhibits.
Exhibit
No. Description
------- -----------
*2.1 Plan of Reorganization dated as of February 26, 1997 by and
among Comstock Bank and Comstock Bancorp (included as
Appendix A to the Proxy Statement--Prospectus).
*3.1 Articles of Incorporation of Comstock Bancorp (included as
Appendix C to the Proxy Statement--Prospectus).
*3.2 Bylaws of Comstock Bancorp (included as Appendix D to the
Proxy Statement--Prospectus).
*3.3 Articles of Incorporation of Comstock Bank.
*3.4 Bylaws of Comstock Bank.
**4.1 Form of Stock Certificate of Comstock Bancorp.
**5.1 Opinion of Benesch, Friedlander, Coplan & Aronoff LLP re:
legality.
**8.1 Opinion of Benesch, Friedlander, Coplan & Aronoff LLP re:
federal tax matters.
*10.1 Employment Agreement dated as of December 14, 1992 between
the Bank and Robert Barone.
<PAGE>
Exhibit
No. Description
------- -----------
*10.2 Form of Assignment of and First Amendment to Employment
Agreement among Bancorp, the Bank and Robert Barone.
*10.3 Employment Agreement dated as of December 14, 1992 between
the Bank and Larry Platz.
*10.4 Form of Assignment of and First Amendment to Employment
Agreement among Bancorp, the Bank and Larry Platz.
*10.5 1992 Incentive Plan of Comstock Bank, as amended.
*10.6 1992 Non-Employee Directors' Stock Option Plan, as amended.
*10.7 Form of Comstock Bank Payroll Deduction Stock Purchase Plan.
*10.8 Form of Assignment of and First Amendment to Warrant Agree-
ment.
**23.1 Consent of Benesch, Friedlander, Coplan & Aronoff LLP
(included in Exhibits 5.1 and 8.1 to this Registration
Statement).
*23.2 Consent of Kafoury, Armstrong & Co.
*27.1 Financial Data Schedule (only filed in EDGAR format).
*99.1 Proxy Card for 1997 Annual Meeting of Comstock Bank.
- ------------------------
* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules
All schedules have been omitted as not applicable or not required under the
rules of Regulation S-X.
Item 22.
Undertakings
The undersigned Registrant hereby undertakes as follows:
(1) To respond to requests for information that is incorporated by reference
into the Proxy Statement--Prospectus pursuant to Items 4, 10(b), 11, or 13 of
this Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the Registration Statement through the date of responding to the
request.
(2) To supply by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein, that was not the
subject of and included in the Registration Statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement, or amendment
thereto, to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Reno, State of Nevada, on March 25, 1997.
Comstock Bancorp
By: /s/ Robert N. Barone
--------------------
Robert N. Barone
Chairman of the Board of Directors,
Chief Executive Officer and Treasurer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears blow constitutes and appoints Robert N. Barone and Larry Platz as their
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities to sign the Form S-4 Registration Statement and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the U. S. Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
and any rules and regulations promulgated thereunder, this Registration
Statement or amendment thereto, has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Robert N. Barone Chairman of the Board of Directors, March 25, 1997
- -------------------- Chief Executive Officer and Treasurer
Robert N. Barone
/s/ Larry Platz Director, President and Secretary March 25, 1997
- --------------------
Larry Platz
/s/ Edward Allison Director March 25, 1997
- --------------------
Edward Allison
<PAGE>
Name Title Date
---- ----- ----
/s/ Stephen Benna Director March 25, 1997
- --------------------
Stephen Benna
/s/ John Coombs Director March 25, 1997
- --------------------
John Coombs
/s/ Michael Dyer Director March 25, 1997
- --------------------
Michael Dyer
/s/ Mervyn Matorian Director March 25, 1997
- --------------------
Mervyn Matorian
/s/ Samuel McMullen Director March 25, 1997
- --------------------
Samuel McMullen
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------ ----------------------
*2.1 Plan of Reorganization dated as of February 26, 1997 by and
among Comstock Bank and Comstock Bancorp (included as
Appendix A to the Proxy Statement--Prospectus).
*3.1 Articles of Incorporation of Comstock Bancorp (included as
Appendix C to the Proxy Statement--Prospectus).
*3.2 Bylaws of Comstock Bancorp (included as Appendix D to the
Proxy Statement--Prospectus).
*3.3 Articles of Incorporation of Comstock Bank.
*3.4 Bylaws of Comstock Bank.
**4.1 Form of Stock Certificate of Comstock Bancorp.
**5.1 Opinion of Benesch, Friedlander, Coplan & Aronoff LLP re:
legality.
**8.1 Opinion of Benesch, Friedlander, Coplan & Aronoff LLP re:
federal tax matters.
*10.1 Employment Agreement dated as of December 14, 1992 between
the Bank and Robert Barone.
*10.2 Form of Assignment of and First Amendment to Employment
Agreement among Bancorp, the Bank and Robert Barone.
*10.3 Employment Agreement dated as of December 14, 1992 between
the Bank and Larry Platz.
*10.4 Form of Assignment of and First Amendment to Employment
Agreement among Bancorp, the Bank and Larry Platz.
*10.5 1992 Incentive Plan of Comstock Bank, as amended.
*10.6 1992 Non-Employee Directors' Stock Option Plan, as amended.
*10.7 Form of Comstock Bank Payroll Deduction Stock Purchase Plan.
*10.8 Form of Assignment of and First Amendment to Warrant
Agreement.
**23.1 Consent of Benesch, Friedlander, Coplan & Aronoff LLP
(included in Exhibits 5.1 and 8.1 to this Registration
Statement).
<PAGE>
Exhibit
Number Description of Exhibit
------ ----------------------
*23.2 Consent of Kafoury, Armstrong & Co.
*27.1 Financial Data Schedule (only filed in EDGAR format).
*99.1 Proxy Card for 1997 Annual Meeting of Comstock Bank.
- ------------------------
* Filed herewith.
** To be filed by amendment.
<PAGE>
EXHIBIT 3.3
COMPOSITE
ARTICLES OF INCORPORATION
OF
COMSTOCK BANK
a Nevada Banking Corporation
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned have this day
voluntarily associated ourselves together for the purpose of forming a
corporation under the laws of the State of Nevada, relating to banking
corporations:
AND WE DO HEREBY CERTIFY:
FIRST: That the name of this corporation is COMSTOCK BANK. The
principal office of the corporation is fixed and located at 6275 Neil Road,
Reno, Nevada 89511, effective, May 1, 1996.
SECOND: The principal office or place of business of the corporation in
this State is to be at 400 West King Street, Carson City, Nevada, but this
corporation may maintain an office or offices elsewhere, within or without the
State of Nevada, at such place or places as the Board of Directors may designate
or as may be designated in the By-Laws of the corporation.
THIRD: The nature of the business, object and purpose proposed to be
transacted, promoted and carried on by the corporation are to engage in any
activity in which banking corporations may engage under the provisions of Title
55 of Nevada Revised Statutes, being Chapters 657 through 671. The powers of
said corporation shall be all of the lawful powers necessary to carry on the
said business and accomplish the object and purpose of this corporation.
<PAGE>
FOURTH: The corporation shall have the power to issue one (1) class of
stock to be designated as common stock with a par value of FIFTY CENTS ($.50)
per share. The authorized capital stock of the corporation shall consist of SIX
MILLION (6,000,000) SHARES of said common stock, or a total authorized capital
of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00); provided, however,
that said corporation shall not be authorized to commence the banking business
until such time as there has been a total of ONE MILLION FIVE HUNDRED THOUSAND
DOLLARS ($1,500,000.00) paid into the capital accounts of the corporation in
such manner as may be required by the Superintendent of Banks of the State of
Nevada. No stock of the corporation shall have preemptive rights.
Changes in the capital stock structure shall be made in accordance with
the applicable laws of the State of Nevada.
FIFTH: The members of the governing board of this corporation shall be
styled "Directors", and they shall be not less than five (5) nor more than
twenty-five (25) in number as fixed either by (1) an amendment to the Articles
of Incorporation, or (2) the adoption of By-Laws, and, from time to time,
amendments thereto increasing or decreasing the number of directors. The names
and addresses of the five (5) persons who are appointed to serve as the first
Board of Directors are as follows:
G. STEPHEN BILYEU, 621 Highlands St., Carson City, Nevada 89701
PAUL M. CHALK, 706 Ivy St., Carson City, Nevada 89701
KEITH W. MACDONALD, 707 Hillcrest St., Carson City, Nevada 89701
THEODORE H. STOKES, 4400 Kings Canyon Road, Carson City, Nevada 89701
WENDLE H. TARKINGTON, 670 W. Arroyo St., Reno, Nevada
SIXTH: The capital stock of the corporation shall be issued only when
fully paid.
SEVENTH: The names and post office addresses of the incorporators
signing these Articles of Incorporation shall be the same as the first Board of
Directors set forth in paragraph FIFTH above.
<PAGE>
EIGHTH: The names and post office addresses of subscribers for stock
with the number of shares and the amount of each subscription are as follows:
SUBSCRIBED
NO. OF PURCHASE
NAME: ADDRESS: SHARES: PRICE:
- --------------------------------------------------------------------------------
G. STEPHEN BILYEU 621 Highlands St. 100 $1,250.00
Carson City, NV 89701
PAUL M. CHALK 706 Ivy St. 100 $1,250.00
Carson City, NV 89701
KEITH W. MACDONALD 707 Hillcrest St. 100 $1,250.00
Carson City, NV 89701
THEODORE H. STOKES 4400 Kings Canyon Rd. 100 $1,250.00
Carson City, NV 89701
WENDLE H. TARKINGTON 670 W. Arroyo St. 100 $1,250.00
Reno, Nevada
NINTH: This corporation shall have perpetual existence.
TENTH: The private property of the stockholders of this corporation
shall not be subject to the payment of the debts of said corporation to any
extent whatever.
ELEVENTH: The Board of Directors of this corporation may from time to
time fix the consideration for which any and all of stock shall be sold and
consideration of such sale, and the terms fixed shall, in the absence of fraud,
be binding and conclusive upon the corporation and its stockholders and any and
all shares issued upon compliance with said terms and upon payment of the
consideration so fixed and the amount subscribed therefore, shall be deemed and
held to be fully paid but subject to assessment by the Board of Directors upon
order of the Superintendent of the Banks of the State of Nevada for the purpose
of restoring an impairment or reduction of capital in the manner and to the
extent provided for in Nevada Revised Statutes 661.085 and 661.095.
<PAGE>
TWELFTH: The Board of Directors shall have power from time to time to
determine and vary the amount of the working capital of the corporation; to
determine whether any, and if any, what part of the accumulated profits shall be
declared in dividends and paid to the stockholders; to determine the times for
the declaration and the payment of dividends; and to direct and to determine the
use and disposition of any surplus or net profits over and above the capital
stock paid in.
From time to time, to determine whether, and to what extent, and at
what times and places, and under what conditions and regulations, the accounts
and books of this corporation (other than the original or duplicate stock
ledger), or any of them, shall be open to inspection of stockholders, and no
stockholder shall have any right of inspection of any account, book or document
of this corporation except as conferred by statute, unless authorized by a
resolution of the stockholders or directors.
By resolution or resolutions, passed by a majority of the whole board,
to designate one or more committees, each committee to consist of two or more of
the directors of the corporation, which, to the extent provided in said
resolution or resolutions, or in the By-Laws of the corporation, shall have, and
may exercise the power of the Board of Directors in the management of the
business of the corporation. Such committee or committees shall have such name
or names as may be stated in the By-Laws of the corporation, or as may be
determined by resolution adopted by the Board of Directors.
<PAGE>
In carrying on the business of the corporation the Board of Directors
is hereby authorized and empowered to sell, exchange, mortgage, bond or
otherwise dispose of, deal with and encumber any or all of the property of the
corporation, upon such terms and conditions as such Board of Directors may deem
just and proper and for the best interests of the corporation, subject to the
applicable laws of the State of Nevada.
This corporation may, in its By-Laws, confer powers upon its Board of
Directors in addition to the foregoing, and in addition to the powers and
authorities expressly conferred upon them by statute.
THIRTEENTH: This corporation reserves the right to amend, alter, change
or repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by statute, or by these Articles of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
FOURTEENTH: Meetings of the stockholders and/or directors may be held
at any office of the corporation either in or out of the State of Nevada, in any
place in the world.
FIFTEENTH: A director or officer shall not be liable to the
corporation, nor to any stockholder or stockholders of the corporation, for
damages which result from the breach of any fiduciary duty by the director or
officer, unless the breach of fiduciary duty is the result of:
(a) acts or omissions which involve intentional misconduct,
fraud or a knowing violation of the law; or
<PAGE>
(b) the payment of dividends in violation of NRS 78.300.
IN WITNESS WHEREOF, we have hereunto set our hands this 11th day of
May, 1979.
/s/ G. Stephen Bilyeu
-------------------------
G. STEPHEN BILYEU
/s/ Paul M. Chalk
-------------------------
PAUL M. CHALK
/s/ Keith W. MacDonald
-------------------------
KEITH W. MACDONALD
/s/ Theodore H. Stokes
-------------------------
THEODORE H. STOKES
/s/ Wendle H. Tarkington
-------------------------
WENDLE H. TARKINGTON
<PAGE>
EXHIBIT 3.4
COMPOSITE
BYLAWS OF
COMSTOCK BANK
CARSON CITY, NEVADA
ORGANIZED UNDER THE BANKING LAWS
OF THE STATE OF NEVADA
<PAGE>
INDEX
-----
Page
----
ARTICLE I OFFICES 1
Section 1.1 Principal Executive Office 1
Section 1.2 Other Offices 1
ARTICLE II MEETINGS OF SHAREHOLDERS 1
Section 2.1 Place of Meetings 1
Section 2.2 Annual Meetings 1
Section 2.3 Nominations for Director 2
Section 2.4 Special Meetings 3
Section 2.5 Quorum 3
Section 2.6 Adjourned Meeting and Notice Thereof 4
Section 2.7 Voting 4
Section 2.8 Validation of Defectively Called
or Noticed Meetings 4
Section 2.9 Action Without Meeting 5
Section 2.10 Proxies 6
Section 2.11 Inspectors of Election 6
ARTICLE III DIRECTORS 7
Section 3.1 Powers 7
Section 3.2 Number and Classification of Directors 8
Section 3.3 Election and Term of Office 9
Section 3.4 Director's Oath 9
Section 3.5 Vacancies 9
Section 3.6 Place of Meeting 10
Section 3.7 Organization Meeting 10
Section 3.8 Other Regular Meetings 10
Section 3.9 Special Meetings 10
Section 3.10 Action Without Meeting 10
Section 3.11 Action at a Meeting; Quorum
and Required Vote 11
Section 3.12 Validation of Defectively Called
or Noticed Meetings 11
Section 3.13 Waiver of Notice by Attendance 11
Section 3.14 Adjournment 11
Section 3.15 Notice of Adjournment 11
Section 3.16 Fees and Compensation 12
Section 3.17 Indemnification of Corporate Agents 12
Section 3.18 Transactions Between the Corporation
and its Directors 12
<PAGE>
Page
----
ARTICLE IV OFFICERS 13
Section 4.1 Officers 13
Section 4.2 Election 13
Section 4.3 Subordinate Officers, etc. 13
Section 4.4 Removal and Resignation 14
Section 4.5 Vacancies 14
Section 4.6 President 14
Section 4.7 Vice Presidents 14
Section 4.8 Secretary 14
Section 4.9 Cashier 15
ARTICLE V GENERAL CORPORATE MATTERS 15
Section 5.1 Record Date 15
Section 5.2 Inspection of Corporate Records 16
Section 5.3 Maintenance and Inspection of Bylaws 16
Section 5.4 Annual and Other Reports 17
Section 5.5 Checks, Drafts, Etc. 17
Section 5.6 Contracts, Etc., How Executed 17
Section 5.7 Certificates for Shares 17
Section 5.8 Statements on Certificate for Shares 17
Section 5.9 Lost, Stolen or Destroyed Certificates 17
Section 5.10 Representation of Shares of
Other Corporations 17
Section 5.11 Construction and Definitions 18
Section 5.12 Corporate Seal 18
ARTICLE VI AMENDMENTS 18
Section 6.1 Power of Shareholders 18
Section 6.2 Power of Directors 18
Section 6.3 Effective Date 18
<PAGE>
BYLAWS
OF
COMSTOCK BANK
(A NEVADA STATE BANKING CORPORATION)
ARTICLE I
OFFICES
Section 1.1 Principal Executive Office . The principal executive office
of the Corporation (the "Head Office") is hereby fixed and located in Carson
City, State of Nevada. The Board of Directors is hereby granted full power and
authority to charge said Head Office from one location to another, subject to
all necessary regulatory approvals.
Section 1.2 Other Offices . Branch offices or other places of business
may at any time be established by the Board of Directors at any place or places,
subject to all necessary regulatory approvals.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1 Place of Meetings . All meetings of shareholders shall be
held at the Head Office of the Corporation, or at any other place within the
State of Nevada which may be designated either by the Board of Directors or by
the written consent of all persons entitled to vote thereat and not present at
the meeting, given either before or after the meeting and filed with the
Secretary of the Corporation.
Section 2.2 Annual Meetings .
(a) Time and Place. The Annual Meeting of Shareholders shall
be held each year on a date and at a time designated by
the Board of Directors.
(b) Business to be Transacted. At the Annual Meeting,
directors shall be elected, reports of the affairs of
the Corporation shall be considered, and any other
business may be transacted which is within the powers of
the shareholders.
(c) Notice, Means. Written notice of each Annual Meeting
shall be given to each shareholder entitled to vote,
either personally or by mail or other means of written
communication, charges prepaid, addressed to such
shareholder at his address appearing on the books of the
corporation or given by him to the Corporation for the
purpose of notice. If any notice or report addressed to
the shareholder at the address of such shareholder
appearing on the books of the Corporation is returned to
the Corporation by the United States Postal Service
marked to indicate that the United States Postal Service
is unable to deliver the notice or report to the
shareholder at such address, all future notices or
<PAGE>
reports shall be deemed to have been duly given without
further mailing if the same shall be available for the
shareholder upon written demand of the shareholder at
the Head Office of the Corporation for a period of one
year from the date of the giving of the notice or report
to all other shareholders. If a shareholder gives no
address, notice shall be deemed to have been given him
if sent by mail or other means of written communication
addressed to the place where the Head Office of the
Corporation is situated, or if published at least once
in some newspaper of general circulation in the county
in which said Head Office is located. An affidavit of
the mailing or other means of giving any notice of any
Annual Meeting shall be executed by the Secretary,
Assistant Secretary, or any transfer agent of the
Corporation giving the notice, and shall be filed and
maintained in the minute book of the Corporation.
(d) Notice, Time and Content. All notices referred to in
subsection (c) above shall be given to each shareholder
entitled thereto not less than ten (10) days nor more
than sixty (60) days before each Annual Meeting. Any
such notice shall be deemed to have been given at the
time when delivered personally or deposited in the mail
or sent by other means of written communication.
Such notices shall specify:
(i) the place, the date, and the hour of such
meeting;
(ii) those matters which the Board, at the time of the
mailing of the notice, intends to present for
action by the shareholders;
(iii) if directors are to be elected, the names of
nominees intended at the time of the notice to be
presented by management for election;
(iv) the general nature of a proposal, if any, to take
action with respect to approval of, (a) a
contract or other transaction with an interested
director, (b) amendment of the articles of
incorporation, (c) a reorganization of the
Corporation, (d) voluntary dissolution of the
Corporation, or (e) a distribution in dissolution
other than in accordance with the rights of
outstanding preferred shares, if any; and
(v) such other matters, if any, as may be expressly
required by statute.
Section 2.3 Nominations for Director . Nominations for election of
members of the Board of Directors may be made by the Board of Directors or by
any shareholder of any outstanding class of voting stock of the Corporation
entitled to vote for the election of directors. Notice of intention to make any
nominations, other than by the Board of Directors, shall be made in writing,
signed and received by the President of the Corporation no more than 60 days
prior to any meeting of shareholders called for the election of directors, and
no more than 10 days after the date the notice of such meeting is sent to
shareholders pursuant to Section 2.2 of these bylaws; provided, however, that if
only 10 days' notice of the meeting is given to shareholders, such notice of
intention to nominate shall be received by the President of the Corporation not
<PAGE>
later than the time fixed in the notice of the meeting for the opening of the
meeting. Such notification shall contain the following information to the extent
known to the notifying shareholder: (a) the name, address and the term of office
of each proposed nominee; (b) the principal occupation of each proposed nominee;
(c) the number of shares of voting stock of the Corporation owned by each
proposed nominee; (d) the name and residence address of the notifying
shareholder; (e) the number of shares of voting stock of the Corporation owned
by the notifying shareholder; and (f) with the written consent of the proposed
nominee, whether the proposed nominee has ever been convicted of or pleaded nolo
contendere to any criminal offense involving dishonesty or breach of trust,
filed a petition in bankruptcy or been adjudged bankrupt. Nominations not made
in accordance herewith shall be disregarded by the then chairman of the meeting,
and the inspectors of election shall then disregard all votes cast for each
nominee.
The first paragraph of this Section 2.3 shall be set forth in any
notice of a shareholders' meeting, whether pursuant to Section 2.2 or Section
2.4 of these bylaws, at which meeting the election of directors is to be
considered.
Section 2.4 Special Meetings .
(a) Calling of. Special meetings of the shareholders, for
the purpose of taking any action permitted by the
shareholders under the Nevada Revised Statutes and the
articles of incorporation of this Corporation, may be
called at any time by the Chairman of the Board, the
President, the Board of Directors, or by one or more
shareholders holding not less than thirty-three and
one-third percent (33-1/3%) of the outstanding shares
entitled to vote.
(b) Time and Notice of. Upon receipt of a request in writing
that a special meeting of shareholders be called for any
proper purpose, directed to the Chairman of the Board,
President, Vice President or Secretary by any person
(other than the Board) entitled to call a special
meeting of shareholders, then such officer shall
forthwith cause notice to be given to shareholders
entitled to vote that a meeting will be held at a time
requested by the person or persons calling the meeting
or at a time set by the officer if the requested time is
inexpedient, which time shall be not less than
thirty-five (35) nor more than sixty (60) days after
receipt of the request. If such notice is not given
within twenty (20) days after receipt of such request,
the persons calling for the meeting may give notice
thereof in the manner provided by these bylaws or apply
to the District Court for an order requiring the giving
of such notice. Except in special cases where other
express provision is made by statute, notice of such
special meetings shall be given in the same manner as
for Annual Meetings of Shareholders. In addition to the
matters required by item (i) and, if applicable, item
(iii) of Section 2.2 of these bylaws, notice of any
special meeting shall specify the general nature of the
business to be transacted, and no other business may be
transacted at such meeting.
Section 2.5 Quorum . A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum for the transaction
of business at any meeting of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
<PAGE>
Section 2.6 Adjourned Meeting and Notice Thereof . Any shareholders'
meeting, Annual or Special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum no other business may be transacted at such meeting, except as
provided in Section 2.4 above. When any shareholders' meeting, either Annual or
Special, is adjourned for forty-five (45) days or more, or if after adjournment,
a new record date is fixed for the adjourned meeting, notice of the adjourned
meeting shall be given as in the case of an original meeting. Except as provided
above, it shall not be necessary to give any notice of the time and place of the
adjourned meeting or of the business to be transacted thereat, other than by
announcement of the time and place thereof at the meeting at which such
adjournment is taken.
Section 2.7 Voting .
(a) Record Date. Unless a record date for voting purposes is
fixed as provided in Section 5.1 of Article V of these
bylaws then, subject to any provisions of the Nevada
Revised Statutes (relating to voting of shares held by a
fiduciary, in the name of a corporation, or in joint
ownership), only persons in whose names shares entitled
to vote stand on the stock records of the Corporation at
the close of business on the business day next preceding
the day on which notice of the meeting is given or if
such notice is waived, at the close of business on the
business day next preceding the day on which the meeting
of shareholders is held, shall be entitled to vote at
such meeting, and such day shall be the record date for
such meeting.
(b) Ballot. Voting may be oral or by written ballot;
provided, however, all elections for directors must be
by ballot if demand for election by ballot is made by a
shareholder at the meeting and before the voting begins.
If a quorum is present, except with respect to election
of directors, the affirmative vote of the majority of
the shares represented at the meeting and entitled to
vote on any matter shall be the act of the shareholders,
unless the vote of a greater number or voting by classes
is required by the Nevada Revised Statutes or the
Articles of Incorporation.
Section 2.8 Validation of Defectively Called or Noticed Meetings . The
transactions of any meeting of shareholders, either Annual or special, however
called and noticed, and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each of the
persons entitled to vote, who was not present in person or by proxy, signs a
written waiver of notice or a consent to a holding of the meeting or an approval
of the minutes. The waiver of notice or consent need not specify either the
business to be transacted or the purpose of any Annual or special meeting of
shareholders except that if action is taken or proposed to be taken for approval
of any of those matters specified in Section 2.2 (d) (iv) or Article II, the
waiver of notice or consent shall state the general nature of the proposal. All
such waivers, consents or approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
<PAGE>
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the meeting.
Section 2.9 Action Without Meeting.
(a) Election of Directors. Except as provided in Section
3.5(d) of Article III of these Bylaws, Directors may be
elected without a meeting by a consent in writing,
setting forth the action so taken, signed by a majority
of the persons who would be entitled to vote for the
election of directors, provided that, without notice
except as hereinafter set forth, a director may be
elected at any time to fill a vacancy not filled by the
directors by the written consent of persons holding a
majority of the outstanding shares entitled to vote for
the election of directors.
(b) Other Action. Unless otherwise provided for in the
articles, any action which, under any provision of the
Nevada Revised Statutes may be taken at a meeting of the
shareholders, may be taken without a meeting, and
without notice except as hereinafter set forth, if a
consent in writing, setting forth the action so taken,
is signed by the holders of outstanding shares having
not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were
present and voted.
Unless the consent of all shareholders entitled to vote have been
solicited in writing: (i) notice of any proposed shareholder approval of (a) a
contract or other transaction with an interested director, (b) indemnification
of an agent of the Corporation as authorized by Section 3.17 of Article III of
these Bylaws, (c) a reorganization of the Corporation, or (d) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, if any, without a meeting by less than unanimous written consent, shall
be given at least ten (10) days before the consummation of the action authorized
by such approval; and, (ii) prompt notice shall be given of the taking of any
other corporate action approved by shareholders without a meeting by less than
unanimous written consent, to those shareholders entitled to vote who have not
consented in writing. Such notices shall be given in the manner and shall be
deemed to have been given as provided in Section 2.2 of Article II of these
Bylaws.
Unless, as provided in Section 5.1 of Article V of these Bylaws, the
Board of Directors has fixed a record date for the determination of shareholders
entitled to notice of and to give such written consent, the record date for such
determination shall be the day on which the first written consent is given. All
such written consents shall be filed with the Secretary of the Corporation.
Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares of a personal representative of the
shareholder or his respective proxyholders, may revoke the consent by a writing
received by the Corporation prior to the time that written consents of the
number of shares required to authorize the proposed action have been filed with
the Secretary of the Corporation, but may not do so thereafter. Such revocation
is effective upon its receipt by the Secretary of the Corporation.
<PAGE>
Section 2.10 Proxies . Every person entitled to vote or execute
consents shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the Corporation. Any proxy duly executed
is not revoked and continues in full force and effect until (i) an instrument
revoking it or a duly executed proxy bearing a later date is filed with the
Secretary of the Corporation prior to the vote pursuant thereto, (ii) the person
executing the proxy attends the meeting and votes in person, or (iii) written
notice of the death or incapacity of the maker of such proxy is received by the
Corporation before said proxy is voted and counted; provided that no such proxy
shall be valid after the expiration of six (6) months from the date of its
execution, unless coupled with an interest, or unless the person executing it
specifies therein the length of time for which it is to continue in force, which
in no case shall exceed seven (7) years from the date of its execution.
Section 2.11 Inspectors of Election .
(a) Appointment, Number. 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 inspectors of election are not so appointed,
or if any person so appointed fails to appear or refuses
to act, the chairman of any such meeting may, and on the
request of any shareholder or his proxy shall, make such
appointment at the meeting. The number of inspectors
shall be either one (1) or three (3). If appointed at a
meeting on the request of one or more shareholders or
proxies, the majority of shares represented in person or
by proxy shall determine whether one (1) or three (3)
inspectors are to be appointed.
(b) Duties. The duties of such inspectors shall be as
prescribed herein and shall include: determining the
number of shares outstanding and the voting power of
each; the shares 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 when the polls shall close; determining the
result; and such acts as may be proper to conduct the
election or vote with fairness to all shareholders. In
the determination of the validity and effect of proxies,
the dates contained on the forms of proxy shall
presumptively determine the order of execution of the
proxies regardless of the postmark dates on the
envelopes in which they are mailed. The inspectors of
election shall perform their duties impartially, in good
faith, to the best of their ability and as expeditiously
as is practical. If there are three (3) inspectors of
election, the decision, act or certificate of a majority
is effective in all respects as the decision, act or
certificate of all. Any report or certificate made by
the inspectors of election is prima facie evidence of
the facts stated therein.
<PAGE>
ARTICLE III
DIRECTORS
Section 3.1 Powers . Subject to any limitations of the Articles of
Incorporation and of the Nevada Revised Statutes to action to be authorized or
approved by the shareholders and subject to the duties of directors as
prescribed by these bylaws, all corporate powers shall be exercised by or under
the authority of, and the business and affairs of the Corporation shall be
controlled by, the Board of Directors. Without prejudice to such general powers,
but subject to the same limitations, it is hereby expressly declared that the
directors shall have the following powers:
First - To select and remove all the officers, agents and
employees of the Corporation, prescribe such powers and duties for them
as may not be inconsistent with law, with the articles of incorporation
or these bylaws, fix their compensation, including retirement, employee
benefits, stock options or other forms deemed appropriate, and require
from them security for faithful service.
Second - To conduct, manage and control the affairs and
business of the Corporation, and to make such rules and regulations
therefor not inconsistent with law, or with the articles of
incorporation or the bylaws, as they may deem best.
Third - To change the Head Office of the Corporation from one
location to another as provided in Section 1.1 of Article I of these
bylaws; to fix and locate from time to time one or more branch offices
or other places of business of the Corporation, as provided in Section
1.2 of Article I of these bylaws; to designate any place within the
State of Nevada for the holding of any shareholders' meeting or
meetings; and to adopt, make and use a corporate seal, and to prescribe
the forms of certificates of stock, and to alter the form of such seal
and of such certificates from time to time, as in their judgment they
may deem best, provided such seal and such certificates shall at all
times comply with the provisions of law.
Fourth - To authorize the issue of shares of stock for the
Corporation from time to time, upon such terms as may be lawful.
Fifth - To borrow money and incur indebtedness for the
purposes of the Corporation, and to cause to be executed and delivered
therefor, in the corporate name, promissory notes, bonds, capital
notes, debentures, deeds of trust, mortgages, pledges, hypothecations
or other evidences of debt and securities therefor, to the extent
permitted by law.
Sixth - By resolution adopted by a majority of the authorized
number of directors, the Board may designate an executive and other
committees, each consisting of two or more directors, to serve at the
pleasure of the Board, and to prescribe the manner in which proceedings
of such committee shall be conducted. Unless the Board of Directors
shall otherwise prescribe the manner of proceedings of any such
committee, meetings of such committee may be regularly scheduled in
advance and may be called at any time by any two members thereof;
otherwise, the provisions of these bylaws with respect to notice and
conduct of meetings of the Board shall govern. Any such committee, to
the extent provided in a resolution of the Board, shall have all of the
authority of the Board, except with respect to:
<PAGE>
(i) the approval of any action for which the Nevada
Revised Statutes or the articles of incorporation
also require shareholder approval;
(ii) the filling of vacancies on the Board or in any
committee;
(iii) the fixing of compensation of the directors for
serving on the Board or on any committee;
(iv) the adoption, amendment or repeal of bylaws;
(v) the amendment or repeal of any resolution of the
Board;
(vi) any distribution to the shareholders, except at a
rate or in a periodic amount or within a price
range determined by the board;
(vii) the appointment of other committees of the Board
or the members thereof; or
(viii) the approval of any action for which the Nevada
Revised Statutes require the approval of a
greater number of directors.
Seventh - The Board may appoint a Stock Option Committee or
Committees composed of not less than three (3) directors, one of whom
shall serve as chairman. The duties of this Committee shall be to
manage this Corporation's stock option plan(s), to make periodic
reports to the Board as to the status of the Plan, and, in addition to
the power of the Board to grant options, to grant qualified and
non-qualified options pursuant to the Corporation's stock option
plan(s).
Eighth - The Board may establish one or more advisory boards
of directors or advisory committees to advise the Corporation as the
Board may authorize. Each member of such a board or committee shall be
appointed by the Board of Directors on a year-to-year basis. Such
members may be permitted to attend certain meetings of the Board, but
they shall have no vote on matters acted upon by the Board.
Section 3.2 Number and Classification of Directors . The number of
directors shall not be less than five (5) nor than nine (9) until changed by a
bylaw amending this Section 3.2 duly adopted by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote. The exact
number of directors shall be fixed from time to time, within the limits
specified in the Articles of Incorporation or in this Section 3.2, by a bylaw or
amendment thereof or by a resolution duly adopted by a vote of a majority of the
shares entitled to vote represented at a duly held meeting at which a quorum is
present, or by the written consent of the holders of a majority of the
outstanding shares entitled to vote, or by the Board of Directors. (Amended by
Minutes, December 10, 1981.)
<PAGE>
Subject to the foregoing provisions for changing the number of
directors, the number of directors of this Corporation has been fixed at seven
(7).
Section 3.3 Election and Term of Office . Directors shall be elected at
each Annual Meeting of Shareholders, but if any such Annual Meeting is not held
or the directors are not elected thereat, the directors may be elected at any
special meeting of shareholders held for that purpose. The term of office of
directors shall expire at the first Annual Meeting of shareholders after their
election. Thereafter, at each Annual Meeting directors shall be elected to hold
office until the second succeeding Annual Meeting. All directors shall hold
office until a successor is elected and qualified, subject to the Nevada Revised
Statutes and the provisions of these by laws with respect to vacancies on the
Board.
Section 3.4 Director's Oath . Each director upon taking office, after
receipt of a certificate of authority by the Corporation to conduct a banking
business from the Nevada Superintendent of Banks, shall make an oath or
affirmation as required by Section 661.155 of the Nevada Revised Statutes and
each such oath, subscribed by the director and certified by the notary public
before whom it is taken, shall be immediately filed with the Nevada
Superintendent of Banks.
Section 3.5 Vacancies .
(a) When a Vacancy Exists. A vacancy in the Board of
Directors shall be deemed to exist: (1) in case of the
death, resignation or removal of any director; (2) if a
director has been declared of unsound mind by order of
court; (3) if a director is convicted of a felony; (4)
if the authorized number of directors be increased; (5)
if the shareholders fail, at any annual or special
meeting of shareholders at which any director or
directors are elected, to elect the full authorized
number of directors to be voted for at that meeting; or
(6) any time that a minimum of five directors have been
elected at the immediately preceding annual meeting and
there remain unfilled positions, up to the maximum
number of positions authorized by Article III, Section
3.2 of these Bylaws, for which candidates were not
proposed and voted on at the immediately preceding
annual meeting.
(b) Filling of Vacancies by Directors. Vacancies in the
Board of Directors may be filled by a majority of the
directors, though less than a quorum, or by a sole
remaining director, and each director so elected shall
hold office until his successor is elected at an annual
or a special meeting of shareholders. If the Board of
Directors accepts the resignation of a director tendered
to take effect at a future time, the Board of Directors
(or the shareholders) may elect a successor to take
office when the resignation becomes effective.
(c) Filling of Vacancies by Shareholders. The shareholders
may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors.
Any such election by written consent shall require the
consent of holders of a majority of the outstanding
shares entitled to vote.
<PAGE>
(d) Vacancy Due to Removal of Director. Any director may be
removed from office by the vote or written consent of
stockholders representing not less than two-thirds of
the issued and outstanding capital stock entitled to
voting power.
(e) When Reduction in Number Effective. No reduction of the
authorized number of directors shall have the effect of
removing any director prior to the expiration of his
term of office.
Section 3.6 Place of Meeting. Regular meetings of the Board of
Directors shall be held at any place within the State of Nevada which has been
designated from time to time by resolution of the Board. In the absence of such
designation, regular meetings shall be held at the Head Office of the
Corporation. Special meetings of the Board may be held either at a place so
designated or at the Head Office.
Section 3.7 Organization Meeting . Immediately following each Annual
Meeting of Shareholders the Board of Directors shall hold a regular meeting at
the place of said Annual Meeting or at such other place as shall be fixed by the
Board of Directors, for the purpose of organization, election of officers, and
the transaction of other business. Call and notice of such meetings are hereby
dispensed with.
Section 3.8 Other Regular Meetings . Other regular meetings of the
Board of Directors shall be held at least once each calendar month at such day
and hour as shall be fixed from time to time by the Board of Directors by
resolution or in the bylaws. If such day falls upon a legal holiday, then said
meeting shall be held at the same time on the next day thereafter ensuing which
is a full business day. Notice of all such regular meetings of the Board of
Directors is hereby dispensed with.
Section 3.9 Special Meetings . Special meetings of the Board of
Directors for any purpose or purposes shall be called at any time by the
Chairman of the Board, the President, any Vice President, the Secretary or by
any two directors. Written notice of the time and place of special meetings
shall be delivered personally to each director or communicated to each director
by telephone, or by telegraph or mail, charges prepaid, addressed to him at his
address as it is shown upon the records of the Corporation or, if it is not so
shown on such records or if not readily ascertainable, at the place at which the
meetings of the directors are regularly held. In case such notice is mailed or
telegraphed, it shall be deposited in the United States mail or delivered to the
telegraph company in the place in which the Head Office of the Corporation is
located at least three (3) days prior to the time of the holding of the meeting.
In case such notice is delivered, personally or by telephone, as above provided,
it shall be so delivered at least twenty-four (24) hours prior to the time of
the holding of the meeting. Such mailing, telegraphing or delivery, personally
or by telephone, as above provided, shall constitute due, legal and personal
notice to such director. Any notice shall state the date, place and hour of the
meeting and the general nature of the business to be transacted.
<PAGE>
Section 3.10 Action Without Meeting . Any action by the Board of
Directors may be taken without a meeting if all members of the Board shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board and shall have the same force and effect as a unanimous vote of such
directors.
Section 3.11 Action at a Meeting; Quorum and Required Vote . Presence
of a majority of the authorized number of directors at a meeting of the Board of
Directors constitutes a quorum for the transaction of business, except as
hereinafter provided. Members of the Board may participate in a meeting through
use of conference telephone or similar communications equipment, so long as all
members participating in such meeting can hear one another. Participation in a
meeting as permitted in the preceding sentence constitutes presence in person at
such meeting, and each person participating in the meeting shall sign the
minutes thereof. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the Board of Directors, unless a greater number, or the
same number after disqualifying one or more directors from voting, is required
by law, by the articles of incorporation, or by these bylaws. A meeting at which
a quorum is initially present may continue to transact business notwithstanding
the withdrawal of a director, provided that any action taken is approved by at
least a majority of the required quorum for such meeting.
Section 3.12 Validation of Defectively Called or Noticed Meetings . The
transactions of any meeting of the Board of Directors, however called and
noticed or wherever held, shall be as valid as though had at a meeting duly held
after regular call and notice, if a quorum is present and if, either before or
after the meeting, each of the directors not present or who, though present, has
prior to the meeting or at its commencement, protested the lack of proper notice
to him, signs a written waiver of notice or a consent to holding such meeting or
an approval of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 3.13 Waiver of Notice by Attendance . Attendance by a director
at any meeting shall constitute a waiver of notice of such meeting, unless a
director attends for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called, noticed, or convened;
provided, however, if after stating his objection, the objecting director
continues to attend and by his attendance participates in any matters other than
those to which he objected, he shall be deemed to have waived notice of such
meeting and withdrawn his objections.
Section 3.14 Adjournment . A quorum of the directors may adjourn any
directors' meeting to meet again at a stated day and hour; provided, however,
that in the absence of a quorum a majority of the directors present at any
directors' meeting, either regular or special, may adjourn from time to time
until the time fixed for the next regular meeting of the Board.
Section 3.15 Notice of Adjournment . If the meeting is adjourned for
more than twenty-four (24) hours, notice of any adjournment to another time or
place shall be given prior to the time of the adjourned meeting to the directors
who were not present at the time of adjournment. Otherwise notice of the time
and place of holding an adjourned meeting need not be given to absent directors
if the time and place be fixed at the meeting adjourned.
<PAGE>
Section 3.16 Fees and Compensation . Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
Board.
Section 3.17 Indemnification of Corporate Agents . The corporation may
indemnify each of its agents against expenses, judgments, fines, settlements and
other amounts, actually and reasonably incurred by such person having been made
or having been threatened to be made a party to a proceeding to the fullest
extent possible by the provisions of the Nevada Revised Statutes and the
Corporation may advance the expenses reasonably expected to be incurred by such
agent in defending any such proceeding upon receipt of the undertaking required
by the Nevada Revised Statutes. The terms "agent," "proceeding" and "expense"
made in this Section 3.17 shall have the same meaning as such terms in said
Section 78.751 of the Nevada Revised Statutes.
Section 3.18 Transactions Between the Corporation and its Directors .
(a) Corporation and Directors. No contract or other
transaction between the Corporation and one or more of
its directors, or between the Corporation and any
corporation, firm or association in which one or more of
its directors has a material financial interest (a mere
common directorship shall not constitute a material
financial interest), is either void or voidable because
such director or directors or such other corporation,
firm or association are parties or because such director
or directors are present at the meeting of the board or
a committee thereof which authorizes, approves or
ratifies the contract or transaction, if
(1) the material facts as to the transaction and as
to such director's interest are fully disclosed
or known to the shareholders, and such contract
or transaction is approved in good faith by the
affirmative vote of a majority of the shares
entitled to vote, represented at a duly held
meeting at which a quorum is present or by
written consent of shareholders, with the shares
owned by the interested director or directors not
being entitled to vote thereon;
(2) the material facts as to the transaction and as
to such director's interest are fully disclosed
or known to the Board or committee, and the Board
or committee authorizes, approves or ratifies the
contract or transaction in good faith by a vote
sufficient without counting the vote of the
interested director or directors, and the
contract or transaction is just and reasonable as
to the Corporation at the time it is authorized,
approved or ratified; or
(3) as to contracts or transactions not approved as
provided in paragraph (a) or (b) of this
subdivision, the person asserting the validity of
the contract or transaction sustains the burden
of proving that the contract or transaction was
just and reasonable as to the Corporation at the
time it was authorized, approved or ratified.
<PAGE>
(b) Corporations Having Interrelated Directors. No contract
or other transaction between the Corporation and any
corporation or association of which one or more of its
directors are directors is either void or voidable
because such director or directors are present at the
meeting of the Board or a committee thereof which
authorizes, approves or ratifies the contract or
transactions, if
(1) The material facts as to the transaction and as
to such director's other directorship are fully
disclosed or known to the Board or committee, and
the Board or committee authorizes, approves or
ratifies the contract or transaction in good
faith by a vote sufficient without counting the
vote of the common director or directors, or the
contract or transaction is approved by the
shareholders in good faith, or
(2) As to contracts or other transactions not
approved as provided in paragraph (1) of this
subdivision, the contract or transaction is just
and reasonable as to the Corporation at the time
it is authorized, approved or ratified.
This subsection (b) does not apply to contracts or transactions covered
by subsection (a).
(c) Interested Directors. Interested or common directors may
be counted in determining the presence of a quorum at a
meeting of the Board or a committee thereof which
authorizes, approves or ratifies a contract or
transaction.
(d) Loans and Extensions of Credit. For purposes of this
Section 3.18, the term "transaction" does not include
loans or extensions of credit in the ordinary course of
business.
ARTICLE IV
OFFICERS
Section 4.1 Officers . The officers of the Corporation shall be a
President, a Vice President, a Secretary and a Cashier. The Corporation may also
have, at the discretion of the Board of Directors, additional Vice Presidents, a
Chairman of the Board, one or more Assistant Secretaries, one or more Assistant
Cashiers and such other officers as may be appointed in accordance with the
provisions of Section 4.3. One person may hold two or more offices, except that
the offices of President and Secretary shall not be held by the same person.
Section 4.2 Election . The officers of the Corporation, except such
officers as may be appointed in accordance with the provisions of Section 4.3 or
Section 4.5, shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified. The
President shall be elected from among the members of the Board of Directors.
<PAGE>
Section 4.3 Subordinate Officers, Etc. The Board of Directors may
appoint, and may empower the President to appoint, such other officers as the
business of the Corporation may require, each of whom shall hold office, for
such period, have such authority and perform such duties as are provided in
these bylaws or as the Board of Directors may from time to time determine.
Section 4.4 Removal and Resignation . Any officer may be removed,
either with or without cause, by the Board of Directors, at any regular or
special meeting thereof, or except in case of an officer chosen by the Board of
Directors, by any officer upon whom such power of removal may be conferred by
the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors or to the President or to the Secretary of the Corporation,
without prejudice, however, to the rights, if any, of the Corporation under any
contract to which such officer is a party. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4.5 Vacancies . A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these bylaws for regular appointments to such office.
Section 4.6 President . The President shall be the chief executive
officer of the Corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the business and
officers of the Corporation. He shall preside at all meetings of the
shareholders and at all meetings of the Board of Directors in the absence of the
Chairman of the Board. He shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have such
other powers and duties as may be prescribed by the Board of Directors or the
bylaws.
Section 4.7 Vice Presidents . In the case of absence or disability of
the President, the Vice Presidents, if any, in order of their rank as fixed by
the Board of Directors or if not ranked, the Vice President designated by the
Board of Directors, shall perform all 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. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board of Directors or these bylaws.
Section 4.8 Secretary .
(a) Book of Minutes. The Secretary shall record or cause to
be recorded, and shall keep or cause to be kept, at the
Head Office and at such other place as the Board of
Directors may order, a book or minutes of actions taken
at all meetings of Directors and shareholders. The
minutes shall include the time and place of the meeting,
whether it is regular or special, and, if special, how
authorized, the notice thereof given, the names of those
present at directors' meetings, the number of shares
present or represented at shareholders' meetings, and
the proceedings thereof.
<PAGE>
(b) Share Register. The Secretary shall keep, or cause to be
kept, at the Head Office or at the office of the
Corporation's transfer agent, a share register, or a
duplicate share register, showing the names of the
shareholders and their addresses, the number and classes
of shares held by each, the number and date of
certificates issued for the same, and the number and
date of cancellation of every certificate surrendered
for cancellation.
(c) Other Duties. The Secretary shall give, or cause to be
given, notice of all the meetings of the shareholders
and of the Board of Directors required by law or by the
bylaws to be given, and the Secretary shall keep the
seal of the Corporation, if any, in safe custody, and
shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or
by the bylaws.
Section 4.9 Cashier .
(a) Book of Account. The office of Cashier shall be deemed
to be that of Treasurer, and any Assistant Cashier shall
be deemed the Assistant Treasurer of the Corporation.
The Cashier of the Corporation shall keep and maintain,
or cause to be kept and maintained, adequate and correct
accounts of the properties and business transactions of
the Corporation, and shall send or cause to be sent to
the shareholders of the Corporation such financial
statements and reports as are required to be sent to
them by law or these bylaws. The books of account shall
be open to inspection by any director at all reasonable
times.
(b) Other Duties. The Cashier shall deposit or cause to be
deposited, all moneys and other valuables in the name
and to the credit of the Corporation, with such
depositories as may be designated by the Board of
Directors. The Cashier shall disburse, or cause to be
disbursed, such funds of the Corporation as may be
ordered by the Board of Directors; shall render to the
President and directors, upon their request, an account
of all of his transactions as Cashier and of the
financial condition of the Corporation; and shall have
such other powers and perform such other duties as may
be prescribed by the Board of Directors or these bylaws.
ARTICLE V
GENERAL CORPORATE MATTERS
Section 5.1 Record Date . The Board of Directors may fix a time in the
future as a record date for the determination of the shareholders entitled to
notice of and to vote at any meeting of shareholders or entitled to give consent
to corporate action in writing without a meeting, to receive any report, to
receive any dividend or distribution, or any allotment of rights, or to exercise
rights in respect to any change, conversion, or exchange of shares. The record
date so fixed shall be not more than sixty (60) days nor less than ten (10) days
prior to the date of any meeting, nor more than sixty (60) days prior to any
other event for the purposes of which it is fixed. When a record date is so
fixed, only shareholders of record on that date are entitled to notice of and to
vote at any such meeting, to give consent without a meeting, to receive any
<PAGE>
report, to receive a dividend, distribution, or allotment of rights, or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the Corporation after the record date, except as
otherwise provided in the Articles of Incorporation or these bylaws.
Section 5.2 Inspection of Corporate Records .
(a) By Shareholders. The accounting books and all financial
records of this Corporation and any subsidiary of this
Corporation shall be open to inspection upon the written
demand on the Corporation by any shareholder of record
owning at least fifteen percent (15%) of the issued and
outstanding shares or holder of a voting trust
certificate representing the same percentage of shares,
upon at least five (5) days' written demand on the
Corporation by any shareholder of record owning at least
fifteen percent (15%) of the issued and outstanding
shares or holder of a voting trust certificate
representing the same percentage of shares, upon at
least five (5) days' written demand, at any reasonable
time during usual business hours, for a purpose
reasonably related to such holder's interest as a
shareholder or as the holder of such voting trust
certificate. Such inspection by a shareholder or holder
of a voting trust certificate may be made in person or
by an agent or attorney.
A shareholder or shareholders, holding at least fifteen
percent (15%) in the aggregate of the outstanding voting shares of the
Corporation, or in the event the Corporation is subject to the
reporting requirements of the Security Exchange Act of 1934, a
shareholder or shareholders who hold at least one percent (1%) of such
voting shares and have filed a Form F-6 with the Federal Deposit
Insurance Corporation relating to the election of Directors of the
Corporation, shall have (in person or by agent or attorney) the
absolute right: (1) to inspect the record of shareholders' names and
addresses and shareholdings during usual business hours upon five (5)
business days' prior written demand upon the Corporation and; (2) to
obtain from the transfer agent for the Corporation upon written demand
and upon the tender of its usual charges, a list of the shareholders'
names and addresses, who are entitled to vote for the election of
directors, and their shareholdings, as of the most recent record date
for which it has been compiled or as of a date specified by the
shareholder subsequent to the date of demand. The list shall be made
available on or before the later of five (5) business days after the
demand is received or the date specified therein as the date as of
which the list is to be compiled.
(b) By Directors. Every director shall have the absolute
right at any reasonable time to inspect and copy all
books, records and documents of every kind and to
inspect the physical properties of the Corporation. Such
inspection by a director may be made in person or by
agent or attorney and the right of inspection includes
the right to copy and make extracts.
Section 5.3 Maintenance and Inspection of Bylaws . The Corporation
shall keep at its Head Office the original or a copy of the bylaws as amended to
date, which shall be open to inspection by the shareholders at all reasonable
times during office hours.
<PAGE>
Section 5.4 Annual and Other Reports . The Board of Directors of the
Corporation shall cause an annual report to be sent to the shareholders at least
fifteen (15) days prior to the Annual Meeting of shareholders but not later than
one hundred twenty (120) days after the close of the fiscal year in accordance
with the provisions of the Nevada Revised Statutes.
Section 5.5 Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board of Directors.
Section 5.6 Contracts, Etc., How Executed . The Board of Directors,
except as otherwise provided in these bylaws, may authorize any officer or
officers, agent or agents, to enter into any contract or execute any instrument
in the name of and on behalf of the Corporation, and such authority may be
general or confined to specific instances; and, unless so authorized or ratified
by the Board of Directors or within the agency power of an officer, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or to any amount.
Section 5.7 Certificates for Shares . Every holder of shares in the
Corporation shall be entitled to have a certificate signed in the name of the
Corporation by the Chairman of the Board or the President or a Vice President
and by the Chief Financial Officer or an Assistant Treasurer or the Secretary or
any Assistant Secretary, certifying the number of shares and the class or series
of shares owned by the shareholder. Any of the signatures on the certificate may
be a 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, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were an officer, transfer agent or registrar at the date of issue.
Section 5.8 Statements on Certificate for Shares . Any such certificate
shall also contain such legend or other statement as may be required by law, by
these bylaws or by any agreement between the Corporation and the issuee thereof.
Section 5.9 Lost, Stolen or Destroyed Certificates . No new
certificates for shares shall be issued to replace an old certificate unless the
latter is surrendered and cancelled at the same time; provided, however, that
the Board of Directors or the President and the Vice President may, however, in
case any certificate for shares is lost, stolen, mutilated or destroyed,
authorize the issuance of a new certificate in lieu thereof, upon such terms and
conditions, including reasonable indemnification of the Corporation, as the
Board of Directors or the President or the Vice President shall determine. In
the event of the issuance of a new certificate, the rights and liabilities of
the Corporation, and of the holders of the old and new certificates, shall be
governed by the relevant provisions of the Nevada Revised Statutes.
<PAGE>
Section 5.10 Representation of Shares of Other Corporations . The
Chairman of the Board, President or any Vice President, or any other person
authorized by resolution of the Board of Directors or by any of the foregoing
designated officers, are authorized to vote, represent and exercise on behalf of
this Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this Corporation. The
authority herein granted to said officers to vote or represent on behalf of this
Corporation any and all shares held by this Corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
other person authorized so to do by proxy or power of attorney duly executed by
these officers.
Section 5.11 Construction and Definitions . Unless the context
otherwise requires, the general provisions, rules of construction and
definitions contained in the Nevada Revised Statutes shall govern the
construction of these bylaws. Without limiting the generality of the foregoing,
the masculine gender includes the feminine and neuter, the singular number
includes the plural and the plural number includes the singular, and the term
"person" includes a corporation as well as a natural person.
Section 5.12 Corporate Seal . The Board of Directors may adopt, use and
at will alter a corporate seal. Any corporate seal shall be circular in form and
shall have inscribed thereon the name of the Corporation, the date of its
incorporation and the word "Nevada."
ARTICLE VI
AMENDMENTS
Section 6.1 Power of Shareholders . New bylaws may be adopted or these
bylaws may be amended or repealed by the affirmative vote of a majority of the
outstanding shares entitled to vote, or by the written consent of the
shareholders entitled to vote such shares, except as otherwise provided by law
or by the Articles of Incorporation.
Section 6.2 Power of Directors . Subject to the right of shareholders
(as provided in Section 6.1) to adopt, amend or repeal bylaws, these bylaws may
be adopted, amended or repealed by he Board of Directors; provided, however,
that the Board of Directors may adopt a bylaw or amendment thereof changing the
authorized number of directors only for the purpose of fixing the exact number
of directors within the limits specified in Section 3.2 of Article III of these
bylaws.
Section 6.3 Effective Date . These bylaws shall become effective only
when a copy thereof, certified by the Secretary of the Corporation, has been
filed with the Nevada Superintendent of Banks. Any amendment to these bylaws
shall become effective only when a copy thereof, certified by the Secretary or
Assistant Secretary of the Corporation, has been filed with the Superintendent.
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Agreement made and entered into as of December 14, 1992, by
Comstock Bank, a Nevada corporation ("Comstock"), and Robert N. Barone (Mr.
Barone).
RECITALS
i. Comstock desires to void the present contract of employment between
Comstock and Mr. Barone and to enter into a new contract governing the continued
employment of Mr. Barone. This desire on the part of Comstock arises from the
determination that it is in the best interests of the stockholders of Comstock
that Mr. Barone continue in his position as Chief Executive Officer of Comstock
and that he continue to exercise the duties and responsibilities of such office.
Comstock believes that establishing a longer-term employment contract with Mr.
Barone will benefit Comstock through creating incentive for Mr. Barone to
continue in the employment of Comstock.
ii. Mr. Barone is willing to void his existing contract of employment
and to enter into a new agreement with the express understanding that he is
relinquishing the rights under his presently existing contract of employment on
the basis of the additional benefits to be received under the terms and
conditions set forth below.
TERMS AND CONDITIONS
1. EMPLOYMENT: Comstock hereby continues the employment of Mr. Barone
and Mr. Barone hereby accepts the continuation of employment with Comstock on
the terms of this Agreement, in the position and with the duties and
responsibilities set forth in paragraph 3, below and in Exhibit "A" as appended,
and upon the other terms and conditions hereinafter stated.
2. TERM: Mr. Barone shall be employed pursuant to this contract for a
period of five (5) years, beginning on December 15, 1992, or until termination
for cause, as that term is defined in paragraph 9.3 of this Agreement. PROVIDED
THAT, the term of this Agreement shall be extended by an additional year being
<PAGE>
added to the term on each anniversary date of this Agreement unless the Board of
Directors of Comstock shall have given written notice to Mr. Barone thirty (30)
days prior to the anniversary date that an additional year will not be added
effective on the upcoming anniversary date. This provision that an additional
year shall be added to the term of the Agreement on each anniversary date unless
written notice to the contrary has been given to Mr. Barone, shall continue in
effect from year-to-year throughout the entire term of this Agreement. The
giving of notice by the Board of Directors in a particular year that an
additional year will not be added shall effect only that year and an additional
year shall be added in subsequent years, unless notice is also given in such
subsequent years that there will be no additional year added. Upon the
expiration of this Agreement, Mr. Barone may continue in the employment of
Comstock, at the sole discretion of Comstock, upon such terms and conditions as
Comstock and Mr. Barone may then agree to.
3. POSITION, DUTIES, RESPONSIBILITIES:
3.1 Position: It is intended at all times during the term of the
Agreement that Mr. Barone shall serve as Chief Executive Officer of Comstock
and, other than as provided for herein, shall devote his full time and efforts
to the position of Chief Executive Officer. In accordance with such position, he
is hereby granted appropriate responsibilities, duties, and authority. Mr.
Barone may not be removed from the position of Chief Executive Officer, nor may
the duties, responsibilities, and authority normally attendant to such position,
and those duties, responsibilities, and authority actually possessed by Mr.
Barone as of the date of this Agreement be substantially altered or diminished,
unless cause exists, as defined in paragraph 9.3, for the termination of this
Agreement. A description of duties presently being performed by Mr. Barone is
appended as Exhibit "A". It is expressly understood that, as a minimum, Mr.
Barone shall be entitled to perform these duties, with commensurate authority,
so long as this Agreement shall continue in force and effect. Any substantive
<PAGE>
diminution or alteration of Mr. Barone's duties, responsibilities or authority,
without Mr. Barone's express agreement, shall constitute a material breach of
this Agreement and shall be deemed a constructive termination without cause
which shall entitle Mr. Barone to immediately demand and receive all benefit and
relief specified under paragraph 9.4 of this Agreement as if he had been
terminated upon a change in control.
3.2 Effect of Merger or Acquisition: It is further expressly understood
that in the event that Comstock should be merged into or acquired by another
corporation, and Comstock is not the surviving entity, Mr. Barone shall be given
a position of commensurate duty, responsibility and authority. Failure to
appoint Mr. Barone to such a position in the event of a merger or acquisition
shall constitute a material breach of this Agreement and shall be deemed a
constructive termination without cause which shall entitle Mr. Barone to
immediately demand and receive all benefit and relief specified under paragraph
9.4 of this Agreement as if he had been terminated upon a change in control.
3.3 Location of Employment: Unless Mr. Barone otherwise consents, the
principal place of his employment shall be in Comstock's primary administrative
office, as that office may be located from time to time.
3.4 Other Duties, Responsibilities and Activities: Mr. Barone shall be
free to engage in activities other than those specifically described in Exhibit
"A" at the discretion of the Board of Directors. It is expressly understood that
the Board of Directors shall not assign Mr. Barone duties in addition to the
duties or responsibilities so described unless changes in Comstock's structure
or changes within the banking industry would dictate the assignment of such
additional duties as sound and normal banking and business practice within the
range of normal duties of employees holding positions similar to that of Mr.
Barone in similarly situated banking institutions. Mr. Barone may request such
<PAGE>
additional duties, responsibilities, or authority as he may from time-to-time
determine to be necessary or appropriate and the Board of Directors shall not
unreasonably withhold the assignment of such duties, responsibilities or
authority. Provided that no such grant of additional duties, responsibilities,
or authority to Mr. Barone may diminish the duties, responsibilities, or
authority of Larry A. Platz, if Mr. Platz then be employed by Comstock and does
not acquiesce in such assignment of additional duties, responsibilities, or
authority to Mr. Barone. Mr. Barone shall be free to engage in charitable and
community activities, and to manage personal investments, provided such
activities do not materially interfere with the performance of his duties and
responsibilities under the Agreement.
4. SALARY: Mr. Barone shall be paid a base salary, payable in equal
semi-monthly installments, at a rate of no less than One Hundred Thirty Two
Thousand Dollars ($132,000.00) per year. The base salary amount is subject to
renegotiation every six months, though such renegotiation need not result in a
salary change. Salary changes shall only result in an increase in Mr. Barone's
base salary, not a decrease.
5. ANNUAL BONUS: Mr. Barone is currently eligible to receive an annual
incentive bonus based upon the profitability of Comstock. A description of the
incentive bonus program presently applicable to Mr. Barone, as reflected by the
minutes of the Board of Directors of Comstock in approving and implementing the
program, is attached hereto as Exhibit "B". Mr. Barone shall, as a minimum, be
allowed to continue to be eligible for an incentive bonus on the terms and
conditions specified in Exhibit "B" unless economic conditions or the financial
condition of Comstock dictate, as a matter of strict business necessity, that
such incentive program be suspended. In the event that strict business necessity
results in the suspension of the bonus incentive program, the bonus incentive
program shall be reinstated as soon as conditions improve to the point that the
bonus incentive program can be reinstated without jeopardizing the financial
soundness of Comstock.
<PAGE>
6. EMPLOYEE BENEFIT PLANS AND PROGRAMS: Mr. Barone will be entitled to
participate in all benefit plans and programs of Comstock now or hereafter made
available to executives and other salaried employees, in accordance with their
terms, which may include, but are not limited to, pension and other retirement
plans, life insurance, health insurance, sick leave, long term disability
insurance, vacations, and holidays. Specifically, during the course of his
employment, Comstock will provide, at no cost to Mr. Barone, a long-term
disability insurance program which shall, as a minimum, provide the features set
forth in Exhibit "C" to this Agreement. It is expressly understood that the
authorization participating in benefits and programs under this paragraph is in
addition to any benefits otherwise established through this Agreement or
independently, including, but not limited to, the Life Insurance provided for by
a Split-Dollar Insurance Agreement between Comstock and Mr. Barone, which is
attached to this Agreement as Exhibit "D".
7. SPLIT-DOLLAR INSURANCE: Comstock has, independent of this Agreement,
entered into a Split-Dollar Insurance Agreement (Exhibit "D") with Mr. Barone.
It is expressly agreed and understood that so long as this Employment Agreement
continues in force and effect, Comstock shall continue to make the premium
payments required by the Split-Dollar Agreement, as provided for in Exhibit "D".
It is further expressly understood and agreed that the rights of the parties
under the Split-Dollar Insurance Agreement, are governed by the provisions of
the Split-Dollar Insurance Agreement, a copy of which is attached for purposes
of reference, and not for incorporation, as Exhibit "D". Mr. Barone agrees to
make a collateral assignment to Comstock of his rights in the insurance policy
to be issued pursuant to the Split-Dollar Insurance Agreement. The collateral
assignment, which shall be to insure repayment of premiums advanced by Comstock,
will be in the form which is evidenced by Exhibit "E" to this Agreement.
<PAGE>
8. STOCK OPTIONS: The Board of Directors of Comstock has, concurrently
with the entry of this Agreement, granted stock options to Mr. Barone. The terms
and conditions governing the grant and exercise of such options are specified in
a stock option Award Agreement, a copy of which is attached hereto as Exhibit
"F", for purposes of reference and not incorporation. The stock option Award
Agreement is expressly understood by the parties to stand alone and to not be a
term or condition of this Agreement. It is further expressly understood that the
stock options granted by Exhibit "F" are in addition to and do not constitute a
limitation upon any stock options previously granted to Mr. Barone and such
previously granted stock options or stock option plans shall continue in full
force and effect and shall not be limited in any manner by this Agreement.
9. MANNER AND CONSEQUENCES OF TERMINATION OF EMPLOYMENT: It is agreed
that Mr. Barone's employment may only terminate as a result of (1) voluntary
resignation, (2) voluntary retirement at age 65, (3) voluntary retirement before
age 65, (4) disability, (5) death, and (6) cause, as defined in paragraph 9.3.
The specific rights of Mr. Barone in the event of termination as a result of
each of these reasons are individually addressed below.
9.1 Voluntary Resignation, Voluntary Retirement or Death: In the event
that Mr. Barone should voluntarily resign his employment with Comstock, should
take voluntary retirement prior to or at the age of 65, or should die, any
rights under this Employment Agreement shall immediately cease as of the
effective date of his termination, including the right to receive any salary
from the date of termination forward.
<PAGE>
9.2 Termination for Disability: For purposes of this Agreement, the
definition of "disability" shall be the same as the definition of "disability"
in the policy of disability insurance issued by Northwestern Mutual Life
Insurance Company to insure Mr. Barone, a copy of which is attached to this
Agreement as Exhibit "C", or the definition contained in any policy of
disability insurance purchased by Comstock for the benefit of Mr. Barone which
replaces Exhibit "C" and which is in effect at the time that Mr. Barone should
become disabled. In the event that Mr. Barone's employment is terminated as a
result of disability, this subparagraph shall be controlling. In such event, the
following shall occur:
(a) Mr. Barone's salary under this Agreement shall
immediately cease.
(b) Mr. Barone shall be entitled to any and all rights under
the disability policy provided for by this Agreement.
9.3 Termination for Cause: Other than as specifically provided in
subparagraphs 9.1 and 9.2, Mr. Barone's employment may be terminated only for
cause. This subparagraph shall be controlling with regard to any termination for
cause. For purposes of this Agreement, termination for cause shall be defined as
follows and no other or additional meaning or basis shall be utilized in
determining whether "cause" exists. "Cause" shall mean only:
(a) Mr. Barone's willful failure or refusal, after
reasonable written notice thereof and opportunity to
remedy the same, to perform specific directives of the
Board of Directors, when such directives are consistent
with the scope and nature of Mr. Barone's duties and
responsibilities as set forth in this Agreement and are
made for legitimate business purposes of Comstock and in
a manner consistent with reasonable and prudent business
practices and expectations.
(b) Dishonesty of Mr. Barone which directly effects
Comstock.
(c) The abuse of alcohol or controlled substances in a
manner which interferes with the performance of Mr.
Barone's obligations under this Agreement, continuing
after warning and an appropriate opportunity to cure the
problem, including the obligation on the part of
Comstock to pay for any rehabilitation program requested
by Mr. Barone. In order to take action under this
subparagraph, Comstock must have given specific written
warning to Mr. Barone which includes the offer to
provide any rehabilitation program or procedure
requested by Mr. Barone.
<PAGE>
(d) Conviction of a felony or of any crime involving moral
turpitude, fraud, or misrepresentation which would
constitute a basis for removal of Mr. Barone as an
officer of a banking institution under national or state
banking laws and regulations.
(e) Any gross or willful misconduct of Mr. Barone which
results in substantial loss to Comstock, substantial
damage to Comstock's reputation, theft or embezzlement
from Comstock, or any intentional act having the purpose
or effect of materially injuring the reputation,
business or business relationships of Comstock.
(f) Any material breach of this Agreement which is not
covered by subparagraphs (a-e) immediately above,
provided that Mr. Barone must be given written notice of
such material breach and allowed reasonable time, which
shall include at a minimum 10 days, after written notice
thereof, to remedy the breach.
It is specifically understood and agreed that any act or failure to act by Mr.
Barone which is done or omitted to be done by him in good faith and for a
purpose which he reasonably believed to be in the best interest of Comstock
shall not be deemed to be gross or willful and shall not be deemed to be cause
for termination under this paragraph. In the event that Comstock believes that
cause for termination under this subparagraph exists, Comstock must give Mr.
Barone an express written specification of the cause which is deemed to exist.
Mr. Barone shall have ten business days following receipt of the written
specification of cause in which to give notice to Comstock that he is demanding
that the determination of whether cause in fact exists for termination be
submitted to binding arbitration as provided for in this Agreement. If Mr.
Barone does not demand that the determination of whether cause exists be
submitted to binding arbitration, his employment shall terminate as of the close
of business on the tenth (10th) business day following receipt of the
specification of cause. If Mr. Barone does demand arbitration, the arbitrator
shall be limited to the grounds specified in subparagraphs (a) through (f) above
in determining whether cause exists. It is expressly understood that Mr. Barone
shall continue to receive all rights and benefits under this Agreement,
including salary, or any rights or benefits which he is otherwise receiving,
unless the document under which he is receiving such additional rights or
benefits specifically provides to the contrary, until the effective date of his
<PAGE>
termination, if no arbitration is demanded or until a decision is rendered by
the arbitrator establishing the existence of "cause" for termination. In the
event that the asserted cause for termination is based on subparagraphs (b),
(c), (d) or (e), Comstock may place Mr. Barone on administrative leave, with pay
and benefits, during the arbitration process. If the asserted cause is pursuant
to subparagraphs (a) or (f) above, Mr. Barone shall be entitled to continue to
perform his duties and responsibilities and to fully exercise his authority
during the arbitration process. If Mr. Barone does not contest the termination
or if the arbitrator decides that "cause" for termination has been established
and Mr. Barone's employment is terminated on such basis, then Mr. Barone's
salary and any benefits under this employment contract shall immediately cease
as of the effective date of termination, in the absence of an arbitration in
which a decision is rendered by an arbitrator, or the date of receipt of the
arbitrator's decision.
9.4 Termination upon Change of Control: Paragraphs 9.1 through 9.3
above set forth all of the bases for termination of Mr. Barone under this
Agreement. However, it is understood that in the event of a change of control of
Comstock through either purchase of stock, merger or a reconstitution of the
Board of Directors, Comstock may wish to terminate Mr. Barone's rights under
this Agreement. In such event, Comstock and Mr. Barone hereby expressly agree
that Comstock may terminate such rights on the condition that Mr. Barone's
salary shall continue, at the salary level being paid to Mr. Barone as of the
date of termination, for a period of four years from the date of termination.
During this period, Mr. Barone will not be required to perform any services for
Comstock and shall be entitled to accept other employment without diminution of
the salary paid by Comstock during such four year period. It is expressly
understood and agreed that unless Mr. Barone, in his sole discretion shall elect
otherwise, Comstock must give Mr. Barone a minimum of sixty (60) days written
notice of Comstock's intent to elect to exercise Comstock's rights under this
subparagraph and that Comstock may not physically remove Mr. Barone from his
employment duties, responsibilities, or authority during such sixty (60) day
period.
<PAGE>
[GOLDEN PARACHUTE INSERT: Notwithstanding anything to the contrary
contained in this Agreement or in any other agreement between Mr. Barone and
Comstock, it is the intention of Comstock and Mr. Barone that no portion of the
payments made under this Section 9.4 of this Agreement or any other payment or
payments to or for Mr. Barone under this Agreement or any other agreement or
plan ("Termination Payments") be deemed to be an excess parachute payment as
defined in Section 280G of the Internal Revenue Code of 1986, as amended, or its
successor provisions (the "Code"; and any reference to a specific Code section
shall be deemed to include any successor provision to such section). It is
agreed that the present value of the Termination Payments, receipt of which is
contingent on the types of changes in control in Comstock Bank set forth in
Section 280G(b)(2)(A)(i) (a "Change in Control"), and to which Section 280G of
the Code applies (in the aggregate, "Total Payments") shall not exceed an amount
equal to one dollar ($1.00) less than the maximum amount which Comstock may pay
without loss of deduction under Section 280G of the Code. Present value for
purposes of this Agreement shall be calculated in accordance with Section
280G(d)(4) of the Code. Within thirty (30) days following the termination of Mr.
Barone's employment or notice by Comstock to Mr. Barone of its belief that there
is a payment or benefit due Mr. Barone which will result in an excess parachute
payment as defined by Section 280G of the Code, Mr. Barone and Comstock, at
Comstock's expense, shall obtain an opinion of legal counsel from mutually
acceptable counsel, which opinions need not be unqualified, which sets forth (i)
the "base amount" of Mr. Barone's compensation as determined pursuant to Section
280G, (ii) the present value of Total Payments, and (iii) the amount and present
value of any excess parachute payments as determined pursuant to Section 280G of
the Code. In the event such opinion determines that there would be an excess
parachute payment, the Termination Payment hereunder or any other payment
determined by such counsel to be includible in Total Payments shall be reduced
or eliminated as specified by Mr. Barone in writing delivered to Comstock within
30 days of his receipt of such opinion or, if Mr. Barone fails to so notify
Comstock, then as Comstock shall reasonably determine, so that under the bases
of calculation set forth in such opinion there will be no excess parachute
payment. Legal counsel, in its sole discretion, may request the advice of a firm
of recognized executive compensation consultants as to the reasonableness of any
item of compensation to be received by Mr. Barone from Comstock in connection
with the Section 280G opinion required by this Section_____. If legal counsel
requests such advice, Mr. Barone and Comstock shall obtain it, at Comstock's
expense, and the legal counsel may rely on it in providing the Section 280G
opinion required by this Section _____. Notwithstanding the treatment of any
payments made to Barone hereunder on the income tax returns of Comstock
(including any amendments or other changes of such returns by audit or
otherwise), the opinion of legal counsel with respect to these issues should be
final and binding on Comstock and Barone. In the event that the provisions of
Section 280G and 4999 of the Code or any successor provision are repealed
without any successor provision, this Section _____ shall be of no further force
or effect.]
9.5 Termination for any other Reason: It is not contemplated that Mr.
Barone's employment could be terminated in any manner not addressed above.
However, to the extent that Mr. Barone's employment should be terminated in some
other unforeseen manner, any such termination shall be treated as a termination
upon change of control as provided for by subparagraph 9.4 above and Mr. Barone
shall be entitled to all rights and entitlements that he would be entitled to
upon termination as a result of change in control.
<PAGE>
10. SUCCESSORS OR ASSIGNS: This Agreement shall be fully binding upon
and inure to the benefit of the successors and assigns of Comstock. "Successors
and assigns" shall include any successor pursuant to a merger, consolidation or
sale or other transfer of all or substantially all of Comstock's assets.
11. SEVERABILITY: In the event that any provision or portion of the
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions or portions of the Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
12. SURVIVORSHIP: The respective rights and obligations of the parties
hereunder shall survive any termination of the Agreement to the extent necessary
to the intended preservation of such rights and obligations.
13. REFERENCES: The singular shall include the plural. In the event of
the death of Mr. Barone or a judicial determination of his incompetence,
reference in this Agreement to Mr. Barone shall be deemed, where appropriate, to
refer to his legal representative or, where appropriate, to his executor,
beneficiary or beneficiaries.
14. ARBITRATION: The parties hereby agree that any dispute, action,
claim or controversy between Comstock and Mr. Barone, whether sounding in
contract, tort or otherwise, shall be resolved by submission to arbitration in
accordance with NRS Chapter 38. The disputes, actions, claims or controversies
which shall be submitted to arbitration shall include all disputes, actions,
claims or controversies arising out of or in connection with (1) this Agreement
or any related agreements or instruments; (2) all past, present and future
agreements involving the parties; (3) the underlying facts which gave rise to
this Agreement; (4) any transaction contemplated hereby, and all past and future
transactions involving the parties; and (5) any aspect of the past, present or
future relationships of the parties.
<PAGE>
The parties hereby agree that an arbitrator shall be selected from a
list provided by the American Arbitration Association, unless the parties
specifically agree in writing otherwise. Any arbitration will be conducted
according to the Commercial Arbitration Rules of The American Arbitration
Association, provided that the discovery rules of the Nevada Rules of Civil
Procedure beginning with NRCP 26 through NRCP 37 shall be applicable and
available to the parties. In the event of any inconsistency between the
Commercial Arbitration Rules of the American Arbitration Association and this
Agreement, the terms of this Agreement shall control. All statutes of limitation
which would otherwise be applicable shall apply to any arbitration proceeding
commenced under this Agreement. Judgment upon any award rendered by an
Arbitrator may be entered in any Court having jurisdiction and may be enforced
as any judgment rendered by a Nevada District Court.
The parties hereby specifically waive their right to file any action at
law or in equity arising from any implementation or interpretation of this
Agreement or the underlying transactions which gave rise to this Agreement
except as specifically provided herein. This provision requiring arbitration
does not affect any right of either party to obtain provisional or ancillary
remedies such as injunctive relief or declaratory judgment as to contract terms
or conditions from a court having jurisdiction, before, during or after the
pendency of any arbitration. The institution and maintenance of an action for
judicial relief or the pursuit of any provisional or ancillary remedies which
are provided for herein, shall not constitute a waiver of the requirement of
arbitration created by this Agreement. This provision requiring arbitration does
constitute a SPECIFIC WAIVER OF THE RIGHT TO TRIAL BY JURY or to proceed in any
Nevada or Federal District Court or in the Courts of any other State, with the
exceptions of the right to seek judicial assistance as provided above, and the
right to seek enforcement of or compliance with this Agreement to submit to
arbitration.
<PAGE>
15. ATTORNEY'S FEES AND COSTS: Should either party be required to
retain the services of an attorney to enforce any term or condition of this
Agreement or to obtain any right created hereby, such prevailing party shall be
entitled to receive any attorney's fees and costs so incurred, regardless of
whether litigation or other formal legal proceeding shall be initiated.
16. NOTICES: Any notice required to be given by this Agreement shall be
given only by personal delivery or by certified mail addressed to the party at
the address specified below.
Comstock Bank Robert N. Barone
901 N. Stewart St. 2625 Spinnaker Drive
Carson City, NV 89701 Reno, Nevada 89509
Any notice given by personal delivery must be receipted by the party to whom it
is addressed and shall be considered received for all purposes of this
Agreement, upon such receipt. All notices given by certified mail shall be
considered received for all purposes of this Agreement, as of the date of
receipt.
17. GOVERNING LAWS: The provisions of this Agreement shall be construed
in accordance with the laws of the State of Nevada.
18. ENTIRE AGREEMENT: This Agreement and the attached Exhibits "A"
through "F" contain the entire understanding and agreement between the parties
with respect to the terms and conditions for the continuation of Mr. Barone's
employment and may not be modified or altered except by a written modification
signed by both parties.
19. SIGNATURES: The signatures of the parties constitute their
acceptance of and willingness to be bound by the terms and conditions of this
Agreement. The signatures of the members of the Board of Directors constitute
affirmation of the fact that the terms and conditions of and rights extended by
this Agreement are approved and accepted by the Board of Directors and, to the
extent that it should be deemed necessary, are hereby ratified and approved by
the Board of Directors as a reflection of a vote by the Board of Directors
approving and accepting such terms, conditions and rights and agreeing that
Comstock shall be bound by and to such terms, conditions and rights.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the Agreement and
have, thereby, consented and agreed to be bound by the terms and conditions of
the Agreement.
DATED this 14th day of December, 1992.
COMSTOCK BANK
By: /s/ Larry A. Platz
-------------------------
LARRY A. PLATZ, President
DATED this 14th day of December, 1992.
/s/ Robert Whear /s/ John Coombs
- ------------------------- ------------------------
ROBERT WHEAR, Director JOHN COOMBS, Director
/s/ Merv Matorian /s/ Daniel Gustin
- ------------------------- -------------------------
MERV MATORIAN, Director DANIEL GUSTIN, Director
/s/ Michael W. Dyer
- -------------------------
MICHAEL W. DYER, Director
DATED this 14th day of December, 1992.
/s/ Robert N. Barone
- -------------------------
ROBERT N. BARONE
<PAGE>
DUTIES AND RESPONSIBILITIES OF THE CEO
1. Organizes Board Exhibits and Agenda;
2. Organizes annual meeting of stockholders;
3. Main contact for stockholders;
4. Responsible for accounting, payroll and higher financial functions
of the bank including the financial statements, accounting policy,
proxy statements, and financial reports to the regulators,
shareholders, and the public;
5 Directs the Bank's planning effort (short and long term) including
budgeting and strategic planning;
6. Bank's contact with outside auditor and regulators;
7. Responsible for management of the bank's securities' portfolios,
liquidity and any hedging and/or trading activities; responsible for
setting interest rates paid on deposits;
8. Responsible for bank merger/acquisition activity;
9. Responsible for overall data processing systems;
10. Responsible for bank security;
11. Responsible for bank's risk management;
12. As the CEO, serves on Management Committee; is a signer on loan
approvals and expenditures per Board designated authorities;
13. Shares responsibilities for policy making with the President;
14. As the CEO attends appropriate Board committee meetings including
the following:
Loan Committee; Investment Committee; Audit Committee; Compliance,
Planning, and CRA
Prepares the agenda and organizes the exhibits for the following:
Investment Committee, Audit Committee, Planning Committee;
15. Directs any additional ventures of the Bank as designated by the Board.
EXHIBIT "A"
<PAGE>
EXHIBIT 10.2
ASSIGNMENT OF AND FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
ASSIGNMENT OF AND FIRST AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of
May ___, 1997 by and among Comstock Bancorp, a Nevada bank holding corporation
("Bancorp"), Comstock Bank, a Nevada banking corporation ("Comstock"), and
Robert N. Barone ("Employee").
WHEREAS, Comstock and Employee are parties to an Employment Agreement
dated as of December 14, 1992 (the "Employment Agreement");
WHEREAS, Bancorp owns all of the issued and outstanding common stock,
par value $.50 per share, of Comstock;
WHEREAS, Comstock desires to assign its rights and obligations under
the Employment Agreement to Bancorp and Employee desires to consent to such
assignment; and
WHEREAS, Bancorp and Employee desire to amend certain terms and
conditions of the Employment Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein and for other valuable consideration, the parties hereto agree
as follows:
1. Assignment. Comstock hereby assigns its rights and obligations under
the terms and conditions of the Employment Agreement to Bancorp and Bancorp
hereby agrees to be bound by the terms and conditions of the Employment
Agreement. Employee hereby consents to such assignment.
2. Change of Control. For purposes of Section 3.2 and 9.4 of the
Employment Agreement, a "change of control" shall be deemed to have occurred
upon the occurrence of any of the following events:
(a). Bancorp is involved in merger or other acquisition in
which Bancorp is not the surviving entity;
(b). Shares representing greater than or equal to forty
percent (40%) of the voting power of Bancorp are
acquired by a person, entity or group (as such term is
used in Rule 13d-5 of the Securities Exchange Act of
1934, as amended) through a transaction or series of
transactions; or
<PAGE>
(c). A majority of the members of Bancorp's Board of
Directors elected at an annual meeting of the
shareholders of Bancorp are replaced, are removed
without cause or resign during the period commencing at
the annual meeting of shareholders at which the
directors were elected and ending after the next annual
meeting of shareholders at which directors of Bancorp
are elected.
3. Waiver of Change of Control. Employee hereby waives any rights or
benefits he may have had under the terms of the Employment Agreement including,
without limitation, any claim to compensation or notice pursuant to Section 9.4
of the Employment Agreement, based on the transactions contemplated by the
Agreement and Plan of Reorganization dated February 26, 1997 between Bancorp and
Comstock.
4. Other Terms and Conditions. Bancorp and Employee agree that (i) all
references to Comstock in the Employment Agreement shall be deemed to be
references to Bancorp, and (ii) all other terms, conditions, covenants and
agreements set forth in the Employment Agreement, except as otherwise amended or
modified herein, shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment of
and First Amendment to Employment Agreement as of the date first written above.
COMSTOCK BANCORP
-----------------------------------
By:
Its:
COMSTOCK BANK
-----------------------------------
By:
Its:
-----------------------------------
ROBERT N. BARONE
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Agreement made and entered into as of December 14, 1992, by
Comstock Bank, a Nevada corporation ("Comstock"), and Larry A. Platz (Mr.
Platz).
RECITALS
i. Comstock desires to void the present contract of employment between
Comstock and Mr. Platz and to enter into a new contract governing the continued
employment of Mr. Platz. This desire on the part of Comstock arises from the
determination that it is in the best interests of the stockholders of Comstock
that Mr. Platz continue in his position as President of Comstock and that he
continue to exercise the duties and responsibilities of such office. Comstock
believes that establishing a longer-term employment contract with Mr. Platz will
benefit Comstock through creating incentive for Mr. Platz to continue in the
employment of Comstock.
ii. Mr. Platz is willing to void his existing contract of employment
and to enter into a new agreement with the express understanding that he is
relinquishing the rights under his presently existing contract of employment on
the basis of the additional benefits to be received under the terms and
conditions set forth below.
TERMS AND CONDITIONS
1. EMPLOYMENT: Comstock hereby continues the employment of Mr. Platz
and Mr. Platz hereby accepts the continuation of employment with Comstock on the
terms of this Agreement, in the position and with the duties and
responsibilities set forth in paragraph 3, below and in Exhibit "A" as appended,
and upon the other terms and conditions hereinafter stated.
2. TERM: Mr. Platz shall be employed pursuant to this contract for a
period of five (5) years, beginning on December 15, 1992, or until termination
for cause, as that term is defined in paragraph 9.3 of this Agreement. PROVIDED
THAT, the term of this Agreement shall be extended by an additional year being
<PAGE>
added to the term on each anniversary date of this Agreement unless the Board of
Directors of Comstock shall have given written notice to Mr. Platz thirty (30)
days prior to the anniversary date that an additional year will not be added
effective on the upcoming anniversary date. This provision that an additional
year shall be added to the term of the Agreement on each anniversary date unless
written notice to the contrary has been given to Mr. Platz, shall continue in
effect from year-to-year throughout the entire term of this Agreement. The
giving of notice by the Board of Directors in a particular year that an
additional year will not be added shall effect only that year and an additional
year shall be added in subsequent years, unless notice is also given in such
subsequent years that there will be no additional year added. Upon the
expiration of this Agreement, Mr. Platz may continue in the employment of
Comstock, at the sole discretion of Comstock, upon such terms and conditions as
Comstock and Mr. Platz may then agree to.
3. POSITION, DUTIES, RESPONSIBILITIES:
3.1 Position: It is intended at all times during the term of the
Agreement that Mr. Platz shall serve as President of Comstock and, other than as
provided for herein, shall devote his full time and efforts to the position of
President. In accordance with such position, he is hereby granted appropriate
responsibilities, duties, and authority. Mr. Platz may not be removed from the
position of President, nor may the duties, responsibilities, and authority
normally attendant to such position, and those duties, responsibilities, and
authority actually possessed by Mr. Platz as of the date of this Agreement be
substantially altered or diminished, unless cause exists, as defined in
paragraph 9.3, for the termination of this Agreement. A description of duties
presently being performed by Mr. Platz is appended as Exhibit "A". It is
expressly understood that, as a minimum, Mr. Platz shall be entitled to perform
these duties, with commensurate authority, so long as this Agreement shall
continue in force and effect. Any substantive diminution or alteration of Mr.
Platz's duties, responsibilities or authority, without Mr. Platz's express
agreement, shall constitute a material breach of this Agreement and shall be
deemed a constructive termination without cause which shall entitle Mr. Platz to
immediately demand and receive all benefit and relief specified under paragraph
9.4 of this Agreement as if he had been terminated upon a change in control.
<PAGE>
3.2 Effect of Merger or Acquisition: It is further expressly understood
that in the event that Comstock should be merged into or acquired by another
corporation, and Comstock is not the surviving entity, Mr. Platz shall be given
a position of commensurate duty, responsibility and authority. Failure to
appoint Mr. Platz to such a position in the event of a merger or acquisition
shall constitute a material breach of this Agreement and shall be deemed a
constructive termination without cause which shall entitle Mr. Platz to
immediately demand and receive all benefit and relief specified under paragraph
9.4 of this Agreement as if he had been terminated upon a change in control.
3.3 Location of Employment: Unless Mr. Platz otherwise consents, the
principal place of his employment shall be in Comstock's primary administrative
office, as that office may be located from time to time.
3.4 Other Duties, Responsibilities and Activities: Mr. Platz shall be
free to engage in activities other than those specifically described in Exhibit
"A" at the discretion of the Board of Directors. It is expressly understood that
the Board of Directors shall not assign Mr. Platz duties in addition to the
duties or responsibilities so described unless changes in Comstock's structure
or changes within the banking industry would dictate the assignment of such
additional duties as sound and normal banking and business practice within the
range of normal duties of employees holding positions similar to that of Mr.
Platz in similarly situated banking institutions. Mr. Platz may request such
additional duties, responsibilities, or authority as he may from time-to-time
determine to be necessary or appropriate and the Board of Directors shall not
unreasonably withhold the assignment of such duties, responsibilities or
authority. Provided that no such grant of additional duties, responsibilities,
or authority to Mr. Platz may diminish the duties, responsibilities, or
authority of Larry A. Platz, if Mr. Platz then be employed by Comstock and does
not acquiesce in such assignment of additional duties, responsibilities, or
authority to Mr. Platz. Mr. Platz shall be free to engage in charitable and
community activities, and to manage personal investments, provided such
activities do not materially interfere with the performance of his duties and
responsibilities under the Agreement.
<PAGE>
4. SALARY: Mr. Platz shall be paid a base salary, payable in equal
semi-monthly installments, at a rate of no less than One Hundred Thirty Two
Thousand Dollars ($132,000.00) per year. The base salary amount is subject to
renegotiation every six months, though such renegotiation need not result in a
salary change. Salary changes shall only result in an increase in Mr. Platz's
base salary, not a decrease.
5. ANNUAL BONUS: Mr. Platz is currently eligible to receive an annual
incentive bonus based upon the profitability of Comstock. A description of the
incentive bonus program presently applicable to Mr. Platz, as reflected by the
minutes of the Board of Directors of Comstock in approving and implementing the
program, is attached hereto as Exhibit "B". Mr. Platz shall, as a minimum, be
allowed to continue to be eligible for an incentive bonus on the terms and
conditions specified in Exhibit "B" unless economic conditions or the financial
condition of Comstock dictate, as a matter of strict business necessity, that
such incentive program be suspended. In the event that strict business necessity
results in the suspension of the bonus incentive program, the bonus incentive
program shall be reinstated as soon as conditions improve to the point that the
bonus incentive program can be reinstated without jeopardizing the financial
soundness of Comstock.
6. EMPLOYEE BENEFIT PLANS AND PROGRAMS: Mr. Platz will be entitled to
participate in all benefit plans and programs of Comstock now or hereafter made
available to executives and other salaried employees, in accordance with their
terms, which may include, but are not limited to, pension and other retirement
plans, life insurance, health insurance, sick leave, long term disability
insurance, vacations, and holidays. Specifically, during the course of his
employment, Comstock will provide, at no cost to Mr. Platz, a long-term
disability insurance program which shall, as a minimum, provide the features set
forth in Exhibit "C" to this Agreement. It is expressly understood that the
authorization participating in benefits and programs under this paragraph is in
addition to any benefits otherwise established through this Agreement or
independently, including, but not limited to, the Life Insurance provided for by
a Split-Dollar Insurance Agreement between Comstock and Mr. Platz, which is
attached to this Agreement as Exhibit "D".
7. SPLIT-DOLLAR INSURANCE: Comstock has, independent of this Agreement,
entered into a Split-Dollar Insurance Agreement (Exhibit "D") with Mr. Platz. It
is expressly agreed and understood that so long as this Employment Agreement
continues in force and effect, Comstock shall continue to make the premium
payments required by the Split-Dollar Agreement, as provided for in Exhibit "D".
It is further expressly understood and agreed that the rights of the parties
under the Split-Dollar Insurance Agreement, are governed by the provisions of
the Split-Dollar Insurance Agreement, a copy of which is attached for purposes
of reference, and not for incorporation, as Exhibit "D". Mr. Platz agrees to
make a collateral assignment to Comstock of his rights in the insurance policy
to be issued pursuant to the Split-Dollar Insurance Agreement. The collateral
assignment, which shall be to insure repayment of premiums advanced by Comstock,
will be in the form which is evidenced by Exhibit "E" to this Agreement.
<PAGE>
8. STOCK OPTIONS: The Board of Directors of Comstock has, concurrently
with the entry of this Agreement, granted stock options to Mr. Platz. The terms
and conditions governing the grant and exercise of such options are specified in
a stock option Award Agreement, a copy of which is attached hereto as Exhibit
"F", for purposes of reference and not incorporation. The stock option Award
Agreement is expressly understood by the parties to stand alone and to not be a
term or condition of this Agreement. It is further expressly understood that the
stock options granted by Exhibit "F" are in addition to and do not constitute a
limitation upon any stock options previously granted to Mr. Platz and such
previously granted stock options or stock option plans shall continue in full
force and effect and shall not be limited in any manner by this Agreement.
9. MANNER AND CONSEQUENCES OF TERMINATION OF EMPLOYMENT: It is agreed
that Mr. Platz's employment may only terminate as a result of (1) voluntary
resignation, (2) voluntary retirement at age 65, (3) voluntary retirement before
age 65, (4) disability, (5) death, and (6) cause, as defined in paragraph 9.3.
The specific rights of Mr. Platz in the event of termination as a result of each
of these reasons are individually addressed below.
9.1 Voluntary Resignation, Voluntary Retirement or Death: In the event
that Mr. Platz should voluntarily resign his employment with Comstock, should
take voluntary retirement prior to or at the age of 65, or should die, any
rights under this Employment Agreement shall immediately cease as of the
effective date of his termination, including the right to receive any salary
from the date of termination forward.
9.2 Termination for Disability: For purposes of this Agreement, the
definition of "disability" shall be the same as the definition of "disability"
in the policy of disability insurance issued by Northwestern Mutual Life
Insurance Company to insure Mr. Platz, a copy of which is attached to this
Agreement as Exhibit "C", or the definition contained in any policy of
disability insurance purchased by Comstock for the benefit of Mr. Platz which
replaces Exhibit "C" and which is in effect at the time that Mr. Platz should
become disabled. In the event that Mr. Platz's employment is terminated as a
result of disability, this subparagraph shall be controlling. In such event, the
following shall occur:
<PAGE>
(a) Mr. Platz's salary under this Agreement shall
immediately cease.
(b) Mr. Platz shall be entitled to any and all rights under
the disability policy provided for by this Agreement.
9.3 Termination for Cause: Other than as specifically provided in
subparagraphs 9.1 and 9.2, Mr. Platz's employment may be terminated only for
cause. This subparagraph shall be controlling with regard to any termination for
cause. For purposes of this Agreement, termination for cause shall be defined as
follows and no other or additional meaning or basis shall be utilized in
determining whether "cause" exists. "Cause" shall mean only:
(a) Mr. Platz's willful failure or refusal, after reasonable
written notice thereof and opportunity to remedy the
same, to perform specific directives of the Board of
Directors, when such directives are consistent with the
scope and nature of Mr. Platz's duties and
responsibilities as set forth in this Agreement and are
made for legitimate business purposes of Comstock and in
a manner consistent with reasonable and prudent business
practices and expectations.
(b) Dishonesty of Mr. Platz which directly effects Comstock.
(c) The abuse of alcohol or controlled substances in a
manner which interferes with the performance of Mr.
Platz's obligations under this Agreement, continuing
after warning and an appropriate opportunity to cure the
problem, including the obligation on the part of
Comstock to pay for any rehabilitation program requested
by Mr. Platz. In order to take action under this
subparagraph, Comstock must have given specific written
warning to Mr. Platz which includes the offer to provide
any rehabilitation program or procedure requested by Mr.
Platz.
(d) Conviction of a felony or of any crime involving moral
turpitude, fraud, or misrepresentation which would
constitute a basis for removal of Mr. Platz as an
officer of a banking institution under national or state
banking laws and regulations.
<PAGE>
(e) Any gross or willful misconduct of Mr. Platz which
results in substantial loss to Comstock, substantial
damage to Comstock's reputation, theft or embezzlement
from Comstock, or any intentional act having the purpose
or effect of materially injuring the reputation,
business or business relationships of Comstock.
(f) Any material breach of this Agreement which is not
covered by subparagraphs (a-e) immediately above,
provided that Mr. Platz must be given written notice of
such material breach and allowed reasonable time, which
shall include at a minimum 10 days, after written notice
thereof, to remedy the breach.
It is specifically understood and agreed that any act or failure to act by Mr.
Platz which is done or omitted to be done by him in good faith and for a purpose
which he reasonably believed to be in the best interest of Comstock shall not be
deemed to be gross or willful and shall not be deemed to be cause for
termination under this paragraph. In the event that Comstock believes that cause
for termination under this subparagraph exists, Comstock must give Mr. Platz an
express written specification of the cause which is deemed to exist. Mr. Platz
shall have ten business days following receipt of the written specification of
cause in which to give notice to Comstock that he is demanding that the
determination of whether cause in fact exists for termination be submitted to
binding arbitration as provided for in this Agreement. If Mr. Platz does not
demand that the determination of whether cause exists be submitted to binding
arbitration, his employment shall terminate as of the close of business on the
tenth (10th) business day following receipt of the specification of cause. If
Mr. Platz does demand arbitration, the arbitrator shall be limited to the
grounds specified in subparagraphs (a) through (f) above in determining whether
cause exists. It is expressly understood that Mr. Platz shall continue to
receive all rights and benefits under this Agreement, including salary, or any
rights or benefits which he is otherwise receiving, unless the document under
which he is receiving such additional rights or benefits specifically provides
to the contrary, until the effective date of his termination, if no arbitration
is demanded or until a decision is rendered by the arbitrator establishing the
existence of "cause" for termination. In the event that the asserted cause for
<PAGE>
termination is based on subparagraphs (b), (c), (d) or (e), Comstock may place
Mr. Platz on administrative leave, with pay and benefits, during the arbitration
process. If the asserted cause is pursuant to subparagraphs (a) or (f) above,
Mr. Platz shall be entitled to continue to perform his duties and
responsibilities and to fully exercise his authority during the arbitration
process. If Mr. Platz does not contest the termination or if the arbitrator
decides that "cause" for termination has been established and Mr. Platz's
employment is terminated on such basis, then Mr. Platz's salary and any benefits
under this employment contract shall immediately cease as of the effective date
of termination, in the absence of an arbitration in which a decision is rendered
by an arbitrator, or the date of receipt of the arbitrator's decision.
9.4 Termination upon Change of Control: Paragraphs 9.1 through 9.3
above set forth all of the bases for termination of Mr. Platz under this
Agreement. However, it is understood that in the event of a change of control of
Comstock through either purchase of stock, merger or a reconstitution of the
Board of Directors, Comstock may wish to terminate Mr. Platz's rights under this
Agreement. In such event, Comstock and Mr. Platz hereby expressly agree that
Comstock may terminate such rights on the condition that Mr. Platz's salary
shall continue, at the salary level being paid to Mr. Platz as of the date of
termination, for a period of four years from the date of termination. During
this period, Mr. Platz will not be required to perform any services for Comstock
and shall be entitled to accept other employment without diminution of the
salary paid by Comstock during such four year period. It is expressly understood
and agreed that unless Mr. Platz, in his sole discretion shall elect otherwise,
Comstock must give Mr. Platz a minimum of sixty (60) days written notice of
Comstock's intent to elect to exercise Comstock's rights under this subparagraph
and that Comstock may not physically remove Mr. Platz from his employment
duties, responsibilities, or authority during such sixty (60) day period.
<PAGE>
[GOLDEN PARACHUTE INSERT: Notwithstanding anything to the contrary
contained in this Agreement or in any other agreement between Mr. Platz and
Comstock, it is the intention of Comstock and Mr. Platz that no portion of the
payments made under this Section 9.4 of this Agreement or any other payment or
payments to or for Mr. Platz under this Agreement or any other agreement or plan
("Termination Payments") be deemed to be an excess parachute payment as defined
in Section 280G of the Internal Revenue Code of 1986, as amended, or its
successor provisions (the "Code"; and any reference to a specific Code section
shall be deemed to include any successor provision to such section). It is
agreed that the present value of the Termination Payments, receipt of which is
contingent on the types of changes in control in Comstock Bank set forth in
Section 280G(b)(2)(A)(i) (a "Change in Control"), and to which Section 280G of
the Code applies (in the aggregate, "Total Payments") shall not exceed an amount
equal to one dollar ($1.00) less than the maximum amount which Comstock may pay
without loss of deduction under Section 280G of the Code. Present value for
purposes of this Agreement shall be calculated in accordance with Section
280G(d)(4) of the Code. Within thirty (30) days following the termination of Mr.
Platz's employment or notice by Comstock to Mr. Platz of its belief that there
is a payment or benefit due Mr. Platz which will result in an excess parachute
payment as defined by Section 280G of the Code, Mr. Platz and Comstock, at
Comstock's expense, shall obtain an opinion of legal counsel from mutually
acceptable counsel, which opinions need not be unqualified, which sets forth (i)
the "base amount" of Mr. Platz's compensation as determined pursuant to Section
280G, (ii) the present value of Total Payments, and (iii) the amount and present
value of any excess parachute payments as determined pursuant to Section 280G of
the Code. In the event such opinion determines that there would be an excess
parachute payment, the Termination Payment hereunder or any other payment
determined by such counsel to be includible in Total Payments shall be reduced
<PAGE>
or eliminated as specified by Mr. Platz in writing delivered to Comstock within
30 days of his receipt of such opinion or, if Mr. Platz fails to so notify
Comstock, then as Comstock shall reasonably determine, so that under the bases
of calculation set forth in such opinion there will be no excess parachute
payment. Legal counsel, in its sole discretion, may request the advice of a firm
of recognized executive compensation consultants as to the reasonableness of any
item of compensation to be received by Mr. Platz from Comstock in connection
with the Section 280G opinion required by this Section_____. If legal counsel
requests such advice, Mr. Platz and Comstock shall obtain it, at Comstock's
expense, and the legal counsel may rely on it in providing the Section 280G
opinion required by this Section _____. Notwithstanding the treatment of any
payments made to Platz hereunder on the income tax returns of Comstock
(including any amendments or other changes of such returns by audit or
otherwise), the opinion of legal counsel with respect to these issues should be
final and binding on Comstock and Platz. In the event that the provisions of
Section 280G and 4999 of the Code or any successor provision are repealed
without any successor provision, this Section _____ shall be of no further force
or effect.]
9.5 Termination for any other Reason: It is not contemplated that Mr.
Platz's employment could be terminated in any manner not addressed above.
However, to the extent that Mr. Platz's employment should be terminated in some
other unforeseen manner, any such termination shall be treated as a termination
upon change of control as provided for by subparagraph 9.4 above and Mr. Platz
shall be entitled to all rights and entitlements that he would be entitled to
upon termination as a result of change in control.
10. SUCCESSORS OR ASSIGNS: This Agreement shall be fully binding upon
and inure to the benefit of the successors and assigns of Comstock. "Successors
<PAGE>
and assigns" shall include any successor pursuant to a merger, consolidation or
sale or other transfer of all or substantially all of Comstock's assets.
11. SEVERABILITY: In the event that any provision or portion of the
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions or portions of the Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
12. SURVIVORSHIP: The respective rights and obligations of the parties
hereunder shall survive any termination of the Agreement to the extent necessary
to the intended preservation of such rights and obligations.
13. REFERENCES: The singular shall include the plural. In the event of
the death of Mr. Platz or a judicial determination of his incompetence,
reference in this Agreement to Mr. Platz shall be deemed, where appropriate, to
refer to his legal representative or, where appropriate, to his executor,
beneficiary or beneficiaries.
14. ARBITRATION: The parties hereby agree that any dispute, action,
claim or controversy between Comstock and Mr. Platz, whether sounding in
contract, tort or otherwise, shall be resolved by submission to arbitration in
accordance with NRS Chapter 38. The disputes, actions, claims or controversies
which shall be submitted to arbitration shall include all disputes, actions,
claims or controversies arising out of or in connection with (1) this Agreement
or any related agreements or instruments; (2) all past, present and future
agreements involving the parties; (3) the underlying facts which gave rise to
this Agreement; (4) any transaction contemplated hereby, and all past and future
transactions involving the parties; and (5) any aspect of the past, present or
future relationships of the parties.
<PAGE>
The parties hereby agree that an arbitrator shall be selected from a list
provided by the American Arbitration Association, unless the parties
specifically agree in writing otherwise. Any arbitration will be conducted
according to the Commercial Arbitration Rules of The American Arbitration
Association, provided that the discovery rules of the Nevada Rules of Civil
Procedure beginning with NRCP 26 through NRCP 37 shall be applicable and
available to the parties. In the event of any inconsistency between the
Commercial Arbitration Rules of the American Arbitration Association and this
Agreement, the terms of this Agreement shall control. All statutes of limitation
which would otherwise be applicable shall apply to any arbitration proceeding
commenced under this Agreement. Judgment upon any award rendered by an
Arbitrator may be entered in any Court having jurisdiction and may be enforced
as any judgment rendered by a Nevada District Court.
The parties hereby specifically waive their right to file any action at law
or in equity arising from any implementation or interpretation of this Agreement
or the underlying transactions which gave rise to this Agreement except as
specifically provided herein. This provision requiring arbitration does not
affect any right of either party to obtain provisional or ancillary remedies
such as injunctive relief or declaratory judgment as to contract terms or
conditions from a court having jurisdiction, before, during or after the
pendency of any arbitration. The institution and maintenance of an action for
judicial relief or the pursuit of any provisional or ancillary remedies which
are provided for herein, shall not constitute a waiver of the requirement of
arbitration created by this Agreement. This provision requiring arbitration does
constitute a SPECIFIC WAIVER OF THE RIGHT TO TRIAL BY JURY or to proceed in any
Nevada or Federal District Court or in the Courts of any other State, with the
exceptions of the right to seek judicial assistance as provided above, and the
right to seek enforcement of or compliance with this Agreement to submit to
arbitration.
<PAGE>
15. ATTORNEY'S FEES AND COSTS: Should either party be required to
retain the services of an attorney to enforce any term or condition of this
Agreement or to obtain any right created hereby, such prevailing party shall be
entitled to receive any attorney's fees and costs so incurred, regardless of
whether litigation or other formal legal proceeding shall be initiated.
16. NOTICES: Any notice required to be given by this Agreement shall be
given only by personal delivery or by certified mail addressed to the party at
the address specified below.
Comstock Bank Larry A. Platz
901 N. Stewart St. 12550 Stillwater Way
Carson City, NV 89701 Reno, Nevada 89511
Any notice given by personal delivery must be receipted by the party to whom it
is addressed and shall be considered received for all purposes of this
Agreement, upon such receipt. All notices given by certified mail shall be
considered received for all purposes of this Agreement, as of the date of
receipt.
17. GOVERNING LAWS: The provisions of this Agreement shall be construed
in accordance with the laws of the State of Nevada.
18. ENTIRE AGREEMENT: This Agreement and the attached Exhibits "A"
through "F" contain the entire understanding and agreement between the parties
with respect to the terms and conditions for the continuation of Mr. Platz's
employment and may not be modified or altered except by a written modification
signed by both parties.
19. SIGNATURES: The signatures of the parties constitute their
acceptance of and willingness to be bound by the terms and conditions of this
Agreement. The signatures of the members of the Board of Directors constitute
affirmation of the fact that the terms and conditions of and rights extended by
this Agreement are approved and accepted by the Board of Directors and, to the
extent that it should be deemed necessary, are hereby ratified and approved by
the Board of Directors as a reflection of a vote by the Board of Directors
approving and accepting such terms, conditions and rights and agreeing that
Comstock shall be bound by and to such terms, conditions and rights.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the Agreement and
have, thereby, consented and agreed to be bound by the terms and conditions of
the Agreement.
DATED this 14th day of December, 1992.
COMSTOCK BANK
By: /s/ Robert N. Barone
--------------------
ROBERT N. BARONE, C.E.O.
DATED this 14th day of December, 1992.
/s/ Robert Whear /s/ John Coombs
- ---------------------- ---------------------
ROBERT WHEAR, Director JOHN COOMBS, Director
/s/ Merv Matorian /s/ Daniel Gustin
- ----------------------- -----------------------
MERV MATORIAN, Director DANIEL GUSTIN, Director
/s/ Michael W. Dyer
- -------------------------
MICHAEL W. DYER, Director
DATED this 14th day of December, 1992.
/s/Larry A. Platz
- -----------------
LARRY A. PLATZ
<PAGE>
EXHIBIT 10.4
ASSIGNMENT OF AND FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
ASSIGNMENT OF AND FIRST AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of
May ___, 1997 by and among Comstock Bancorp, a Nevada bank holding corporation
("Bancorp"), Comstock Bank, a Nevada banking corporation ("Comstock"), and Larry
A. Platz ("Employee").
WHEREAS, Comstock and Employee are parties to an Employment Agreement
dated as of December 14, 1992 (the "Employment Agreement");
WHEREAS, Bancorp owns all of the issued and outstanding common stock,
par value $.50 per share, of Comstock;
WHEREAS, Comstock desires to assign its rights and obligations under
the Employment Agreement to Bancorp and Employee desires to consent to such
assignment; and
WHEREAS, Bancorp and Employee desire to amend certain terms and
conditions of the Employment Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein and for other valuable consideration, the parties hereto agree
as follows:
1. Assignment. Comstock hereby assigns its rights and obligations under
the terms and conditions of the Employment Agreement to Bancorp and Bancorp
hereby agrees to be bound by the terms and conditions of the Employment
Agreement. Employee hereby consents to such assignment.
2. Change of Control. For purposes of Section 3.2 and 9.4 of the
Employment Agreement, a "change of control" shall be deemed to have occurred
upon the occurrence of any of the following events:
(a). Bancorp is involved in merger or other acquisition in
which Bancorp is not the surviving entity;
(b). Shares representing greater than or equal to forty
percent (40%) of the voting power of Bancorp are
acquired by a person, entity or group (as such term is
used in Rule 13d-5 of the Securities Exchange Act of
1934, as amended) through a transaction or series of
transactions; or
<PAGE>
(c). A majority of the members of Bancorp's Board of
Directors elected at an annual meeting of the
shareholders of Bancorp are replaced, are removed
without cause or resign during the period commencing at
the annual meeting of shareholders at which the
directors were elected and ending after the next annual
meeting of shareholders at which directors of Bancorp
are elected.
3. Waiver of Change of Control. Employee hereby waives any rights or
benefits he may have had under the terms of the Employment Agreement including,
without limitation, any claim to compensation or notice pursuant to Section 9.4
of the Employment Agreement, based on the transactions contemplated by the
Agreement and Plan of Reorganization dated February 26, 1997 between Bancorp and
Comstock.
4. Other Terms and Conditions. Bancorp and Employee agree that (i) all
references to Comstock in the Employment Agreement shall be deemed to be
references to Bancorp, and (ii) all other terms, conditions, covenants and
agreements set forth in the Employment Agreement, except as otherwise amended or
modified herein, shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment of
and First Amendment to Employment Agreement as of the date first written above.
COMSTOCK BANCORP
-----------------------------------
By:
Its:
COMSTOCK BANK
-----------------------------------
By:
Its:
-----------------------------------
LARRY PLATZ
<PAGE>
EXHIBIT 10.5
1992 INCENTIVE PLAN
OF
COMSTOCK BANK
1. Purpose of the Plan. This 1992 Incentive Plan of Comstock Bank
adopted on this 5th day of February, 1992, is intended to encourage officers and
key employees of the Company and its Subsidiaries to acquire or increase their
ownership of common stock of the Company on reasonable terms. The opportunity so
provided is intended to foster in participants a strong incentive to put forth
maximum effort for the continued success and growth of the Company and its
Subsidiaries, to aid in retaining individuals who put forth such efforts, and to
assist in attracting the best available individuals to the Company and its
Subsidiaries in the future.
2. Definitions. When used herein, the following terms shall have the
meaning set forth below:
2.1 "Award" means an Option, a Restricted Stock Award or a
Stock Bonus Award.
2.2 "Award Agreement" means a written agreement in such form
as may be, from time to time, hereafter approved by the
Committee, or the Board if no Committee is appointed,
which shall be duly executed by the Company and the
Employee and which sets forth the terms and conditions
of an Award under the Plan.
2.3 "Board" means the Board of Directors of Comstock Bank.
2.4 "Code" means the Internal Revenue Code of 1986, as in
effect at the time of reference, or any successor
revenue code which may hereafter be adopted in lieu
thereof, and reference to any specific provisions of the
Code shall refer to the corresponding provisions of the
Code as it may hereafter be amended or replaced.
2.5 "Committee" means the Stock Option Committee of the
Board or any other committee appointed by the Board who
are invested by the Board with responsibility for the
administration of the Plan and whose members meet the
requirements for eligibility to serve as set forth in
Section 335.411 (as defined in Section 2.17 below) and
in the Plan.
2.6 "Company" means Comstock Bank.
2.7 "Employees" means officers (including officers who are
members of the Board) and other key employees of the
Company or any of its Subsidiaries.
<PAGE>
2.8 "Fair Market Value" means with respect to the Shares,
the fair market value determined by the Committee, or
the Board if no Committee is appointed, in its
discretion; provided however, that if the Shares are
traded on the over-the-counter market, Fair Market Value
means the mean between the high and the low bid and
asked prices for the Shares on the over-the-counter
market on the last business day prior to the date on
which the value is to be determined (or the next
preceding day on which sales occurred if there were no
sales on such date); provided further, however, if no
sales have occurred on the over-the-counter market
during the three week period preceding the date on which
value is to be determined Fair Market Value means the
the average of the mean between the high and the low bid
and asked prices for the Shares on the over-the-counter
market for the three (3) month period ending on the last
business day prior to the date on which the value is to
be determined; provided further, however, if the Shares
are traded on any other established securities market,
Fair Market Value means the closing price of the Shares
on the last business day prior to the date on which the
value is to be determined, as reported in the Wall
Street Journal or such other source of quotation for, or
reports of trading of, the Shares as the Board may
reasonably select from time to time.
2.9 "Incentive Stock Option" means an Option meeting the
requirements and containing the limitations and
restrictions set forth in Section 422 of the Code.
2.10 "Non-Qualified Stock Option" means an Option other than
an Incentive Stock Option.
2.11 "Option" means the right to purchase the number of
Shares specified by the Committee, or the Board if no
Committee is appointed, at a price and for a term fixed
by the Committee, or the Board if no Committee is
appointed, in accordance with the Plan, and subject to
such other limitations and restrictions as the Plan and
the Committee or the Board, as the case may be, impose,
as well as the right, if any, to receive the cash
payments specified in Section 10 of the Plan.
2.12 "Parent" means any corporation, other than the employer
corporation, in an unbroken chain of corporations ending
with the employer corporation if, at the time of the
granting of the Option, each of the corporations other
than the employer corporation owns stock possessing
fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other
corporations in such chain.
2.13 "Plan" means the Company's 1992 Incentive Plan.
2.14 "Regulation T" means Part 220, chapter II, title 12 of
the Code of Federal Regulations, issued by the Board of
Governors of the Federal Reserve System pursuant to the
Exchange Act, as amended from time to time, or any
successor regulation which may hereafter be adopted in
lieu thereof.
2.15 "Restricted Stock Agreement" means an Award Agreement
executed in connection with a Restricted Stock Award.
<PAGE>
2.16 "Restricted Stock Award" means the right to receive
Shares, but subject to forfeiture and/or other
restrictions set forth in the related Stock Restriction
Agreement and the Plan, as well as the right, if any, to
receive the cash payments specified in Section 10 of the
Plan.
2.17 "Section 335.411" means Section 335.411 of the General
Rules and Regulations of the Federal Deposit Insurance
Corporation as in effect at the time of reference, or
any successor rules or regulations which may hereafter
be adopted in lieu thereof.
2.18 "Shares" means shares of the Company $.50 par value
common stock or, if by reason of the adjustment
provisions contained herein, any rights under an Award
under the Plan pertain to any other security, such other
security.
2.19 "Stock Bonus Award" means the right to receive Shares,
without payment except as otherwise provided in Section
9 of the Plan, as well as the right, if any, to receive
the cash payments specified in Section 10 of the Plan.
2.20 "Subsidiary" or "Subsidiaries" means any corporation or
corporations other than the employer corporation in an
unbroken chain of corporations beginning with the
employer corporation if each of the corporations other
than the last corporation in the unbroken chain owns
stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in
one of the other corporations in such chain.
2.21 "Successor" means the legal representative of the estate
of a deceased Employee or the person or persons who
shall acquire the right to exercise or receive an Award
by bequest or inheritance or by reason of the death of
the Employee.
2.22 "Term" means the period during which a particular Award
may be exercised.
3. Stock Subject to the Plan. There will be reserved for use, upon the
exercise of Awards to be granted from time to time under the Plan, an aggregate
of 250,000 Shares, which Shares may be, in whole or in part, as the Board shall
from time to time determine, authorized but unissued Shares, or issued Shares
which shall have been reacquired by the Company. Any Shares subject to issuance
upon exercise of Options but which are not issued because of a surrender, lapse,
expiration or termination of any such Option prior to issuance of the Shares
shall once again be available for issuance in satisfaction of Awards. Similarly,
any Shares issued pursuant to a Restricted Stock Award which are subsequently
forfeited pursuant to the terms of the related Restricted Stock Agreement shall
once again be available for issuance in satisfaction of Awards.
<PAGE>
4. Administration of the Plan. The Board shall appoint the Committee,
which shall consist of not less than three (3) disinterested persons as defined
in Section 335.411; provided, however, if the Board fails to appoint a
Committee, the Board shall be invested with the responsibility for the
administration of the Plan. Subject to the provisions of the Plan, the
Committee, or the Board if no Committee is appointed, shall have full authority,
in its discretion, to determine the Employees to whom Awards shall be granted,
the number of Shares to be covered by each of the Awards, and the terms of any
such Award; to amend or cancel Awards (subject to Section 21 of the Plan), to
accelerate the vesting of Awards; to require the cancellation or surrender of
any previously granted options or other awards under this Plan or any other
plans of the Company as a condition to the granting of an Award, to interpret
the Plan; and to prescribe, amend, and, rescind rules and regulations relating
to the Plan, and generally to interpret and determine any and all matters
whatsoever relating to the administration of the Plan and the granting of Awards
hereunder. The Board may, from time to time appoint members to the Committee in
substitution for or in addition to members previously appointed and may fill
vacancies, however caused, in the Committee. The Committee shall select one of
its members as its Chairman and shall hold its meetings at such times and places
as it shall deem advisable. A majority of its members shall constitute a quorum.
Any action of the Committee may be taken by a written instrument signed by all
of the members, and any action so taken shall be fully as effective as if it had
been taken by a vote of a majority of the members at a meeting duly called and
held. The Committee shall make such rules and regulations for the conduct of its
business as it shall deem advisable and shall appoint a Secretary who shall keep
minutes of its meetings and records of all action taken in writing without a
meeting. No member of the Committee shall be liable, in the absence of bad
faith, for any act or omission with respect to his service on the Committee.
5. Employees to Whom Awards May Be Granted. Awards may be granted in
each calendar year or portion thereof while the Plan is in effect to such of the
Employees as the Committee, or the Board if no Committee is appointed, in its
discretion, shall determine.
In determining the Employees to whom Awards shall be granted and the
number of Shares to be subject to purchase under such Awards, the Committee, or
the Board if no Committee is appointed, shall take into account the duties of
the respective Employees, their present and potential contributions to the
success of the Company and its subsidiaries, and such other factors as the
Committee or the Board, as the case may be, shall deem relevant in connection
with accomplishing the purposes of the Plan.
No Award shall be granted to any member of the Committee so long as his
membership on the Committee continues or to any member of the Board who is not
also an officer or key employee of the Company or any Subsidiary.
<PAGE>
6. Stock Options.
6.1 Types of Options. Options granted under the Plan may be
(i) Incentive Stock Options, (ii) Non-Qualified Stock Options, or (iii)
a combination of the foregoing. The Award Agreement shall designate
whether an Option is an Incentive Stock Option or a Non-Qualified Stock
Option and separate Award Agreements shall be issued for each type of
Option when a combination of an Incentive Stock Option and a
Non-Qualified Stock Option are granted on the same date to the same
Employee. Any Option which is designated as a Non-Qualified Stock
Option shall not be treated by the Company or the Employee to whom the
Option is granted as an Incentive Stock Option for Federal income tax
purposes.
6.2 Option Price. Unless otherwise determined by the
Committee, or the Board if no Committee is appointed, in its sole
discretion, the option price per share of any Non-Qualified Stock
Option granted under the Plan shall not be less than the Fair Market
Value of the Shares covered by the Option on the date the Option is
granted. The option price per share of any Incentive Stock Option
granted under the Plan shall not be less than the Fair Market Value of
the Shares covered by the Option on the date the Option is granted.
Notwithstanding anything herein to the contrary, in the event
an Incentive Stock Option is granted to an Employee who, at the time
such Incentive Stock Option is granted, owns, as defined in Section 425
of the Code, stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of:
(i) the Company; or
(ii) if applicable, a Subsidiary; or
(iii) if applicable, a Parent,
then the option price per share of any Incentive Stock Option granted
to such Employee shall not be less than one hundred ten percent (110%)
of the Fair Market Value of the Shares covered by the Option on the
date the Option is granted.
6.3 Terms of Options. Options granted hereunder shall be
exercisable for a Term of not more than ten (10) years from the date of
grant thereof, but shall be subject to earlier termination as
hereinafter provided. Each Award Agreement issued hereunder shall
specify the term of the Option, which Term shall be determined by the
Committee, or the Board if no Committee is appointed, in accordance
with its discretionary authority hereunder.
Notwithstanding anything herein to the contrary, in the event
an Incentive Stock Option is granted to an Employee who, at the time
such Incentive Stock Option is granted, owns, as defined in Section 425
of the Code, stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of:
<PAGE>
(i) the Company; or
(ii) if applicable, a Subsidiary; or
(iii) if applicable, a Parent,
then such Incentive Stock Option shall not be exercisable more than
five (5) years from the date of grant thereof, but shall be subject to
earlier termination as hereinafter provided.
7. Limit on Fair Market Value of Incentive Stock Options. In any
calendar year, no Employee may be granted an Incentive Stock Option hereunder to
the extent that the aggregate fair market value (such fair market value being
determined as of the date of grant of the option in question) of the stock with
respect to which incentive stock options are first exercisable by any Employee
during any calendar year (under all such plans of the Employee's employer
corporation, its Parent, if any, and its Subsidiaries, if any) exceeds the sum
of One Hundred Thousand Dollars ($100,000). For purposes of the preceding
sentence, options shall be taken into account in the order in which they were
granted. Any Option granted under the Plan which is intended to be an Incentive
Stock Option, but which exceeds the limitation set forth in this Section 7,
shall be a Non-Qualified Stock Option.
8. Restricted Stock Awards. Restricted Stock Awards granted under the
Plan shall be subject to such terms and conditions as the Committee,or the Board
if no Committee is appointed, may, in its discretion, determine. Restricted
Stock Awards issued under the Plan shall be evidenced by Restricted Stock
Agreements in such form as the Committee, or the Board if no Committee is
appointed, may from time to time determine.
8.1 Receipt of Shares. Each Restricted Stock Agreement shall
set forth the number of Shares issuable under the Restricted Stock
Award evidenced thereby. Subject to the restrictions in Section 8.3 of
the Plan and as set forth in the related Restricted Stock Agreement,
the number of Shares granted under a Restricted Stock Award shall be
issued to the recipient Employee thereof on the date of grant of such
Restricted Stock Award or as soon as may be practicable thereafter.
8.2 Rights of Recipient Employees. Shares received pursuant
to Restricted Stock Awards shall be duly issued or transferred to the
Employee, and a certificate or certificates for such Shares shall be
issued in the Employee's name. Subject to the restrictions in Section
8.3 of the Plan and as set forth in the related Restricted Stock
Agreement, the Employee shall thereupon be a stockholder with respect
to all the Shares represented by such certificate or certificates and
shall have all the rights of a stockholder with respect to such Shares,
including the right to vote such Shares and to receive dividends and
other distributions paid with respect to such Shares. In aid of such
restrictions, certificates for Shares awarded hereunder, together with
a suitably executed stock power signed by each recipient Employee,
shall be held by the Company in its control for the account of such
<PAGE>
Employee (i) until the restrictions determined by the Committee or the
Board if no Committee is appointed, in its discretion, and as set forth
in the related Restricted Stock Agreement, lapse pursuant to the Plan
or the Restricted Stock Agreement, at which time a certificate for the
appropriate number of Shares (free of all restrictions imposed by the
Plan or the Restricted Stock Agreement) shall be delivered to the
Employee, or (ii) until such Shares are forfeited to the Company and
cancelled as provided by the Plan or the Restricted Stock Agreement.
8.3 Restrictions. Except as otherwise determined by the
Committee, or the Board if no Committee is appointed, in its sole
discretion, each Share issued pursuant to a Restricted Stock Agreement
shall be subject, in addition to any other restrictions set forth in
the related Restricted Stock Agreement, to the following restrictions
until such restrictions have lapsed pursuant to Section 8.4 of the
Plan:
(a) Disposition. The Shares awarded to an Employee
and held by the Company pursuant to Section 8.2 of the Plan,
and the right to vote such Shares or receive dividends on such
Shares, may not be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of.
(b) Forfeiture. The Shares awarded to an Employee
shall be forfeited to the Company without notice and without
consideration therefor immediately upon the termination of
Employee's employment with the Company, and all Subsidiaries
of the Company, for any reason.
8.4 Lapse of Restrictions. Except as otherwise determined by
the Committee, or the Board if no Committee is appointed, in its sole
discretion, the restrictions set forth in Section 8.3 of the Plan on
Shares issued under a Restricted Stock Award shall lapse, and
certificates for the Shares held for the account of the Employee in
accordance with Section 8.2 of the Plan hereof shall be appropriately
distributed to Employee as follows:
(a) After one (1) year from the date of grant, the
restrictions shall lapse as to not more than one-third (1/3)
of the Shares originally awarded.
(b) After two (2) years from the date of grant, the
restrictions shall lapse as to an aggregate of not more than
two-thirds (2/3) of the Shares originally awarded.
(c) After three (3) years from the date of grant, the
restrictions shall lapse as to all of the Shares originally
awarded.
9. Stock Bonus Awards. Stock Bonus Awards may be granted under the Plan
with respect to Shares, and shall be granted, subject to the provisions of this
Plan, upon such terms and conditions as the Committee, or the Board if no
Committee is appointed, may determine. The Committee, or the Board if no
Committee is appointed, in its discretion, may require the Employees to whom
<PAGE>
Stock Bonus Awards are granted to pay the Company an amount equal to the
aggregate par value of the Shares to be issued to such Employees. Subject to the
Employee delivering in cash or by check the amounts, if any, required to be paid
pursuant to this Section 9 or pursuant to Section 19 of the Plan (relating to
taxes), a certificate or certificates for such Shares shall be issued in the
Employee's name as soon as reasonably practicable following the date of grant,
or if such payments are required, following the date of such payments. The
Company shall deliver such certificate or certificates to the Employee and the
Employee shall thereupon be a stockholder with respect to all Shares represented
by such certificate or certificates and shall have all the rights of a
stockholder with respect to such Shares.
10. Receipt of Cash Payments. The Committee, or the Board if no
Committee is appointed, may, in its sole discretion, provide that the Company
will make a cash payment to the Employee covered thereby equal to the aggregate
of the amount of federal, state and local taxes which such Employee would be
required to pay to each such taxing authority attributable to the realization of
taxable income, if any, as a result of receipt of Shares pursuant to any
Options, Restricted Stock Awards or Stock Bonus Awards granted under the Plan.
The Committee, or the Board if no Committee is appointed, may, in its
discretion, require the Employee to make an election to be taxed immediately
under Section 83(b) of the Code as a condition to receiving such payment. In
computing the amount of such payment, it shall be assumed that every Employee
granted an Award under the Plan is subject to tax by each taxing authority at
the highest marginal tax rate in the respective taxing jurisdiction of such
Employee (provided that the highest marginal tax rate for federal income tax
purposes shall be determined without reference to Section 1(g) of the Code),
taking into account the city and state in which such Employee resides, but
giving effect to the tax benefit, if any, which such Employee may enjoy to the
extent that any such tax is deductible in determining the tax liability of any
other taxing jurisdiction. In addition to the foregoing, the Committee, or the
Board if no Committee is appointed, may, in its discretion, increase each cash
payment due to an Employee hereunder by the aggregate of the federal, state and
local taxes for which such Employee may be liable (computed on the same basis)
on account of the cash payment to be made hereunder, such that each Employee who
receives Shares under this Plan shall receive such Shares net of all taxes
imposed on such Employee on account of the receipt of Shares under this Plan.
11. Date of Grant. The date of grant of an Award granted hereunder
shall be the date on which the Committee, or the Board if no Committee is
appointed, acts in granting the Award.
12. Exercise of Rights Under Awards.
12.1 Notice of Exercise. An Employee entitled to exercise an
Award may do so by delivery of a written notice to that effect
specifying the number of Shares with respect to which the Award is
being exercised and any other information the Committee, or the Board
if no Committee is appointed, may prescribe. The notice shall be
accompanied by payment in full of the purchase price of any Shares to
be purchased, which payment may be made in cash or, with the
Committee's or the Board's approval, as the case may be, in Shares
which have been held at least six (6) months by such Employee and which
<PAGE>
are valued at Fair Market Value at the time of exercise or a
combination thereof. No Shares shall be issued upon exercise of an
Option until full payment has been made therefor. All notices or
requests provided for herein shall be delivered to the Chief Executive
Officer of the Company.
12.2 Cashless Exercise Procedures. The Committee, or the
Board if no Committee is appointed, in its sole discretion, may
establish procedures whereby an Employee, subject to the requirements
of Section 335.411, Regulation T, federal income tax laws, and other
federal, state and local tax and securities laws, can exercise an
Option or a portion thereof without making a direct payment of the
option price to the Company. If the Committee or the Board, as the case
may be, so elects to establish a cashless exercise program, the
Committee or the Board, as the case may be, shall determine, in its
sole discretion, and from time to time, such administrative procedures
and policies as it deems appropriate and such procedures and policies
shall be binding on any Employee wishing to utilize the cashless
exercise program.
13. Award Terms and Conditions. Each Award or each agreement setting
forth an Award shall contain such other terms and conditions not inconsistent
herewith as shall be approved by the Board or by the Committee.
14. Rights of Award Holder. The holder of an Award shall not have any
of the rights of a stockholder with respect to the Shares subject to purchase or
receipt under his Award, except to the extent that one or more certificates for
such Shares shall be delivered to him upon the due exercise or grant of the
Award.
15. Nontransferability of Awards. An Award shall not be transferable,
other than: (a) by will or the laws of descent and distribution, and an Award
may be exercised, during the lifetime of the holder of the Award, only by him or
in the event of death, his Successor, or in the event of disability, his
personal representative, or (b) pursuant to a qualified domestic relation order,
as defined in the Code or the Employee Retirement Income Security Act (ERISA) or
the rules thereunder; provided, however, that Incentive Stock Options may not be
transferred pursuant to a qualified domestic relation order unless such transfer
is otherwise permitted pursuant to the Code and regulations thereunder without
affecting the Option's qualification under Section 422 as an Incentive Stock
Option.
16. Adjustments Upon Changes in Capitalization. In the event of
changes in all of the outstanding Shares by reason of stock dividends, stock
splits, recapitalizations, mergers, consolidations, combinations, or exchanges
of shares, separations, reorganizations or liquidations, or similar events or,
in the event of extraordinary cash dividends being declared with respect to the
Shares, or similar transactions, the number and class of Shares available under
the Plan in the aggregate, the number and class of Shares subject to Awards
theretofore granted, applicable purchase prices and all other applicable
provisions, shall, subject to the provisions of the Plan, be equitably adjusted
by the Committee, or the Board if no Committee is appointed (which adjustment
may, but need not, include payment to the holder of an Option, in cash or in
<PAGE>
Shares, in an amount equal to the difference between the price at which such
Award may be exercised and the then current fair market value of the Shares
subject to such Award as equitably determined by the Committee or the Board, as
the case may be). The foregoing adjustment and the manner of application of the
foregoing provisions shall be determined by the Committee or the Board, as the
case may be, in its sole discretion. Any such adjustment may provide for the
elimination of any fractional Share which might otherwise become subject to an
Award.
17. Unusual Corporate Events. Notwithstanding anything to the
contrary, in the case of an unusual corporate event such as liquidation, merger,
reorganization (other than a reorganization as defined by Section 368(a)(1)(F)
of the Code), or other business combination, acquisition or change in the
control of the Company through a tender offer or otherwise, the Board may, in
its sole discretion, determine, on a case by case basis, that each Award granted
under the Plan shall terminate ninety (90) days after the occurrence of such
unusual corporate event, but, in the event of any such termination:
(a) An Option holder shall have the right, commencing at least
five (5) days prior to such unusual corporate event and subject to any
other limitation on the exercises of such Award in effect on the date
of exercise to immediately exercise any Options in full, without regard
to any vesting limitations, to the extent they shall not have been
exercised, and
(b) All restrictions on Restricted Stock Awards shall
immediately lapse and certificates for the affected Shares and the cash
payment required by Section 8.2 of the Plan (if any payment is due)
shall be appropriately distributed.
18. Forms of Options. Nothing contained in the Plan nor any resolution
adopted or to be adopted by the Board or by the stockholders of the Company
shall constitute the granting of any Award. An Award shall be granted hereunder
only by action taken by the Committee, or the Board of no Committee is
appointed, in granting an Award. Whenever the Committee or the Board, as the
case may be, shall designate an Employee for the receipt of an Award, the
Secretary or the Chief Executive Officer of the Company, or such other person as
the Committee or the Board, as the case may be, shall appoint, shall forthwith
send notice thereof to the Employee, in such form as the Committee or the Board,
as the case may be, shall approve, stating the number of Shares subject to
Award, its Term, and the other terms and conditions thereof. The notice shall be
accompanied by a written Award Agreement in such form as may from time to time
hereafter be approved by the Committee or the Board, as the case may be, which
shall have been duly executed by or on behalf of the Company. If the surrender
of previously issued Awards is made a condition of the grant, the notice shall
set forth the pertinent details of such condition. Execution by the Employee to
whom such Award is granted of said Award Agreement in accordance with the
provisions set forth in this Plan shall be a condition precedent to the exercise
of any Award.
<PAGE>
19. Taxes.
19.1 Right to Withhold Required Taxes. The Company shall have
the right to require a person entitled to receive Shares pursuant to
the receipt or an exercise of an Award under the Plan to pay the
Company the amount of any taxes which the Company is or will be
required to withhold with respect to such Shares before the certificate
for such Shares is delivered pursuant to the Award. Furthermore, the
Company may elect to deduct such taxes from any other amounts then
payable in cash or in shares or from any other amounts payable any time
thereafter in cash to the Employee. If the Employee disposes of Shares
acquired pursuant to an Incentive Stock Option in any transaction
considered to be a disqualifying transaction under Sections 421 and 422
of the Code, the Employee shall notify the Company of such transfer and
the Company shall have the right to deduct any taxes required by law to
be withheld from any amounts otherwise payable in cash then or at any
time thereafter to the Employee.
19.2 Employee Election to Withhold Shares. Subject to
Committee approval, or Board approval if no Committee is appointed, an
Employee who is subject to Section 16(b) of the Securities and Exchange
Act of 1934, as amended, may satisfy his tax liability with respect to
the exercise of an Option, by having the Company withhold Shares
otherwise issuable upon exercise of the Option if such Employee makes
an election to do so which satisfies the requirements of Section
335.411.
20. Termination of the Plan. The Plan shall terminate ten (10) years
from the date hereof, and an Award shall not be granted under the Plan after
that date although the terms of any Awards may be amended at any date prior to
the end of its Term in accordance with the Plan. Any Awards outstanding at the
time of termination of the Plan shall continue in full force and effect
according to the terms and conditions of the Award and this Plan.
21. Amendment of the Plan. The Plan may be amended at any time and
from time to time by the Board, but no amendment without the approval of the
stockholders of the Company shall be made if stockholder approval under Section
422 of the Code (or any successor provision) or Section 335.411 would be
required. Notwithstanding the discretionary authority granted to the Committee
in Section 4 of the Plan, no amendment of the Plan or any Award granted under
the Plan shall impair any of the rights of any holder, without his consent,
under any Award theretofore granted under the Plan.
22. Delivery of Shares on Exercise. Delivery of certificates for
Shares pursuant to an Award exercise may be postponed by the Company such period
as may be required for it with reasonable diligence to comply with any
applicable requirements of any federal, state or local law or regulation or any
administrative or quasi-administrative requirement applicable to the sale,
issuance, distribution or delivery of such Shares. The Committee, or the Board
if no Committee is appointed, may, in its sole discretion, require an Employee
to furnish the Company with appropriate representations and a written investment
letter prior to the exercise of an Award or the delivery of any Shares pursuant
to an Award.
<PAGE>
23. Fees and Costs. The Company shall pay all original issue taxes on
the exercise of any Award granted under the Plan and all other fees and expenses
necessarily incurred by the Company in connection therewith.
24. Effectiveness of the Plan. The Plan shall become effective when
approved by the Board. The Plan shall thereafter be submitted to the Company's
stockholders for approval and unless the Plan is approved by the affirmative
votes of the holders of shares having a majority of the voting power of all
shares represented at a meeting duly held in accordance with Nevada law within
twelve (12) months after being approved by the Board, the Plan and all Awards
made under it shall be void and of no force and effect.
25. Other Provisions. As used in the Plan, and in Awards and other
documents prepared in implementation of the Plan, references to the masculine
pronoun shall be deemed to refer to the feminine or neuter, and references in
the singular or the plural shall refer to the plural or the singular, as the
identity of the person or persons or entity or entities being referred to may
require. The captions used in the Plan and in such Awards and other documents
prepared in implementation of the Plan are for convenience only and shall not
affect the meaning of any provision hereof or thereof.
<PAGE>
AMENDMENT NO. 1
TO THE
1992 INCENTIVE PLAN
OF
COMSTOCK BANK
1. Section 2.17 of the Incentive Plan is hereby deleted and the
following substituted therefor:
"2.17 "Section 240.16b-3" means Section 240.16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as
adopted by the Federal Deposit Insurance Corporation pursuant to
Section 335.410 of the General Rules and Regulations of the Federal
Deposit Insurance Corporation on January 28, 1992, or any successor
rules or regulations which may hereafter be adopted in lieu thereof."
2. All references to Section 335.411 in the Incentive Plan are hereby
changed to Section 240.16b-3.
3. Section 4 of the Incentive Plan is hereby amended to provide that
the Committee shall consist of not less than two (2) disinterested persons as
defined in Section 240.16b-3.
AMENDMENT NO. 2
TO THE
1992 INCENTIVE PLAN
OF
COMSTOCK BANK
1. Section 10 of the Incentive Plan is hereby deleted.
2. Section 3 of the Incentive Plan is hereby amended to increase the
aggregate number of shares available under the plan to 325,000.
<PAGE>
EXHIBIT 10.6
1992 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN OF
COMSTOCK BANK
1. Purpose of the Plan. This 1992 Non-Employee Directors' Stock Option
Plan of Comstock Bank adopted on this 5th day of February, 1992, is intended to
encourage directors of the Company who are not officers and key employees of the
Company or any of its Subsidiaries to acquire or increase their ownership of
common stock of the Company on reasonable terms. The opportunity so provided is
intended to foster in participants a strong incentive to put forth maximum
effort for the continued success and growth of the Company and its Subsidiaries,
to aid in retaining individuals who put forth such efforts, and to assist in
attracting the best available individuals to the Company in the future.
2. Definitions. When used herein, the following terms shall have the
meaning set forth below:
2.1 "Award" means the right set forth in Section 5(a) of the
Plan to purchase Shares and the corresponding Option granted pursuant
thereto, as well as the automatic Option set forth in Section 5(b) of
the Plan.
2.2 "Board" means the Board of Directors of Comstock Bank.
2.3 "Code" means the Internal Revenue Code of 1986, as in
effect at the time of reference, or any successor revenue code which
may hereafter be adopted in lieu thereof, and reference to any specific
provisions of the Code shall refer to the corresponding provisions of
the Code as it may hereafter be amended or replaced.
2.4 "Committee" means the Stock Option Committee of the Board
or any other committee appointed by the Board who are invested by the
Board with responsibility for the administration of the Plan and whose
members meet the requirements for eligibility to serve as set forth in
Section 335.411 (as defined in Section 2.11 below) and in the Plan.
2.5 "Company" means Comstock Bank.
2.6 "Directors" means directors who serve on the Board and who
are not officers or key employees of the Company or any of its
Subsidiaries.
2.7 "Fair Market Value" means with respect to the Shares, the
fair market value determined by the Committee, or the Board if no
Committee is appointed, in its discretion; provided, however, that if
the Shares are traded on the over-the-counter market, Fair Market Value
means the mean between the high and the low bid and asked prices for
the Shares on the over-the-counter market on the last business day
prior to the date on which the value is to be determined (or the next
preceding day on which sales occur if there were no sales on such
<PAGE>
date); provided further, however, if no sales have occurred in the
over-the-counter market during the three week period preceding the date
on which value is to be determined, Fair Market Value means the average
of the mean between the high and the low bid and asked prices for the
Shares on the over-the-counter market for the three (3) month period
ending on the last business day prior to the date on which the value is
to be determined; provided further, however, if the Shares are traded
on any other established securities market, Fair Market Value means the
closing price of the Shares on the last business day prior to the date
on which the value is to be determined, as reported in the Wall Street
Journal or such other source of quotation for, or reports of trading
of, the Shares as the Board may reasonably select from time to time.
2.8 "Option" means the right to purchase the number of Shares
specified by the Committee, or the Board if no Committee is appointed,
at a price and for a term fixed by the Committee, or the Board if no
Committee is appointed, in accordance with the Plan, and subject to
such other limitations and restrictions as the Plan and the Committee
or the Board, as the case may be, impose.
2.9 "Option Agreement" means a written agreement in such form
as may be, from time to time, hereafter approved by the Committee, or
the Board if no Committee is appointed, which shall be duly executed by
the Company and the Director and which sets forth the terms and
conditions of an Option under the Plan.
2.10 "Plan" means the Company's 1992 Non-Employee Directors'
Stock Option Plan.
2.11 "Section 335.411" means Section 335.411 of the General
Rules and Regulations of the Federal Deposit Insurance Corporation as
in effect at the time of reference, or any successor rules or
regulations which may hereafter be adopted in lieu thereof.
2.12 "Shares" means shares of the Company $.50 par value
common stock or, if by reason of the adjustment provisions contained
herein, any rights under an Award under the Plan pertain to any other
security, such other security.
2.13 "Subsidiary" or "Subsidiaries" means any corporation or
corporations other than the Company in an unbroken chain of
corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
2.14 "Successor" means the legal representative of the estate
of a deceased Director or the person or persons who shall acquire the
right to exercise or receive an Award by bequest or inheritance or by
reason of the death of the Director.
<PAGE>
2.15 "Term" means the period during which a particular Award
may be exercised.
3. Stock Subject to the Plan. There will be reserved for use, upon the
exercise of Awards to be granted from time to time under the Plan, an aggregate
of 150,000 Shares, which Shares may be, in whole or in part, as the Board shall
from time to time determine, authorized but unissued Shares, or issued Shares
which shall have been reacquired by the Company. Any Shares subject to issuance
upon exercise of the right set forth in Section 5(a) of the Plan to purchase
Shares or upon exercise of Options but which are not issued because of a
surrender, lapse, expiration or termination of any such right to purchase Shares
or of any such Option prior to issuance of the Shares shall once again be
available for issuance in satisfaction of Awards.
4. Administration of the Plan. The Board shall appoint the Committee,
which shall consist of not less than three (3) disinterested persons as defined
in Section 335.411; provided, however, if the Board fails to appoint a
Committee, the Board shall be invested with the responsibility for the
administration of the Plan. Subject to the provisions of the Plan, the
Committee, or the Board if no Committee is appointed, shall have full authority,
in its discretion, to interpret the Plan, to prescribe, amend, and, rescind
rules and regulations relating to the Plan, and generally to interpret and
determine any and all matters whatsoever relating to the administration of the
Plan and the granting of Awards hereunder. The Board may, from time to time
appoint members to the Committee in substitution for or in addition to members
previously appointed and may fill vacancies, however caused, in the Committee.
The Committee shall select one of its members as its Chairman and shall hold its
meetings at such times and places as it shall deem advisable. A majority of its
members shall constitute a quorum. Any action of the Committee may be taken by a
written instrument signed by all of the members, and any action so taken shall
be fully as effective as if it had been taken by a vote of a majority of the
members at a meeting duly called and held. The Committee shall make such rules
and regulations for the conduct of its business as it shall deem advisable and
shall appoint a Secretary who shall keep minutes of its meetings and records of
all action taken in writing without a meeting. No member of the Committee shall
be liable, in the absence of bad faith, for any act or omission with respect to
his service on the Committee.
5. Grant of Right to Purchase Shares and Corresponding Option. At the
Board meeting immediately following the Annual Meeting of the Shareholders
each year:
(a) each Director shall be permitted to purchase, from the Shares
available under the Plan, up to 2,500 Shares at the Fair
Market Value on that date,and
(b) each Director shall be granted on such date, without further
action by the Board or the Committee, an Option to purchase
1,000 Shares,
provided he was a Director for at least three (3) full months during the
preceding fiscal year and provided he has not been an employee or officer of the
Company or any of its affiliates (as such term is defined in Section 335.411)
<PAGE>
nor has been eligible to receive any award of stock, options, or stock
appreciation rights under any other benefit plan of the Company or its
affiliates (as such term is defined in Section 335.411) during the twelve (12)
months preceding such date. For each Share that the Director elects to purchase
pursuant to Section 5(a) of the Plan, the Director shall receive an Option, on
the same date, to purchase an equivalent number of Shares at the same price.
Notwithstanding the foregoing, during the term of the Plan, no Director shall be
granted rights to purchase Shares and Options to purchase Shares which in the
aggregate equal more than Fifty Thousand (50,000) Shares under the Plan and if
the number of Shares available to grant under the Plan on a scheduled date of
grant is insufficient to make all automatic grants required to be made pursuant
to the Plan on such date, then each eligible Director shall receive the right to
purchase Shares and a corresponding Option to purchase Shares pursuant to
Section 5(a) of the Plan and the Option pursuant to Section 5(b) of the Plan
equal, in the aggregate, to a pro rata number of the remaining Shares available
under the Plan; provided further, however, that if such proration results in
fractional Shares, then such right to purchase Shares and such Options shall be
rounded down to the nearest number of whole Shares.
6. Stock Option Provisions.
6.1 Option Price. The option price per share of any Option
granted under the Plan shall be the Fair Market Value
of the Shares covered by the Option on the date the
Option is granted.
6.2 Terms of Options.Options granted hereunder shall be
exercisable for a Term of not more than five (5) years
from the date of grant thereof.
6.3 Termination of Directorship. In the event a Director
ceases to be a member of the Board (other than by
reason of death or disability), an Option may be
exercised by the Director at any time within three (3)
months after he ceases to be a member of the Board, but
not beyond the Term of the Option.
6.4 Death or Disability of Director. If a Director dies or
becomes disabled while he is a member of the Board, an
Option may be exercised by his Successor, in the event
of death, or by him or his personal representative, as
the case may be, in the event of disability, at any
time within one year after he ceases to be a member of
the Board on account of such death or disability, but
not beyond the Term of the Option.
6.5 Receipt of Cash Payments. The Company will make a cash
payment to the Director covered thereby equal to the
aggregate of the amount of federal, state and local
taxes which such Director would be required to pay to
each such taxing authority attributable to the
realization of taxable income, if any, as a result of
receipt of Shares pursuant to the exercise of any
Options granted under Section 5(b) of the Plan. The
Committee, or the Board if no Committee is appointed,
may, in its discretion, require the Director to make an
election to be taxed immediately under Section 83(b) of
the Code as a condition to receiving such payment. In
computing the amount of such payment, it shall be
assumed that every Director granted an Award under the
Plan is subject to tax by each taxing authority at the
highest marginal tax rate in the respective taxing
<PAGE>
jurisdiction of such Director (provided that the
highest marginal tax rate for federal income tax
purposes shall be determined without reference to
Section 1(g) of the Code), taking into account the city
and state in which such Director resides, but giving
effect to the tax benefit, if any, which such Director
may enjoy to the extent that any such tax is deductible
in determining the tax liability of any other taxing
jurisdiction. In addition to the foregoing, each cash
payment due to a Director hereunder shall be increased
by the aggregate of the federal, state and local taxes
for which such Director may be liable (computed on the
same basis) on account of the cash payment to be made
hereunder, such that each Director who receives Shares
pursuant to the exercise of an Option granted under
Section 5(b) of this Plan shall receive such Shares net
of all taxes imposed on such Director on account of the
receipt of Shares under this Plan.
7. Exercise of Rights Under Awards. A Director entitled to exercise an
Award to purchase Shares pursuant to Section 5(a) of this Plan may do so by
delivery at the Board meeting immediately following the Annual Shareholders'
Meeting of a written notice to that effect specifying the number of Shares to be
purchased on such date and any other information the Committee, or the Board if
no Committee is appointed, may prescribe. A Director entitled to exercise an
Option may do so by delivery of a written notice to that effect specifying the
number of Shares with respect to which the Option is being exercised and any
other information the Committee, or the Board if no Committee is appointed, may
prescribe. Any such notice shall be accompanied by payment in full of the
purchase price of any Shares to be purchased, which payment may be made in cash
or in Shares which have been held at least six (6) months by such Director and
which are valued at Fair Market Value at the time of exercise or a combination
thereof. No Shares shall be issued upon exercise of an Option until full payment
has been made therefor. All notices or requests provided for herein shall be
delivered to the Chief Executive Officer of the Company.
8. Award Terms and Conditions. Each Award or each agreement setting
forth an Award shall contain such other terms and conditions not inconsistent
herewith as shall be approved by the Board or by the Committee.
9. Rights of Award Holder. The holder of an Award shall not have any of
the rights of a stockholder with respect to the Shares subject to purchase or
receipt under his Award, except to the extent that one or more certificates for
such Shares shall be delivered to him upon the due exercise of the Award.
10. Nontransferability of Awards. An Award shall not be transferable,
other than: (a) by will or the laws of descent and distribution, and an Award
may be exercised, during the lifetime of the holder of the Award, only by him or
in the event of death, his Successor, or in the event of disability, his
personal representative, or (b) pursuant to a qualified domestic relation order,
as defined in the Code or the Employee Retirement Income Security Act (ERISA) or
the rules thereunder.
<PAGE>
11. Adjustments Upon Changes in Capitalization. In the event of changes
in all of the outstanding Shares by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations, or exchanges of
shares, separations, reorganizations or liquidations, or similar events or, in
the event of extraordinary cash dividends being declared with respect to the
Shares, or similar transactions, the number and class of Shares available under
the Plan in the aggregate, the number and class of Shares subject to Awards
theretofore granted, applicable purchase prices and all other applicable
provisions, shall, subject to the provisions of the Plan, be equitably adjusted
by the Committee, or the Board if no Committee is appointed (which adjustment
may, but need not, include payment to the holder of an Option, in cash or in
Shares, in an amount equal to the difference between the price at which such
Award may be exercised and the then current fair market value of the Shares
subject to such Award as equitably determined by the Committee or the Board, as
the case may be). The foregoing adjustment and the manner of application of the
foregoing provisions shall be determined by the Committee or the Board, as the
case may be, in its sole discretion. Any such adjustment may provide for the
elimination of any fractional Share which might otherwise become subject to an
Award.
12. Unusual Corporate Events. Notwithstanding anything to the contrary,
in the case of an unusual corporate event such as liquidation, merger,
reorganization (other than a reorganization as defined by Section 368(a)(1)(F)
of the Code), or other business combination, acquisition or change in the
control of the Company through a tender offer or otherwise, each Award granted
under the Plan shall terminate ninety (90) days after the occurrence of such
unusual corporate event.
13. Forms of Options. An Award shall be granted hereunder on the date
or dates specified in the Plan. Whenever the Plan provides for the receipt of an
Award by a Director, the Chief Executive Officer of the Company, or such other
person as the Committee or the Board, as the case may be, shall appoint, shall
forthwith send notice thereof to the Director, in such form as the Committee or
the Board, as the case may be, shall approve, stating the number of Shares
subject to Award, its Term, and the other terms and conditions thereof. The
notice shall be accompanied by a written Award Agreement in such form as may
from time to time hereafter be approved by the Committee or the Board, as the
case may be, which shall have been duly executed by or on behalf of the Company.
Execution by the Director to whom such Award is granted of said Award Agreement
in accordance with the provisions set forth in this Plan shall be a condition
precedent to the exercise of any Award.
14. Taxes.
14.1 Right to Withhold Required Taxes. The Company shall
have the right to require a person entitled to receive
Shares pursuant to the exercise of an Award under the
Plan to pay the Company the amount of any taxes which
the Company is or will be required to withhold, if any,
with respect to such Shares before the certificate for
such Shares is delivered pursuant to the Award.
Furthermore, the Company may elect to deduct such taxes
from any other amounts then payable in cash or in
shares or from any other amounts payable any time
thereafter in cash to the Director.
<PAGE>
14.2 Director Election to Withhold Shares. Subject to
Committee approval, or Board approval if no Committee
is appointed, a Director may satisfy his withholding
tax liability, if any, with respect to the exercise of
an Option, by having the Company withhold Shares
otherwise issuable upon exercise of the Option if such
Director makes an election to do so which satisfies the
requirements of Section 335.411.
15. Termination of the Plan. The Plan shall terminate ten (10) years
from the date hereof, and an Award shall not be granted under the Plan after
that date although the terms of any Awards may be amended at any date prior to
the end of its Term in accordance with the Plan. Any Awards outstanding at the
time of termination of the Plan shall continue in full force and effect
according to the terms and conditions of the Award and this Plan.
16. Amendment of the Plan. The Plan may be amended at any time and from
time to time by the Board, but no amendment without the approval of the
stockholders of the Company shall be made if stockholder approval under Section
422 of the Code (or any successor provision) or Section 335.411 would be
required. Notwithstanding the discretionary authority granted to the Committee
in Section 4 of the Plan, no amendment of the Plan or any Award granted under
the Plan shall impair any of the rights of any holder, without his consent,
under any Award theretofore granted under the Plan.
17. Delivery of Shares on Exercise. Delivery of certificates for Shares
pursuant to an Award exercise may be postponed by the Company for such period as
may be required for it with reasonable diligence to comply with any applicable
requirements of any federal, state or local law or regulation or any
administrative or quasi-administrative requirement applicable to the sale,
issuance, distribution or delivery of such Shares. The Committee, or the Board
if no Committee is appointed, may, in its sole discretion, require a Director to
furnish the Company with appropriate representations and a written investment
letter prior to the exercise of an Award or the delivery of any Shares pursuant
to an Award.
18. Fees and Costs. The Company shall pay all original issue taxes on
the exercise of any Award granted under the Plan and all other fees and expenses
necessarily incurred by the Company in connection therewith.
19. Effectiveness of the Plan. The Plan shall become effective when
approved by the Board. The Plan shall thereafter be submitted to the Company's
stockholders for approval and unless the Plan is approved by the affirmative
votes of the holders of shares having a majority of the voting power of all
shares represented at a meeting duly held in accordance with Nevada law within
twelve (12) months after being approved by the Board, the Plan and all Awards
made under it shall be void and of no force and effect.
20. Other Provisions. As used in the Plan, and in Awards and other
documents prepared in implementation of the Plan, references to the masculine
pronoun shall be deemed to refer to the feminine or neuter, and references in
the singular or the plural shall refer to the plural or the singular, as the
identity of the person or persons or entity or entities being referred to may
require. The captions used in the Plan and in such Awards and other documents
prepared in implementation of the Plan are for convenience only and shall not
affect the meaning of any provision hereof or thereof.
<PAGE>
AMENDMENT NO. 1
TO THE
1992 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
OF COMSTOCK BANK
1. Section 2.11 of the Directors' Plan is hereby deleted and the
following substituted therefor: "2.11 "Section 240.16b-3" means Section
240.16b-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as adopted by the Federal Deposit Insurance
Corporation pursuant to Section 335.410 of the General Rules and
Regulations of the Federal Deposit Insurance Corporation on January 28,
1992, or any successor rules or regulations which may hereafter be
adopted in lieu thereof."
2. All references to Section 335.411 in the Directors' Plan are hereby
changed to Section 240.16b-3.
3. Section 4 of the Directors' Plan is hereby amended to provide that
the Committee shall consist of not less than two (2) disinterested
persons as defined in Section 240.16b-3.
4. Section 14.2 of the Directors' Plan is hereby deleted and the
following substituted therefor: "14.2 Director Election to Withhold
Shares. A Director may satisfy his withholding tax liability, if any,
with respect to the exercise of an Option, by having the Company
withhold shares otherwise issuable upon exercise of the Option if such
Director makes an election to do so that satisfies Section 240.16b-3."
5. Section 16 of the Directors' Plan is hereby amended by adding the
following sentence to the end thereof: "Notwithstanding the foregoing,
the Plan may not be amended more than once every six months to change
the Plan provisions listed in Section 240.16b-3(c)(2)(ii)(A), other
than to comport with changes in the Code, ERISA or Section 240.16b-3."
<PAGE>
AMENDMENT NO. 2
TO THE
1992 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
OF
COMSTOCK BANK
1. Section 6.5 of the Incentive Plan is hereby deleted.
<PAGE>
EXHIBIT 10.7
FORM OF
COMSTOCK BANK
PAYROLL DEDUCTION STOCK PURCHASE PLAN
ARTICLE I
PURPOSE
The purpose of the Plan adopted hereunder (the "Plan") is to
facilitate, through payroll deductions by Eligible Employees of Comstock Bank
(the "Bank"), the purchase of publicly traded shares of the Bank ("Shares")
thereby enabling shareholders to acquire a proprietary interest or increase
their proprietary interest in and to the Bank.
ARTICLE II
ADMINISTRATOR
The Bank shall from time to time designate the Administrator of the
Plan ("Administrator") who shall be responsible for the administration and
overseeing of the Plan. The initial Administrator shall be Nevada Agency and
Trust. The Administrator shall receive such reasonable compensation and fees as
may be agreed to from time to time between the Administrator and the Bank. Such
compensation and fees shall be paid by the Bank.
The duties of the Administrator shall include, but not be limited to,
the following:
A. On the first Tuesday of each month ("Purchase Date"), purchasing
from funds held for the account of each participating Eligible Employee who has
$100 or more in the Stock Purchase Fund, as many full Shares for each such
Eligible Employee as can be purchased with the funds held for the account of the
participating Eligible Employee in the Stock Purchase Fund. No fractional Shares
shall be purchased for any participating Eligible Employee. Shares purchased
under the Plan shall be purchased at the market price for Shares on the NASDAQ
Exchange on the Purchase Date. Notwithstanding the foregoing, no purchases of
Shares shall be made by the Administrator unless there is an aggregate of $1,000
or more available in the Stock Purchase Fund on the Purchase Date for the
accounts of participating Eligible Employees having $100 or more in the Stock
Purchase Fund. Broker's fees incurred as a result of a purchase of Shares on any
Purchase Date shall be borne by each participating Eligible Employee for whom
Shares were purchased on such Purchase Date in the proportion that the number of
Shares purchased on such Purchase Date for an Eligible Employee bears to the
total number of Shares purchased by the Administrator on the Purchase Date.
B. Rendering not less than quarterly to each participating Eligible
Employee a report reflecting the number of Shares purchased for such
participating Eligible Employee and the funds held for the account of such
participating Eligible Employee in the Stock Purchase Fund.
<PAGE>
ARTICLE III
DUTIES OF THE BANK
The Bank shall assist Eligible Employees, as that term is hereinafter
defined, who wish to participate in the Plan to execute all documents necessary
therefor and to effect a payroll deduction to be paid into the Stock Purchase
Fund, as that term is hereinafter defined, and to facilitate the deposit of
funds withheld and deducted from the salary of such Eligible Employees into the
Stock Purchase Fund.
ARTICLE IV
EMPLOYEES ELIGIBLE FOR PARTICIPATION
All employees of the Bank who have been employed by the Bank for a
period of six months or more shall be eligible to participate in the Plan.
Notwithstanding the foregoing, officers of the Bank who are required to file
reports with the Securities and Exchange Commission pursuant to Section 16 of
the Securities Exchange Act of 1934, as amended, and the rules thereunder, are
not eligible to participate in the Plan. Employees eligible to participate in
the Plan are referred to herein as Eligible Employees.
ARTICLE V
CONTRIBUTIONS BY PARTICIPATING ELIGIBLE EMPLOYEES
Each Eligible Employee who wishes to participate in the Plan shall
execute and deliver to the Administrator any and all documents necessary to
cause a payroll deduction to be effected authorizing monies otherwise payable to
Employee from the Bank to be paid into an account ("Stock Purchase Fund"), the
proceeds of which will be used to purchase Shares for the account of
participating Eligible Employees, subject, however, to the restrictions and
limitations set forth in Article II hereof.
ARTICLE VI
ISSUANCE OF STOCK
Shares purchased by the Administrator for the account of a
participating Eligible Employee through the Plan shall not initially be
registered or issued in the name of the participating Eligible Employee, but
will be held by Nevada Agency and Trust, as transfer agent for the Bank, unless
a participating Eligible Employee requests that Shares purchased on the
participating Eligible Employee's account be issued in his or her name. If a
participating Eligible Employee requires Shares purchased for his account
through the Plan to be issued in his or her name during his or her employment
with the Bank or voluntarily terminates his or her employment with the Bank,
such participating Eligible Employee shall be responsible for all broker's fees
and transfer fees, if any, incurred in transferring the Shares in his or her
<PAGE>
name. In the event of the involuntary termination of a participating Eligible
Employee's employment with the Bank or the termination of the Plan by the Bank
in accordance with Article X hereof, all Shares purchased for the account of
such participating Eligible Employee shall be issued in the name of such
Eligible Employee and all broker's fees and transfer fees, if any, incurred as a
result thereof shall be paid by the Bank.
ARTICLE VII
TERMINATION OF PARTICIPATION
BY ELIGIBLE EMPLOYEE
Any participating Eligible Employee may, at any time, by giving written
notice to the Administrator, terminate his or her participation in the Plan.
Upon receipt of the Termination Notice, the Bank shall assist the terminating
Eligible Employee in revoking the payroll deduction effected in connection with
the Plan. The Administrator shall cause all Shares purchased for the account of
the terminating Eligible Employee to be issued in the name of such terminating
Eligible Employee and shall cause any additional funds, if any, held for the
account of such terminating Eligible Employee in the Stock Purchase Fund, after
deducting any broker's fees or transfer fees incurred in connection with the
issuance of such Shares in the name of the terminating Eligible Employee, to be
distributed to such participant. In the event that such broker's fees or
transfer fees exceed the amount of the funds held for the account of the
terminating Eligible Employee in the Stock Purchase Fund, the terminating
Eligible Employee shall pay to the Administrator the balance of such fees prior
to the delivery by the Administrator to the terminating Eligible Employee of a
certificate or certificates evidencing the Shares purchased by the terminating
Eligible Employee in accordance with the Plan.
ARTICLE VIII
ACKNOWLEDGMENT BY PARTICIPATING ELIGIBLE EMPLOYEES
The participating Eligible Employees acknowledge that the primary
benefit of the Plan is to allow Eligible Employees to combine resources, through
payroll deductions, in order to purchase Shares. THE ELIGIBLE EMPLOYEES
ACKNOWLEDGE THAT THE PURCHASE OF SHARES IN ACCORDANCE WITH THE PLAN CONFERS NO
TAX BENEFITS AND THAT SHARES PURCHASED UNDER THE PLAN WILL NOT BE PURCHASED FOR
A DISCOUNTED PRICE, BUT WILL BE PURCHASED AT THE MARKET PRICE OF SHARES ON EACH
PURCHASE DATE. ALL BROKER'S FEES, IF ANY, AND TRANSFER FEES, IF ANY, IN
CONNECTION WITH THE PURCHASE OF SHARES IN ACCORDANCE WITH THE PLAN SHALL BE PAID
IN THE MANNER PROVIDED FOR IN ARTICLES VI, VII AND X HEREOF.
<PAGE>
ARTICLE IX
RIGHTS AS TO SHARES
(1) Voting Rights. The shares of a participating Eligible Employee
purchased in accordance with the Plan shall be considered to be issued and
outstanding shares of the Bank and shall enjoy all voting rights accorded to all
other issued and outstanding shares.
The Administrator will deliver to each participating Eligible Employee
as promptly as practicable all notices of meetings, proxy statements and other
material distributed by the Bank to its stockholders. Any proxy material shall
be accompanied by a form requesting instructions to the Administrator on how to
vote the whole shares credited to such Eligible Employee's account. The full
shares of stock in each Eligible Employee's account will be voted by the
Administrator in accordance with the Eligible Employee's signed instructions
duly delivered to the Administrator.
(2) Distributions and Dividends. Cash dividends paid in respect of an
Eligible Employee's shares held under the Plan will be credited by the
Administrator to such Eligible Employee's account and applied by the
Administrator to the purchase of Shares in accordance with the terms of the
Plan. Stock dividends, stock splits and/or other distributions in respect of
Shares held in the account of an Eligible Employee will be issued to the
Administrator and held by it for the account of the Eligible Employee entitled
to such dividend, stock split and/or distribution.
ARTICLE X
TERMINATION OF PLAN
The Plan may be terminated at any time by a resolution adopted by the
Board of Directors of the Bank. Upon such termination, the Bank shall give
written notice to each Eligible Employee that the Plan has been terminated and
the effective date of such termination. Upon termination of the Plan by the
Bank, the Bank shall assist all participating Eligible Employees in revoking the
payroll deduction effected in connection with the Plan. The Administrator shall
cause all shares purchased for the account of each participating Eligible
Employee to be issued in the names of the participating Eligible Employees and
shall cause any additional funds, if any, held for the accounts of such
participating Eligible Employee to be distributed to each participant. All
broker's fees or transfer fees incurred in the issuance of Shares to
participating Eligible Employees upon termination of the Plan in accordance with
this Article X shall be paid by the Bank.
ARTICLE XI
MISCELLANEOUS
(1) Employment. Nothing in the Plan or Agreement relating thereto shall
confer upon any employee the right to continue in the employ of the Bank.
<PAGE>
(2) Other Compensation Plans. The adoption of the Plan shall not affect
any other compensation plans now in effect for the Bank, nor shall the Plan
preclude the Bank from establishing any other forms of incentive or other
compensation for employees of the Bank.
(3) Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Bank.
(4) Modification. The Bank agrees that this Payroll Deduction Stock
Purchase Plan may be modified only by a written modification agreement approved
by the Board of Directors of the Bank.
Dated this ___ day of _____________, 199___.
COMSTOCK BANK
By: __________________________
Its: __________________________
AGREEMENT AND ACKNOWLEDGMENT
The undersigned Eligible Employee of the Bank desiring to participate
in the Plan, does hereby authorize the Bank to take the actions necessary to
cause a payroll deduction to be effected for deposit of $_________ per month in
the Stock Purchase Fund from funds otherwise payable by the Bank to the
undersigned until changed or terminated by written notice from the undersigned
to the Administrator for the Bank. The undersigned agrees to be bound by the
terms and conditions of the Plan.
Dated this _____ day of _______________, 199___.
__________________________
<PAGE>
EXHIBIT 10.8
ASSIGNMENT OF AND FIRST AMENDMENT
TO WARRANT AGREEMENT
ASSIGNMENT AND FIRST AMENDMENT TO WARRANT AGREEMENT (this "Assignment
and Amendment"), dated as of _______________, 1997 by and among Comstock
Bancorp, a Nevada corporation ("Bancorp"), Comstock Bank, a Nevada banking
corporation ("Comstock"), and ______________ (the "Investor"). Capitalized terms
shall have the meanings given them in the Warrant Agreement (as hereinafter
defined) unless otherwise defined herein.
WHEREAS, Comstock and the Investor are parties to a Warrant Agreement
dated as of _____________, 1994 (the "Warrant Agreement");
WHEREAS, Bancorp and Comstock have entered into an Agreement and Plan
of Reorganization dated as of February 26, 1997 (the "Plan of Reorganization")
attached hereto as Exhibit A pursuant to which Bancorp will acquire all of the
issued and outstanding Common Stock;
WHEREAS, under the terms of the Plan of Reorganization each share of
Common Stock will be exchanged for two shares of common stock, par value $.01
per share, of Bancorp ("Bancorp Common Stock");
WHEREAS, Comstock desires to assign its rights and obligations under
the Warrant Agreement to Bancorp and the Investor desires to consent to such
assignment; and
WHEREAS, Bancorp and the Investor desire to amend certain terms and
conditions of the Warrant Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein and for other valuable consideration, the parties hereto agree
as follows:
1. Assignment. Comstock, effective upon the effective date of the Plan
of Reorganization, hereby assigns its rights and obligations under the terms and
conditions of the Warrant Agreement to Bancorp and Bancorp hereby agrees to be
bound by the terms and conditions of the Warrant Agreement. The Investor hereby
consents to such assignment.
2. Amendments to the Warrant Agreement. Bancorp and the Investor agree
that, effective upon the Effective Time, the Warrant Agreement shall be amended
as follows:
(a). All references to the Bank shall be deemed to be
references to Bancorp;
(b). All references to the Common Stock shall be deemed to be
references to Bancorp Common Stock; and
<PAGE>
(c). Section 3(b) shall be amended and restated in its
entirety as follows:
Each Warrant entitles the Investor to purchase
two (2) shares of Common Stock at a purchase
price of [$____] per share of Common Stock,
subject to adjustment (the "Warrant Price").
3. Other Terms and Conditions. Bancorp and the Investor agree that all
other terms, conditions, covenants and agreements set forth in the Warrant
Agreement, except as otherwise amended or modified herein, shall continue in
full force and effect. This Assignment and Amendment shall be null and void and
have no effect in the event that the Plan of Reorganization does not become
effective.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment of
and First Amendment to Warrant Agreement as of the date first written above.
COMSTOCK BANCORP
-----------------------------------
By:
Its:
COMSTOCK BANK
-----------------------------------
By:
Its:
-----------------------------------
[INVESTOR]
<PAGE>
EXHIBIT 23.2
[Letterhead of Kafoury, Armstrong & Co.]
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts"
and "Financial Statements" and to the use of our report dated January 10, 1997,
in the Registration Statement (Form S-4) of Comstock Bank.
/s/ Kafoury, Armstrong & Co.
Carson City, Nevada
<PAGE>
EXHIBIT 27.1
[ARTICLE] 9
[MULTIPLIER] 1000
[PERIOD-START] JAN-01-1996
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] DEC-31-1996
[CASH] 6738
[INT-BEARING-DEPOSITS] 1498
[FED-FUNDS-SOLD] 13593
[TRADING-ASSETS] 28
[INVESTMENTS-HELD-FOR-SALE] 0
[INVESTMENTS-CARRYING] 17223
[INVESTMENTS-MARKET] 0
[LOANS] 87861
[ALLOWANCE] 857
[TOTAL-ASSETS] 144980
[DEPOSITS] 131304
[SHORT-TERM] 0
[LIABILITIES-OTHER] 478
[LONG-TERM] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 1059
[OTHER-SE] 11950
[TOTAL-LIABILITIES-AND-EQUITY] 144980
[INTEREST-LOAN] 13176
[INTEREST-INVEST] 875
[INTEREST-OTHER] 817
[INTEREST-TOTAL] 14868
[INTEREST-DEPOSIT] 4418
[INTEREST-EXPENSE] 4434
[INTEREST-INCOME-NET] 10434
[LOAN-LOSSES] 250
[SECURITIES-GAINS] (15)
[EXPENSE-OTHER] 7603
[INCOME-PRETAX] 2995
[INCOME-PRE-EXTRAORDINARY] 2995
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 2092
[EPS-PRIMARY] .94
[EPS-DILUTED] .80
[YIELD-ACTUAL] 8.60
[LOANS-NON] 3184
[LOANS-PAST] 420
[LOANS-TROUBLED] 0
[LOANS-PROBLEM] 0
[ALLOWANCE-OPEN] 665
[CHARGE-OFFS] 61
[RECOVERIES] 3
[ALLOWANCE-CLOSE] 857
[ALLOWANCE-DOMESTIC] 857
[ALLOWANCE-FOREIGN] 0
[ALLOWANCE-UNALLOCATED] 0
</TABLE>
<PAGE>
EXHIBIT 99.1
COMSTOCK BANK
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - May 28, 1997
The undersigned appoints each of Robert Barone and Larry Platz
(together, the "Proxies"), each with the power to appoint his substitute, as
proxies of the undersigned, and hereby authorizes them to represent and to vote,
as designated below, all the shares of common stock, par value $0.50 per share
("Bank Common Stock") of Comstock Bank (the "Bank") held of record by the
undersigned on April 7, 1997, at the Annual Meeting of stockholders of Comstock
Bank to be held on May 28, 1997 and any adjournment thereof.
1. Election of Directors
FOR all nominees listed below (except as marked to the contrary below)
WITHHOLD AUTHORITY to vote for all nominees
Nominees:
Edward Allison, Robert Barone, Stephen Benna, John Coombs, Michael Dyer, Mervyn
Matorian, Samuel McMullen, Larry Platz.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below)
2. Ratification of the appointment of Kafoury, Armstrong & Co. as the
independent accountants for the Bank.
FOR AGAINST ABSTAIN
3. Adoption and approval of an Agreement and Plan of Reorganization,
dated as of February 26, 1997, between the Bank and Comstock Bancorp,
a Nevada corporation ("Bancorp"), pursuant to which each issued and
outstanding share of Bank Common Stock will be exchanged for two
shares of common stock, par value $.01 per share, of Bancorp and the
Bank will become a wholly-owned subsidiary of Bancorp.
FOR AGAINST ABSTAIN
(Continued and to be signed on reverse side)
<PAGE>
(Continued from other side)
4. In their discretion, the proxies are authorized to vote on such other
business as may properly come before the meeting and any adjournment
thereof
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ALL NOMINEES AND IN FAVOR OF PROPOSALS 2 AND 3.
Please sign exactly as name appears below. When shares are held by
joint tenants, both must sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in partnership name by any
authorized person.
DATED: __________________, 1997
_______________________________
Signature
_______________________________
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE
<PAGE>
