<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 1)
COMSTOCK BANCORP
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
205667 10 8
(CUSIP Number)
Robert N. Barone
c/o Comstock Bancorp
P.O. Box 7610
Reno, Nevada 89510-7610
(775) 824-7100
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 28, 1998
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box / /.
NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following pages)
(Page 1 of 7 Pages)
<PAGE>
==============================================================================
CUSIP No. 205667 10 8 13D Page 2 of 7 Pages
==============================================================================
- ------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Robert N. Barone
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF and OO
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) / /
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- ------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES --
BENEFICIALLY ----------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 400,068 *
REPORTING ----------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH --
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
400,068 *
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
400,068 *
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.83% *
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- ------------------------------------------------------------------------------
* Does not include 385,000 shares of Comstock Bancorp common stock held by
Resource Management, Inc., in which Mr. Robert N. Barone holds a 15%
minority interest
<PAGE>
==============================================================================
CUSIP No. 205667 10 8 13D Page 3 of 7 Pages
==============================================================================
- ------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
The Barone Family 1988 Trust
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC and OO
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) / /
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- ------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES --
BENEFICIALLY ----------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 400,068 *
REPORTING ----------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH --
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
400,068 *
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
400,068 *
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.83% *
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- ------------------------------------------------------------------------------
* Does not include 385,000 shares of Comstock Bancorp common stock held by
Resource Management, Inc., in which Mr. Robert N. Barone holds a 15%
minority interest
<PAGE>
This Amendment No. 1 to Schedule 13D Statement (this "Statement") is filed
for the purpose of reporting the acquisition by Mr. Robert N. Barone of 271,700
shares of common stock, par value $.01 per share, of Comstock Bancorp, a Nevada
corporation ("Comstock"), pursuant to exercise of options. This Amendment No. 1
is also being filed to report that all of Mr. Barone's shares of Comstock are
held by The Barone Family 1988 Trust, of which Mr. Robert N. Barone is trustee,
and to report certain events and circumstances described hereinafter.
ITEM 2. IDENTITY AND BACKGROUND
Item 2 is amended and supplemented as follows:
(a). This Statement is being filed by Robert N. Barone and by The Barone
Family 1988 Trust. Robert N. Barone and his spouse are trustees of The Barone
Family 1988 Trust, a Nevada trust.
(b), (c) and (f). Mr. Barone's principal occupation is Chairman of the
Board of Directors, Chief Executive Officer and Treasurer of Comstock and its
wholly owned subsidiary, Comstock Bank. Mr. Barone's business address is 6275
Neil Road, Reno, Nevada 89511. Mr. Barone is a citizen of the United States of
America.
The Barone Family 1988 Trust is a personal trust formed under Nevada law
for estate planning purposes by Mr. Robert N. Barone. The address of The Barone
Family 1988 Trust is 2495 Manzanita Lane, Reno, Nevada 89509.
(d) and (e). During the past five years, neither Mr. Barone nor The Barone
Family 1988 Trust has been convicted in any criminal proceeding (excluding
traffic violations or similar misdemeanors) or been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was not or is not subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Item 3 is amended and supplemented as follows:
The shares reported herein as having been acquired by Mr. Barone were
acquired by exercise of options previously granted to Mr. Barone under stock
option plans of Comstock. A total of 271,700 shares of common stock of Comstock
were acquired by Mr. Barone by exercise of options.
Funds for the exercise of options and payment of associated taxes were
obtained by Mr. Barone from (i) personal funds, working capital and borrowings
from one or more individuals or firms or (ii) margin debt from one or more
securities or brokerage firms. The aggregate exercise price paid by Mr. Barone
upon exercise of options was approximately $646,985. Taxes paid with respect
thereto were approximately $793,975, for total borrowings of approximately
$1,500,000 relating to the exercise of options and payment of associated taxes.
The original borrowings employed for the purpose of exercising options and
paying associated taxes have been partially retired by margin debt or other
borrowings from one or more securities or brokerage firms, including Mr.
Barone's margin account with Prudential Securities, Pershing and borrowings from
Hovde Acquisition, L.L.C., an entity controlled by the principals of Hovde
Financial, Inc.
To the extent permitted by law, the securities or brokerage firms and Hovde
Acquisition, L.L.C. have a lien on certain of the shares reported herein as
being beneficially owned by Mr. Barone and The Barone Family 1988 Trust. Copies
of the agreements setting forth the terms of the borrowings and margin debt are
attached hereto as Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5.
<PAGE>
ITEM 4. PURPOSE OF TRANSACTION
Item 4 is amended and supplemented as follows:
Robert N. Barone exercised his options for personal financial planning
reasons. Mr. Barone and The Barone Family 1988 Trust hold the shares of
Comstock common stock for investment purposes.
As reported in Comstock's Form 8-K Current Report filed with the Securities
and Exchange Commission on January 13, 1999 (Commission File No. 0-22391),
Comstock and First Security Corporation, a Delaware corporation and bank holding
company headquartered in Salt Lake City, Utah, entered into an Agreement and
Plan of Reorganization dated as of January 12, 1999. The Agreement and Plan of
Reorganization provides that Comstock will, upon receipt of stockholder and
regulatory approvals and satisfaction of the other conditions stated in the
Agreement and Plan of Reorganization, merge with and into First Security
Corporation. First Security Corporation will be the surviving entity in that
merger. A copy of the Agreement and Plan of Reorganization is attached hereto
as Exhibit 4.1. Hovde Financial, Inc. has acted as financial advisor to
Comstock in connection with the pending acquisition by First Security
Corporation and will receive compensation therefor.
Mr. Barone and the other directors of Comstock entered into a Shareholder
Voting Agreement with First Security Corporation in connection with execution of
the Agreement and Plan of Reorganization. The Shareholder Voting Agreement
provides that each of the directors executing the Shareholder Voting Agreement,
including Mr. Barone:
- is required to vote his Comstock common stock in favor of the
merger with First Security Corporation;
- may not sell, agree to sell or grant a proxy to vote any Comstock
common stock owned by him or thereafter acquired by him, except
for a proxy in favor of First Security Corporation or in favor of
the merger; and
- may not solicit or encourage a competing acquisition proposal or
furnish information to or cooperate with a competing bidder for
Comstock.
However, the Shareholder Voting Agreement provides that the directors executing
the Shareholder Voting Agreement are not required to take any action that would,
in the reasonable opinion of their legal counsel, violate any duties imposed by
law. The obligations represented by the Shareholder Voting Agreement terminate
on the earlier to occur of termination of the Agreement and Plan of
Reorganization or consummation of the merger contemplated thereby. A copy of
the Shareholder Voting Agreement is included herewith as Exhibit 4.2.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Item 5 is amended and supplemented as follows:
(a). Robert N. Barone and The Barone Family 1988 Trust are the beneficial
owners of 400,068 shares (7.83% of the outstanding shares) of common stock of
Comstock. The number of shares of common stock beneficially owned by Mr. Barone
and The Barone Family 1988 Trust and the percentage of outstanding shares of
common stock represented thereby have been computed in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended. Comstock has
5,108,400 shares of common stock issued and outstanding as of the date hereof.
Mr. Barone also owns a 15% minority interest in Resource Management, Inc.,
a privately owned money management firm headquartered in Cleveland, Ohio
<PAGE>
and doing business under the name "Gelfand/Maxus Asset Management." Mr.
Barone's brother, Richard A. Barone, is the controlling stockholder and
President of Resource Management, Inc. Resource Management, Inc. owns
385,000 shares of Comstock common stock, or approximately 7.54%. The shares
owned by Resource Management, Inc. are not included in Mr. Barone's and The
Barone Family 1988 Trust's shares ownership reported herein.
Each of Mr. Robert N. Barone and The Barone Family 1988 Trust disclaims
beneficial ownership of the shares held by Resource Management, Inc. The filing
of this Statement shall not be construed as an admission that Mr. Robert N.
Barone or The Barone Family 1988 Trust is, for the purposes of Section 13(d) or
13(g) of the Securities Exchange Act of 1934, the beneficial owner of any
Comstock securities held by Resource Management, Inc.
(b). As trustee of The Barone Family 1988 Trust, Mr. Barone shares with
the other trustee(s) the power to (i) vote or direct the voting of, and (ii)
dispose or direct the disposition of the 400,068 shares of common stock reported
herein as beneficially owned by him and The Barone Family 1988 Trust.
(c). A total of 271,700 shares of common stock of Comstock were acquired
by Mr. Barone pursuant to exercise of options, as follows:
<TABLE>
<CAPTION>
Number of Shares
Acquired by Option Exercise Price
Exercise Date of Exercise Per Share
- ------------------ ---------------- --------------
<S> <C> <C>
11,000 December 28, 1998 $3.352
95,700 December 28, 1998 $3.436
165,000 December 28, 1998 $1.705
</TABLE>
(d). Not applicable.
(e). Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Item 6 is amended and supplemented as follows:
Reference is hereby made to the (i) the promissory notes, account agreement
and margin agreement included herewith as Exhibits 3.1 through 3.5 and (ii) the
Agreement and Plan of Reorganization included herewith as Exhibit 4.1 and the
Shareholder Voting Agreement included herewith as Exhibit 4.2.
<PAGE>
ITEM 7. EXHIBITS
Item 7 is amended and supplemented as follows:
Exhibit 3.1 --- Cognovit Promissory Note dated December 31, 1998, in the
amount of $1,500,000, issued to Umberto P. Fedeli, Jr.
Exhibit 3.2 --- Cognovit Promissory Note dated December 31, 1998, in the
amount of $600,000, issued to Resource Management, Inc.,
dba Maxus Investment Group, and Stock Pledge Agreement
Exhibit 3.3 --- General Account Agreement with Prudential Securities,
Inc.
Exhibit 3.4 --- Margin Agreement with Donaldson, Lufkin & Jenrette
Securities Corporation's Pershing division
Exhibit 3.5 --- Promissory Note dated February 9, 1999, in the
amount of $500,000, issued to Hovde Acquisition, L.L.C.
Exhibit 4.1 --- Agreement and Plan of Reorganization and Merger dated
as of January 12, 1999 by and between Comstock Bancorp,
Comstock Bank, First Security Corporation and First
Security Bank of Nevada
Exhibit 4.2 --- Shareholder Voting Agreement dated as of January 12,
1999 by and among First Security Corporation, First
Security Bank of Nevada and the directors of Comstock
Bancorp
Exhibit 7 --- Agreement of Joint Filing
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 18, 1999 /s/ Robert N. Barone
--------------------
ROBERT N. BARONE
THE BARONE FAMILY 1988 TRUST
/s/ Robert N. Barone
--------------------
ROBERT N. BARONE, TRUSTEE
THE BARONE FAMILY 1988 TRUST
/s/ Diane M. Barone
--------------------
DIANE M. BARONE, TRUSTEE
<PAGE>
EXHIBIT 3.1
COGNOVIT PROMISSORY NOTE
$1,500,000.00 December 31, 1998
FOR VALUE RECEIVED, ROBERT BARONE (hereinafter referred to as "Maker"),
promises to pay to the order of Umberto P. Fedeli, Jr. the principal amount of
One and One Half Million Dollars ($1.5 Million) with interest on the unpaid
principal balance from the date hereof at the rate of nine percent (9%) per
annum. This Note will be payable on demand; provided, however, that until such
demand is made, the interest on this Note will be payable in annual installments
of accrued interest.
All installments shall be applied first to payment of accrued interest and
second to payment of principal. Principal and interest may be prepaid, in whole
or in part, at any time without penalty.
In case of default in the payment of any installment of interest or
principal or other default under the terms of this Note, holder may, at its
option and without notice, declare the entire principal and accrued interest of
this Note immediately due and payable and may proceed to enforce the collection
thereof.
The undersigned shall pay all court costs incurred in the collection of
this Note.
No extension of this Note, no release of any collateral given for security
of this Note or any guaranty of this Note, no release of any person primarily or
secondarily liable on this Note, and no delay in the enforcement of the payment
of this Note or any guaranty of this Note shall affect the liability of Maker or
any endorser of this Note.
Presentment for payment, notice of dishonor, protest of dishonor, and
notice of protest are expressly waived by all parties liable hereunder, their
heirs, legal representatives, successors and assigns.
This Note shall be governed by and construed in accordance with the laws of
the State of Ohio.
Maker agrees that any suit to enforce this Note or to obtain any remedy
with respect to this Note shall be brought in the United States District Court
for the Northern District of Ohio or in the Common Pleas Court of Cuyahoga
County, Ohio, and for such purposes, Maker expressly and irrevocably consents to
the exclusive jurisdiction and venue of such courts. Maker consents to personal
jurisdiction within Cuyahoga County, Ohio in connection with any such
proceeding.
In the event that any provision or clause of this Note is found to be void
or unenforceable to any extent and for any reason, all remaining provisions of
this Note shall remain in full force and effect to the maximum extent permitted
and this Note shall be enforceable as if such void or unenforceable provision
had never been made a part hereof. To this end, the provisions of this Note are
declared to be severable.
Any attorney-at-law may appear at any time after the debt hereby evidenced
becomes due, whether by acceleration or otherwise, in any court of record of the
State of Ohio or any other State in the United States, and waive the issuing and
service of process and confess judgment in favor of the legal holder hereof
against Maker for the amount of principal and interest then appearing due upon
this Note, together with the costs of suit, and thereupon release all errors and
waive all right of appeal.
Maker acknowledges that this Note does not arise out of a consumer loan
<PAGE>
or transaction.
WARNING:
BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF
YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT
YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM
YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
/s/ Robert Barone
-----------------------------
Robert Barone
"Maker"
<PAGE>
EXHIBIT 3.2
COGNOVIT PROMISSORY NOTE
$600,000.00 December 31, 1998
FOR VALUE RECEIVED, ROBERT BARONE (hereinafter referred to as "Maker"),
promises to pay to the order of RESOURCE MANAGEMENT, INC. D/B/A/ MAXUS
INVESTMENT GROUP the principal amount of Six Hundred Thousand and 00/100 Dollars
($600,000) with interest on the unpaid principal balance from the date hereof at
the rate of nine percent (9%)per annum. This Note will be payable on demand;
provided, however, that until such demand is made, the interest on this Note
will be payable in annual installments of accrued interest.
All installments shall be applied first to payment of accrued interest and
second to payment of principal. Principal and interest may be prepaid, in whole
or in part, at any time without penalty.
To secure the payment of this Note, Maker has entered into a pledge
agreement of even date with respect to certain collateral. Default under the
terms of that pledge agreement shall constitute a default under the terms of
this Note.
In case of default in the payment of any installment of interest or
principal or other default under the terms of this Note, holder may, at its
option and without notice, declare the entire principal and accrued interest of
this Note immediately due and payable and may proceed to enforce the collection
thereof.
The undersigned shall pay all court costs incurred in the collection of
this Note.
No extension of this Note, no release of any collateral given for security
of this Note or any guaranty of this Note, no release of any person primarily or
secondarily liable on this Note, and no delay in the enforcement of the payment
of this Note or any guaranty of this Note shall affect the liability of Maker or
any endorser of this Note.
Presentment for payment, notice of dishonor, protest of dishonor, and
notice of protest are expressly waived by all parties liable hereunder, their
heirs, legal representatives, successors and assigns.
This Note shall be governed by and construed in accordance with the laws of
the State of Ohio.
Maker agrees that any suit to enforce this Note or to obtain any remedy
with respect to this Note shall be brought in the United States District Court
for the Northern District of Ohio or in the Common Pleas Court of Cuyahoga
County, Ohio, and for such purposes, Maker expressly and irrevocably consents to
the exclusive jurisdiction and venue of such courts. Maker consents to personal
jurisdiction within Cuyahoga County, Ohio in connection with any such
proceeding.
In the event that any provision or clause of this Note is found to be void
or unenforceable to any extent and for any reason, all remaining provisions of
this Note shall remain in full force and effect to the maximum extent permitted
and this Note shall be enforceable as if such void or unenforceable provision
had never been made a part hereof. To this end, the provisions of this Note are
declared to be severable.
Any attorney-at-law may appear at any time after the debt hereby evidenced
becomes due, whether by acceleration or otherwise, in any court of record of the
State of Ohio or any other State in the United States, and waive
<PAGE>
the issuing and service of process and confess judgment in favor of the legal
holder hereof against Maker for the amount of principal and interest then
appearing due upon this Note, together with the costs of suit, and thereupon
release all errors and waive all right of appeal.
Maker acknowledges that this Note does not arise out of a consumer loan or
transaction.
WARNING:
BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF
YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT
YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM
YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
/s/ Robert Barone
-----------------------------
Robert Barone
"Maker"
<PAGE>
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Agreement") is made and entered into as of
December 31, 1998 by and among ROBERT BARONE and DIANE BARONE ("Pledgor") and
RESOURCE MANAGEMENT, INC. D/B/A/ MAXUS INVESTMENT GROUP ("Pledgee").
RECITALS:
Pledgor has borrowed Six Hundred Thousand Dollars ($600,000) from
Pledgee, the repayment of which is evidenced by a cognovit promissory note of
even date (the "Note"). Pledgee desires to retain a secured interest in the
Class A common shares of Pledgee owned by Pledgor as security for repayment
of the Note.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and promises made in this Agreement and for other valuable
consideration (the receipt and sufficiency of which Pledgor hereby
acknowledges), the parties agree as follows:
SECTION 1 - PLEDGE OF STOCK. Pledgor hereby absolutely and unconditionally
assigns, transfers, sets over, pledges and grants a security interest to Pledgee
in Pledgor's thirty-seven thousand five hundred (37,500) Class A common shares
of Pledgee owned by Pledgor (the "Shares"), together with all dividends (except
to the extent paid under Section 7), income and issues therefrom, rights of
preemption and all other rights attached or inuring to the Shares (which Shares
and all such dividends, income, issues and rights are herein collectively
referred to as the "Pledged Stock").
SECTION 2 - COLLATERAL SECURITY. The Pledged Stock is hereby pledged and
assigned to Pledgee as collateral security for: (a) the performance of
Pledgor's obligations under the Note: and (b) any other obligations now or
hereafter incurred or created under, arising out of or in connection with this
Agreement or the Note, together with any and all expenses which may be incurred
by Pledgee in collecting any or all of the obligations or enforcing any right
under this Agreement.
SECTION 3 - SECURED PARTY STATUS. Pledgor acknowledges that Pledgor's
covenants, pledges and assignments under this Agreement constitute Pledgor's
grant of a security interest in the Pledged Stock to Pledgee. In addition to
the rights and remedies provided herein, Pledgee is hereby granted all the
rights and remedies of a secured party under Chapter 1309 of the Ohio Revised
Code and all amendments thereto.
SECTION 4 - DELIVERY OF STOCK CERTIFICATES. Pledgor hereby delivers to
Pledgee all of the certificates representing the Pledged Stock, duly endorsed in
blank for pledge. Pledgee shall retain, administer and distribute the Pledged
Stock and all proceeds therefrom in accordance with this Agreement.
SECTION 5 - REPRESENTATION AND WARRANTIES. Pledgor represents and warrants
to Pledgee that: (a) Pledgor has the legal record and is the beneficial owner
of, and has good and marketable title to, the Pledged Stock, subject to no
pledge, lien, mortgage, hypothecation, security interest, charge, option or
other encumbrance whatsoever, except for the lien and security interest created
by this Agreement; (b) Pledgor has the full power, authority and legal right to
pledge all of the Pledged Stock; (c) no consent of any other party (including,
without limitation, creditors of Pledgor) and no consent, license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority are
required to be obtained by Pledgor in connection with the execution, delivery or
performance of this Agreement; and (d) the execution, delivery and performance
of this Agreement will not violate any provision of any applicable law,
regulation or any order, judgment, writ,
<PAGE>
award or decree of any court, arbitrator or governmental authority or of any
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which Pledgor is a party or which purports to be binding upon
Pledgor.
SECTION 6 - NO DISPOSITION OR ENCUMBRANCE. Without the prior written
consent of Pledgee, which shall not be unreasonably withheld, Pledgor shall not
sell, assign, transfer, exchange or otherwise dispose of the Pledged Stock, nor
will Pledgee create, incur or permit to exist any pledge, lien, mortgage,
hypothecation, security interest, charge, option or other encumbrance with
respect to any of the Pledged Stock. Notwithstanding the above, Pledgor may
sell the Pledged Stock for a fair market value amount provided that the proceeds
of such sale are applied against Pledgor's unpaid indebtedness secured by this
Agreement.
SECTION 7 - PLEDGOR'S RIGHTS. Unless an event of default under this
Agreement shall have occurred and be continuing, Pledgor shall be entitled to
receive all cash dividends paid in respect of the Pledged Stock, Pledgor shall
be entitled to vote the Pledged Stock and to give consents, waivers and
ratifications in respect of the Pledged Stock; provided, however, that no vote
shall be cast or consent, waiver or ratification given or action taken which
would impair the Pledged Stock or be inconsistent with or violate any provision
of this Agreement, the Note or any other agreement or document evidencing the
obligations of Pledgor.
SECTION 8 - DEFEND TITLE. Pledgor covenants and agrees that Pledgor will
defend Pledgee's right, title and security interest in and to the Pledged Stock
against the claims and demands of all persons whomsoever.
SECTION 9 - EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
(a) the failure of Pledgor to make payments when due, or within any
applicable cure period, under the Note;
(b) the failure of Pledgor to perform any covenant or obligation contained
in this Agreement or the Note; or
(c) any representation or warranty of Pledgor in this Agreement is
determined to have been false or untrue in any material respect when
made.
SECTION 10 - SALE OF PLEDGED STOCK. Upon the occurrence of an Event of
Default, Pledgor hereby grants to Pledgee the full right, power and authority to
sell, assign and deliver all or any part of the Pledged Stock (and/or any
additions thereto) at a private or public sale, at the option of Pledgee, in
order to satisfy all or any part of the obligations of Pledgor secured by this
Agreement, whether now existing or hereafter arising. No such sale, assignment
or delivery shall be made until the expiration of five (5) days after written
notice is given to Pledgor of the amount or amounts due or claimed to be due
from Pledgor, with demand for payment, but without any requirement of public
notice or advertising; provided, however, that Pledgee shall notify Pledgor in
writing of the time, place and conditions of such sale, assignment or delivery.
At any public sale, Pledgee shall be free to purchase all or any part of the
Pledged Stock. From the proceeds arising from any private or public sale,
Pledgee shall pay and discharge all of Pledgor's unpaid indebtedness secured by
this Agreement, plus all reasonable costs, attorneys' fees and expenses actually
and reasonably incurred by Pledgee in connection with such sale, assignment and
delivery, and shall remit the surplus, if any, to Pledgor. Pledgor shall not be
liable for any deficiency.
SECTION 11 - TERMINATION OF AGREEMENT. Upon Pledgee's receipt of all of
Pledgor's indebtedness secured by this Agreement, the pledge and security
interest contained in this Agreement shall automatically and immediately
<PAGE>
terminate and Pledgee shall return to Pledgor all the Pledged Stock remaining
with Pledgee as of such termination date.
SECTION 12 - SEVERABILITY. All provisions of this Agreement are severable
and no provision of this Agreement shall be affected by the invalidity of any
such other provision.
SECTION 13 - BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, personal representatives, successors and assigns and shall inure to
the benefit of the holders from time to time of the obligations secured by this
Agreement.
SECTION 14 - GOVERNING LAW AND FORUM. This Agreement and all disputes
hereunder shall be governed by and construed in accordance with the laws of the
State of Ohio. The parties agree that any suit to enforce any provision of this
Agreement or to obtain any remedy with respect to this Agreement shall be
brought by a party in the United States District Court for the Northern District
of Ohio or in the Common Pleas Court of Cuyahoga County, Ohio and for such
purposes, the parties expressly and irrevocably consent to the exclusive
jurisdiction and venue of such courts. The parties consent to personal
jurisdiction within Cuyahoga County, Ohio in connection with any such
proceeding.
SECTION 15 - WAIVER. No action by Pledgor or Pledgee and no refusal or
neglect of Pledgor or Pledgee to exercise any right under this Agreement or to
enforce compliance with the terms of this Agreement shall constitute a waiver of
any provision contained in this Agreement, unless such waiver is expressed in
writing by the waiving party.
SECTION 16 - NOTICES. Any notice required to be given under this Agreement
shall be sufficient if made in writing and mailed by certified mail to Pledgor
at his home address, or such other address as he may from time to time indicate
to Pledgee, and to Pledgee at its principal office address, or such other
address as it may from time to time indicate to Pledgor.
SECTION 17 - ENTIRE AGREEMENT. This Agreement represents the entire
Agreement among the parties regarding the subject matter hereof and supersedes
all prior, written or oral agreements or understandings among the parties
regarding this matter. This Agreement may be modified only by written
instruments signed by each of the parties hereto.
EXECUTED as of the date first written above.
/s/ Robert Barone
-------------------------------
Robert Barone
/s/ Diane Barone
-------------------------------
Diane Barone
"Pledgor"
Resource Management, Inc. d/b/a
Maxus Investment Group
By:
-------------------------------
Richard Barone, President
"Pledgee"
<PAGE>
EXHIBIT 3.3
COMMAND ACCOUNT-SM- PRUDENTIAL SECURITIES
MARGIN AGREEMENT PRUDENTIAL SECURITIES INCORPORATED, A
SUBSIDIARY OF THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA, NEWARK, NEW JERSEY
1. COMMAND ACCOUNT. I/we ("Client") hereby requests that Prudential
Securities Incorporated ("PSI") accept a Prudential Securities COMMAND Account
("COMMAND Account") application in Client's name as appears below. This
Agreement sets forth the terms and conditions that govern the COMMAND Account to
be provided to the Client, and in consideration of PSI accepting such COMMAND
Account, Client hereby agrees to abide by all such terms and conditions, as of
the date of execution.
For Tenancy by the Entirety Accounts, Clients specifically authorize each
other to use the COMMAND Account to buy and sell securities, write checks and
use the Card or otherwise use the assets of the COMMAND Account without the
prior approval of the other.
Client understands that a COMMAND Account consists of a PSI margin account
(the "Securities Account") which is linked to a choice of either an investment
fund ("COMMAND Fund") or to the COMMAND Insured Income Account-SM- ("CMIIA"),
plus a Visa-Registered Trademark- Gold Account ("Visa Account") provided by The
Prudential Bank and Trust Company ("PB&T"), with which PSI maintains and
agreement. Under the terms of the Agreement between PB&T and PSI, the Visa
Account may be opened, and one or more Visa Gold Cards (the "Card") may be
issued and checks provided ("Checks") for use in the COMMAND Account. Before
any COMMAND Account is provided by PSI, PB&T must specifically accept this
Agreement.
Client understands that PSI will charge the Client an annual fee for
services provided hereunder by debiting the Client's COMMAND Account. Such fee
is paid in advance and set forth in the COMMAND Program Description, the receipt
of which Client hereby acknowledges. Client will be informed of any fee changes
in advance. Should Client's COMMAND Account be terminated for any reason,
Client will not receive a refund of any portion of that annual fee. Client
understands that by choosing COMMAND Essentials-SM-, Client will not receive the
features referenced in Section 3, below. The features of COMMAND Essentials can
be found in the COMMAND Program Description.
PSI Investment advisory clients that participate in a PSI sponsored managed
account program ("Advisory clients") and PSI Employee Benefit Plan clients on
whose behalf PSI files Form 1099-R with the Internal Revenue Service, are
restricted to COMMAND Essentials. These clients should discuss their choice of
an investment fund with their Financial Advisor in order to determine which fund
is the most appropriate given their investment objectives.
2. THE SECURITIES ACCOUNT. Client may use Client's Securities Account to
purchase and sell securities, including options, on margin or otherwise.
Concurrent with the opening of Client's COMMAND Account, Client will choose one
of the COMMAND Funds ("Primary Fund") or CMIIA as Client's Primary Investment
Vehicle. Free credit cash balances in Client's Securities Account (that is, any
cash that may be transferred out of the Securities Account without giving rise
to interest charges) of $1 or more will be automatically invested or deposited,
on a daily basis, in the Primary Investment Vehicle by means of a purchase order
submitted to the Primary Fund or a deposit into CMIIA by PSI, in accordance with
the terms of the Primary Fund's prospectus or the CMIIA Client Information
Notice. In addition, Client may make manual purchases of shares of another
COMMAND Fund ("Secondary Fund") or manual deposits into CMIIA as a Secondary
Investment Vehicle. The purchase price for shares of the COMMAND Funds will be
the net asset value per share next determined after receipt by a COMMAND Fund of
a purchase order. Ordinarily, a
<PAGE>
purchase order or deposit will not be entered until free credit cash balances
or cash in the form of Federal Funds becomes available to PSI. However, in
certain situations, PSI may, without charge, advance Federal Funds to the
COMMAND Funds or CMIIA on Client's behalf to enable Client to purchase
COMMAND Fund shares and earn COMMAND Fund dividends or earn CMIIA interest
prior to final collection of checks deposited to Client's Securities Account.
It is understood, therefore, that PSI may reasonably withhold access to the
redemption proceeds of COMMAND Fund shares purchased with, or CMIIA balances
resulting from, funds so advanced until PSI is satisfied that any and all
checks deposited to Client's Securities Account have been collected.
It is anticipated that the COMMAND Funds will declare dividends daily, as
earned, on shares of a COMMAND Fund and will reinvest daily any such dividends
in COMMAND Fund shares. Client understands that an investment in shares of the
COMMAND Funds is not equivalent to a bank deposit. As with any investment in
securities, the value of Client's investment may fluctuate. The shares of
beneficial interest of the COMMAND Funds are maintained on the register of the
COMMAND Fund. Certificates are not physically issued. Securities in Client's
Account are protected by the Securities Investor Protection Corporation and
additional similar protection is provided through insurance purchased by PSI.
CMIIA balances and interest are insured through the depository institution's
Federal Deposit Insurance Corporation coverage.
Shares and cash comprising Client's Primary Investment Vehicle will be
redeemed (at net asset value) or withdrawn, automatically, to satisfy debit
balances in Client's Securities Account. Next, shares and cash comprising
Client's Secondary Investment Vehicle will be redeemed (at net asset value) or
withdrawn, automatically, to satisfy debit balances in Client's Securities
Account. Thereafter, Client's shares in other money market funds managed by
Prudential Mutual Fund Management, Inc. ("Prudential Money Funds") or balances
in other insured income accounts will be redeemed at their net asset value or
withdrawn, automatically, to satisfy debit balances in Client's Securities
Account. If Client is eligible and elects the Monthly Automatic Payout feature,
and/or the Cash Transfer Service feature, then the liquidation sequence set
forth below in Section 3 will be applicable. No fee, commission or other charge
will be made with respect to the purchase or redemption of COMMAND Fund or
Prudential Money Fund shares or deposit to and withdrawal from CMIIA or other
insured income accounts. Affiliates of PSI receive fees in connection with the
operation of the COMMAND Funds. Administration, distribution and advisory fees
will be paid by the COMMAND Funds as set forth in the COMMAND Funds'
prospectuses. Client acknowledges receipt of the COMMAND Funds' prospectuses,
which more fully describe the COMMAND Funds and the COMMAND Program Description,
which describes the CMIIA.
3. THE PRUDENTIAL BANK AND TRUST COMPANY VISA ACCOUNT. Client hereby applies
to The Prudential Bank and Trust Company ("PB&T") for a Visa Gold Account ("Visa
Account") and requests that checks ("Checks") be provided and, if applicable,
that one or more Visa Gold Cards ("Card") be issued for use with Client's Visa
Account. If a Card is issued. Client requests that a Personal Identification
Number ("PIN") be issued as well so that Client may access Client's COMMAND
Account through the Visa Automated Teller Machine ("ATM") Network. Client
understands that Client's application for a Visa Account is accepted by PB&T
when a Card and PIN are issued by Client or Checks are provided, and is subject
to applicable rules and regulations of Visa USA Inc. and Visa International.
Client agrees that by signing, using, or permitting another to use the Checks,
Card or PIN, Client will be bound by the following terms and conditions. The
Card remains the property of PB&T and may be cancelled by PB&T at any time
without prior notice. Client will surrender any unused Checks and Card(s) and
discontinue utilization of Client's Visa Account immediately upon request of
PB&T or PSI. Client understands that PB&T will open Client's Visa Account in
the name supplied to it by PSI, that information concerning transactions in
Client's Visa Account or the status of such account will be furnished to Client
by PSI, and that billing error disputes or inquiries are to be directed to PB&T
through PSI. Client also understands that Client's Card transaction receipts
will not be returned to Client. Client may write Checks on the Visa Account
with PB&T. The Visa Card may be used by Client to make purchases of merchandise
and services, to obtain
<PAGE>
cash advances (which a bank may limit to $5,000 or less per account per day),
and to obtain cash through the Visa ATM Network (which is limited to 5
withdrawals per day and a maximum total withdrawal of $1,000 per day; some
institutions may have a lower limit). The aggregate amount available for
such purposes (the "Authorization Limit") will be the total of (i) the
uninvested free credit cash balance, if any, in the Securities Account
pending investment in shares of the Primary Fund or deposit into CMIIA; (ii)
the net asset value of Client's shares in the Primary Fund and Secondary
Fund, the balance in CMIIA, the net asset value of Client's shares in
Prudential Money Funds and balances in other insured income accounts, if any;
and (iii) where applicable, the available margin loan value of any securities
in Client's Securities Account. All Visa Account transactions within
Client's Authorization Limit will be paid to PB&T by PSI from and through
Client's Securities Account, as provided by this Agreement and hereby
authorized by Client. Since the amount so available is dependent upon the
status of clearance of checks deposited by Client to the Securities Account
as well as securities prices and the status of transactions in the Securities
Account and the Visa Account, it will fluctuate from day to day.
Whenever Client uses the Card to pay for merchandise or services, or to
obtain a cash advance, Client will be required to sign a transaction draft as
evidence of the transaction, which will be forwarded through card processing
systems to PB&T for payment. In addition, each time Client writes a Check
against the Visa Account, the Check will be forwarded to PB&T for payment. PB&T
will notify PSI daily as to the amount of all Card purchases, cash advances and
Check usage in Client's Visa Account received and paid by PB&T, and PSI will
promptly make payment to PB&T on Client's behalf for all Card purchases, cash
advance and Check usage posted to Client's Visa Account. However, PSI will not
debit Client's Securities Account until the twenty-fifth day of each month or
the prior business day if the twenty-fifth falls on a weekend or holiday for all
Card purchases. Client understands that Client's Authorization Limit is
instantaneously reduced (by the amount of all Card purchases, cash advance and
Check usage) at the time PB&T is notified of any such use of the Card. However,
shares in the COMMAND Funds, balances in CMIIA, shares in Prudential Money Funds
or balances in other insured income accounts are not redeemed or withdrawn until
PSI is notified of the Check or cash advance charge or until the monthly debit
to Client's Securities Account for Card purchases is made. PSI will make
payment to PB&T to the extent that sufficient funds may be provided first, from
the free credit cash balance, if any, held in the Securities Account; and
second, from the proceeds of redemption of Client's shares in the COMMAND Funds,
or withdrawal of balance in CMIIA, or from the proceeds of redemption of
Client's shares in the Prudential Money Funds or withdrawal of balances in other
insured income accounts; and third, if applicable, should such sources prove
insufficient, from margin loans made by PSI for Client's Securities Account
within the available margin loan value of the securities in the account. If PSI
does advance such monies, such amount will be a loan by PSI to Client and will
be secured by securities in any PSI Account in which Client may have an
interest. If PSI extends credit to Client, interest will be charged from the
day it makes payment to PB&T on Client's behalf at the same rate PSI generally
charges for margin loans. Client acknowledges receipt of PSI's standard written
statement of margin interest charges and other terms and conditions for margin
accounts. Should these sources prove to be insufficient to satisfy all charges
owing in the Visa Account, PB&T may advance the balance of funds and will charge
interest at a rate to be determined from time to time by PB&T for the time such
Visa Account is overdrawn. Any such amount, including interest, will be due and
payable by Client to PB&T immediately.
Pending delayed debiting of Card purchases, Client may continue to trade
securities in Client's Securities Account. However, Client may not dispose of
assets in Client's COMMAND Account or any other account Client may have with PSI
if such disposal will negatively affect Client's obligation to pay PSI for Card
purchases.
4. DISCLAIMER. Client understands that if Client is eligible and elects to
receive a Card, Client will be provided with services and benefits outlined in
the COMMAND Program Description furnished to Client (the "COMMAND Card
<PAGE>
Services"). Client acknowledges and agrees that these COMMAND Card Services
are provided by Visa USA's third-party providers, by United Bank Club
Association, Inc.'s ("UBCA") third-party providers, or other service
providers, over which PSI has no responsibility or control. Therefore, PSI
expressly disclaims liability, and Client agrees that PSI shall have no
liability, for any acts, omissions, claims, costs, losses, or damages arising
from or relating to use by Client of the COMMAND Card Services or Visa USA's
and UBCA's agents, employees and third-party providers or other service
providers. In addition, Client understands that Client is responsible for
the cost of certain COMMAND Card Services including, medical, legal,
transportation or other travel assistance services or goods provided.
5. LIABILITY. Client acknowledges that the Checks and/or Card(s) or PIN
issued pursuant to this Agreement are for Client's exclusive possession and
accordingly agrees to use reasonable care to safeguard them and limit access to
them. Neither Client nor any person authorized to act on Client's behalf will
incur any charge by use of the Checks and/or Card(s) or PIN in excess of the
Authorization Limit. Client agrees to assume liability for all transactions
made by Client, or by any authorized person, through the use of the Checks
and/or Card(s) or PIN in connection with Client's Visa Account. Client also
agrees to pay the reasonable costs and expenses of collection of any unpaid
balance due on Client's COMMAND Account, including, but not limited to,
attorneys' fees involved in such collection, to the extent provided by law.
It is understood that, in the event of any unauthorized use of Client's
Checks in connection with Client's Account, Client's Account will not be
credited with interest on these misused funds for the period prior to
reimbursement of these funds to PSI by PB&T.
6. PERIODIC REPORTS AND STATEMENTS. Client understands that each month client
will receive and review a transaction statement from PSI, which will detail: all
purchases and cash advances that were made with the Card; Checks drawn against
Client's Visa Account, electronic funds transfers; securities bought or sold in
Client's Securities Account, whether on margin or on a fully paid basis; margin
interest charges, if any; the number of shares of the COMMAND Funds that were
purchased or redeemed for Client; and deposits to and withdrawals from CMIIA.
The amount of the annual fee that PSI charges for making the COMMAND Account
available and any additional fees with respect to the operation of Client's
Account will be indicated on the statement. Client authorizes PSI to act on
Client's behalf to accept reorders for Checks and requests to stop payment on
Checks, for which fees will be charged to Client's COMMAND Account. Fees may
also be charged for Checks processed, as indicated in the prospectuses, and such
fees will be indicated on the statement.
If there is no transaction activity in Client's COMMAND Account, PSI
reserves the right to send only quarterly transaction statements.
PSI will not send out confirmations following purchases and redemptions of
shares in the COMMAND Funds or receipts following deposits in or withdrawals
from CMIIA. The statement, however, will describe all such transactions which
took place during the preceding month.
Client agrees to pay interest and service charges upon Client's accounts
monthly at the prevailing rate as determined by PSI. Client understands that
Client must carefully review the statements promptly after receipt and notify
PSI of any errors in writing addressed to the Branch Manager of the Branch
Office servicing Client's COMMAND Account within ten days after transmittal by
PSI of the statement or such statements shall be deemed conclusive.
7. TERMINATION OF COMMAND ACCOUNT. Client may terminate Client's COMMAND
Account, including the Securities and VISA Account, by notice at any time.
Client will remain responsible for any charges to Client's Securities Account or
Visa Account whether arising before or after termination. Client understands
that PSI may by notice terminate Client's COMMAND Account, including the
Securities and Visa Accounts, at any time at its discretion, including for
reasons of Client's insolvency or any breach or default of this Agreement by
Client. If Client's COMMAND Account is terminated either by Client or PSI,
Client will promptly return all unused Checks and Card(s) to PSI. Failure to
return such Checks and Card(s) to PSI may result in a delay in complying with
Client's instructions as to the disposition of assets in
<PAGE>
Client's COMMAND Account. Client also understands that upon termination of
Client's COMMAND Account, all pending Card purchases will be paid for by
automatic debit of Client's COMMAND Account on the next business day, and any
other Card usage or Checks presented for payment will be automatically paid
from Client's COMMAND Account upon receipt by PSI. If Client's COMMAND
Account is terminated, PSI may, and is hereby authorized to, redeem all
shares of the COMMAND Funds owned by Client in Client's COMMAND Account and
to withdraw any balance in CMIIA. Client agrees to pay PSI the reasonable
costs and expenses of collection, including but not limited to attorneys'
fees, for any debit balance in Client's Securities Account.
8. MARGIN MAINTENANCE/LIQUIDATION. Client will maintain such margins, in
Client's margin account, if applicable, as PSI may in its discretion require
from time to time and will pay on demand any debit balance owing with respect to
any of Client's accounts. Whenever in PSI's discretion it may deem it desirable
for its protection (and without the necessity of a margin call), including but
not limited to an instance where a petition in bankruptcy or for the appointment
of a receiver is filed by or against Client, or an attachment is levied against
any of Client's accounts, or in the event of notice of Client's death or
incapacity, or in compliance with the orders of any Exchange, PSI may, without
prior demand, tender, and without any notice of the time or place of sale, all
of which are expressly waived, sell any or all securities, or commodities or
contracts relating thereto of which Client's Securities Account or any other PSI
account may be short, in order to close out in whole or in part any commitment
on Client's behalf, and PSI may place stop orders with respect to such
securities or commodities. Such sale or purchase may be made at PSI's discretion
on any Exchange or other market where such business is then transacted, or at
public auction or private sale with or without advertising. Neither any
demands, calls, tenders or notices which PSI may make or give any one or more
instances nor any prior course of conduct or dealings between the parties, shall
invalidate the aforesaid waivers on Client's part. PSI shall have the right to
purchase for PSI's own account any or all of the aforesaid property at any such
sale, discharged of any right to redemption, which is hereby waived.
All transactions in any of Client's accounts are to be paid for or required
margin deposited no later than 2:00 p.m. (ET) on the settlement date or at such
earlier time as PSI shall require.
9. SHORT SALES/DELIVERIES. Client agrees that in giving orders to sell, all
"short" sale orders will be designated as "short" by Client and all "long" sale
orders will be designated as "long" by Client, and that the designation of a
sell order as "long" is a representation on Client's part that Client owns the
security and, if the security is not in PSI's possession, that it is not then
possible to deliver the security to PSI forthwith, and Client will deliver it on
or before the settlement date.
10. SECURITY INTEREST/HYPOTHECATION (PLEDGE). Any and all credit balances,
monies, securities, commodities or contracts relating thereto, and all other
property of whatsoever kind, including but not limited to, property belonging to
Client, owed to Client, or in which Client may have an interest, held by PSI or
carried for Client's accounts ("Client Property"), shall be subject to a general
lien for the discharge of Client's obligations to PSI (including unmatured and
contingent obligations) however arising and without regard to whether or not PSI
has made advances with respect to such property. The Client Property without
notice to Client may be carried in PSI's general loans and all securities may be
pledged, repledged, hypothecated or re-hypothecated, separately or in common
with other securities or any other property, for the sum due to PSI thereon or
for a greater sum and without retaining in Client's possession and control for
delivery a like amount of similar securities or other property. At any time and
from time to time PSI may, in its discretion, without notice to Client, apply
and/or transfer the Client Property, freely interchangeable between any accounts
or in any account in which Client may have an interest. PSI is specifically
authorized to transfer to Client's cash account on the settlement day following
a purchase made in that account, excess funds available in any of Client's other
accounts, including but not limited to any free balances in any margin account
or in any non-regulated commodities account sufficient to make full payment of
this cash purchase.
<PAGE>
Client agrees that any debit occurring in Client's Account or in any account
in which Client may have an interest may be transferred by PSI at its option
to Client's margin-account. In return for PSI's extension or maintenance of
credit in connection with Client's account, Client acknowledges that PSI and
any succeeding firm are hereby authorized from time to time to lend
separately or together with the property of others, either to PSI or to
others, any property, together with any attendant rights of ownership which
PSI may be carrying for Client on margin. In connection with such loans, PSI
may receive and retain certain benefits to which Client is entitled. In
certain circumstances, such loan may limit, in whole or in part, Client's
ability to exercise voting rights of the securities lent. This authorization
shall apply to all accounts carried by PSI for Client and shall remain in
full force until written notice is received by PSI at PSI's principal office
in New York.
By signing this agreement, Client acknowledges that Client's securities may
be loaned to PSI or loaned out to others. By signing this agreement, Client
further acknowledges that Client has received a copy of this agreement.
11. APPLICABLE RULES AND REGULATIONS. The COMMAND Account will be maintained
pursuant to all applicable Federal and State laws, including the rules and
regulations of the Securities and Exchange Commission, the Board of Governors of
the Federal Reserve System, the New York Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc., as well as to the policies of PSI. All
transactions for Client's COMMAND Account will be subject to the constitution,
rules, regulations, customs and usages, as the same may be constituted from time
to time, of the Exchange or market (and its clearing house, if any) where
executed. No waiver of any provision of this Agreement shall be deemed a waiver
of any other provision, nor a continuing waiver of the provision or provisions
so waived.
If any provision hereof is or at any time should become inconsistent with
any present or future law, rule or regulation of any securities or commodities
exchange or any sovereign government or a regulatory body thereof and if any of
these bodies have jurisdiction over the subject matter of this Agreement, said
provision shall be deemed to be superseded or modified to conform to such law,
rule or regulation, but in all other respects this Agreement shall continue and
remain in full force and effect.
12. COMMUNICATIONS. All notices and other communications pursuant to this
Agreement, including reports, statements and margin calls, may be sent to Client
at Client's address last given to PSI, or at such other address as Client may
hereafter give PSI in writing, or to PSI, at its Branch Office servicing
Client's Account.
All notices and other communicated shall be deemed given, if by personal
delivery or facsimile transmission, on the date of such delivery of, if by mail,
on the date of postmark when deposited, prepaid, in a US Post Office Box.
13. REPRESENTATIONS. Client is of full age and represents that Client is not
an employee of any Exchange or of a Member Firm of any Exchange or the NASD, or
of a bank, trust company, or insurance company, and that Client will promptly
notify PSI in writing if Client becomes so employed.
14. ACTS OF GOD. Client understands that PSI will not be liable for loss
caused directly or indirectly by government restrictions, exchange or market
rulings, suspension of trading, war, strikes, "Acts of God", or conditions
beyond PSI's control.
15. CAPTIONS. Section captions have been inserted solely for the purpose of
convenience in description and under no circumstances shall be deemed to qualify
any of the rights set forth in the provisions.
16. ARBITRATION/GOVERNING LAW
- - Arbitration is final and binding on the parties.
- - The parties are waiving their right to seek remedies in court, including the
right to Jury trial.
- - Pre-arbitration discovery is generally more limited than and different from
court proceedings.
- - The arbitrators' award is not required to include factual findings or legal
reasoning and any party's right to appeal or to seek modification of rulings
by the arbitrators is strictly limited.
- - The panel of arbitrators will typically include a minority of arbitrators
<PAGE>
who were or are affiliated with the securities industry.
I agree that all controversies which may arise between us concerning any
transaction (whether executed or to be executed within or outside of the United
States), my account or this or any other agreement between us, whether entered
into prior, on or subsequent to the date indicated on the signature page, shall
be determined by arbitration. The arbitration may be before the New York Stock
Exchange, Inc. or the National Association of Securities Dealers, Inc. or any
other self-regulatory organization of which PSI is a member, as I may elect and
shall be governed by the laws of the State of New York, If I do not make such
election by registered mail addressed to you at your main office within five (5)
days of such demand by you that I make such election, then you may make such
election. Any notice in connection with such arbitration proceeding, may be
sent to me by mail, and I hereby waive personal service. Judgment upon any
award rendered by the arbitrators may be entered in any court having
jurisdiction, without notice to me. No person shall bring a putative or
certified class action to arbitration, nor seek to enforce any pre-dispute
arbitration agreement against any person who has initiated in court a putative
class action; or who is a member of a putative class and who has not opted out
of the class with respect to any claims encompassed by the putative class
action, until: (i) the class certification is denied; (ii) the class is
decertified; or (iii) the customer is excluded from the class by the court.
Such forbearance to enforce an agreement to arbitrate shall not constitute a
waiver of any rights under this agreement except to the extent stated herein.
This Agreement shall be governed by the laws of the State of New York, and shall
inure to the benefit of PSI's successors and assigns, and shall be binding on
the undersigned, Client's representatives, attorneys-in-fact, heirs, executors,
administrators and assigns.
17. SIGNATURE. Client hereby consents and agrees to all of the terms and
conditions of this Agreement appearing above and as continued on the reverse
side.
FOR CORPORATE ACCOUNTS ONLY. A resolution of Client's Board of Directors
authorizing the opening of the COMMAND Account must be attached. Client further
warrants to PSI that the officers signing below are authorized and empowered,
for and on behalf of the corporation, pursuant to the resolution of the Board of
Directors of the corporation (a certified copy of which is attached hereto), to
establish and maintain a margin COMMAND Account with PSI with complete and full
authority to act on behalf of the corporation, to receive and distribute funds,
write and sign Checks, and make charges on Client's Visa Card on or against
Client's Corporate COMMAND Account.
THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE ON PAGE 2, IN SECTION
16 ABOVE.
Robert Barone
- --------------------------------------
Account Name (Please Print)
/s/ Robert Barone, Trustee
- --------------------------------------
Signature
- --------------------------------------
Title (If Corporate COMMAND Account)
Diane Barone
- --------------------------------------
Account Name (If Joint Account)
/s/ Diane Barone, Trustee
- --------------------------------------
Signature
<PAGE>
EXHIBIT 3.4
PERSHING
Division of Donaldson, Lufkin & Jenrette Securities Corporation
One Pershing Plaza-Jersey City, New Jersey 07399
MARGIN AGREEMENT
TO: Pershing, Division of Donaldson, Lufkin & Jenrette Securities Corporation:
In consideration of your accepting and carrying for the undersigned one or more
accounts introduced to you by my broker, bank or other introducing firm
("Introducing Firm"), which Introducing Firm is intended to have the benefit and
is a third party beneficiary of this agreement, the undersigned agrees as
follows:
ROLE OF PERSHING
1. You are carrying the accounts of the undersigned as clearing broker
pursuant to a clearing agreement with Introducing Firm. Until receipt from
the undersigned of written notice to the contrary, you may accept from
Introducing Firm, without inquiry or investigation, (i) orders for the
purchase or sale of securities and other property on margin or otherwise, and
(ii) any other instructions concerning said accounts. Notices to the
undersigned concerning margin requirements or other matters related to the
undersigned's accounts usually will go through undersigned's Introducing Firm
although direct notice to the undersigned with duplicate notice to
undersigned's Introducing Firm may occur if market conditions, time
constraints or other circumstances require it. You shall not be responsible
or liable for any acts or omissions of Introducing Firm or its employees. I
understand that Pershing provides no investment advice nor do you give advice
or offer any opinion with respect to the suitability of any transaction or
order. I understand that my Introducing Firm is not acting as the agent of
Pershing and I agree that I will in no way hold Pershing, Donaldson, Lufkin &
Jenrette Securities Corporation, its other Divisions, and its Officers,
Directors and Agents liable for any trading losses incurred by me.
APPLICABLE RULES AND REGULATIONS
2. All transactions for the undersigned shall be subject to the constitution,
rules, regulations, customs and usages of the exchange or market and its
clearing house, if any, where executed by you or your agents, including your
subsidiaries and affiliates.
DEFINITIONS
3. For purposes of this agreement "securities, commodities and other
property," as used herein shall include, but not be limited to money,
securities, and commodities of every kind and nature and all contracts and
options relating thereto, whether for present or future delivery.
LIEN
4. All securities, commodities and other property of the undersigned which you
may at any time be carrying for the undersigned, or which may at any time be in
your possession or under your control, shall be subject to a general lien and
security interest in your favor for the discharge of all the undersigned's
indebtedness and other obligations to you, without regard to your having made
any advances in connection with such securities and other property and without
regard to the number of accounts the undersigned may have with you. In
enforcing your lien, you shall have the discretion to determine which securities
and property are to be sold and which contracts are to be closed.
LIQUIDATION
<PAGE>
5. If, in your discretion you consider it necessary for your protection to
require additional collateral or in the event that a petition in bankruptcy, or
for appointment of a receiver is filed by or against the undersigned, or an
attachment is levied against the accounts of the undersigned, or in the event of
the death of the undersigned, you shall have the right to sell any or all
securities, commodities and other property in the accounts of the undersigned
with you, whether carried individually or jointly with others, to buy any or all
securities, commodities and other property which may be short in such accounts,
to cancel any open orders and to close any or all outstanding contracts, all
without demand for margin or additional margin, notice of sale or purchase or
other notice or advertisement. Any such sales or purchases may be made at your
discretion on any exchange or other market where such business is usually
transacted, or at public auction or private sale, and you may be the purchasers
for your own account. It being understood that a prior demand, or call, or
prior notice of the time and place of such sale or purchase shall not be
considered a waiver of your right to sell or buy without demand or notice.
PAYMENT OF INDEBTEDNESS UPON DEMAND AND LIABILITY FOR COSTS OF COLLECTION
6. The undersigned shall at all times be liable for the payment upon demand of
any debit balance or other obligations owing in any of the accounts of the
undersigned with you and the undersigned shall be liable to you for any
deficiency remaining in any such accounts in the event of the liquidation
thereof, in whole or in part, by you or by the undersigned; and, the undersigned
shall make payments of such obligations and indebtedness upon demand. The
reasonable costs and expense of collection of the debit balance, recovery of
securities, and any unpaid deficiency in the accounts of the undersigned with
you, including, but not limited to, attorney's fees, incurred and payable or
paid by you shall be payable to you by the undersigned.
PLEDGE OF SECURITIES
7. All securities, commodities and other property now or hereafter held,
carried or maintained by you in your possession in any of the accounts of the
undersigned may be pledged and repledged by you from time to time, without
notice to the undersigned, either separately or in common with other such
securities, commodities and other property for any amount due in the accounts of
the undersigned, or for any greater amount, and you may do so without retaining
to your possession or control for delivery a like amount of similar securities,
commodities or other property.
MARGIN REQUIREMENTS, CREDIT CHARGES AND CREDIT INVESTIGATION
8. The undersigned will at all times maintain such securities, commodities and
other property in the accounts of the undersigned for margin purposes as you
shall require from time to time and the monthly debit balances or adjusted
balances in the accounts of the undersigned with you shall be charged, in
accordance with your practice, with interest at a rate permitted by the laws of
the State of New York. It is understood that the interest charge made to the
undersigned's account at the close of a charge period will be added to the
opening balance for the next charge period unless paid.
I acknowledge receipt from my Introducing Firm of the disclosure statement
which explains the conditions under which interest can be charged to my account,
the annual rate of interest, how debit balances are determined and the methods
of computing interest.
You may exchange credit information about the undersigned with others. You
may request a credit report on the undersigned and upon request, you will state
the name and address of the consumer reporting agency that furnished it. If you
extend, update or renew the undersigned's credit, you may request a new credit
report without telling the undersigned.
COMMUNICATIONS
9. Communications may be sent to the undersigned at the current address of the
undersigned, which is on file at your office, or at such other address as
<PAGE>
the undersigned may hereafter give you in writing, or through my Introducing
Firm, and all communications, so sent, whether by mail, telegraph, or
messenger or otherwise, shall be deemed given to the undersigned personally,
whether actually received or not.
SCOPE AND TRANSFERABILITY
10. This agreement shall cover individually and collectively all accounts which
the undersigned may open or reopen with you, and shall inure to the benefit of
your successors whether by merger, consolidation or otherwise, and assigns, and
you may transfer the accounts of the undersigned to your successors and assigns,
and this agreement shall be binding upon the heirs, executors, administrators,
successors and assigns of the undersigned.
NON-INVESTMENT ADVICE
11. The undersigned acknowledges that you will not provide the undersigned with
any legal, tax or accounting advice, that your employees are not authorized to
give any such advice and that the undersigned will not solicit or rely upon any
such advice from you or your employees whether in connection with transactions
in or for any of the accounts of the undersigned or otherwise. In making legal,
tax or accounting decisions with respect to transactions in or for the accounts
of the undersigned or any other matter, the undersigned will consult with and
rely upon its own advisors and not you, and you shall have no liability
therefor.
EXTRAORDINARY EVENTS
12. You shall not be liable for loss caused directly or indirectly by
government restrictions, exchange or market rulings, suspension of trading, war,
strikes or other conditions beyond your control.
REPRESENTATIONS AS TO CAPACITY TO ENTER INTO AGREEMENT
13. The undersigned, if an individual, represents that the undersigned is of
full age, that unless otherwise disclosed to you in writing, the undersigned is
not an employee of any exchange, or of any corporation of which an exchange owns
a majority of the capital stock, or of a member firm or member corporation
registered on any exchange or of a bank, trust company, insurance company, or of
any corporations, firm or individual engaged in the business of dealing either
as broker or as principal in securities, bills of exchange, acceptances or other
forms of commercial paper. The undersigned further represents that no one
except the undersigned has an interest in the account or accounts of the
undersigned with you.
JOINT AND SEVERAL LIABILITY
14. If the undersigned shall consist of more than one individual, their
obligations under this agreement shall be joint and several. The undersigned
have executed the Joint Account Agreement and made the election required
therein.
OPTION TRANSACTIONS
15. If at any time the undersigned shall enter into any transaction for the
purchase or sale of an option contract, the undersigned hereby agrees to first
obtain from the Introducing Firm the then current disclosure statements of the
Options Clearing Corporation and further agrees to abide by the rules of any
national securities association, registered securities exchange or clearing
organization applicable to the trading of option contracts and, acting alone or
in concert, will not violate the position or exercise limitation rules of any
such association or exchange or of the Options Clearing Corporation or other
clearing organization.
SEPARABILITY
16. If any provision or condition of this agreement shall be held to be invalid
or unenforceable by any court, or regulatory or self-regulatory agency or body,
such invalidity or unenforceability shall attach only to such provision or
condition. The validity of the remaining provisions and conditions shall not be
affected thereby and this agreement shall be carried
<PAGE>
out as if any such invalid or unenforceable provision or condition were not
contained herein.
HEADINGS ARE DESCRIPTIVE
17. The heading of each provision hereof is for descriptive purposes only and
shall not be deemed to modify or qualify any of the rights or obligations set
forth in each such provision.
ASSIGNMENT OF PERSHING'S RIGHTS UNDER THIS AGREEMENT TO INTRODUCING FIRM
18. The undersigned agrees that any rights that Pershing has under this
agreement, including but not limited to the right, to collect any debit balance
or other obligations owing in any of the accounts of the undersigned may be
assigned to the Introducing Firm of the undersigned so that the undersigned's
Introducing Firm may collect from the undersigned independently or jointly with
Pershing or enforce any other rights granted to Pershing under this agreement.
ARBITRATION DISCLOSURES
19. - ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
- THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO JURY TRIAL.
- PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT
FROM COURT PROCEEDINGS.
- THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION
OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
- THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF
ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
AGREEMENT TO ARBITRATE CONTROVERSIES
20. IT IS AGREED THAT ANY CONTROVERSY BETWEEN AND AMONG THE UNDERSIGNED,
PERSHING AND INTRODUCING FIRM OR ANY OF THEM ARISING OUT OF PERSHING'S OR
INTRODUCING FIRM'S BUSINESS OR THIS AGREEMENT, SHALL BE SUBMITTED TO ARBITRATION
BEFORE THE NEW YORK STOCK EXCHANGE, INC. OR ANY OTHER NATIONAL SECURITIES
EXCHANGE ON WHICH A TRANSACTION GIVING RISE TO THE CLAIM TOOK PLACE (AND ONLY
BEFORE SUCH EXCHANGE) OR THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.,
AS THE UNDERSIGNED MAY ELECT AND IN ACCORDANCE WITH THE RULES OBTAINING OF THE
SELECTED ORGANIZATION. ARBITRATION MUST BE COMMENCED BY SERVICE UPON THE OTHER
PARTY OF A WRITTEN DEMAND FOR ARBITRATION OR A WRITTEN NOTICE OF INTENTION TO
ARBITRATE, THEREIN ELECTING THE ARBITRATION TRIBUNAL. IN THE EVENT THE
UNDERSIGNED DOES NOT MAKE SUCH ELECTION WITHIN FIVE (5) DAYS OF SUCH DEMAND OR
NOTICE, THEN THE UNDERSIGNED AUTHORIZES YOU TO DO SO ON BEHALF OF THE
UNDERSIGNED.
NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR
SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS
INITIATED IN COURT A PUTATIVE CLASS ACTION; AND WHO IS A MEMBER OF A PUTATIVE
CLASS AND WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS
ENCOMPASSED BY THE PUTATIVE CLASS ACTION, UNTIL: (I) THE CLASS CERTIFICATION IS
DENIED; (II) THE CLASS IS DECERTIFIED; OR (III) THE CUSTOMER IS EXCLUDED FROM
THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE
SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE
EXTENT STATED HEREIN.
THE LAWS OF THE STATE OF NEW YORK GOVERN
21. THIS AGREEMENT AND ITS ENFORCEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
LOAN CONSENT
22. BY SIGNING THIS AGREEMENT, THE UNDERSIGNED ACKNOWLEDGES THAT SECURITIES NOT
FULLY PAID FOR BY THE UNDERSIGNED MAY BE LOANED TO YOU OR LOANED OUT TO OTHERS.
THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE IN PARAGRAPH 20 ON
THIS PAGE. I ACKNOWLEDGE RECEIVING A COPY OF THIS AGREEMENT.
<PAGE>
SIGNATURES
(If a Corporation, Partnership or (If Individuals)
Other Entity)
/s/ Robert Barone, Trustee
- ---------------------------- --------------------------------
(Name of Entity)
/s/ Diane Barone, Trustee
--------------------------------
(Second Party if Joint Account)
By
---------------------------------
Title
------------------------------
DATED 9-16-97
--------------------------------------------------
<PAGE>
CONTROL OR RESTRICTED (RULE 144) STOCK
BORROWER'S AGREEMENT
In consideration of any margin credit extended by PERSHING DIVISION OF
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION ("PERSHING") to the
undersigned on _______ shares of the common stock of ____________________ owned
by the undersigned and pledged to Pershing (the "Shares"), the undersigned
agrees, represents and warrants as follows:
1. The Shares are fully paid for and the undersigned is the unconditional
beneficial owner of the Shares, free and clear of any security interest, claim
or charge. The Shares are registered in the name of the undersigned, no other
person or entity has an interest in the Shares and the undersigned has full
right, power and authority to sell, pledge, transfer and deliver the Shares.
2. The Shares or any other such shares owned or controlled by the
undersigned (i) have not been assigned, transferred, donated, pledged encumbered
or the subject of a put or call option by the undersigned or any other person or
entity (ii) will be deposited in the account of the undersigned with Pershing in
fully negotiable form, and (iii) for the period of the agreement, will not be
sold assigned, transferred, donated, pledged, encumbered or the subject of a put
or call option of the undersigned or any other person or entity without the
prior written consent of a principal of Pershing; provided, however, such
requirement shall not apply to sales of the Shares through Pershing, or the
pledge or the Shares to Pershing as provided in the agreement.
3. All of the information set forth by the undersigned in the Form 144,
Rule 144 Questionnaire and representation letter, copies of which are attached
and made a part hereof, is accurate and complete and should any change or event
occur which would render the information Inaccurate or Incomplete, the
undersigned will immediately notify Pershing of such change or event.
4. The margin credit arrangement referred to herein shall be supplemental
and in addition to all the terms and conditions of the Customer Agreement
between the undersigned and Pershing which the undersigned acknowledges he has
read, understood, and executed and which remains in full force and effect.
5. It is understood that the minimum margin required to be maintained by
the undersigned for the Shares is 40% of the current market value of the Shares
as determined on a day by day basis or $3.00 per share, whichever is greater.
It is further understood that such minimum maintenance requirement may be
changed by Pershing at any time.
6. Should it become necessary to sell any of the Shares or to satisfy the
margin deficiency, the undersigned agrees fully to cooperate with Pershing,
including the furnishing of information and completion of forms and instruments
necessary to effect the sale. In addition, Pershing shall be authorized to sign
a properly completed Form 144 in the name of and on behalf of the undersigned.
Capitalized terms that are used herein but not otherwise defined shall have the
meanings ascribed to such terms in terms that are used herein but not otherwise
defined shall have the meanings ascribed to such terms in the Control or
Restricted (Rule 144) Stock Borrower's Agreement between the undersigned and
Pershing of even date herewith.
7. It is agreed that in the event the undersigned fails to satisfy a
margin deficiency, Pershing is hereby authorized to liquidate at its discretion
sufficient shares of this security held in the undersigned's account to satisfy
the margin deficiency.
<PAGE>
8. The undersigned will not take any action which would impair the
salability of the Shares or omit to take any action necessary to avoid such
impairment. The undersigned further agrees to indemnify and hold harmless
Pershing and its officers and employees from any loss, liability, claim, damage
or expense, including any legal expense, to which Pershing and its officers and
employees may become the subject as a result of any untrue statement or omission
in any document furnished to Pershing by the undersigned or breach of this
agreement by the undersigned.
9. The failure by Pershing to object to any act or omission on the part
of the undersigned which is in contravention of any provision of this agreement,
shall not constitute a waiver of any of the rights of Pershing under this
agreement or otherwise.
10. The undersigned represents that he has sufficient collateral or cash
to meet any margin calls which might result from a margin deficiency or from the
subsequent unavailability of Rule 144 and that he will promptly advise Pershing
should he become aware of any circumstances indicating that Rule 144 is no
longer available with respect to the shares pledged.
11. Pershing agrees that the interest rate to be charged shall not exceed
3.00% above the Pershing Base Lending Rate, as described in the "Correspondent
Account Disclosure Statement".
12. This agreement shall remain in full force and effect until it is
either (i) terminated by Pershing, or (ii) terminated by the undersigned with
the consent of Pershing. However, all representations, warranties and
indemnities provided by the undersigned hereunder shall survive the termination
of this agreement.
/s/ Robert Barone
------------------------------
(Signature)
Robert Barone
------------------------------
(Name)
1-15-99
------------------------------
(Date)
------------------------------
(Account Number)
------------------------------
Joint Account
------------------------------
(Signature)
------------------------------
(Name)
------------------------------
(Date)
<PAGE>
RULE 144 & 145 CHECKLIST
1. Issuer Comstock Bancorp (LODE)
-----------------------------------------------------------------
2. Seller Robert Barone
-----------------------------------------------------------------
3. Account Number
---------------------------------------------------------
4. Account Executive Richard Barone (MAXUS)
------------------------------------------------------
5. Relationship of Seller to Issuer Chairman & CEO
---------------------------------------
6. Where traded? Nasdaq Small cap
----------------------------------------------------------
7. Number of shares to be sold
--------------------------------------------
8. Number of shares owned by seller 400,000
---------------------------------------
9. Number of shares sold past 3 months 0
------------------------------------
10. Number of shares outstanding 5.055 million
-------------------------------------------
11. Are certificates legended? No
---------------------------------------------
12. How acquired? Option Exercise
----------------------------------------------------------
(a) Date acquired 12/28/98
-----------------------------------------------------
(b) From whom
---------------------------------------------------------
(c) Date of payment 12/23/98
---------------------------------------------------
13. If Securities acquired as a gift, pledge or from a trust, how and when
did the previous owner acquire them?
-----------------------------------
14. Any short positions? No
---------------------------------------------------
15. Any family members selling or have sold within past 3 months? No
----------
16. Seller acting in concert? No
----------------------------------------------
17. Name of Issuer's counsel Francis X. Grady
-----------------------------------------------
18. Counsel's telephone number 440 356 7255
---------------------------------------------
19. Remarks
----------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
20. Is Issuer a reporting company? Yes
-----------------------------------------
21. Is it current in its reporting? Yes
----------------------------------------
22. Name of Transfer Agent Nevada Agency & Trust
-------------------------------------------------
23. Number of shares approved 15,000,000
----------------------------------------------
24. Date of approval May 26, 1997
-------------------------------------------------------
25. Approved by Shareholders of Bancorp
------------------------------------------------------------
<PAGE>
Donaldson, Lufkin & Jenrette Securities Corporation
One Pershing Plaza
Jersey City, NJ 07399
Att: Credit Department
Gentlemen:
The undersigned confirms that the ____________ shares of _______________
which are to be placed in my/our margin account are fully paid for and that I
am/we are the beneficial owner(s) of said shares.
The undersigned also represents and warrants the following:
1. the shares are eligible to be sold pursuant to Rule 144,
2. no shares have been sold by me/us nor any member of my/our immediate
family and/or others with whom the undersigned is acting in concert
within the past ninety days,
3. that said shares account for my/our total holdings unless as set forth
below:
a. I/we own and maintain physical possession of 128,000 additional
shares. These shares are not nor will be used as collateral in
another margin account or sold in any cash account without
authorization from DLJ until this agreement terminates.
b. I/we maintain an account with ____________________ and they are
holding _____________ shares of subject stock for me/us without
written authorization from DLJ.
4. I/we will promptly advise you of any change relative to the above
representations.
Very truly yours,
/s/ Robert Barone
------------------------------------------
Signature
Robert Barone
------------------------------------------
Name
------------------------------------------
Account Number
1-15-99
------------------------------------------
Date
<PAGE>
RULE 144 SELLER'S LETTER
Name & Address of Broker
- ---------------------------
- ---------------------------
- ---------------------------
Ladies and Gentlemen:
In connection with the sale by the undersigned of ___________ shares of _______
(the "Company") under Rule 144 of the Securities Act of 1933 as amended. The
undersigned hereby represents that:
1. The undersigned has not made, and will not make, any payment in
connection with the execution of the above order to any persons other
than _________________________.
Name of Broker
2. The undersigned has not solicited or arranged for the solicitation of
orders to buy in anticipation of or in connection with this transaction.
3. The undersigned has not sold any (or sold _______) shares of the Company
within the preceding ninety days, and the undersigned has no sale orders
open with any other broker, except as executed below:
Name of brokers: _______________________ Number of shares: ________________
4. The undersigned will notify you before placing any other orders to sell
shares of __________________ (the "Company") during the pendency of my Rule
144 transaction with you.
5. To the best of my knowledge, members of the undersigned's immediate family
and others with whom the undersigned is acting in concert have not sold (or
have sold _____________) shares of the Company stock within the preceding
ninety days.
6. In the event that any or all of the securities the undersigned is selling
are restricted securities as defined in Paragraph (a)(3) of Rule 144, the
undersigned warrants that the securities have been beneficially owned for a
period of at least one year as computed in accordance with Paragraph (d) of
Rule 144.
7. Enclosed is an executed copy of Form 144, three copies of which will be
transmitted to the Securities and Exchange Commission by you and (where
applicable) one copy of which will be sent to the principal exchange upon
which the securities are traded. (I understand that no form need be filed
if the amount of securities to be sold during any three month period does
not exceed 500 shares and the aggregate does not exceed $10,000 worth of
securities.)
I am familiar with Rule 144 and agree that you may rely upon the above
statements in executing the order referred to above. I also state that the
Company may rely upon all of the above representations.
Very truly yours,
Signature /s/ Robert Barone Dated 1-15-99
--------------------------------- ----------------------
Print Name Robert Barone
--------------------------------
Account Number
----------------------------
<PAGE>
EXHIBIT 3.5
PROMISSORY NOTE
Principal Amount; Washington, D.C.
$500,000.00 February 9, 1999
I. TERMS OF NOTE
FOR VALUE RECEIVED, THE BARONE FAMILY 1988 TRUST dated March 3, 1988,
Robert N. and Diane M. Barone, trustees, a Nevada trust ("Maker"), together with
its successors and assigns, promises to pay to the order of Hovde Acquisition,
L.L.C. or its successors and assigns (the "Lender" or "Holder"), at 1826
Jefferson Place, N.W., Washington, D.C. or at such other place as the Holder of
this Promissory Note (the "Note") may from time to time designate, the principal
amount of Five Hundred Thousand Dollars and No Cents ($500,000.00) together with
interest from the date of February 9, 1999 on the unpaid principal at the
interest rate of nine percent (9%) per annum.
PAYMENT: FORM AND SCHEDULE. Maker shall repay the full amount of the
entire unpaid principal balance hereof in full together with any interest due
and accruing through June 30, 1999, and upon such payment this Note shall be
satisfied.
II. EVENTS OF DEFAULT
EVENTS OF DEFAULT. The occurrence of any one or more of the following
shall constitute an event of default ("Event of Default") hereunder and Maker
covenants and agrees to give Holder prompt written notice of the occurrence of
any one or more of the following:
(i) Failure to pay, when due, the entire unpaid principal balance
hereof in full together with accrued interest as payable
hereunder, and continuance of such failure for ten (10) days after
the date on which such sum is due;
(ii) The commencement by Maker or any guarantor hereof (a "Guarantor")
of any case, proceeding, or other action seeking reorganization,
arrangement, adjustment, liquidation, or composition of Maker's or
Guarantor's debts under any law relating to bankruptcy,
insolvency, or reorganization, or relief of debtors, or seeking
appointment of a receiver, trustee, custodian, or other similar
official for it/his/her or for all or any substantial part of
its/his/her property; and
(iii) The commencement of any case, proceeding, or other action against
Maker or a Guarantor seeking to have any order for relief entered
against Maker or a Guarantor as debtor, or seeking reorganization,
arrangement, adjustment, liquidation, or composition of Maker or
Guarantor or its/his/her debts under any laws relating to
bankruptcy, insolvency, reorganization, or relief of debtors, or
seeking appointment of a receiver, trustee, custodian, or similar
official for Maker or a Guarantor or for all or any substantial
part of the property of Maker or a Guarantor, and (a) Maker or a
Guarantor shall, by any act or omission, indicate its/his/her
consent to, approval of, or acquiescence in such case, proceeding,
or action, or (b) such case, proceeding, or action results in the
entry of an order for relief which is not fully stayed within
seven (7) business days after the entry thereof, or (c) such case,
proceeding, or action remains undismissed for a period of fifteen
(15) days or more is dismissed or suspended only pursuant to
<PAGE>
Section 305 of the United States Bankruptcy Code or any
corresponding provision of any future United States bankruptcy law.
III. HOLDER'S RIGHTS
HOLDER'S RIGHTS IN EVENT OF DEFAULT. Upon the occurrence of any such Event
of Default hereunder, the entire principal amount hereof shall be accelerated,
and shall be immediately due and payable together with interest accrued and
accruing thereon, at the option of the Holder, without demand or notice, and in
addition thereto, and not in substitution therefor, Holder shall be entitled to
exercise any one or more of the rights and remedies provided by applicable law.
From and after the date of an Event of Default, interest on the entire principal
amount outstanding shall accrue and be payable through and including the date of
satisfaction in full hereof at the rate of twelve percent (12%) per annum.
Failure to exercise said option or to pursue such other remedies shall not
constitute a waiver of such option or such other remedies or of the right to
exercise any of the same in the event of any subsequent Event of Default
hereunder.
Each Obligor (which term shall include Maker and all makers, sureties,
guarantors, endorsers, and other persons assuming obligations pursuant to this
Note) under this Note hereby waives presentment, protest, demand, notice of
dishonor, and all other notices, and all defenses and pleas on the grounds of
any extension or extensions of the time of payments after maturity, with or
without notice. No renewal or extension of this Note, no release or surrender
of any collateral given as security for this Note, nor release of any obligor,
and no delay in enforcement of this Note or in exercising any right or power
hereunder, shall affect the liability of any Obligor. The pleading of any
statute of limitations as a defense to any demand against any Obligor is
expressly waived.
EXERCISE OF HOLDER'S RIGHTS. No single or partial exercise of Holder of
any right hereunder, or under any other agreement given as security for this
Note or pertaining hereto, shall preclude any other or further exercise thereof
or the exercise of any other rights. No delay or omission on the part of Holder
in exercising any right hereunder shall operate as a waiver of such right or of
any other right under this Note.
IV. MISCELLANEOUS
CONFESSION OF JUDGMENT. Maker and Holder acknowledge and agree that if,
for any reason other than default on part of Holder, for which it has received
written notice, Maker fails to render timely payment to Holder as specified
herein, that this Note may be presented to any court of competent jurisdiction
without contest, to secure a confessed judgment to be enforced by such court
against Maker in the face value amount stated above, less any amounts previously
paid to Holder.
INDEMNIFICATION. Maker hereby indemnifies Holder and holds Holder harmless
as to any and all claims arising out of the execution, existence, or performance
under this Note, including but not limited to claims arising from any
governmental taxing entity or subdivision, and any claimant against or creditor
of Maker.
SUCCESSORS AND ASSIGNS. Whenever used herein, the words "Maker," "Holder,"
"Guarantor" and "Obligor" shall be deemed to include their respective successors
and assigns.
JURISDICTION. This Note shall be governed by and construed under and in
accordance with the laws of the District of Columbia, and shall be enforceable
<PAGE>
in the courts of the District of Columbia.
SAVINGS. It is expressly agreed that if any portion of this Note shall be
deemed invalid or unenforceable, then the remaining portion of this Note shall
remain in full force and effect, notwithstanding.
IN WITNESS WHEREOF, the undersigned has duly executed this Note as of the
day and year first set forth above.
MAKER:
THE BARONE FAMILY 1988 TRUST dated
March 3, 1988, Robert N. and Diane M. Barone, trustees
By: /s/ Robert N. Barone, Trustee
-------------------------------------
Robert N. Barone, trustee
By: /s/ Diane M. Barone, Trustee
-------------------------------------
Diane M. Barone, trustee
State of Nevada )
City/County of Washoe )
I HEREBY CERTIFY, that on this 10th day of February, 1999, before me a Notary
Public of said State of Nevada, personally appeared Robert N. Barone and Diane
M. Barone, known to me (or satisfactorily proven) to be the persons whose names
are subscribed to the within instrument, and acknowledged that he/she executed
the same for the purposes therein contained as the duly authorized trustees of
The Barone Family 1988 Trust dated March 3, 1988, Robert N. and Diane M. Barone,
trustees signing the name of said trust by himself/herself as a trustee.
WITNESS my hand and Notarial Seal.
/s/ Heidi C. Warde
------------------------------------
Notary Public
My commission expires: 3-15-01
GUARANTEE AGREEMENT OF TRUSTEES AS INDIVIDUALS
In order to induce Lender to lend The Barone Family 1988 Trust dated March 3,
1988, Robert N. and Diane M. Barone, trustees ("Maker") the principal amount of
Five Hundred Thousand Dollars and No Cents as set forth in the hereinbefore
Promissory Note dated February , 1999 (the "Promissory Note"), the
undersigned, Robert N. Barone and Diane M. Barone, each individually, and not in
their capacity as a trustee, a Guarantor, jointly and severally hereby
unconditionally and irrevocably guarantee to the Holder of the Promissory Note
set forth hereinabove: (a) the due and punctual payment in full (and not merely
the collectibility) of the principal of the Promissory Note and the interest
thereon, in each case when due and payable, whether upon the stated maturity of
the Promissory Note or accelerated maturity, all according to the terms of the
Promissory Note; and (b) the due and punctual performance of all of the other
terms, covenants and conditions contained in the Promissory Note on the part of
the Maker to be performed. Each Guarantor unconditionally and irrevocably
waives: (a) presentment and demand for payment of the principal of or interest
on the Promissory Note and protest of non-payment; (b) notice of acceptance of
this guarantee agreement and of presentment, demand and protest; (c) notice of
any default under this guarantee agreement or the Promissory Note; and (d) all
other notices and demands otherwise required by law which any such Guarantor may
lawfully waive.
<PAGE>
Each Guarantor hereby consents and irrevocably submits to the jurisdiction of
the courts of the District of Columbia or any federal court sitting in such
jurisdiction over any suit, action, or proceeding arising out of or relating to
this guarantee agreement. Each of the Guarantors irrevocably waives, to the
extent permitted by law, any objection either may now or hereafter have to the
laying of the venue of any such suit, action, or proceeding brought in any such
court and any claim that any such suit, action, or proceeding brought in any
such court has been brought in an inconvenient forum.
This guarantee agreement shall inure to the benefit of, and be enforceable by,
Lender and its successors and assigns as holder of the Promissory Note, and
shall be binding upon, and enforceable against, each Guarantor and his/her
successors and assigns.
WITNESS the signature of each Guarantor as of the day and year first above
written.
WITNESS:
/s/ Robert N. Barone
-------------------------------
Robert N. Barone
/s/ Notary Public
- -------------------------
/s/ Diane M. Barone
-------------------------------
WITNESS: Diane M. Barone
State of Nevada )
City/County of Washoe )
I HEREBY CERTIFY, that on this 10th day of February, 1999, before me a Notary
Public of said State of Nevada, personally appeared Robert N. Barone and Diane
M. Barone, known to me (or satisfactorily proven) to be the persons whose names
are subscribed to the within instrument, and acknowledged that he/she executed
the same for the purposes therein contained.
WITNESS my hand and Notarial Seal.
/s/ Heidi C. Warde
------------------------------------
Notary Public
My commission expires: 3-15-01
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JANUARY 12, 1999
BY AND AMONG
FIRST SECURITY CORPORATION,
FIRST SECURITY BANK OF NEVADA,
COMSTOCK BANCORP
AND
COMSTOCK BANK
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.2 Directors and Officers of the Surviving Corporation . . . . . . . . . . . .4
1.3 Subsequent Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE II THE BANK MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.1 The Bank Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.2 Directors and Officers of the Surviving Bank. . . . . . . . . . . . . . . .6
2.3 Subsequent Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.4 Conversion of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE III CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . .7
3.1 Conversion of Common Stock of Merging Entities. . . . . . . . . . . . . . .7
(a) Conversion of Bancorp Common Stock . . . . . . . . . . . . . . . . .7
(b) Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . .7
(c) FSC Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.2 The Merging Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
(a) FSB Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . .9
(b) Bank Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . .9
3.3 Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.4 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Exchange of Shares and Certificates . . . . . . . . . . . . . . . . . . . 11
(a) Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Exchange Procedures; Transfer of Shares. . . . . . . . . . . . . . 11
(c) Distributions with Respect to Unexchanged Shares . . . . . . . . . 12
(d) No Further Ownership Rights in Bancorp Common
Stock; No Transfer Following the Closing Date. . . . . . . . . . . 13
(e) Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . 13
(f) Termination of Exchange Fund . . . . . . . . . . . . . . . . . . . 14
(g) No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(h) Investment of Exchange Fund. . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV COVENANTS OF BANCORP AND BANK. . . . . . . . . . . . . . . . . . . . . 15
4.1 Conduct of Business Pending the Closing . . . . . . . . . . . . . . . . . 15
(a) Change in Capital Stock; Issuance of Shares. . . . . . . . . . . . 16
(b) Options, Warrants, and Rights. . . . . . . . . . . . . . . . . . . 16
(c) Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(d) Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . 16
(e) Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
i
<PAGE>
(f) Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . 17
(g) Acquisitions and Mergers . . . . . . . . . . . . . . . . . . . . . 17
(h) Liens; Indebtedness; Increase in Compensation, etc.. . . . . . . . 17
(i) Amendments to Charter, etc.. . . . . . . . . . . . . . . . . . . . 18
4.2 Investigation; Access . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3 Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.4 Termination of Employee Benefit Plans . . . . . . . . . . . . . . . . . . 20
4.5 Information for Proxy Statement . . . . . . . . . . . . . . . . . . . . . 20
4.6 Environmental Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 Notification of Actions . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BANCORP AND BANK . . . . . . . . . . 21
5.1 Organization, Conduct of Business, etc. . . . . . . . . . . . . . . . . . 22
5.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3 Options, SARs, Warrants, etc. . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Authorization; Validity of Agreement. . . . . . . . . . . . . . . . . . . 23
5.5 Bancorp and Bank Reports. . . . . . . . . . . . . . . . . . . . . . . . . 23
5.6 Bancorp and Bank Financial Statements; No Undisclosed Liabilities . . . . 24
5.7 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.8 Loan Loss Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.9 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.10 Absence of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.11 Absence of Material Adverse Changes. . . . . . . . . . . . . . . . . . . 28
5.12 Actions, Proceedings and Investigations. . . . . . . . . . . . . . . . . 29
5.13 Absence of Brokerage Commissions, etc. . . . . . . . . . . . . . . . . . 29
5.14 Material Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.15 Compliance With Laws; Documentation. . . . . . . . . . . . . . . . . . . 30
5.16 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.17 Repurchase Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.18 Taxes and Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.19 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.20 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.21 Section 280G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.22 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VI COVENANTS, REPRESENTATIONS AND WARRANTIES OF FSC AND FSB . . . . . . . 38
6.1 Organization, Conduct of Business, etc. . . . . . . . . . . . . . . . . . 38
6.2 Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . 39
6.3 FSC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.4 FSC Financial Statements; Tax Returns . . . . . . . . . . . . . . . . . . 39
6.5 Absence of Material Adverse Changes . . . . . . . . . . . . . . . . . . . 40
6.6 Absence of Defaults Under Agreements. . . . . . . . . . . . . . . . . . . 40
6.7 Actions, Proceedings, and Investigations. . . . . . . . . . . . . . . . . 41
ii
<PAGE>
6.8 Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.9 FSC Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.10 Registration of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.11 Notification of Actions. . . . . . . . . . . . . . . . . . . . . . . . . 42
6.12 NASDAQ/NMS Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.13 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.14 Ongoing Credit Review. . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.15 Limitations on FSC's Conduct Prior to the Effective Time . . . . . . . . 44
6.16 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.17 FSB Board Position . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.18 Federal Home Loan Bank Membership. . . . . . . . . . . . . . . . . . . . 45
ARTICLE VII PROXY STATEMENT; SHAREHOLDER MEETINGS. . . . . . . . . . . . . . . . 45
7.1 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.2 Bancorp Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.3 Bank and FSB Action By Unanimous Written Consent. . . . . . . . . . . . . 47
ARTICLE VIII CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . 47
8.1 Conditions of Closing For All Parties . . . . . . . . . . . . . . . . . . 47
(a) Regulatory Approval. . . . . . . . . . . . . . . . . . . . . . . . 47
(b) Registration Statement, etc. . . . . . . . . . . . . . . . . . . . 48
(c) No Injunction, etc.. . . . . . . . . . . . . . . . . . . . . . . . 48
(d) Tax Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(e) Section 280G . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.2 Conditions of Closing For FSC and FSB . . . . . . . . . . . . . . . . . . 49
(a) Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . 49
(b) Bancorp and Bank Resolutions; Corporate Documents. . . . . . . . . 49
(c) Bancorp and Bank Representations and Warranties. . . . . . . . . . 49
(d) Comfort Letters. . . . . . . . . . . . . . . . . . . . . . . . . . 50
(e) Opinion of Bancorp and Bank Counsel. . . . . . . . . . . . . . . . 50
(f) Affiliate's Letter . . . . . . . . . . . . . . . . . . . . . . . . 50
(g) Condition of Bank. . . . . . . . . . . . . . . . . . . . . . . . . 50
(h) Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . 53
(i) Condition of Properties. . . . . . . . . . . . . . . . . . . . . . 53
(j) Options and Warrants . . . . . . . . . . . . . . . . . . . . . . . 53
(k) Cafeteria Plan Issues. . . . . . . . . . . . . . . . . . . . . . . 53
8.3 Conditions of Closing For Bancorp and Bank. . . . . . . . . . . . . . . . 54
(a) FSC and FSB Representations and Warranties . . . . . . . . . . . . 54
(b) Opinion of FSC Counsel . . . . . . . . . . . . . . . . . . . . . . 54
(c) FSC Resolutions; Corporate Documents. . . . . . . . . . . . . . . 54
(d) Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . 55
(e) Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 55
iii
<PAGE>
ARTICLE IX CLOSING OF MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.2 Filing of Certificate of Merger and Articles of Merger. . . . . . . . . . 55
ARTICLE X TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE XI ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.1 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.2 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.3 Instruments of Transfer, etc.. . . . . . . . . . . . . . . . . . . . . . 60
11.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.9 Exclusive Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . 63
11.10 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.11 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.12 Nonsurvival of Representations, Warranties and Agreements . . . . . . . 65
11.13 Alternative Structure . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.14 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.15 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.16 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.17 Definition of Material Adverse Effect . . . . . . . . . . . . . . . . . 66
</TABLE>
EXHIBITS
Exhibit A - Certificate of Merger (Delaware)
Exhibit B - Articles of Merger (Nevada)
<TABLE>
SCHEDULES
<S> <C>
Schedule 2.2 Directors of FSB
Schedule 4.1(d) -- Purchase of Shares
Schedule 4.2 -- Investigation, Access
Schedule 5.1 -- Organization, Conduct of Business
Schedule 5.2 -- Capitalization
Schedule 5.3 -- Options
Schedule 5.5 -- Bank Reports
Schedule 5.6 -- Financial Statements
Schedule 5.7 -- Environmental Matters
iv
<PAGE>
Schedule 5.9 -- Title to Properties
Schedule 5.10 -- Absence of Defaults
Schedule 5.11 -- Material Adverse Changes
Schedule 5.12 -- Litigation, Etc.
Schedule 5.14 -- Material Contracts
Schedule 5.15 -- Compliance with Law
Schedule 5.16 -- Employee Benefit Plans
Schedule 5.18 -- Taxes
Schedule 5.19 -- Consents
Schedule 5.20 -- Insurance
Schedule 8.1(d) -- Form of Tax Opinion
Schedule 8.2(d) -- Comfort Letters
Schedule 8.2(e) -- Opinion of Bank and Bancorp
Schedule 8.2(f) -- Affiliate's Letter
Schedule 8.2(h-1) -- Barone Employment Agreement
Schedule 8.2(h-2) -- Platz Employment Agreement
Schedule 8.3(b) -- Opinion of FSC and FSB
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization, dated as of the 12th day of
January, 1999 (this "AGREEMENT"), is made and entered into by and among FIRST
SECURITY CORPORATION, a Delaware corporation ("FSC"), FIRST SECURITY BANK OF
NEVADA, a bank organized under the laws of Nevada ("FSB"), COMSTOCK BANCORP, a
Nevada corporation ("Bancorp"), and COMSTOCK BANK, a bank organized under the
laws of Nevada ("BANK").
R E C I T A L S:
A. FSC is a corporation duly organized and existing under the laws of
the State of Delaware, with its principal place of business located in Salt
Lake City, Utah. FSC is authorized by its Articles of Incorporation, as
amended, to issue (i) 400,000 shares of preferred stock, each of no par value
("FSC PREFERRED STOCK"), 18,052 of which are designated as Class A Preferred
Stock, of which 9,361 were issued and outstanding on November 30, 1998, and
(ii) 600,000,000 shares of common stock, each of $1.25 par value ("FSC COMMON
STOCK"), of which as of November 30, 1998, there were 188,440,989 (net of
Treasury) shares issued and outstanding ("BASIC SHARES").
B. FSB is a bank duly organized under the laws of the State of
Nevada, with its principal place of business located in Las Vegas, Nevada.
FSB is authorized by its Articles of Incorporation to issue 5,000,000 shares
of common stock, each of $1.00 par value ("FSB COMMON STOCK"), of which as of
the date of this Agreement there were 4,329,161 shares issued and
outstanding. FSC owns beneficially and of record all of the issued and
outstanding shares of FSB Common Stock.
C. Bancorp is a corporation duly organized and existing under the
laws of the State of Nevada, with its principal place of business located in
Reno,
-1-
<PAGE>
Nevada. Bancorp is authorized by its Articles of Incorporation to issue
15,000,000 shares of common stock, $.01 par value ("BANCORP COMMON STOCK"),
of which, as of November 30, 1998, there were (i) 4,481,368 shares issued and
outstanding, (ii) options outstanding for 651,732 shares as of such date (the
"OPTIONS") and (iii) warrants outstanding for 52,800 shares (the "WARRANTS").
D. Bank is a bank incorporated under the laws of the State of Nevada,
having its principal place of business located in Reno, Nevada. Bank is
authorized by its Articles of Incorporation to issue 6,000,000 shares of
common stock, each of $.50 par value ("BANK COMMON STOCK"), of which as of
the date of this Agreement there were 2,210,834 shares issued and
outstanding. Bancorp owns beneficially and of record all of the issued and
outstanding shares of Bank Common Stock.
E. The parties hereto desire that Bancorp be merged with and into FSC
(the "MERGER") pursuant to this Agreement and that certain Certificate of
Merger in the form attached hereto as EXHIBIT A (the "CERTIFICATE OF MERGER")
and that immediately after the Merger, Bank be merged with and into FSB (the
"BANK MERGER") pursuant to this Agreement and those certain Articles of
Merger attached hereto as EXHIBIT B (the "BANK ARTICLES OF MERGER").
A G R E E M E N T:
NOW, THEREFORE, in consideration of foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, covenant and agree as follows:
-2-
<PAGE>
ARTICLE I
THE MERGER
1.1 THE MERGER.
(a) Pursuant to the laws of the States of Delaware and Nevada,
and subject to the terms and conditions of this Agreement, at the effective time
of the Certificate of Merger (the "EFFECTIVE TIME"), FSC and Bancorp (sometimes
referred to herein as the "MERGING ENTITIES") shall consummate the Merger
pursuant to which (a) Bancorp shall be merged with and into FSC, and the
separate corporate existence of Bancorp shall thereupon cease; (b) FSC shall be
the successor or surviving corporation in the Merger and shall continue to be
governed by the laws of the State of Delaware (the "SURVIVING CORPORATION"); and
(c) the separate corporate existence of FSC with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger,
except as set forth in this Article I. FSC, as the Surviving Corporation, shall
thereupon and thereafter possess all the rights, privileges, powers and
franchises, of a public as well as a private nature, and shall be subject to all
restrictions, disabilities and duties of the Merging Entities; and all property,
real, personal and mixed and all debts due to the Merging Entities on whatever
account, including subscriptions for shares and all other things in action or
belonging to the Merging Entities shall be taken and deemed to be vested in FSC
without further act or deed. FSC shall thenceforth be responsible for all the
debts, liabilities and duties of each of the Merging Entities and may be
prosecuted to judgment as if the Merger had not taken place, or FSC may be
substituted in place of the Merging Entities and neither the rights of creditors
nor any liens upon any property of either shall be impaired by the Merger.
(b) As of the Effective Time, the certificate of incorporation
of FSC as in effect immediately prior to the Merger shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended as provided
-3-
<PAGE>
by law and such certificate of incorporation. As of the Effective Time, the
bylaws of FSC as in effect immediately prior to the Effective Time shall be the
bylaws of the Surviving Corporation until thereafter amended as provided by law
and such bylaws of the Surviving Corporation.
1.2 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors and officers of the Surviving Corporation at the Effective Time shall
be the directors and officers of FSC as of immediately prior to the Effective
Time, and shall serve in their respective positions until their successors shall
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the certificate of incorporation and
the bylaws of the Surviving Corporation.
1.3 SUBSEQUENT ACTIONS. If, at any time after the Merger, FSC shall
consider or be advised that any deeds, bills of sale, assignments, assurances,
or any other actions or things are necessary or desirable to vest, perfect, or
confirm of record or otherwise in FSC its right, title, or interest in, to, or
under any of the rights, properties, or assets of Bancorp acquired or to be
acquired by FSC as a result of or in connection with the Merger, or otherwise to
carry out this Agreement, the officers and directors of FSC shall be authorized
to execute and deliver, in the name and on behalf of Bancorp or otherwise, all
such deeds, bills of sale, assignments, and assurances, and to make and do, in
the name and on behalf of Bancorp or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect, or confirm any right,
title, and interest in, to, and under such rights, properties, or assets in FSC
or otherwise to carry out this Agreement.
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ARTICLE II
THE BANK MERGER
2.1 THE BANK MERGER.
(a) Immediately after but essentially concurrently with the
Merger, and pursuant to the laws of the State of Nevada, and subject to the
terms and conditions of this Agreement, at the time that the Bank Articles of
Merger become effective, FSB and Bank (sometimes collectively referred to herein
as the "MERGING BANKS") shall consummate the Bank Merger pursuant to which (a)
the Bank shall be merged with and into FSB, immediately after but essentially
concurrently with the Merger, and the separate corporate existence of Bank shall
thereupon cease; (b) FSB shall be the successor or surviving bank in the Merger
and shall continue to be governed by the laws of the State of Nevada (sometimes
referred to herein as the "SURVIVING BANK"); and (c) the separate corporate
existence of FSB with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Bank Merger, except as set forth in
this Article II. FSB, as the Surviving Bank, shall thereupon and thereafter
possess all the rights, privileges, powers and franchises, of a public as well
as a private nature, and shall be subject to all restrictions, disabilities and
duties of the Merging Banks, and all property, real, personal and mixed and all
debts due to the Merging Banks on whatever account, including subscriptions for
shares and all other things in action or belonging to the Merging Banks shall be
taken and deemed to be vested in FSB without further act or deed. FSB shall
thenceforth be responsible for all the debts, liabilities and duties of each of
the Merging Banks and may be prosecuted to judgment as if the Bank Merger had
not taken place, or FSB may be substituted in place of the Merging Banks and
neither the rights of creditors nor any liens upon any property of either shall
be impaired by the Bank Merger.
(b) As of the effective time of the Bank Merger, the articles
of incorporation of FSB as in effect immediately prior to the Bank Merger shall
be
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the articles of incorporation of the Surviving Bank without amendment until
thereafter amended as provided by law and such articles of incorporation. As of
the effective time of the Bank Merger, the bylaws of FSB as in effect
immediately prior to the Bank Merger shall be the bylaws of the Surviving Bank
without amendment until thereafter amended as provided by law and such bylaws.
2.2 DIRECTORS AND OFFICERS OF THE SURVIVING BANK. The directors of
the Surviving Bank shall be as set forth on Schedule 2.2 attached hereto and
such individuals shall serve for a twelve month period from and after the
Closing Date or until their successors are duly elected and qualified or until
their earlier death, resignation or removal in accordance with the articles of
incorporation and the bylaws of the Surviving Bank. The officers of the
Surviving Bank at the effective time of the Bank Merger shall be the officers of
FSB as of immediately prior to the Bank Merger and shall serve in their
respective positions until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the articles of incorporation and the bylaws of the Surviving
Bank.
2.3 SUBSEQUENT ACTIONS. If, at any time after the Bank Merger, FSB
shall consider or be advised that any deeds, bills of sale, assignments,
assurances, or any other actions or things are necessary or desirable to vest,
perfect, or confirm of record or otherwise in FSB its right, title, or interest
in, to, or under any of the rights, properties, or assets of Bank acquired or to
be acquired by FSB as a result of or in connection with the Bank Merger, or
otherwise to carry out this Agreement, the officers and directors of FSB shall
be authorized to execute and deliver, in the name and on behalf of Bank or
otherwise, all such deeds, bills of sale, assignments, and assurances, and to
make and do, in the name and on behalf of Bank or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect, or confirm
any right, title, and interest in, to, and under such rights, properties, or
assets in FSB or otherwise to carry out this Agreement.
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2.4 CONVERSION OF SHARES. The manner and basis of converting the
shares of the Merging Banks shall be as set forth in Article III, below.
ARTICLE III
CONVERSION OF SECURITIES
3.1 CONVERSION OF COMMON STOCK OF MERGING ENTITIES.
(a) CONVERSION OF BANCORP COMMON STOCK. In accordance with
this Agreement, as of the Effective Time, by virtue of the Merger and without
any further action on the part of the holders of any shares of Bancorp Common
Stock, each issued and outstanding share of Bancorp Common Stock (of which there
shall be no more than 5,185,900 shares fully diluted and assuming all Options
and Warrants shall have been exercised or terminated) other than shares as to
which dissenters' rights are perfected ("DISSENTING SHARES"), and all rights in
respect thereof, shall be converted, IPSO FACTO, into the right to receive the
Merger Consideration.
As of the Effective Time, all such shares of Bancorp Common Stock,
including all Option and Warrant shares, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist. Each
holder of a certificate representing any shares of Bancorp Common Stock shall
cease to have any rights with respect thereto, except the right to receive, upon
the surrender of any such certificates, the Merger Consideration upon the terms
and subject to the conditions set forth herein.
(b) CERTAIN DEFINITIONS
"AVERAGE FSC SHARE PRICE" shall mean the average of the last sales
prices per share of FSC Common Stock on the Nasdaq National Market
for the ten (10) consecutive trading days preceding the
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Closing Date (such period referred to herein as the "CLOSING
CALCULATION PERIOD"); subject to the following:
(i) if the Average FSC Share Price is greater
than or equal to $24.05, the Average FSC Share Price shall
be $24.05; and
(ii) if the Average FSC Share Price is less than
or equal to $18.70, the Average FSC Share Price shall be
$18.70.
"BANCORP SHARE PRICE" shall mean, subject to adjustment pursuant
to Section 8.2(g) below, $65,000,000 divided by (i) the total
number of issued and outstanding shares of Bancorp Common Stock,
plus (ii) the total number of shares of Bancorp Common Stock
subject to all Vested Options, plus (iii) the total number of
shares of Bancorp Common Stock subject to all Warrants.
"EXCHANGE RATIO" shall mean (in each case, rounded to four digits
to the right of the decimal point) that number of shares of FSC
Common Stock (rounded to the nearest one thousandth) determined as
follows:
Bancorp Share Price
-------------------
Average FSC Share Price
"MERGER CONSIDERATION" for each share of Bancorp Common Stock
being converted into shares of FSC Common Stock shall mean that
number of duly authorized, validly issued, fully paid and
nonassessable shares of FSC Common Stock equal to the Exchange
Ratio; PROVIDED, HOWEVER, if, prior to the Effective Time, FSC
should split, reclassify or combine the FSC Common Stock,
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or pay a stock dividend or other stock distribution in FSC
Common Stock, as of a record date prior to the Effective
Time, appropriate adjustment or adjustments (rounded to
four digits to the right of the decimal point) will be
made to the Exchange Ratio and the total number of shares
of FSC Common Stock to be issued in the transaction so as
to maintain the proportional interest in FSC Common
Stock which the shareholders of Bancorp would otherwise
have received.
(c) FSC STOCK. All shares of FSC Common Stock which are
outstanding immediately prior to the Merger shall continue to be outstanding
after the Merger.
3.2 THE MERGING BANKS.
(a) FSB COMMON STOCK. All shares of FSB Common Stock which are
outstanding immediately prior to the Bank Merger shall continue to be
outstanding immediately after the Bank Merger
(b) BANK COMMON STOCK. As of the Effective Time, each issued
and outstanding share of Bank Common Stock and all rights in respect thereof
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and no FSB Common Stock or FSC Common Stock shall be
delivered in exchange therefore.
3.3 OPTIONS. Immediately prior to the Effective Time, each then
outstanding Option issued under each stock option plan, program, agreement or
arrangement of Bancorp (each a "BANCORP STOCK PLAN") that has previously vested
prior to the Merger (a "VESTED OPTION") shall be exercised pursuant to a
cashless exercise procedure whereby each holder of a Vested Option shall be
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entitled to receive on a net basis that number of shares of Bancorp Common Stock
equal to X in the following formula:
X = A(B - C)
-------
B
Where A equals the number of shares of Bancorp Common Stock subject to such
Vested Option, B equals the Bancorp Share Price and C equals the strike price of
such Vested Option. The aggregate number of shares so issuable with respect to
all Vested Options shall be referred to herein as the "BANCORP OPTION SHARES."
At the Effective Time, each Bancorp Option Share shall be converted into shares
of FSC Common Stock pursuant to Sections 3.1 and 3.5 for the account of the
holder of such Vested Option.
3.4 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, Dissenting Shares shall not be converted into or represent a right to
receive the Merger Consideration pursuant to Section 3.1 hereof, but the holder
thereof shall be entitled to only such rights as are granted by the NGCL.
(b) Notwithstanding the provisions of Section 3.4. (a) above,
if any holder of shares of Bancorp Common Stock who demands appraisal of such
holder's shares of Bancorp Common Stock under the NGCL effectively withdraws or
loses (through failure to perfect or otherwise) his or her right to appraisal,
then as of the Effective Time or the occurrence of such event, whichever later
occurs, such holder's shares of Bancorp Common Stock shall automatically be
converted into and represent only the right to receive the Merger Consideration
as provided in Section 3.1. hereof, without interest, upon surrender of the
certificate or certificates representing such shares of Bancorp Common Stock
pursuant to Section 3.5 hereof.
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(c) Bancorp shall give FSC (i) prompt notice of any written
demands for appraisal or payment of the fair value of any shares of Bancorp
Common Stock, withdrawals of such demands, and any other instruments served
on the Bancorp pursuant to the NGCL. Except with the prior written consent
to FSC, Bancorp shall not voluntarily make any payment with respect to any
demands for appraisal, settle or offer to settle any such demands.
3.5 EXCHANGE OF SHARES AND CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, FSC shall
deposit with First Chicago Trust Company of New York or such other bank or
trust company as may be designated by FSC (the "EXCHANGE AGENT"), for the
benefit of the holders of shares of Bancorp Common Stock, for exchange in
accordance with this Article III, through the Exchange Agent, (i) cash in an
amount sufficient to pay cash in lieu of fractional shares, and (ii)
certificates representing the shares of FSC Common Stock issuable pursuant to
Section 3.1. hereof in exchange for outstanding shares of Bancorp Common
Stock (the "EXCHANGE FUND").
(b) EXCHANGE PROCEDURES; TRANSFER OF SHARES. As soon as
reasonably practicable after the Effective Time, the Exchange Agent shall
mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Bancorp Common Stock (the "CERTIFICATES") whose shares were converted into
the right to receive shares of FSC Common Stock pursuant to Section 3.1.
hereof (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as FSC may reasonably specify and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of FSC Common
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Stock, and cash in lieu of fractional shares of FSC Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by FSC, together with documents as
may reasonably be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor (i) a
certificate representing that whole number of shares which such holder has
the right to receive pursuant to the provisions of this Article III and (ii)
cash in lieu of any fractional number of shares as contemplated by this
Section 3.5, and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Bancorp Common Stock which is not
registered in the transfer records of Bancorp, a certificate representing the
proper number of shares of FSC Common Stock may be issued to a person other
than the person in whose name the Certificate so surrendered is registered,
if such Certificate shall be properly endorsed or otherwise be in proper form
for transfer and the person requesting such payment shall pay any transfer or
the taxes required by reason of the issuance of shares of FSC Common Stock to
a person other than the registered holder of such Certificate or establish to
the satisfaction of FSC that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 3.5, each Certificate shall
be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration and cash in lieu of any
fractional shares of FSC Common Stock as contemplated by this Section 3.5.
No interest shall be paid or accrue on any cash payable in lieu of any
fractional shares of FSC Common Stock.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to FSC Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of FSC Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall
be paid to any such holder
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pursuant to Section 3.5(e) hereof, until the surrender of such Certificate in
accordance with this Article III. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be applied to the
holder of the certificate representing whole shares of FSC Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
FSC Common Stock to which such holder is entitled pursuant to Section 3.5(e)
and the amount of dividends or other distributions with a record date after
the Effective Time theretofore paid with respect to such whole shares of FSC
Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time
but prior to such surrender and a payment date subsequent to such surrender
payable with respect to such whole shares of FSC Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN BANCORP COMMON STOCK; NO
TRANSFER FOLLOWING THE CLOSING DATE. All shares of FSC Common Stock issued
upon the surrender for exchange of Certificates in accordance with the terms
of this Article III (including any cash paid pursuant to Section 3.5(e)
hereof) shall be deemed to have been issued (and paid) in full satisfaction
of all rights pertaining to the shares of Bancorp Common Stock theretofore
represented by such Certificates, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
shares of Bancorp Common Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented
to the Surviving Corporation or the Exchange Agent for any reason, they shall
be canceled and exchanged as provided in this Article III, except as
otherwise provided by law.
(e) FRACTIONAL SHARES.
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(i) No certificates representing fractional shares of FSC
Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests shall not entitle the
owner thereof to vote or to any other rights of a stockholder of FSC.
(ii) Notwithstanding any other provision of this
Agreement, each holder of shares of Bancorp Common Stock converted
pursuant to the Merger who would otherwise have been entitled to receive
a fraction of a share of FSC Common Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof,
cash (without interest) in an amount equal to (A) such fraction
multiplied by (B) the Average FSC Share Price.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund which remains undistributed to the holders of the Certificates
for six months after the Effective Time shall be delivered to FSC, upon
demand, and any holders of the Certificates who have not theretofore complied
with this Article III shall thereafter look only to FSC for payment of their
Bancorp Common Stock, any cash in lieu of fractional shares of FSC Common
Stock and any dividends or distributions with respect to FSC Common Stock.
(g) NO LIABILITY. None of FSC, FSB, Bancorp, Bank or the
Exchange Agent shall be liable to any person in respect of any shares of FSC
Common Stock (or dividends or distributions with respect thereto) or cash
from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificates
shall not have been surrendered prior to seven years after the Effective
Time, or immediately prior to such earlier date on which any shares of FSC
Common Stock, any cash in lieu of fractional shares of FSC Common Stock, or
any dividends or distributions with respect to FSC Common Stock in respect of
such Certificate would
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otherwise escheat to or become the property of any Governmental Entity, any
such shares, cash, dividends or distributions in respect of such Certificate
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation free and clear of all claims or interest of any person
previously entitled thereto.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by FSC, on a daily
basis. Any interest and other income resulting from such investments shall
be paid to FSC.
ARTICLE IV
COVENANTS OF BANCORP AND BANK
4.1 CONDUCT OF BUSINESS PENDING THE CLOSING. Except as otherwise
contemplated hereby, between the date hereof and the Effective Time, or the
time when this Agreement terminates as provided herein, each of Bancorp and
Bank shall conduct its respective operations and business in the usual and
ordinary course of business and consistent with past practice and use their
commercially reasonable efforts to retain for the benefit of FSC and FSB the
continuing services of the present officers and employees of Bank and
Bancorp, to preserve the goodwill of customers and others having business
relations with Bank and Bancorp, to preserve the deposit levels of Bank, to
preserve the benefits of all contractual relationships with others and to
keep in force at least at their present limits all policies of insurance
currently in effect. Without limiting the generality of the foregoing, and
except as otherwise specifically permitted by this Agreement, during the
period from the date hereof to the Effective Time, neither Bank nor Bancorp
shall, without the prior written authorization of the Chairman, President or
Chief Financial Officer of FSC:
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(a) CHANGE IN CAPITAL STOCK; ISSUANCE OF SHARES. Make any
change in their authorized capital stock, or issue, agree to issue or permit
Bank or Bancorp to become obligated to issue any shares of their capital
stock, or securities convertible into their capital stock, except that
Bancorp may issue shares of Bancorp Common Stock upon the exercise of
outstanding Options or Warrants described in Schedule 5.3;
(b) OPTIONS, WARRANTS, AND RIGHTS. Grant or issue any
options, warrants or other rights, including stock appreciation rights, of
any kind relating to the purchase of shares of their capital stock, or
securities convertible into their capital stock (except for the Options and
Warrants outstanding as of the date hereof described in Schedule 5.3, Bancorp
and Bank hereby represent and warrant that no options, warrants, stock
appreciation rights or other rights to purchase shares of their capital stock
are outstanding on the date hereof);
(c) DIVIDENDS. Declare or pay any dividends or other
distributions on any shares of their capital stock; PROVIDED, however, that
Bank may declare dividends to Bancorp in accordance with normal practices and
to cover expenses associated with the transactions hereunder in an amount not
to exceed $3,530,278 (see lines 11 and 20 on Schedule 8.2(g) attached hereto);
(d) PURCHASE OF SHARES. Purchase or otherwise acquire, or
agree to acquire, any shares of their stock, other than in a fiduciary
capacity;
(e) BENEFIT PLANS. Except as required by law, or, with the
consent of FSC, to terminate the employee benefit plans identified in Section
5.16 incident to the integration of Bank's employees into the employee
benefit plans offered by FSC or FSB, enter into or amend any pension,
retirement, stock option, stock appreciation, profit sharing, deferred
compensation, consultant, bonus, group insurance or similar benefit plan
(other than the cafeteria plan identified in Schedule 5.16) in respect of any
of their directors, officers or other employees;
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(f) CONDUCT OF BUSINESS. Except as contemplated by this
Agreement, take or omit to take any action which (i) causes Bancorp or Bank
not to conduct their respective businesses in a manner consistent with normal
business practices, including with respect to the securities or asset
portfolios of Bank, (ii) has a Material Adverse Effect on the financial
condition (present or prospective), businesses, properties, assets or
operations of Bancorp and Bank (the parties hereto recognize that the
operation of Bancorp and Bank until the Effective Time is the responsibility
of Bancorp and Bank and their respective Boards of Directors and officers;
nevertheless, Bancorp and Bank shall keep FSC advised of all important
changes in the financial condition (present or prospective), business,
properties, assets or operations of Bancorp and Bank);
(g) ACQUISITIONS AND MERGERS. Acquire or merge with any
other company or acquire any branch or other significant part of the assets
of any other company;
(h) LIENS; INDEBTEDNESS; INCREASE IN COMPENSATION, ETC.
Except in the ordinary course of business, (i) mortgage, pledge or subject to
a lien or any other encumbrance any of their respective assets, dispose of
any of their respective assets, incur or cancel any indebtedness or claims,
purchase or lease any assets having a purchase price or lease cost, in the
aggregate, of more than $20,000.00, other than the pending property purchase
and the parking lot renovation at 6275 Neil Road, Reno, Nevada identified in
Schedule 5.14 or (ii) except for the two Agreements for Change-in-Control
Severance Benefits set forth in Schedule 5.16 hereto, increase any
compensation or benefits payable to their respective officers or employees,
except to pay routine merit increases in accordance with past practices and
costs associated with the transactions contemplated under this Agreement (the
parties hereto recognize that Bank has in the ordinary course of business
routinely pledged up to $45,000,000 of mortgage loan assets and U.S.
government and agency securities as collateral for
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borrowings from the Federal Home Loan Bank of San Francisco and that Bank may
continue to pledge residential mortgage loans and U.S. government and agency
securities to the Federal Home Loan Bank of San Francisco to secure
borrowings in an aggregate amount up to $35,000,000 through the Closing
Date). Notwithstanding the restrictions contained in this section, Bancorp or
Bank may grant individual annual increases to officers and employees for 1999
in accordance with past practices up to a maximum aggregate total of 6% of
the total annual compensation of all officers and employees, which amount
shall not in any event exceed $378,902, and continue during 1999 incentive
compensation arrangements in accordance with past practices.
(i) AMENDMENTS TO CHARTER, ETC. Amend their respective
Articles of Incorporation or make any material amendments to their respective
Bylaws which would interfere in any manner with the transactions contemplated
by this Agreement.
4.2 INVESTIGATION; ACCESS. Each of Bancorp and Bank shall
diligently endeavor to (i) take or cause to be taken all action required
under this Agreement on its part to be taken as promptly as practicable so as
to permit the consummation of the transactions contemplated by this Agreement
at the earliest possible date and cooperate fully with FSC and FSB to that
end, including, without limitation, providing to FSC and FSB, and their
respective employees, accountants and counsel, access to Bancorp's and Bank's
books, records, reports, tax returns and facilities and to its employees,
accountants, and counsel; PROVIDED, however, that such investigation to be
conducted by FSC and FSB shall be performed in such a manner which will not
unreasonably interfere with the normal operations, or customer or employee
relations, of Bancorp and Bank and shall be in accordance with procedures
established by the parties having due regard for the foregoing, and (ii)
furnish all necessary information for inclusion in any
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applications relating to the consents, approvals and permissions of
regulatory authorities referred to in Article VIII.
Bancorp and Bank have delivered to FSC, as Schedule 4.2, (i) a list
setting forth all of the classified, criticized and non-performing assets of
Bank ("CLASSIFIED ASSETS") as identified by Bank or by the most recent
examination by Bank's federal or state bank examiner, along with an
explanation of management's response for dealing with such assets, (ii) a
list of all loans which are more than thirty (30) days past due ("PAST DUE
LOANS"), and (iii) Bank management's analysis of expected losses to be
incurred with respect to the loans (assets) identified in items (i) and (ii).
From execution of the Agreement until Closing, Bancorp and Bank shall
deliver to FSC (i) monthly reports which summarize the loan and lease and the
deposit activity of Bank for the previous month, and (ii) a report detailing
any changes to the Classified Assets or Past Due Loans.
FSC covenants and agrees that FSC and its representatives, counsel,
accountants, agents and employees will hold in strict confidence all
documents and information concerning Bancorp and Bank received from any of
them (except to the extent that such documents or information are a matter of
public record or require disclosure in the Proxy Statement/Prospectus, the
Registration Statement on Form S-4 to be filed by FSC pursuant to Section
6.10, or any of the public information of any applications required to be
filed with any governmental or regulatory agency to obtain the approvals and
consents required to effect the transactions contemplated hereby), and if the
transactions contemplated herein are not consummated, such confidence shall
be maintained and all such documents shall be returned to Bancorp.
4.3 REGULATORY APPROVALS. Bancorp and Bank shall (i) use their
best efforts in good faith to assist FSC in obtaining all necessary
regulatory approvals
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and taking or causing to be taken all other action required under this
Agreement on its or their part to be taken as promptly as practicable so as
to permit the consummation of the transactions contemplated by this Agreement
at the earliest possible date, and cooperate fully with FSC and FSB to that
end, and (ii) furnish all necessary information for inclusion in any
applications relating to the consents, approvals, and permissions of
regulatory authorities referred to in Article VIII. Bancorp and Bank shall
have the right to review all applications to such regulatory authorities
before the filing thereof and to comment upon the form of such applications
and the information contained therein. Bancorp and Bank know of no reasons
why the transactions contemplated by this Agreement should not be approved by
the regulatory authorities.
4.4 TERMINATION OF EMPLOYEE BENEFIT PLANS. On or before the
Effective Time, Bancorp and FSC shall determine whether it is in the best
interests of the parties hereto and the employees of Bancorp and Bank to
terminate the employee benefit plans (as described in Section 5.16) or to
merge such plans into an appropriate FSC benefit plan. FSC will cooperate in
such determination to either freeze the Plans or transfer such benefits under
the Plans (in a plan-to-plan transfer) into an existing benefit plan
maintained by FSC as to which such benefits may be transferred without
necessity of material amendment to, or adverse effect on qualification of,
such FSC plan and provided further that FSC incurs no expense or other
adverse result in allowing such rollover of benefits.
4.5 INFORMATION FOR PROXY STATEMENT. Upon request by FSC, Bancorp
and Bank shall timely prepare and deliver to FSC, in such form required by
rules and regulations of the United States Securities and Exchange Commission
(the "SEC"), all information, descriptions, accounting reports and schedules
(including audited financial statements in the form required by Regulation
S-X of the SEC, as may be required) and other materials required for
preparation and
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filing of the Registration Statement contemplated by Section 6.10 of this
Agreement.
4.6 ENVIRONMENTAL REPORTS. Within twenty (20) days of execution of
this Agreement, Bancorp and Bank shall cause to be prepared, by firms reasonably
acceptable to FSC, Phase I Environmental Reports with respect to real property
owned by Bancorp and Bank, including Bank's branch facilities. In the event a
Phase I report indicates that Bancorp or Bank may be a potentially liable party
for remedial action under any environmental laws (as such term is defined in
Section 5.7 below), then Bancorp and Bank shall cause Phase II Environmental
Reports to be prepared detailing any possible exposure under such laws. The
cost of said Phases I and II Environmental Reports and the cost of any remedial
action determined to be necessary by such reports shall be borne by Bancorp and
Bank. Bank shall make available to FSC any Phase I Environmental Reports which
it has obtained on real property-secured loans.
4.7 NOTIFICATION OF ACTIONS. Bancorp and Bank covenant and agree to
immediately notify FSC and FSB in the event of any action which materially
affects any of the covenants set forth in this Article IV.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BANCORP AND BANK
As an inducement to FSC and FSB to enter into this Agreement, and in
addition to any representations and warranties made elsewhere in this Agreement,
Bancorp and Bank jointly and severally represent and warrant to and agree with
FSC and FSB as of the date of this Agreement and as of the Closing Date as
follows:
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5.1 ORGANIZATION, CONDUCT OF BUSINESS, ETC. Each of Bancorp and Bank
(i) is duly organized and validly existing and in good standing under the laws
of the State of Nevada, (ii) has all requisite power and authority (corporate
and other) to own its properties and conduct its business as now being
conducted, (iii) is duly qualified to do business and is in good standing in
each jurisdiction in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where failure to so qualify would not have a Material Adverse
Effect, as defined in Section 11.17, below, on Bancorp or Bank or their
respective businesses, operations, properties, assets or condition (financial or
otherwise), and (iv) is not transacting business, or operating any properties
owned or leased by it in violation of any provision of federal or state law or
any rule or regulation promulgated thereunder, which violation would have a
Material Adverse Effect on Bancorp or Bank or their respective businesses,
operations, properties, assets or condition (financial or otherwise). Other
than Bancorp's ownership of Bank and except as set forth in Schedule 5.1,
neither Bancorp nor Bank owns any equity interest in any other business
organization and neither Bancorp nor Bank is a party to any joint venture or
similar enterprise.
5.2 CAPITALIZATION. The authorized capital stock of Bank consists
solely of 6,000,000 shares of Bank Common Stock. As of the date hereof, there
are 2,210,834 shares of Bank Common Stock issued and outstanding. Bancorp owns,
beneficially and of record, all of the issued and outstanding shares of Bank
Stock. The authorized capital stock of Bancorp consists solely of 15,000,000
shares of Bancorp Common Stock. As of the date hereof, there are 5,035,500
shares of Bancorp Common Stock issued and outstanding, net of 8,000 shares of
treasury stock. The outstanding shares of Bancorp Common Stock and the holders
of record thereof are identified on Schedule 5.2 hereto. All of the outstanding
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shares of capital stock of each of Bank and Bancorp have been duly authorized
and are validly issued, fully paid and nonassessable.
5.3 OPTIONS, SARS, WARRANTS, ETC. Schedule 5.3 identifies (i) the
holders of each of the Options, the number of Options held by each holder of
Options and the Option exercise price with respect thereto and (ii) the holders
of each of the Warrants, the number of Warrants held by each holder of Warrants
and the Warrant exercise price with respect thereto. Except for the Options and
the Warrants, there are no outstanding stock appreciation rights or options,
warrants, calls, units or commitments of any kind relating to the issuance,
sale, purchase or redemption of, or securities convertible into, capital stock
of Bank or Bancorp. Except for the stock option plans disclosed on Schedule
5.16, neither Bancorp nor Bank maintain a plan relating to the issuance, sale,
purchase or redemption of capital stock of Bancorp or Bank.
5.4 AUTHORIZATION; VALIDITY OF AGREEMENT. Each of Bancorp and Bank
has the corporate power and authority to execute and deliver this Agreement.
This Agreement has been duly and validly approved by the Board of Directors of
Bancorp and Bank, has been duly executed and delivered on behalf of Bancorp and
Bank, and, subject to approval by the shareholders of Bancorp, constitutes a
valid and binding agreement of Bancorp and Bank, enforceable against each in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, liquidation, receivership, conservatorship, insolvency,
moratorium or other similar laws affecting the rights of creditors generally and
by general equitable principles.
5.5 BANCORP AND BANK REPORTS. Since January 1, 1995, each of Bancorp
and Bank has filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that were required to be
filed with the Board of Governors of the Federal Reserve System (the "FEDERAL
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RESERVE BOARD"), Federal Deposit Insurance Corporation (the "FDIC") and the
Nevada Financial Institutions Division (the "DIVISION"). All such reports and
statements filed by Bancorp or Bank with the Federal Reserve Board, the FDIC,
the Division and other applicable state securities or banking authorities are
collectively referred to herein as the "BANK REPORTS." As of their respective
dates, the Bank Reports complied in all material respects with all the statutes,
rules and regulations enforced or promulgated by the regulatory authority with
which they were filed and did not and as of the date hereof do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. Except as set
forth on Schedule 5.5, since January 1, 1995, no regulatory agency, including
the Federal Reserve Board, the FDIC and the Division, has criticized, in any
significant manner, the management or operation of Bancorp or Bank, cited
Bancorp or Bank for a violation of law, or imposed any mandatory action by
Bancorp or Bank to bring such party in compliance with applicable rules and
regulations.
5.6 BANCORP AND BANK FINANCIAL STATEMENTS; NO UNDISCLOSED
LIABILITIES. Bancorp's audited Balance Sheets as of December 31, 1996 and
December 31, 1997, and its audited Statements of Income and Statements of
Cash Flow for the years ended December 31, 1996 and December 31, 1997, and
Bancorp's unaudited interim Balance Sheet for the period ended September 30,
1998, heretofore delivered to FSC (hereinafter the "FINANCIAL STATEMENTS"),
were prepared in accordance with generally accepted accounting principles
consistently applied (except for such interim statement which requires
year-end adjustments) and present fairly Bancorp's and Bank's financial
condition, results of operations and changes in cash flow as of such dates.
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Bancorp and Bank will provide to FSC on a monthly basis prior to the
Effective Time all interim financial statements relating to Bancorp and Bank
customarily prepared by Bancorp or Bank.
Except as and to the extent stated in the Financial Statements delivered
or to be delivered pursuant to this Section 5.6 and in Schedule 5.6, and except
for those liabilities incurred in the normal course of Bancorp's or Bank's
business or as contemplated by this Agreement, neither Bancorp nor Bank has any
material liabilities or obligations, secured or unsecured (whether accrued,
absolute, contingent or otherwise), and whether due or to become due, including
but not limited to liabilities on account of taxes, other governmental charges
or lawsuits subsequently brought. Except as set forth on Schedule 5.6, there
are no suits, actions or proceedings pending or, to the knowledge of Bancorp or
Bank or any of their directors or officers, threatened, or any contingent
liability which would give rise to any right of indemnification on the part of
any director or officer of Bancorp or Bank or his or her heirs, executors or
administrators, as against Bancorp or Bank or any successor to the business of
Bancorp or Bank.
5.7 ENVIRONMENTAL MATTERS. For purposes of this Section 5.7, the term
"environmental laws" shall include all state and federal laws designed to
protect human health or the environment, as amended from time to time, and all
regulations promulgated thereunder, including, without limitation, the Clean Air
Act, 42 U.S.C.A. Sections 7401, ET SEQ., the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C.A. Sections 9601, ET SEQ.,
the Federal Water Pollution Control Act, 33 U.S.C.A. Sections 1251, ET SEQ.,
the Resource Conservation and Recovery Act, 42 U.S.C.A. Sections 6901, ET SEQ.,
and the Toxic Substances Control Act, 15 U.S.C.A. Sections 2601, ET SEQ.
"Hazardous substance" shall include all petroleum products as well as any toxic
or hazardous material, hazardous waste or other hazardous or regulated substance
defined in or regulated by any environmental law, provided that hazardous
substance shall not include
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commercially available consumer products reasonably appropriate for use in or
for routine maintenance or upkeep of an office of a financial institution as
long as such products are used in accordance with label instructions.
Except as set forth in Schedule 5.7, to the best knowledge of Bancorp and
Bank after due inquiry, neither Bancorp or Bank, nor any property of Bancorp or
Bank, is subject to any pending or potential claim, liability or obligation to
any person arising under any environmental law. With respect to the real
property owned or leased by Bancorp and Bank (including other real estate), to
the best knowledge of Bancorp and Bank after due inquiry:
(a) No such property is presently contaminated by, and no
such property has ever been used or is presently being used by any person to
generate, manufacture, refine, transport, treat, store, handle or dispose of,
any hazardous substance in any regulated form or quantity.
(b) No such property has ever contained or presently contains,
or has been used or is being used by any person for storage of, asbestos,
ureaformaldehyde foam insulation, PCB's, dioxins, mercury, lead or uranium (or
other heavy metal) products or tailings, or any other hazardous substance in any
regulated form or quantity, whether contained in construction or fill materials
or used or stored thereon or therein.
(c) Neither Bancorp, Bank nor any other tenant or occupant of
any such property has received a summons, citation, directive, letter, notice of
violation, request for information or other communication, written or oral, from
any local, state or federal agency concerning any possible intentional or
unintentional action or omission on the part of any person which has resulted in
the possible release of any hazardous substance affecting such property or
concerning any other possible violation of any environmental law affecting the
property.
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(d) To the extent any permit, approval or registration is or
has been required to be obtained or maintained under any environmental law with
respect to any such property, any improvement of or on any such property or any
activity occurring on any such property, each such permit, approval or
registration has been obtained and is in good standing. In addition, all such
permits, approvals and registrations have been disclosed to FSC in writing.
(e) No such property contains or has ever contained any storage
tank used or intended for use to store any hazardous substance.
5.8 LOAN LOSS RESERVES. The reserves for possible loan losses and net
loan charge-offs of Bank as established from time to time by Bank are adequate
under generally accepted accounting principles. Such reserves comply in all
material respects with all loan loss requirements or guidelines applied to Bank
by any governmental authorities having jurisdiction with respect thereto.
5.9 TITLE TO PROPERTIES. Except as reflected in the Financial
Statements delivered or to be delivered pursuant to Section 5.6, and except as
set forth on Schedule 5.9, Bancorp and Bank own, free and clear of any liens,
claims, charges, options, or other encumbrances, all of the property, real,
personal or mixed, reflected in the Financial Statements and all property
acquired since such date. Except as set forth in Schedule 5.9, neither Bancorp
nor Bank has received any notice of violation of any applicable zoning
regulation, ordinance or other law, order, regulation or requirement relating to
its operations or its properties. To Bank's knowledge, there are no such
violations of material nature and all buildings and structures used by Bancorp
and Bank substantially conform with all applicable ordinances, codes and
regulations. Except as set forth in Schedule 5.9 hereto, in Bancorp's and
Bank's opinion, all such properties which are material to the business or
operations of Bancorp and Bank are in a good state of maintenance and repair and
are adequate for its current uses and purposes. During each of the
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past three calendar years, Bancorp and Bank and their properties have been
insured for customary risks with customary limits, deductibles, and
exclusions, including but not limited to Bankers Blanket Bond, and such
insurance protection continues in effect as of the date hereof. Bancorp and
Bank have delivered to FSC true and correct copies of all deeds, title
insurance policies and surveys each has with respect to the real property
owned by them and copies of all leases with respect to real property leased
by them.
5.10 ABSENCE OF DEFAULTS. The execution of this Agreement and the
Bank Articles of Merger does not and performance of the transactions
contemplated by them will not (assuming Bancorp shareholder approval and
applicable regulatory approval) (a) violate the provisions of the Articles of
Incorporation or Bylaws of either Bancorp or Bank, or (b), except as set
forth in Schedule 5.10, violate the provisions of or place either Bancorp or
Bank in default under any agreement, indenture, mortgage, lien, lease,
contract, instrument, order, judgment, decree, ordinance, statute, or
regulation to which either Bancorp or Bank is subject, to which any property
of either Bancorp or Bank is subject, or to which either Bancorp or Bank is a
party, which violations or defaults would in the aggregate have a Material
Adverse Effect on the business, operations, properties, assets, or condition
(financial or otherwise) of either Bancorp or Bank.
5.11 ABSENCE OF MATERIAL ADVERSE CHANGES. Except as set forth on
Schedule 5.11, since December 31, 1997, there has been no change, and no
development involving a reasonably foreseeable prospective change, in or
affecting the financial condition (present or prospective), businesses,
properties, assets or operations (present or prospective) of Bancorp and Bank
that either individually or in the aggregate has had or is likely to have a
Material Adverse Effect on Bancorp or Bank. Since December 31, 1997, Bancorp
and Bank have conducted their respective businesses only in the ordinary
course and consistent with past banking standards.
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5.12 ACTIONS, PROCEEDINGS AND INVESTIGATIONS. Set forth in Schedule
5.12 hereto is a complete and accurate listing of all litigation,
administrative or other proceeding to which Bancorp or Bank is a party,
except for such proceedings in which Bank is seeking to collect on a loan or
lease transaction and no counterclaim or similar claim has been filed against
Bank. There are no actions, proceedings or investigations pending, or, to
the knowledge of the executive officers of Bank and Bancorp, threatened or
contemplated against or relating to Bancorp or Bank or any of their
respective properties or assets (and said officers are not aware of any facts
that would give rise to any such claim), which would have a Material Adverse
Effect on the financial condition (present or prospective), businesses,
properties, assets or operations (present or prospective) of Bancorp or Bank,
or the ability of Bancorp or Bank to consummate the Merger and Bank Merger
contemplated hereby.
5.13 ABSENCE OF BROKERAGE COMMISSIONS, ETC. Except for Bancorp's
agreement with Hovde Financial, Inc., the details of which have been
disclosed to FSC in Schedule 5.13, all negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by
Bancorp and Bank directly with FSC and FSB without the participation or
intervention of any other person, firm or corporation employed or engaged by
or on behalf of Bancorp and Bank in such a manner as to give rise to any
valid claim against Bancorp or Bank, or FSC or FSB, for a brokerage
commission, finder's fee or like payment.
5.14 MATERIAL CONTRACTS. Except for those documents listed on Schedule
5.14 hereto, copies of which documents have been provided by Bancorp and Bank to
FSC, each of Bancorp and Bank is not a party to or bound by any commitment,
agreement or other instrument which (i) is material to the business, operations,
properties, assets or financial condition of Bancorp or Bank; (ii) limits the
freedom of Bancorp or Bank to compete in any line of business or with any
person; or (iii) requires Bank to transfer funds (other than in the ordinary
course
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of business) to, make an investment in or guarantee the debt of any entity.
Except as set forth in Schedule 5.14, neither Bancorp or Bank is a party to
any contract or agreement, including but not limited to any lease, service
contract or employment agreement which (i) provides for a remaining term in
excess of two (2) years from and after the date hereof, and (ii) provides for
a total payment thereunder in excess of $20,000.00. Neither Bancorp or Bank
is in default, and there has not occurred any event that with the lapse of
time or giving of notice or both would constitute such a default, in any
respect which has or may have a Material Adverse Effect on the business,
operations, properties, assets or financial condition of Bancorp or Bank
under any of the agreements or other instruments referred to in this Section
5.14.
5.15 COMPLIANCE WITH LAWS; DOCUMENTATION.
(a) Except as set forth on Schedule 5.15, to the best knowledge
of Bancorp and Bank, after due inquiry: the conduct by Bancorp and Bank of
their respective businesses does not violate or infringe any domestic or foreign
laws, statutes, ordinances, rules or regulations, the enforcement of which,
individually or in the aggregate, would have a Material Adverse Effect on the
business, operations, properties, assets or condition (financial or otherwise)
of Bancorp or Bank; and Bancorp and Bank each has complied in all material
respects with every local, state or federal law or ordinance, and every
regulation or order issued thereunder, now in effect and applicable to Bancorp
and Bank governing or pertaining to fair housing, anti-redlining, equal credit
opportunity, truth-in-lending, real estate settlement procedures, fair credit
reporting and every other prohibition against unlawful discrimination in
residential lending, or governing consumer credit, including, but not limited
to, the Consumer Credit Protection Act, Truth-in-Lending Law, and in particular
Regulation Z promulgated by the Federal Reserve Board, and the Real Estate
Settlement Procedures Act of 1974.
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(b) All loans, leases, contracts and accounts receivable
(billed and unbilled), security agreements, guarantees and recourse
agreements of Bank as held in its portfolio, or as sold into the secondary
market, represent and are valid and binding obligations of their respective
parties and debtors, enforceable in accordance with their respective terms,
each is based on a valid, binding and enforceable contract(s) or
commitment(s), each of which has been executed and delivered in full
compliance, in form and substance, with any and all federal, state or local
laws applicable to Bank, or to the other party or parties to the contract(s)
or commitment(s), including without limitation the Truth-in-Lending Act,
Regulations Z and U of the Federal Reserve Board, laws and regulations
providing for non-discriminatory practices in the granting of loans or
credit, applicable usury laws, laws imposing lending limits, and each has
been administered in full compliance with all applicable federal, state or
local laws or regulations. Except as set forth on Schedule 5.15, all Uniform
Commercial Code filings, or filings of trust deeds, or of lien or other
security interest documentation that are required by any applicable federal,
state or local government laws and regulations to perfect the security
interests referred to in any and all of such documents or other security
agreements have been made, and all security interests under such deeds,
documents or security agreements have been perfected, and all contracts have
been entered into or assumed in full compliance with all applicable material
legal or regulatory requirements.
(c) To the best knowledge of Bancorp and Bank, all loan
files of Bank are complete and accurate in all material respects and have
been maintained in accordance with good banking practice.
(d) All notices of default, foreclosure proceedings or
repossession proceedings against any real or personal property collateral
have been issued, initiated and conducted by Bank in full formal and
substantive compliance with all applicable federal, state or local laws and
regulations, and no
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loss or impairment of any security interest, or exposure to meritorious
lawsuits or other proceedings against Bancorp and Bank, has been or will be
suffered or incurred by Bancorp and Bank.
(e) To the best knowledge of Bancorp and Bank, Bank is not
in violation of any applicable servicer or other requirement of the FHA, VA,
FNMA, GNMA, FHLMC or any private mortgage insurer which insures any loans
owned by Bank or as to which Bank has sold to other investors, the effect of
which violation, individually or in the aggregate, would have a Material
Adverse Effect on the business, operations, properties, assets or condition
(financial or other) of Bank, and with respect to such mortgage loans Bank
has not done or failed to do, or caused to be done or omitted to be done, any
act the effect of which act or omission impairs or invalidates (i) any FHA
insurance or commitments of the FHA to insure, (ii) any VA guarantee or
commitment of the VA to guarantee, (iii) any private mortgage insurance or
commitment of any private mortgage insurer to insure, (iv) any title
insurance policy, (v) any hazard insurance policy, or (vi) any flood
insurance policy required by the National Flood Insurance Act of 1968, as
amended, to the material detriment of Bank.
(f) Bank is not knowingly engaged principally, or as one of
its important activities, in the business of extending credit for the purpose
of purchasing or carrying any margin stock.
5.16 EMPLOYEE BENEFITS.
(a) Schedule 5.16 contains a true and complete list of each
employee benefit, compensation or welfare benefit plan, program or agreement
maintained or contributed to or required to be contributed to by Bancorp or Bank
(the "PLANS"). Neither Bancorp nor Bank has any formal plan or commitment,
whether legally binding or not, to create any additional Plan or modify or
change
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any existing Plan that would affect any employee or terminated employee of
Bancorp or Bank.
(b) Except as set forth in Schedule 5.16, there are no
employment agreements entered into by Bancorp or Bank and no other deferred
compensation or salary continuation agreements or commitments maintained or
agreed to by Bancorp or Bank.
(c) With respect to each of the Plans, Bancorp and Bank have
heretofore delivered to FSC true and complete copies of each of the following
documents: (i) each Plan and related trust, if any (including all amendments
thereto); (ii) annual report and actuarial report, if required to be filed
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for the last two (2) years and the latest financial statement, if
any, for each such Plan; (iii) the most recent summary plan description,
together with each summary of material modifications, required under ERISA;
(iv) the most recent determination letter received from the Internal Revenue
Service ("IRS") with respect to each Plan that is intended to be qualified
under Section 401 of the Internal Revenue Code of 1986, as amended (the
"CODE"); and (v) information which identifies (x) all asserted or unasserted
claims arising under any Plan, (y) all claims presently outstanding against
any Plan, (z) a description of any future compliance action required with
respect to any Plan under ERISA, or federal or state law.
(d) All required contributions have been, or will be, made
with respect to each Plan on or prior to the date of this Agreement and have
been properly recorded on the Financial Statements. Except as disclosed on
Schedule 5.16, each trust associated with the Plans, if any, is fully funded
as of the date of this Agreement. Schedule 5.16 sets forth the amount of
monthly payments due and owing for each month that the 401(k) Plan, Bank
Payroll Stock Deduction Purchase Plan, Deferred Compensation Plan and two
Salary Continuation
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Agreements for Robert N. Barone ("MR. BARONE") and Larry A.Platz ("MR.
PLATZ") are continued and the amount of liability for claims if Bancorp or
Bank were to terminate the Plans and the costs involved in any such
termination. Except as disclosed in Schedule 5.16, there are no other
material liabilities that would be incurred in connection with the
termination of the Plans.
(e) Except as disclosed on Schedule 5.16, each of the Plans
has been operated and administered since inception in all material respects
in accordance with applicable laws, including, but not limited to, ERISA and
the Code and each of the Plans that is intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified. The Plans are legally
valid and binding and in full force and effect.
(f) All amendments required under the Code have been made by
Bancorp or Bank and approved by the IRS with respect to each Plan on or prior
to the date of this Agreement.
(g) Except as set forth in Schedule 5.16, no Plan provides
benefits, including, without limitation, death or medical benefits (whether
or not insured), with respect to current or former employees beyond their
retirement or other termination of service (other than (A) coverage mandated
by applicable law, (B) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA,
(C) deferred compensation benefits accrued as liabilities on the books of
Bancorp or Bank, or (D) benefits the full cost of which is borne by the
current or former employee (or his or her beneficiary)).
(h) There are no pending or, to Bancorp's or Bank's
knowledge, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trusts related
thereto.
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(i) Except as set forth in Schedule 5.16, the consummation
of the transactions contemplated by this Agreement will not (either alone or
upon the occurrence of any additional acts or events) (A) entitle any current
or former employee of Bancorp or Bank to severance pay, employment
compensation or any other payment, benefit or award, or (B) accelerate or
modify the time of payment or vesting, or increase the amount of any benefit,
award or compensation due any such employee.
(j) Neither Bancorp nor Bank has ever had liabilities to the
Pension Benefit Guaranty Corporation ("PBGC"). No material liability to the
PBGC has been or will be incurred by Bank or other trade or business under
"common control" with Bancorp or Bank (as determined under Section 414(c) of
the Code) (each a "COMMON CONTROL ENTITY") on account of any termination of a
Plan subject to Title IV of ERISA. On and after September 2, 1974, no filing
has been made by Bancorp or Bank (or any Common Control Entity) with the PBGC
(and no proceeding has been commenced by the PBGC) to terminate any Plan
subject to Title IV of ERISA maintained, or wholly or partially funded, by
Bank (or any Common Control Entity). Neither Bancorp, Bank nor any Common
Control Entity, has (i) ceased operations at a facility so as to become
subject to the provisions of Section 4062(e) of ERISA, (ii) withdrawn as a
substantial employer so as to become subject to the provisions of Section
4063 of ERISA, (iii) ceased making contributions on or before the Closing
Date to any Plan subject to Section 4064(a) of ERISA to which Bancorp or Bank
(or any Common Control Entity) made contributions during the five years prior
to the Closing Date, or (iv) made a complete or partial withdrawal from a
multi-employer plan (as defined in Section 3(37) of ERISA) so as to incur
withdrawal liability as defined in Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under Section 4207 or 4208
of ERISA).
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5.17 REPURCHASE AGREEMENTS. Bank has, as of the date hereof, and as
of the Closing Date will have, valid and perfected first position security
interests in all government securities subject to repurchase agreements, and,
to the knowledge of Bancorp and Bank, as of the date hereof, the value of the
collateral securing each such repurchase agreement equals or exceeds the
amount of the debt secured by such collateral under such agreement.
5.18 TAXES AND TAX RETURNS. Bancorp and Bank each has delivered (or
will deliver within five (5) days of execution of this Agreement) true and
correct copies of all tax returns filed for the years ending 1995, 1996, and
1997. Bancorp and Bank have filed all federal, state and local tax returns
and forms (including but not limited to forms 1099), which are required by
law to be filed or delivered as of the date hereof and have paid all taxes
which have become due. Except as set forth in Schedule 5.18, to the best
knowledge of Bancorp and Bank, after due inquiry, Bank has timely filed all
currency transaction reports required by the Bank Secrecy Act, as amended,
has timely filed all information returns required by Sections 6041, 6041A,
6042, 6045, 6049, 6050H, and 6050J of the Code; and has exercised due
diligence in obtaining certified taxpayer identification numbers as required
pursuant to Treasury Regulation 35a.9999. Where payment of such taxes is not
required to be made as of the date hereof, Bancorp and Bank have set up an
adequate reserve or accrual for the payment of all taxes required to be paid
in respect of the periods covered by such returns.
5.19 CONSENTS AND APPROVALS. Except for (i) the filing of
applications and notices, as applicable, with the State of Nevada, the FDIC
and/or the Federal Reserve Board and approval of such applications, (ii) the
filing of the Bank Articles of Merger with the Nevada Secretary of State and
the filing of the Certificate of Merger with the respective Secretaries of
State of Delaware and Nevada, (iii) the filing with the SEC of a proxy
statement in definitive form relating to the meeting of Bancorp's
stockholders to be held in connection with
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this Agreement and the transactions contemplated hereby (the "PROXY
STATEMENT"), and (iv) the consents and approvals set forth in SCHEDULE 5.19,
no consents or approvals of, or filings or registration with, any
governmental entity or with any third party are necessary in connection with
(A) the execution and delivery by Bancorp and Bank of this Agreement or (B)
the consummation by Bancorp and Bank of the transactions contemplated by this
Agreement.
5.20 INSURANCE. SCHEDULE 5.20 contains a true, complete and
correct description of all material policies of fire, liability, production,
completion bond, errors and omissions, workmen's compensation and other forms
of insurance owned or held by Bancorp and Bank, copies of which have
previously been delivered to FSC. All such policies are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the Closing Date have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. During the
last three years neither Bancorp nor Bank has been refused any insurance with
respect to its assets or operations, nor has its coverage been limited, by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance.
5.21 SECTION 280G. No payment received by any person as a result of
the transactions contemplated hereby shall constitute an "excess parachute
payment" within the meaning of section 280G of the Code.
5.22 DISCLOSURE. No representation or warranty by Bancorp or Bank
contained in this Agreement, nor any statement or certificate furnished or to
be furnished by Bancorp or Bank to FSC or FSB or their representatives in
connection herewith or pursuant hereto, contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material
fact required to make the statements herein or therein contained not
misleading or necessary in order to provide a prospective purchaser of the
business of Bancorp
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and Bank with adequate information as to Bancorp and Bank and their condition
(financial or otherwise), properties, assets, liabilities, business and
prospects, and Bancorp and Bank have disclosed to FSC and FSB in writing all
material adverse facts known to them relating to same.
ARTICLE VI
COVENANTS, REPRESENTATIONS AND WARRANTIES OF FSC AND FSB
As an inducement to Bancorp and Bank to enter into this Agreement, and
in addition to any representations and warranties made elsewhere in this
Agreement, FSC and FSB jointly and severally covenant, represent and warrant
to and agree with Bancorp and Bank as of the date of this Agreement and as of
the Closing Date as follows:
6.1 ORGANIZATION, CONDUCT OF BUSINESS, ETC. FSC and FSB (i) are
each duly organized and validly existing and in good standing under the laws
of Delaware (in the case of FSC), or the State of Nevada (in the case of
FSB), (ii) have all requisite power and authority (corporate and other) to
own their respective properties and conduct their respective businesses as
now being conducted, (iii) are each duly qualified to do business and are in
good standing in each jurisdiction in which the character of the properties
owned or leased by them therein or in which the transaction of their
respective businesses makes such qualification necessary, except when failure
to so qualify would not have a Material Adverse Effect on FSC and its
consolidated subsidiaries, and (iv) are not transacting business, or
operating any properties owned or leased by any of them, in violation of any
provision of federal or state law or any rule or regulation promulgated
thereunder, which violation would have a Material Adverse Effect on FSC and
its consolidated subsidiaries.
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6.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. FSC and FSB each have
the corporate power and authority to execute and deliver this Agreement.
This Agreement has been duly and validly approved by the Executive Committee
of the Board of Directors of FSC and the Board of Directors of FSB, has been
duly executed and delivered on their behalf, and constitutes a valid and
binding agreement of each of FSC and FSB, enforceable in accordance with its
terms, subject to approval of the sole shareholder of FSB and ratification by
the Board of Directors of FSC.
6.3 FSC REPORTS. Since January 1, 1995, FSC and its consolidated
subsidiaries have filed all reports, registrations and statements, together
with any amendments required to be made with respect thereto, that were
required to be filed with (i) the SEC, including but not limited to Form
10-K, Form 10-Q, Form 8-K and proxy statements, (ii) the Federal Reserve
Board, (iii) the Office of the Comptroller of the Currency (the "OCC"), (iv)
the FDIC, and (v) other applicable state securities or banking authorities.
All such reports and statements filed with the SEC, the Federal Reserve
Board, the OCC, the FDIC, and other applicable state securities or banking
authorities are collectively referred to herein as the "FSC REPORTS." As of
their respective dates, to the best knowledge of the officers of FSC, the FSC
Reports complied in all material respects with all the statutes, rules and
regulations enforced or promulgated by the regulatory authority with which
they were filed and did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
6.4 FSC FINANCIAL STATEMENTS; TAX RETURNS. FSC's Consolidated
Balance Sheets as of December 31, 1996 and December 31, 1997, and its
Consolidated Statements of Income and Consolidated Statements of Cash Flow
for the years then ended, heretofore delivered to Bancorp and Bank, were
prepared
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in accordance with generally accepted accounting principles consistently
applied and present fairly its consolidated financial condition, results of
operations and changes in financial position as of such dates and for such
periods. FSC will provide a copy of its Consolidated Balance Sheet and its
Consolidated Statement of Income and Consolidated Statement of Cash Flow as
of December 31, 1998 when available. FSC has filed all federal, state and
local tax returns and forms (including but not limited to Forms 1099), which
are required by law to be filed or delivered as of the date hereof and have
paid all taxes which have become due. Where payment of such taxes is not
required to be made as of the date hereof, FSC has set up an adequate reserve
or accrual for the payment of all taxes required to be paid in respect of the
periods covered by such returns.
Except as and to the extent stated in the FSC Financial Statements
provided by FSC to Bancorp and Bank and except for those liabilities incurred
in the normal course of FSC's or any of its subsidiaries' respective
businesses, FSC and its consolidated subsidiaries do not have any material
liabilities or obligations, secured or unsecured (whether accrued, absolute,
contingent or otherwise).
6.5 ABSENCE OF MATERIAL ADVERSE CHANGES. Since December 31, 1997,
there has been no change, and no development involving a reasonably
foreseeable prospective change, in or affecting the financial condition
(present or prospective), businesses, properties or operations of FSC and its
consolidated subsidiaries that either individually or in the aggregate has
had or is likely to have a Material Adverse Effect on FSC and its
consolidated subsidiaries.
6.6 ABSENCE OF DEFAULTS UNDER AGREEMENTS. Neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will conflict with or result in a breach of or constitute
a default under any provision of FSC's or FSB's respective Articles of
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Incorporation, Bylaws, or any agreement to which FSC or FSB is a party or by
which either of them is bound or to which any of their respective properties
is subject, or result in the creation of any liens or encumbrances upon their
respective assets, and no consents or waivers thereunder are required to be
obtained in connection with the transactions contemplated hereby, except for
the approval of required regulatory authorities and of the shareholders of
FSB and Bank.
6.7 ACTIONS, PROCEEDINGS, AND INVESTIGATIONS. Except as set forth in
FSC's filings with the SEC, there are no actions, proceedings or
investigations pending, or to the knowledge of the executive officers of FSC,
threatened or contemplated, against or relating to FSC or any of its
consolidated subsidiaries, or any of their respective properties, which would
have a Material Adverse Effect on the financial condition (present or
prospective), businesses, properties or operations of FSC and its
consolidated subsidiaries, or the ability of FSC or FSB to consummate the
Merger contemplated hereby.
6.8 REGULATORY APPROVALS. FSC and FSB shall (i) use their best
efforts in good faith to obtain all necessary regulatory approvals and to
take or cause to be taken all other action required under this Agreement on
their part to be taken as promptly as practicable so as to permit the
consummation of the transactions contemplated by this Agreement at the
earliest possible date, and cooperate fully with Bancorp and Bank to that
end, and (ii) furnish all necessary information for inclusion in any
applications relating to the consents, approvals, and permissions of
regulatory authorities referred to in Article VIII. FSC knows of no reasons
why the transactions contemplated by this Agreement should not be approved by
the regulatory authorities. FSC shall give Bancorp prompt notice of receipt
of the regulatory approvals referred to in Section 8.1(a) and shall provide
Bancorp with copies of any written comments by any regulatory authorities
regarding or relating
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to the non-confidential portions of the regulatory applications filed in
connection with the transactions contemplated hereby.
6.9 FSC COMMON STOCK. All of the outstanding FSC Common Stock is
duly authorized and validly issued, fully paid and nonassessable. The FSC
Common Stock to be issued and delivered pursuant to the Merger, when issued
as contemplated hereby, shall be duly authorized, validly issued, fully paid
and nonassessable.
6.10 REGISTRATION OF SHARES. FSC will use its best efforts to cause
a Registration Statement on Form S-4 or other appropriate form (the
"REGISTRATION STATEMENT") to be filed and declared effective under the
Securities Act of 1933, as amended (the "1933 ACT"), with respect to the FSC
Common Stock which is to be issued in connection with the transactions
contemplated by this Agreement, which Registration Statement, at the time it
becomes effective, and at the Effective Time, shall in all material respects
conform to the requirements of the 1933 Act and the General Rules and
Regulations of the SEC under said Act (the "1933 RULES"), and the FSC Common
Stock to be issued by FSC in connection with the Merger shall be duly
qualified or exempted, as the case may be, under applicable state Blue Sky
securities laws in those states in which Bancorp has informed FSC that its
shareholders reside. FSC will furnish to Bancorp, its counsel, investment
banker and accountants drafts of Registration Statement filings sufficiently
in advance of filing so as to afford a reasonable opportunity for review and
comment.
6.11 NOTIFICATION OF ACTIONS. FSC and FSB covenant and agree to
immediately notify Bancorp and Bank in the event of the breach of any of the
covenants set forth in this Article VI.
6.12 NASDAQ/NMS LISTING. FSC shall take all actions necessary to
assure that the shares of FSC Common Stock to be issued in the Merger will be
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approved for listing on the National Association of Security Dealers
Automatic Quotation, National Market System ("NASDAQ/NMS") prior to the
Closing Date.
6.13 INDEMNIFICATION. FSC agrees that all rights to indemnification
or exculpation now existing in favor of the directors and officers of Bancorp
and Bank as provided in their respective charters, bylaws, indemnification
agreements or otherwise in effect as of the date hereof with respect to
matters occurring prior to the Effective Time shall, to the greatest extent
permitted by Delaware law and the organizational documents of FSC as in
effect, survive the Merger and shall continue in full force and effect for a
period of three (3) years. If FSC or any of its successors or assigns
(i) shall consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) shall transfer all or substantially all of
its properties and assets to any individual, corporation or other entity,
then, and in each such case, FSC shall use its commercially reasonable
efforts to cause such successor and assigns of FSC to assume the obligations
set forth in this Section 6.13.
FSC shall use its commercially reasonable efforts to cause the persons
serving as officers and directors of Bancorp and Bank immediately prior to
the Effective Time to be covered for a period of three (3) years after the
Effective Time by the current policies of directors' and officers' liability
insurance maintained by Bank with respect to acts or omissions occurring
prior to the Effective Time which were committed by such officers and
directors in their capacity as such (provided that FSC may substitute
therefor policies of at least the same coverage and amounts containing terms
and conditions which are no less advantageous to such officers and
directors); PROVIDED, however, that FSC shall not be obligated to make annual
premium payments for such insurance to the extent such premiums exceed 150%
of the premiums paid as of the date hereof by Bank for such insurance.
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6.14 ONGOING CREDIT REVIEW. With respect to its ongoing credit
review of Bank between the date hereof and the Effective Time, FSC covenants
and agrees that it shall apply the same credit review procedures and credit
standards it used in the initial credit review and that in its ongoing credit
review it will only seek a change of a grade on a Bank loan (or lease) from
the initial review if there has been a demonstrable adverse change in the
credit, or the borrower or guarantor (or collateral supporting the credit)
has suffered a Material Adverse Effect.
6.15 LIMITATIONS ON FSC'S CONDUCT PRIOR TO THE EFFECTIVE TIME.
Between the date hereof and the Effective Time or the time when this
Agreement terminates as provided herein, FSC shall not, without prior written
consent of Bancorp, take any action which would or is reasonably likely to
(i) adversely affect the ability of FSC to obtain any necessary approvals of
any governmental entity required for the transactions contemplated hereby;
(ii) adversely affect FSC's ability to perform its covenants and agreements
under this Agreement; or (iii) result in any of the conditions to the
performance of FSC's obligations hereunder not being satisfied.
6.16 ACCESS TO INFORMATION. Upon reasonable request by Bancorp, Brad D.
Hardy, Executive Vice President & Chief Financial Officer, or Jay S. Bachman,
Senior Vice President, Corporate Development, shall be available in Salt Lake
City, Utah, to Bancorp and its representatives, counsel, accountants and
agents to discuss FSC's operations, and FSC shall provide to Bancorp and its
representatives, at their request, copies of all filings made with the SEC
between the date hereof and the Closing. Bancorp covenants and agrees that
it and its representatives, counsel, accountants and agents will hold in
strict confidence all documents and information concerning FSC or any of its
subsidiaries so obtained (except to the extent that such documents or
information are a matter of public record or require disclosure in the Form S-4
or any of the public information of
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any application required to be filed with any governmental or regulatory
agency to obtain the approvals and consents required to effect the
transactions contemplated hereby), and if the transactions contemplated
herein are not consummated, such confidence shall be maintained and all such
documents shall be returned to FSC.
6.17 FSB BOARD POSITION. FSC hereby agrees to elect Robert N. Barone
to serve as a member of the Board of Directors of FSB for a term of one (1)
year from and after the Effective Time. FSC further agrees to take no action
to remove Mr. Barone as a director during such period unless such removal is
for cause or results from Mr. Barone's inability to serve by reason of his
physical or mental illness or incapacity.
6.18 FEDERAL HOME LOAN BANK MEMBERSHIP. FSC hereby agrees to
maintain Bank's membership, or obtain on behalf of FSB a membership, in the
San Francisco Federal Home Loan Bank for one (1) year from and after the
Effective Time; PROVIDED, however, that such membership may be terminated at
any time during such period in the event that the Management Committee of
First Security Bank, N.A. determines that there exist compelling business
reasons to do so (such that FSB's continued membership and investment in the
FHLB exposes FSB to unacceptable financial risk).
ARTICLE VII
PROXY STATEMENT; SHAREHOLDER MEETINGS
7.1 PROXY STATEMENT. FSC (with the assistance of Bancorp and Bank)
shall prepare the Registration Statement, as provided in Paragraph 6.10
above, which Registration Statement will include a Proxy Statement to be used
with respect to providing the shareholders of Bancorp with notice of the
shareholder meeting for Bancorp. Bancorp and Bank represent and warrant that
the information they provide for use in the Proxy Statement will comply in
all
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material respects with the requirements of the Securities Exchange Act of
1934 (the "1934 ACT") and the applicable rules and regulations promulgated by
the SEC under such Act (the "1934 RULES"), and will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading, except that Bancorp and Bank make no representation with respect
to information furnished by FSC or FSB expressly for inclusion in the Proxy
Statement. FSC and FSB represent and warrant that the Proxy Statement will
comply in all material respects with the requirements of the 1934 Act and the
applicable 1934 Rules, and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading, except
that FSC and FSB make no representation with respect to information furnished
in writing by Bancorp and Bank expressly for inclusion in the Proxy Statement.
7.2 BANCORP MEETING. This Agreement shall be submitted for approval,
ratification and confirmation by the shareholders of Bancorp at a meeting
thereof to be called in accordance with the applicable provisions of law and
held as promptly as practicable after the execution of this Agreement and in
no event later than the expiration of forty-five (45) days, or in the event
of an SEC comment period, the expiration of such SEC comment period, if
applicable, without the filing of any post-effective amendment to the
Registration Statement to be filed by FSC pursuant to Paragraph 6.10,
following the effectiveness of said Registration Statement. Bancorp will
mail the Proxy Statement prepared by FSC as part of the Registration
Statement to its shareholders for purposes of the meeting of its
shareholders. Consistent with the exercise of their fiduciary duties to
shareholders, the Board of Directors of Bancorp shall recommend to the
shareholders that the shareholders approve the Agreement and the transactions
contemplated therein.
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7.3 BANK AND FSB ACTION BY UNANIMOUS WRITTEN CONSENT. This Agreement
shall be submitted to the sole shareholder of each of Bank and FSB for
approval, ratification and confirmation pursuant to an Action by Unanimous
Written Consent in accordance with the applicable provisions of law as
promptly as practicable after the execution of this Agreement, and in no
event later than the expiration of forty-five (45) days without the filing of
any post-effective amendment to the Registration Statement to be filed by FSC
pursuant to Paragraph 6.10, following the effectiveness of said Registration
Statement. FSC owns beneficially and of record all of the issued and
outstanding shares of FSB Common Stock and will vote all of such shares in
favor of this Agreement. Bancorp owns all of the issued and outstanding
shares of Bank Common Stock and will vote all of such shares in favor of this
Agreement.
ARTICLE VIII
CONDITIONS OF CLOSING
8.1 CONDITIONS OF CLOSING FOR ALL PARTIES.
The consummation of the transactions contemplated by this Agreement is
conditioned upon the following:
(a) REGULATORY APPROVAL. All consents, approvals and
permissions and the satisfaction of all of the requirements prescribed by
law, including but not limited to the consents, approvals and permissions of
all applicable regulatory authorities which are necessary to the carrying out
of the Bank Merger and Merger as described in this Agreement, shall have been
procured; PROVIDED, however, the approvals referred to in this subparagraph
(a) shall not have imposed any significant conditions which FSC and FSB on
the one hand, or Bancorp and Bank, on the other, reasonably deem to be
materially disadvantageous or burdensome. An approval shall be deemed to be
materially
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disadvantageous or burdensome if the approval includes a condition which, in
the reasonable opinion of the Board of Directors of FSC, would have a
Material Adverse Effect on the anticipated economic and business benefits to
FSC of the transactions contemplated by this Agreement.
(b) REGISTRATION STATEMENT, ETC. The FSC Common Stock to be
issued by FSC hereunder shall be the subject of the Registration Statement
and to qualification or exemption under state securities laws as appropriate.
The Registration Statement shall have been declared effective and shall not
be subject to a stop order or any threatened stop order. Such FSC Common
Stock shall have been included for listing in the NASDAQ/NMS subject to
official notice of issuance.
(c) NO INJUNCTION, ETC. There shall not have been instituted
any litigation, regulatory proceeding or other matter which challenges the
legality or effectiveness of the transactions contemplated hereby or seeks an
order, decree or injunction enjoining or prohibiting the consummation of the
Merger.
(d) TAX OPINIONS. FSC and Bancorp shall have received from Ray,
Quinney & Nebeker, counsel to FSC, an opinion reasonably satisfactory to FSC
and Bancorp in the form of Schedule 8.1(d), respectively, to the general
effect that the Merger shall not result in the recognition of gain or loss
for federal income tax purposes by Bancorp or FSC, nor shall the issuance of
the FSC Common Stock result in the recognition of gain or loss by the holders
of Bancorp Common Stock who receive such stock in connection with the Merger.
The opinion shall be dated prior to the date the Prospectus is first mailed
to the shareholders of Bancorp and such opinion shall not have been withdrawn
or modified in any material respect.
(e) SECTION 280G. There shall have been no payments received by
any person as a result of the transactions contemplated hereby that would
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constitute an "excess parachute payment" within the meaning of Section 280G
of the Code.
8.2 CONDITIONS OF CLOSING FOR FSC AND FSB. The obligation of FSC and
FSB, respectively, to consummate the transactions contemplated by this
Agreement is conditioned upon the following:
(a) SHAREHOLDER APPROVAL. A majority of the shareholders of
Bancorp shall have approved this Agreement and the Merger contemplated hereby
(unless a higher percentage of the outstanding shares of Bancorp must approve
the transaction under the Articles of Incorporation or Bylaws of Bancorp).
Bancorp, as the sole shareholder of Bank, shall approve the Agreement and the
Bank Merger.
(b) BANCORP AND BANK RESOLUTIONS; CORPORATE DOCUMENTS. Each of
Bancorp and Bank shall have delivered to FSC and FSB (i) a copy of its
Articles of Incorporation as certified by the Nevada Secretary of State;
(ii) a copy of its bylaws certified by its corporate secretary, (iii) a
certificate of good standing dated as of the Closing Date, issued by the
appropriate governmental agency, (iv) certified copies of resolutions duly
adopted by its Board of Directors approving this Agreement and, in the case
of the Board of Directors of Bancorp, directing the submission thereof to a
vote of the shareholders of Bancorp, and (v) certified copies of resolutions
duly adopted by the shareholders of Bancorp (owning the outstanding shares as
required by subparagraph (a) above) approving this Agreement and the Merger,
all as contemplated hereby.
(c) BANCORP AND BANK REPRESENTATIONS AND WARRANTIES. Unless
waived in writing by FSB and FSC, the representations and warranties of
Bancorp and Bank contained in this Agreement shall be true and correct on and
as of the Closing Date with the same effect as though made on and as of such
date. Except as otherwise contemplated by this Agreement, Bancorp and Bank
shall each have
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performed in all material respects all of its obligations and agreements
hereunder theretofore to be performed by it. FSC and FSB shall have received
at the Closing a certificate to the foregoing effect dated as of the Closing
Date and executed on behalf of Bancorp and Bank by one of their duly
authorized executive officers.
(d) COMFORT LETTERS. FSC shall have received letters from
Kafoury, Armstrong & Co., dated (i) the effective date of the Registration
Statement and (ii) shortly prior to the Effective Time, in form and substance
satisfactory to FSC, with respect to Bancorp's and Bank's financial
condition, which letters shall be based upon customary specified procedures
undertaken by such firm. The "comfort letters" contemplated hereby shall
include, but not be limited to, those matters identified in Schedule 8.2(d)
attached hereto.
(e) OPINION OF BANCORP AND BANK COUNSEL. Unless waived in
writing by FSC and FSB, FSC and FSB shall have received at the Closing from
Grady & Associates, special counsel to Bancorp and Bank, and other counsel to
Bancorp and Bank acceptable to FSC, written opinions, dated the Closing Date,
substantially in the form of Schedule 8.2(e) hereto.
(f) AFFILIATE'S LETTER. Unless waived in writing by FSC, FSC
shall have received a letter from each person who, in the opinion of Bancorp
and its counsel (who shall be entitled to rely on written certificates of
such persons), is an "affiliate" (as that term is defined in Rule 405
promulgated by the SEC under the 1933 Act) of Bancorp in the form attached
hereto as Schedule 8.2(f). Such "affiliate's" letter shall include covenants
with respect to compliance with the rules and regulations of the SEC for any
public reoffering or sale of the FSC Common Stock to be issued under the
terms of this Agreement to such affiliate.
(g) CONDITION OF BANK. FSB shall have determined, based on an
audit and review by its officers, accountants and legal counsel, conducted
prior
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to the execution of this Agreement and updated as of the Closing Date, as
provided below, that (i) the assets, books, records and operations of Bank
are in reasonably satisfactory condition and will not adversely impact FSB
after consummation of the Merger; (ii) based on the review of the assets,
books, records and operations of Bank by FSC, there are no liabilities
(existing, threatened or contingent) which FSC, in its discretion, determines
to be unacceptable, as determined by reference to Articles IV and V of this
Agreement; (iii) the methodology for determining and the allowance for loan
and lease losses of Bank as determined by the grading of Bank loans and
leases by FSC, is adequate in all material respects; (iv) the net earnings
after taxes for the years ended 1995, 1996, 1997 and 1998 are as reported in
the Financial Statements delivered to FSC pursuant to Section 5.6; and (v) as
of the Closing Date, the net worth of Bancorp and Bank, calculated in
accordance with generally accepted accounting principles and as more
specifically set forth in Schedule 8.2(g) attached hereto, will exceed
$16,658,575, exclusive of unrealized securities gains or losses pursuant to
FASB 115 (see line 23 on Schedule 8.2(g)). The net worth test shall be
calculated after accrual or payment of the expenses incurred by Bancorp and
Bank with respect to the Bank Merger and Merger, including but not limited to
investment banker's, auditor's and attorney's fees and expenses incurred with
respect to employee severance payments and/or termination or freezing of any
employee Plan, as defined in Section 5.16 (provided that all of such expenses
collectively shall not exceed an aggregate total of $2,782,183 after tax (see
lines 11 and 22 on Schedule 8.2(g) attached hereto)), but before pay-in of
the exercise strike price, including any tax effects of such exercise, for
the Options and Warrants, all of which shall inure to the benefit of FSC in
addition to the equity target stated herein, as more specifically set forth
in Schedule 8.2(g). Such net worth target assumes a Closing Date of March 31,
1999 and shall be increased by $190,000 per month (on a pro-rated basis) if
the Closing Date were to occur after March 31, 1999. In the event that
Bancorp and Bank incur costs as a result
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of Phase II remediation related to the Carson City, Nevada, property of Five
Hundred Thousand Dollars ($500,000) or less, the parties agree that the
purchase price shall be decreased on a dollar-for-dollar (after-tax) basis.
Should the remediation costs exceed $500,000, the parties shall have the
right to renegotiate the terms of this transaction.
In the event FSB determines, and Bank agrees, that certain loans or
assets should be written down or charged off or that additions to the
provision for loan losses should be made, as contemplated by subparagraphs (ii)
and (iii) of this Section 8.2(g), Bank agrees to take such actions as are
appropriate under the circumstances and the net worth requirement set forth
in this paragraph as a condition to Closing shall be determined after the
taking of such actions.
Any charge-offs, other asset write-downs or additions to the allowance
for loan loss or other financial adjustments at or prior to the Closing made
at the request, in writing, of FSC or FSB, for the convenience of FSC or FSB,
and not required by said subparagraphs (ii) and (iii) of this 8.2(g), which
charge-offs or additions Bank agrees to make, shall not reduce net worth for
purposes of satisfaction of the net worth condition set forth in this
Section 8.2(g).
With respect to the credit review to be conducted by FSC and FSB
hereunder, FSC and FSB covenant and agree that the update credit review of
Bank by FSC and FSB shall be conducted approximately fifteen (15) business
days prior to the Closing Date. In conducting the update credit review, FSC
and FSB agree that they shall apply the same credit review procedures and
credit standards they used in the initial credit review and that in their
update review they will only seek a change of a grade on a Bank loan (or
lease) from the initial review if there has been a demonstrable adverse
change in the credit, or the borrower or guarantor (or collateral supporting
the credit) has suffered a material adverse
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event. A demonstrable adverse change or a material adverse event shall be
defined by reference to the term Material Adverse Effect.
(h) EMPLOYMENT AGREEMENTS. Each of Mr. Barone and Mr. Platz
shall have executed and delivered an Employment Agreement in the form set
forth as Schedules 8.2(h-1) and 8.2(h-2), respectively, attached hereto and
incorporated herein.
(i) CONDITION OF PROPERTIES. FSC shall have determined, based
on the Phase I and Phase II Environmental Reports, as provided in Section 4.6
above, that there are no liabilities (existing, threatened or outright)
associated with the real properties owned by Bancorp or Bank which are
unacceptable. Such determination shall be made by FSC within forty-five (45)
days of receipt of such Phase I and Phase II Environmental Reports delivered
to FSC under Section 4.6, above.
(j) OPTIONS AND WARRANTS. All Options and Warrants shall have
been exercised or cancelled (and no additional Options or Warrants shall have
been issued as of the Closing Date) and each of the Bancorp Stock Option
Plans and agreements related thereto and the warrants covered by the Warrant
Agreement provided under cover of Schedule 5.3 shall have been redeemed.
(k) CAFETERIA PLAN ISSUES. Bank shall have (i) caused a
Cafeteria Plan document under Section 125 of the Code to be in place;
(ii) caused Forms 5500-C/Rs for the years 1993 through 1997 to be filed with
the Department of Labor and the Internal Revenue Service under the Delinquent
Filer Voluntary Compliance Program ("DVCP"), and (iii) paid all penalties
associated with such DVCP filings. Payment of the penalties in connection
with such filings shall have no impact on the net worth test set forth in
Section 8.2(g).
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8.3 CONDITIONS OF CLOSING FOR BANCORP AND BANK. The obligation of
Bancorp and Bank to consummate the transactions contemplated by this
Agreement is conditioned upon the following:
(a) FSC AND FSB REPRESENTATIONS AND WARRANTIES. Unless waived
in writing by Bancorp and Bank, the representations and warranties of FSC and
FSB contained in this Agreement shall be correct on and as of the Closing
Date with the same effect as though made on and as of such date, except for
changes which are not, in the aggregate, material and adverse to the
financial condition, businesses, properties or operations of FSC and its
consolidated subsidiaries, and, except as otherwise contemplated by this
Agreement, FSC and FSB shall have performed in all material respects all of
their obligations and agreements hereunder theretofore to be performed by
them. Bancorp and Bank shall have received at the Closing a certificate to
the foregoing effect dated the Closing Date and executed on behalf of FSC and
FSB by one of their duly authorized executive officers.
(b) OPINION OF FSC COUNSEL. Unless waived in writing by Bancorp
and Bank, Bancorp and Bank shall have received at the Closing from Ray,
Quinney & Nebeker, a written opinion, dated the Closing Date, substantially
in the form of Schedule 8.3(b) hereto.
(c) FSC RESOLUTIONS; CORPORATE DOCUMENTS. FSC shall have
delivered to Bancorp a certified copy of resolutions duly adopted by the
Board of Directors of FSC approving this Agreement, the Merger and the Bank
Merger, all as contemplated hereby. FSC shall deliver to Bancorp (i) a copy
certified by the Delaware Secretary of State's Office of FSC's Certificate of
Incorporation; (ii) a copy of FSC's Bylaws certified by the Corporate
Secretary, and (iii) a certificate of good standing dated as of a recent
date, issued by the Delaware Secretary of State's office.
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(d) SHAREHOLDER APPROVAL. Under the Delaware General
Corporation Law, FSC shareholder approval is not required for the Merger.
FSC, as the sole shareholder of FSB, shall approve the Agreement and the Bank
Merger. A majority of the shareholders of Bancorp shall have approved this
Agreement and the Merger.
(e) FAIRNESS OPINION. Bancorp shall have previously received a
letter from Hovde Financial, Inc. dated as of a date within five (5) days of
the mailing of the Bancorp Proxy Statement to the shareholders of Bancorp, to
the effect that the transactions contemplated by this Agreement are fair from
a financial point of view to the shareholders of Bancorp.
ARTICLE IX
CLOSING OF MERGER
9.1 CLOSING. Unless the Agreement is earlier terminated in
accordance with Article X, below, the closing of the transactions
contemplated herein (the "CLOSING") shall take place at 10:00 a.m. on a date
to be agreed upon by the parties, and if such date is not agreed upon by the
parties, the Closing shall occur on the fifth business day after satisfaction
or waiver of all of the conditions precedent set forth in Article VIII and
the expiration of the required waiting period following approval of FSC's
application to the Federal Reserve Bank of San Francisco and the Nevada
Financial Institutions Division, if any, relating to the Merger and the Bank
Merger but in no event later than thirty (30) days after the expiration of
such period (the "CLOSING DATE"), at the offices of Ray, Quinney & Nebeker,
79 South Main Street, Salt Lake City, Utah 84111.
9.2 FILING OF CERTIFICATE OF MERGER AND ARTICLES OF MERGER.
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(a) Bancorp and FSC shall execute a Certificate of Merger and
Articles of Merger in substantially the forms attached hereto as EXHIBITS A-1
and A-2 and shall cause such Certificate of Merger and Articles of Merger to
be filed with the Delaware Secretary of State's Office and the Nevada
Secretary of State's Office, respectively, on the Closing Date or as soon
thereafter as practicable. The Effective Time of the Merger shall be on such
date as the Delaware Secretary of State and the Nevada Secretary of State,
under their respective rules and regulations, deem the Merger effective.
(b) Bank and FSB shall execute articles of merger in
substantially the form attached hereto as EXHIBIT B and shall cause such
articles of merger to be approved by the Nevada Financial Institutions
Division and filed with the Nevada Secretary of State's office, on the
Closing Date or as soon thereafter as practicable. The Bank Merger shall
take effect on such date as the Nevada Secretary of State, under rules and
regulations governing such office, deems the Bank Merger effective, but in
any event shall be effective after the Effective Time of the Merger.
ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual consent of the Executive Committee and Board of
Directors of FSC and FSB, respectively, and the Boards of Directors of
Bancorp and Bank; or
(b) by the Boards of Directors of FSC and FSB, respectively, or
the Boards of Directors of Bancorp and Bank at any time after the expiration
of
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nine (9) months from the date hereof, if the Bank Merger and Merger shall not
theretofore have been consummated by the failure to satisfy the conditions to
Closing not within the control of the electing party; or
(b) by Bancorp and Bank, upon written notice to FSC and FSB at
any time if any representation or warranty of FSC and FSB contained in this
Agreement was materially incorrect when made or becomes materially incorrect
on or prior to the Closing Date, or if FSC or FSB fail to comply with any of
their respective covenants contained in this Agreement, and the same is not
cured within thirty (30) days after notice of such inaccuracy or
noncompliance; or
(c) by FSC and FSB upon written notice to Bancorp and Bank at
any time if any representation or warranty of Bancorp and Bank contained in
this Agreement was materially incorrect when made or becomes materially
incorrect on or prior to the Closing Date, or if Bancorp and Bank fail to
comply with any of their covenants contained in this Agreement, and the same
is not cured within thirty (30) days after notice of such inaccuracy or
noncompliance; or
(d) by FSC and FSB, upon written notice to Bancorp and Bank at
any time if a majority of Bancorp's shareholders (or such higher level
mandated by the Articles of Incorporation or Bylaws of Bancorp) does not
approve the Merger contemplated hereby, or if such Merger is disapproved by
any governmental authority whose approval is necessary; or
(e) by either Bancorp or FSC, if Bancorp shall have failed to
act or refrain from doing any act as required under this Agreement pursuant
to Section 11.9.
10.2 EFFECT OF TERMINATION. In the event of termination and
abandonment hereof pursuant to the provisions of Section 10.1, this Agreement
shall become void and have no force or effect, except that Sections 10.2, 11.2,
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11.9 and 11.11 shall survive the termination. Such termination shall not
relieve any party of any liability for damages arising out of its willful
breach of any provision of this Agreement for any default prior to such
termination.
ARTICLE XI
ADDITIONAL COVENANTS
11.1 EMPLOYEE MATTERS. FSC shall use its best efforts to effect a
conversion of Bancorp/Bank employees who become FSB employees to FSC benefit
plans within twelve (12) months of the Effective Date (the "CONVERSION
PERIOD"). During the Conversion Period, FSC shall continue only the following
Plans described in Section 5.16, for the benefit of the employees of
Bancorp/Bank who become FSB employees pending termination or merger of the
Plans into FSC benefit plans:
(a) The Bank 401(k) plan; and
(b) The Bank Welfare Benefit Plans listed as or in items 4(a),
(b), (c), (d), (e), (f), (g), (h), and (j) of Schedule 5.16 hereto.
Upon conversion to FSC benefit plans, Bancorp/Bank employees who are
still employed at such time shall cease participation in the Plans described
in Section 5.16 and shall be entitled to participate in such FSC benefit
plans in accordance with the terms thereof and in accordance with FSC policy.
For purposes of determining each such Bancorp/Bank employee's eligibility
and vesting under such FSC benefit plans, FSC shall recognize such
Bancorp/Bank employee's service with Bank beginning on the date such Bank
employee commenced employment with Bank; PROVIDED, however, that with
respect to the FSC 401(k) plan, prior service credit shall be given only for
such period as Bank's 401(k) plan has been in existence; and, PROVIDED
FURTHER that prior service credit
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shall not be given for purposes of accrual of benefits under the FSC
retirement plan.
FSC also covenants and agrees that any pre-existing condition,
limitation or exclusion in its health plans shall not apply to Bancorp or
Bank employees or their covered dependents who are covered under similar
Bancorp or Bank health plans on the Closing Date and who elect coverage under
FSC's health plans at the time such Bancorp or Bank employees are first given
the option to enroll in FSC's health plans.
FSC will use its best efforts to either freeze the Plans or transfer
such benefits under the Plans (in a plan-to-plan transfer) into an existing
benefit plan maintained by FSC as to which such benefits may be transferred
without cost to FSC, or necessity of material amendment to, or adverse effect
on qualifications of, such FSC plan; PROVIDED, however, that no accounts
shall be permitted to roll-over to FSC's 401(k) plan without the express
written consent of the trustee and sponsor of FSC's 401(k) plan, in its sole
discretion, to such roll-over, which approval shall not be given in any event
without receipt of such documentation from Bancorp and Bank as may be
requested by FSC prior to Closing, including, without limitation, an Internal
Revenue Service ruling obtained by Bancorp approving the roll-over and
ensuring the qualification of the FSC 401(k) plan if the FSC 401(k) plan
accepts such roll-overs.
Each of Mr. Barone and Mr. Platz have entered into a Salary
Continuation Agreement dated April 30, 1997 with Bancorp (the "SERP
AGREEMENT") which provides for certain payments to each of Mr. Barone and
Mr. Platz, respectively, upon a change in control of Bank as set forth
therein. FSC agrees that, notwithstanding the date of the Effective Time,
each of Mr. Barone and Mr. Platz shall be entitled to the April 30, 1999
benefit under the SERP Agreement.
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No provision of this Agreement shall be construed to prohibit FSC from
having the right to terminate the employment of any employee, with or without
cause, or to amend or terminate after the Closing Date any employee benefit
plan established, maintained or contributed to by FSC or its subsidiaries.
11.2 COSTS. Each of the parties to this Agreement shall pay its own
charges and costs incurred or to be incurred in connection with the execution
and performance of this Agreement. In the event of a willful breach of a
material agreement or covenant contained herein by either Bancorp and Bank,
on the one hand, or FSC and FSB, on the other, which breach either directly
or indirectly results or would result in a failure to consummate the Bank
Merger and Merger, and which breach cannot be cured or is not cured within
thirty (30) days after written notice of such breach is given to the party
committing such breach, the party causing such breach shall be liable to the
other party for damages for an amount not to exceed $2,500,000; PROVIDED,
further, that in the event of a termination of this Agreement under
Section 10.1(f), above, Bancorp shall pay to FSC a termination fee of
$2,000,000. Either party may elect to forego the recovery of damages and
pursue its right to the specific performance or enforcement of the terms and
provisions of this Agreement.
11.3 INSTRUMENTS OF TRANSFER, ETC. Each of the parties hereto shall
cooperate with the other parties in every way in carrying out the
transactions contemplated herein, in delivering instruments to perfect the
conveyances, assignments and transfers contemplated herein, and in delivering
all documents and instruments reasonably deemed necessary or useful by
counsel for any party hereto.
11.4 NOTICES. All notices, requests, consents and demands shall be
given to or made upon the parties at their respective addresses set forth
below, or at such other address as a party may designate in writing delivered
to the other
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parties. Unless otherwise agreed in this Agreement, all notices, requests,
consents and demands shall be given or made by personal delivery, by
confirmed air courier, by facsimile transmission ("FAX"), with a copy to
follow by first class mail, or by certified first class mail, return receipt
requested, postage prepaid, to the party or parties addressed as aforesaid.
If sent by confirmed air courier, such notice shall be deemed to be given
upon the earlier to occur of the date upon which it is actually received by
the addressee or the business day upon which delivery is made at such address
as confirmed by the air courier (or if the date of such confirmed delivery is
not a business day, the next succeeding business day). If mailed, such
notice shall be deemed to be given upon the earlier to occur of the date upon
which it is actually received by the addressee or the second business day
following the date upon which it is deposited in a first-class postage-prepaid
envelope in the United States mail addressed as aforesaid. If given by fax,
such notice shall be deemed to be given upon the date it is actually received
by the addressee, as confirmed by the fax activity report generated upon
transmission of such fax.
(a) IF TO FSC AND FSB, TO:
First Security Bank of Nevada
530 Las Vegas Blvd. S
Las Vegas, Nevada 89101
Attn: David J. Smith, President
and Chief Executive Officer
Fax Number (702) 385-8705
WITH A COPY TO:
First Security Corporation
79 South Main Street
Salt Lake City, Nevada 84111
Attn: Brad D. Hardy, Esq.
Executive Vice-President & General Counsel
Fax Number: (801) 359-6928
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WITH A COPY TO:
Sylvia I. Iannucci, Esq.
Ray, Quinney & Nebeker
400 Deseret Building
79 South Main Street
Salt Lake City, Utah 84111
Fax Number: (801) 532-7543
(b) IF TO BANCORP AND BANK, TO:
Comstock Bank
6275 Neil Road
Reno, Nevada 89511
Attn: Robert N. Barone, Chief Executive Officer
Fax Number: (775) 828-0377
WITH A COPY TO:
Comstock Bancorp
6275 Neil Road
Reno, Nevada 89511
Attn: Robert N. Barone, Chief Executive Officer
Fax Number: (775) 828-0377
WITH A COPY TO:
Francis X. Grady, Esq.
Grady & Associates
20800 Center Ridge Road, Suite 116
Rocky River, Ohio 44116-4306
Fax Number: (440) 356-7254
Each party hereto shall notify promptly the other in writing of the
occurrence of any event which will or may result in the failure to satisfy
the conditions specified in Article VIII hereof. Between the date of this
Agreement and the Closing Date, each party hereto will advise the other of
the satisfaction of such conditions as they occur.
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11.5 AMENDMENTS. Prior to the Effective Time, any provision of this
Agreement, except for Section 3.1 which establishes the Exchange Ratio, may
be amended or modified at any time, either before or after its approval, if
any, by the shareholders of any party to this Agreement, by an agreement in
writing between the parties hereto approved by their respective Boards of
Directors (or Executive Committee in the case of FSC) and executed in the
same manner as this Agreement.
11.6 ENTIRE AGREEMENT. This Agreement and all exhibits and schedules
hereto and other documents incorporated or referred to herein, contain the
entire agreement of the parties and there are no representations, inducements
or other provisions other than those expressed in writing. No modification,
waiver or discharge of any provision of or breach of this Agreement shall
(i) be effective unless it is executed in writing by the party effecting such
modification, waiver or discharge, or (ii) affect the right of either party
hereto thereafter to enforce any other provision or to exercise any right or
remedy in the event of a breach by a party hereto, whether or not similar.
11.7 ASSIGNMENT. This Agreement may not be assigned by any party
hereto except with the prior written consent of the other parties.
11.8 COUNTERPARTS. Any number of counterparts of this Agreement may
be signed and delivered and each shall be considered an original and together
they shall constitute one agreement.
11.9 EXCLUSIVE MERGER AGREEMENT. Bancorp, Bank, and the Board of
Directors of Bancorp covenant and agree that, between the date hereof and the
date of the meeting of the shareholders of Bancorp described in Article VII
hereof, they will not, either directly or indirectly, solicit or attempt to
procure offers relating to the merger or acquisition of Bancorp or Bank with
or by any entity not a party to this Agreement, or negotiate or enter into
any agreements
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relating to the merger or acquisition of Bancorp or Bank with or by any such
third party, and such persons further agree to use his or her best efforts to
obtain the approval of the Merger by the shareholders of Bancorp.
Notwithstanding the foregoing, neither Bancorp, Bank nor any of their
respective officers or directors shall be required by this Section 11.9 to
take or refrain from taking any action if to do so would, in the written
opinion of Bancorp's legal counsel, violate the duties imposed by law on the
Bancorp directors or officers to the Bancorp shareholders.
11.10 PUBLIC STATEMENTS. No party to this Agreement shall issue any
press release or other public statement concerning the transactions
contemplated by this Agreement without first providing the other parties
hereto with a written copy of the text of such release or statement and
obtaining the consent of the other parties respecting such release or
statement, which consent will not be unreasonably withheld. The consent
provided for in this Section 11.10 shall not be required if the delay
necessary to obtain such consent would preclude the timely issuance of a
press release or public statement as required by law. The provisions of this
Section 11.10 shall not be construed as prohibiting the filing of copies of
this Agreement or descriptions of this Agreement with (i) regulatory agencies
as to which regulatory approvals are contemplated by this Agreement or
(ii) the SEC consistent with Bancorp's obligations as a company whose shares
are registered pursuant to the Securities Exchange Act of 1934.
11.11 CONFIDENTIALITY. Each party shall use all information that it
obtains from the others pursuant to this Agreement solely for the
effectuation of the transactions contemplated by this Agreement or for other
purposes consistent with the intent of this Agreement and shall not use any
of such information for any other purpose, including, without limitation, the
competitive detriment of the other parties. Each party shall maintain as
strictly confidential all information it learns from the others and shall,
upon expiration or termination of this Agreement, return promptly to the
other parties all documentation (and copies
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thereof) provided by them or made available by third parties. Each party may
disclose such information to its respective affiliates, counsel, accountants,
tax advisors and consultants. This provision shall not prohibit the use or
disclosure of confidential information pursuant to court order or which has
otherwise become publicly available.
11.12 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
None of the representations, warranties and agreements in this Agreements or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for the agreements contained in Sections 3.1(a), 3.4,
3.5, 6.10, 6.13, 6.17, 6.18, 11.1, 11.10 and 11.11, the Employment Agreements
in the form of Schedules 8.2(h-1) and 8.2(h-2), and the agreements of the
Affiliates contained in the letters referred to in Section 8.2(f).
11.13 ALTERNATIVE STRUCTURE. Notwithstanding anything to the
contrary contained in this Agreement, prior to the Closing, the parties may
mutually agree to revise the structure of the Bank Merger and the Merger and
related transactions provided that each of the transactions comprising such
revised structure shall (i) not change the amount or form of consideration to
be received by the holders of Bancorp Common Stock, (ii) be capable of
consummation in as timely a manner as the structure contemplated herein and
(iii) not otherwise be prejudicial to the interest of the stockholders of
Bancorp. This Agreement and any related documents shall be appropriately
amended in order to reflect any such revised structure.
11.14 THIRD PARTIES. Except with respect to Article III, Sections
6.13, 6.17, 6.18 and 11.1 which are intended to benefit the shareholders,
employees, officers and directors of Bancorp, each party hereto intends that
this Agreement shall not benefit or create any right or cause of action to
any person other than
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parties hereto. As used in this Agreement, the term "parties" shall refer
only to FSC, FSB, Bancorp or Bank as the context may require.
11.15 SEVERABILITY. Except to the extent that application of this
Section 11.15 would have a Material Adverse Effect on either party, any term
or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement
is so broad as to be unenforceable, the provisions shall be interpreted to be
only so broad as is enforceable.
11.16 CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
11.17 DEFINITION OF "MATERIAL ADVERSE EFFECT". As used in this
Agreement, "Material Adverse Effect" shall mean with respect to a person, a
Material Adverse Effect upon (A) the business, financial condition,
operations, or prospects of such person, or (B) the ability of such person to
timely perform its obligations under the Agreement and to timely consummate
the Merger; PROVIDED, however, that in determining whether a Material Adverse
Effect has occurred there shall be excluded any effect on the referenced
party the cause of which is (i) any change in banking or similar laws, rules
or regulations of general applicability or interpretations thereof by courts
or governmental authorities, (ii) any change in generally accepted accounting
principles or regulatory accounting principles applicable to banks or their
holding companies generally, (iii) any action or omission of FSC or Bancorp
or any subsidiary of either of them taken with the prior written consent of
FSC or Bancorp, as applicable, or permitted by this
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Agreement, and (iv) any changes in general economic conditions affecting
banks or their holding companies generally.
[This Space Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
FIRST SECURITY CORPORATION
By
---------------------------------
Morgan J. Evans, President and
Chief Operating Officer
FIRST SECURITY BANK OF NEVADA
By
---------------------------------
David J. Smith, President and
Chief Executive Officer
COMSTOCK BANCORP
By
---------------------------------
Robert N. Barone, Chairman and
Chief Executive Officer
COMSTOCK BANK
By
---------------------------------
Robert N. Barone, Chairman and
Chief Executive Officer
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SHAREHOLDER VOTING AGREEMENT
AGREEMENT, dated as of January __, 1999, by and among First Security
Bank of Nevada, a Nevada bank ("FSB"), First Security Corporation, a Delaware
corporation ("FSC"), and each of the persons executing this Agreement as
shareholders of Comstock Bancorp, a bank holding company organized under the
laws of the State of Nevada (each such person being referred to as the
"SHAREHOLDER" and all such persons being referred to collectively as the
"SHAREHOLDERS").
The Shareholders are directors and/or significant shareholders owning
outstanding shares of common stock, $.01 par value (the "SHARES") and/or
stock options ("OPTIONS") and/or warrants ("WARRANTS") of Comstock Bancorp
("BANCORP"). Bancorp is the sole shareholder of Comstock Bank, a bank
organized under the laws of the State of Nevada ("BANK"). Each Shareholder
desires to induce (i) FSB and FSC and each other Shareholder to enter into
this Agreement and (ii) FSC and FSB to enter into an Agreement and Plan of
Reorganization (the "MERGER AGREEMENT") with Bancorp and Bank which provides
for a merger of Bank with and into FSB and of Bancorp with and into FSC
(collectively, the "MERGERS"), subject to the conditions set forth in the
Merger Agreement.
NOW, THEREFORE, the parties agree as follows:
1. SALE OF SHARES.
1.1 Except as provided in Section 1.2 hereof, each Shareholder
severally agrees that such Shareholder will not sell, transfer or otherwise
dispose of, or enter into any contract, option, or other arrangement or
understanding with respect to the sale, transfer or other disposition of, or
grant a proxy to vote, any Shares now owned or hereafter acquired by such
Shareholder, other than to or in favor of FSC or an affiliate of FSC, or
pursuant to or in favor of the Merger Agreement.
1.2 Notwithstanding anything in Section 1.1 to the contrary, each
Shareholder may: (i) donate Shares to any bona fide tax-exempt charitable
organization; provided that such charitable organization shall first agree in
writing to be bound by all of the terms and subject to all of the conditions
of this Agreement, (ii) transfer Shares by gift to a member of such
Shareholder's family; provided that such family member shall first agree in
writing to be bound by all of the terms and subject to all of the conditions
of this Agreement.
2. VOTING.
Each Shareholder severally agrees to vote all of the Shares over which
such Shareholder has the power to vote in favor of adoption and approval of
the Merger Agreement and the transactions contemplated thereby. The parties
hereby acknowledge and agree that nothing contained herein is intended to
restrict a Shareholder from voting on any matter, or
<PAGE>
otherwise from acting, in the Shareholder's capacity as a director of Bancorp
with respect to any matter, including but not limited to, the management or
operation of Bancorp.
3. NO SOLICITATION.
Each Shareholder will not solicit, initiate or encourage any
"Acquisition Proposal" (as defined below) or furnish any information to, or
cooperate with, any person, corporation, firm, or other entity with respect
to an Acquisition Proposal. As used herein, "ACQUISITION PROPOSAL" means a
proposal for a merger or other business combination involving Bancorp and/or
Bank or for the acquisition of a substantial equity interest in, or a
substantial portion of the assets of, Bancorp and/or Bank, other than as
provided under the Merger Agreement.
4. LIMITATION OF OBLIGATIONS; TERMINATION.
Notwithstanding any term or condition of this Agreement, Shareholder
shall not be required to take any action which would, in the reasonable
opinion of Shareholder's legal counsel, violate the duties imposed by law on
Shareholder. The obligations of the parties under this Agreement shall
terminate upon the earliest of (i) the termination of the Merger Agreement,
or (ii) the consummation of the Mergers. Upon any such termination, the
obligations of each party to this Agreement shall be extinguished.
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
Each Shareholder severally represents and warrants, subject to the
provisions of Section 1.2 and Section 4 hereof, that such Shareholder has the
full right and authority to enter into this Agreement and that this Agreement
has been duly and validly executed and delivered by such Shareholder and
constitutes a valid and binding obligation of such Shareholder enforceable
against such Shareholder in accordance with its terms.
6. SURVIVAL.
All rights and authority granted herein by each Shareholder shall
survive the death or incapacity of such Shareholder. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective heirs, personal representatives, successors and assigns. FSC may,
without the consent of any (but with notice to each) of the Shareholders,
assign its rights hereunder only to any directly or indirectly wholly owned
subsidiary of FSC.
7. NOTICES. Any notice required or permitted under this Agreement
shall be given in writing and shall be deemed effectively given upon personal
delivery, confirmed telex or facsimile transmission, or upon the third
business day after deposit with the United States Post Office, by registered
or certified mail, postage prepaid, addressed as follows:
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TO FSC AND FSB:
First Security Corporation
79 South Main Street
Salt Lake City, Utah 84111
Attention: Brad D. Hardy, Esq.
Executive Vice President and General Counsel
Fax: (801) 359-6928
First Security Bank of Nevada
530 Las Vegas Blvd., S.
Las Vegas, Nevada 89101
Attention: David J. Smith
President and Chief Executive Officer
Fax: (702) 386-8705
WITH A COPY TO:
Sylvia I. Iannucci, Esq.
Ray, Quinney & Nebeker
P.O. Box 45835
Salt Lake City, Utah 84145-0385
Fax: (801) 532-7543
TO ANY SHAREHOLDER:
At the addresses set forth at the end of this Agreement.
WITH A COPY TO:
Comstock Bancorp
6275 Neil Road
Reno, Nevada 89511-1138
Attention: Robert N. Barone
Chairman and Chief Executive Officer
Fax: (775) 828-0377
AND A COPY TO:
Francis X. Grady, Esq.
Grady & Associates
20800 Center Ridge Road, Suite 116
Rocky River, Ohio 44116-4306
Fax: (440) 356-7254
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<PAGE>
8. SEVERAL OBLIGATIONS.
All of the obligations of the Shareholders under this Agreement shall be
several and not joint and execution of this Agreement by each Shareholder
shall not be deemed to be evidence for any purpose that they are acting as a
group or in concert.
9. EXECUTION AND COUNTERPARTS.
This Agreement may be executed by facsimile and in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute a single agreement. This Agreement shall be deemed
fully executed and binding when all of the parties hereto have executed this
Agreement, at which time this Agreement shall have the same force and effect
as if all signatures appeared on one and the same original.
10. INCORPORATION OF RECITALS.
All of the above recitals are and shall be considered and deemed to be
incorporated in and made an integral part of this Agreement.
11. REGISTRATION STATEMENT.
Each of the Shareholders acknowledges that a Registration Statement on
Form S-4 is in preparation and will be filed by FSC with the Securities and
Exchange Commission. The Registration Statement will include a prospectus of
FSC and a proxy statement of Bancorp, which proxy statement will be used to
solicit proxies of shareholders of Bancorp for use at the Bancorp Meeting.
Each of the Shareholders acknowledges and agrees that (a) he is an accredited
investor, within the meaning of Securities and Exchange Commission Rule 501(a),
or that he has had and continues to have, either alone or together with his
representatives, (i) access to all of the information the Registration
Statement and prospectus and proxy statement therein will provide and
(ii) sufficient opportunity to make inquiries of FSC and Bancorp concerning
such information, (b) on his own or together with his representatives, he is
able to evaluate and has evaluated the merits and risks of approval of the
Merger Agreement and the Mergers contemplated thereby and investment in FSC
common stock and (c) each of FSC and Bancorp has relied and may rely upon
these representations in connection with its execution of this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, FSC, FSB and each Shareholder have caused this
Agreement to be executed as of the date first above written.
FIRST SECURITY CORPORATION
By
---------------------------------
Morgan J. Evans, President and
Chief Operating Officer
FIRST SECURITY BANK OF NEVADA
By
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David J. Smith, President
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THE SHAREHOLDERS
Edward E. Allison
c/o Comstock Bank
P.O. Box 7610
Reno, Nevada 89510-7610
Robert N. Barone
c/o Comstock Bank
P.O. Box 7610
Reno, Nevada 89510-7610
Stephen C. Benna
c/o Comstock Bank
P.O. Box 7610
Reno, Nevada 89510-7610
John A. Coombs
c/o Comstock Bank
P.O. Box 7610
Reno, Nevada 89510-7610
Michael W. Dyer
c/o Comstock Bank
P.O. Box 7610
Reno, Nevada 89510-7610
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Mervyn J. Matorian
c/o Comstock Bank
P.O. Box 7610
Reno, Nevada 89510-7610
Samual P. McMullen
c/o Comstock Bank
P.O. Box 7610
Reno, Nevada 89510-7610
Larry A. Platz
c/o Comstock Bank
P.O. Box 7610
Reno, Nevada 89510-7610
Ronald E. Zideck
c/o Comstock Bank
P.O. Box 7610
Reno, Nevada 89510-7610
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EXHIBIT 7
AGREEMENT OF JOINT FILING
Pursuant to Rule 13d-1(k) under the Securities Exchange Act of 1934, the
undersigned persons hereby agree to file with the Securities and Exchange
Commission, Amendment No. 1 to the Statement on Schedule 13D (the "Statement")
to which this Agreement of Joint Filing is attached as an exhibit, and agree
that such Statement, as so filed, is filed on behalf of each of them.
This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original, and all of which together shall be
deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement of Joint
Filing.
Dated: February 18, 1999 ROBERT N. BARONE
/s/ Robert N. Barone
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Robert N. Barone
THE BARONE FAMILY 1988 TRUST
By: /s/ Robert N. Barone
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Robert N. Barone
Trustee
