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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
LIBERTY BANCSHARES, INC.
(Exact name of the registrant as specified in its articles of incorporation)
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Missouri 6022 43-1716068
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
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1414 East Primrose
Springfield, Missouri 65804
(417) 888-3000
(Address, including zip code, and telephone number, including area code, of the
registrant's principal executive offices)
Gary E. Metzger
Liberty Bancshares, Inc.
1414 East Primrose
Springfield, Missouri 65804
(417) 888-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies of all communications to:
Gary A. Powell James V. Stepleton
Husch & Eppenberger, LLC Husch & Eppenberger, LLC
750 North Jefferson 100 North Broadway, Suite 1300
Springfield, Missouri 65802 St. Louis, Missouri 63102
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: ___________, 1998.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_] ________________
If this form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [_] ________________
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Calculation of Registration Fee
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Title of each Class of Amount to Proposed maximum Proposed maximum Amount of
Securities to be registered be registered offering price aggregate offering registration fee
per unit price
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Common Stock, $1.00 par value 355,160(1) $32.63(2) $11,588,400(2) $3,418.58
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(1) This Registration statement covers the maximum number of shares of common
stock of the Registrant issuable to holders of common stock of Sac River Valley
Bank, a state bank ("Sac River") in the proposed merger of Sac River with and
into Liberty Bank ("Liberty"), a state bank and a wholly-owned subsidiary of the
Registrant.
(2) Estimated solely for the purpose of calculating the registration fee. The
registration fee has been computed pursuant to Rule 457(f)(2) under the
Securities Act of 1933, as amended, based on the book value as of March 31,
1998, of the Sac River common stock to be canceled in the proposed merger of Sac
River into Liberty.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES EXCHANGE COMMISSION, ACTING PURSUANT TO
SAID SECTION 8(A) MAY DETERMINE.
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NOTICE OF SPECIAL MEETING OF
THE SHAREHOLDERS OF SAC RIVER VALLEY BANK
TO BE HELD OCTOBER ____, 1998
To the Shareholders of Sac River Valley Bank:
This is a notice that a Special Meeting of the Shareholders of Sac River
Valley Bank ("Sac River") will be held in the offices of Sac River located at 14
Public Square, Stockton, Missouri on October ____, 1998, at 9:00 a.m., local
time, for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and Plan of
Merger between Liberty Bancshares, Inc. ("Bancshares"), Liberty Bank ("Liberty")
and Sac River (the "Merger Agreement"). In the Merger, Sac River will merge with
and into Liberty (the "Merger") and Liberty will be the surviving corporation.
In the Merger, each issued and outstanding share of common stock of Sac River,
par value $30 per share ("Sac River Common Stock"), will be converted into the
right to receive from Bancshares cash in the amount of $485.70 (the "Mandatory
Per Share Cash Amount") plus, at the election of each shareholder, 35.516 shares
of common stock of Bancshares, par value $1 per share (the "Bancshares Common
Stock"), or cash in the amount of $1,050 per share or a combination of cash and
stock, all as more fully described in the accompanying Proxy
Statement-Prospectus.
2. To transact such other business as may properly come before the meeting
and any adjournment or postponement thereof.
Only shareholders of record of Sac River Common Stock at the close of
business on September ____, 1998 are entitled to notice of and to vote at the
Special Meeting and any adjournment or postponement thereof. Approval of the
Merger Agreement requires the affirmative vote of the holders of two-thirds of
the issued and outstanding shares of Sac River Common Stock. Shareholders of Sac
River are entitled to dissent from the Merger and to receive in cash the fair
value of their shares, as more fully explained in the accompanying Proxy
Statement-Prospectus.
You are cordially invited to attend the Special Meeting. Whether or not you
plan to attend, please complete, date, sign and return the enclosed proxy card
to assure that your shares will be represented at the Special Meeting. A prepaid
return envelope is enclosed for your convenience. If you attend the Special
Meeting, you may vote your shares in person whether or not you have previously
submitted a proxy.
By order of the Board of Directors,
_________________________________
September ____, 1998
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SAC RIVER VALLEY BANK
PROXY STATEMENT
LIBERTY BANCSHARES, INC.
PROSPECTUS
Sac River Valley Bank, a Missouri banking corporation ("Sac River") is
providing this Proxy Statement-Prospectus to its shareholders in connection with
the solicitation of proxies by the Sac River Board of Directors for use at a
special meeting of the shareholders of Sac River (the "Special Meeting"). The
Special Meeting will convene on October ____, 1998, at 9:00 a.m., local time, in
the main office of Sac River located at 14 Public Square, Stockton, Missouri,
including any adjournment or postponement thereof, for the purpose of
considering and voting upon the matters set forth in the preceding Notice of
Special Meeting of the Shareholders of Sac River, as more fully described in
this Proxy Statement-Prospectus.
Liberty Bancshares, Inc. ("Bancshares"), has filed a Registration Statement
on Form S-4 (together with all amendments and exhibits, the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Act of 1933, as amended (the "Securities Act"),
covering up to 355,160 shares of common stock of Bancshares, par value $1 per
share ("Bancshares Common Stock"), to be issued under the Agreement and Plan of
Merger, dated as of June 18, 1998, between Bancshares, Liberty Bank, a Missouri
banking corporation ("Liberty"), and Sac River (the "Merger Agreement"). The
Merger Agreement provides that, subject to the approval of the holders of shares
of common stock of Sac River at the Special Meeting and the satisfaction (or
waiver, to the extent that such waiver is permitted by law) of other conditions
to closing contained in the Merger Agreement, Sac River will merge with and into
Liberty, and Liberty will be the surviving corporation (the "Merger"). In the
Merger each issued and outstanding share of common stock of Sac River ("Sac
River Common Stock") (other than shares held by persons who do not vote in favor
of the Merger and who properly exercise their dissenter's rights by following
the procedures required under Missouri Revised Statutes Section 362.730, as
amended) shall be converted into Bancshares Common Stock or exchanged for cash,
as provided in the Merger Agreement. This Proxy Statement-Prospectus also
constitutes the prospectus of Bancshares filed as part of the Registration
Statement. See "AVAILABLE INFORMATION." Sac River will begin mailing this Proxy
Statement-Prospectus and accompanying form of proxy to shareholders of Sac River
on or about September __, 1998. IN ADDITION TO THE OTHER INFORMATION CONTAINED
HEREIN, SAC RIVER SHAREHOLDERS SHOULD CAREFULLY REVIEW THE "RISK FACTORS"
SECTION OF THIS PROXY STATEMENT-PROSPECTUS ON PAGES 8 TO 12.
THE SECURITIES TO WHICH THIS PROXY STATEMENT-PROSPECTUS RELATES
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF BANCSHARES COMMON STOCK OFFERED HEREBY ARE
NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK
OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
__________________
The date of this Proxy Statement-Prospectus is September ____, 1998.
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No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Proxy Statement-Prospectus in connection with the solicitation of proxies or the
offering of securities made hereby and, if given or made, such information or
representation must not be relied upon as having been authorized by Bancshares
or Sac River. This Proxy Statement-Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, any securities, or the solicitation
of a proxy, in any jurisdiction, to or from any person to whom or from whom it
is unlawful to make any such offer or solicitation in such jurisdiction. Neither
the delivery of this Proxy Statement-Prospectus nor any distribution of
securities made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of Bancshares or Sac River since
the date of this Proxy Statement-Prospectus or that information in this Proxy
Statement-Prospectus or in the documents incorporated by reference herein is
correct as of any time subsequent to the date hereof or the dates thereof.
AVAILABLE INFORMATION
This Proxy Statement-Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement.
Bancshares has provided the information in this Proxy Statement-Prospectus
about Bancshares and its subsidiary, Liberty, and Sac River has provided the
information about itself. At the present time, neither Bancshares or Sac River
is a reporting company under the Securities Exchange Act of 1934 (the "Exchange
Act"). After the consummation of the Merger, Bancshares will file reports with
the Commission for a period of one year as required by Section 15(d) of the
Exchange Act.
Bancshares has filed the Registration Statement with the Commission. This
Proxy Statement-Prospectus constitutes a part of the Registration Statement, but
does not contain all of the information in the Registration Statement. The
Registration Statement, including all exhibits to the Registration Statement,
and the reports and other information Bancshares will file with the Commission
after the Merger can be inspected and copied at the principal offices of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices of the Commission: 7 World
Trade Center, New York, New York 10048, and the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60601. Copies of all
materials filed by Bancshares may be obtained from the Commission at its
principal office in Washington, D.C., upon payment of the fees prescribed by the
Commission. The Commission maintains a World Wide Web site (http://www.sec.gov)
that contains all reports, proxy and information statements and all other
documents filed electronically with the Commission. Bancshares will file
electronically all documents that it is required to file with the Commission.
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TABLE OF CONTENTS
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NOTICE OF SPECIAL MEETING OF
THE SHAREHOLDERS OF SAC RIVER VALLEY BANK
To Be Held October ____, 1998.................................................................................- 2 -
SAC RIVER VALLEY BANK PROXY STATEMENT.........................................................................- 3 -
LIBERTY BANCSHARES, INC. PROSPECTUS...........................................................................- 3 -
AVAILABLE INFORMATION.........................................................................................- 4 -
SUMMARY......................................................................................................... 1
The Companies............................................................................................... 1
Bancshares.............................................................................................. 1
Liberty................................................................................................. 1
Sac River............................................................................................... 1
The Special Meeting......................................................................................... 1
The Merger.................................................................................................. 2
Risk Factors................................................................................................ 2
Conditions to the Merger.................................................................................... 2
Voting Rights and Votes Required for Approval............................................................... 3
Effective Time, Cash Payments, and Exchange of Certificates................................................. 3
Dissenters' Rights.......................................................................................... 4
Termination................................................................................................. 4
Recommendation of the Board of Directors of Sac River....................................................... 4
Certain Federal Income Tax Consequences..................................................................... 4
Regulatory Matters.......................................................................................... 5
Management of Sac River and Liberty Following Consummation of Merger........................................ 5
Certain Relationships and Related Stock Ownership........................................................... 5
Comparison of Shareholders' Rights.......................................................................... 5
Accounting Treatment of the Merger.......................................................................... 5
Selected Consolidated Financial Data of Bancshares.......................................................... 5
Selected Financial Data of Sac River........................................................................ 6
Historical and Pro Forma Comparative Per Share Data......................................................... 7
RISK FACTORS.................................................................................................... 8
Lack of Trading Market.................................................................................. 8
Risks Associated with Commercial Real Estate, Business and Construction Loans........................... 8
Risks Related to Geographic Concentration of Lending Operations......................................... 9
Effect of Changes in Interest Rates .................................................................... 9
Asset Quality........................................................................................... 10
Year 2000............................................................................................... 10
Risk Associated with Merger............................................................................. 11
Competition............................................................................................. 11
Laws and Regulations.................................................................................... 11
Dependence Upon Key Personnel........................................................................... 11
THE SPECIAL MEETING............................................................................................. 12
Introduction............................................................................................ 12
Purpose................................................................................................. 12
Record Date............................................................................................. 12
Votes Required.......................................................................................... 12
Voting and Revocation of Proxies........................................................................ 13
Solicitation of Proxies................................................................................. 14
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THE MERGER...................................................................................................... 14
Background of the Merger................................................................................ 14
Reasons of the Board of Directors of Sac River for Approving the Merger................................. 15
Recommendation of the Board of Directors of Sac River................................................... 16
Reasons of the Boards of Directors of Bancshares and Liberty for Approving the Merger................... 17
Terms of the Merger..................................................................................... 17
Dissenters' Rights...................................................................................... 17
Effective Time of the Merger............................................................................ 17
Surrender of Sac River Common Stock Certificates and Payment............................................ 18
Conditions to the Merger................................................................................ 18
Conduct of Business Pending the Merger.................................................................. 21
Waiver and Amendment.................................................................................... 21
Termination............................................................................................. 21
Expenses................................................................................................ 22
Effect on Employee Benefit Plans........................................................................ 22
Bank Regulatory Matters................................................................................. 26
Certain Federal Income Tax Consequences of the Merger................................................... 27
Resales of Bancshares Common Stock Issued in the Merger................................................. 29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................................................. 30
Related Stock Ownership................................................................................. 30
Loan Participation...................................................................................... 30
Legal Counsel........................................................................................... 30
Directors of Bancshares................................................................................. 30
DISSENTERS' RIGHTS OF HOLDERS
OF SAC RIVER COMMON STOCK....................................................................................... 31
DESCRIPTION OF BANCSHARES COMMON STOCK.......................................................................... 31
COMPARISON OF SHAREHOLDER RIGHTS................................................................................ 32
Capital Stock........................................................................................... 32
Preemptive Rights....................................................................................... 32
Voting Rights of Capital Stock.......................................................................... 32
Board of Directors...................................................................................... 32
Cumulative Voting....................................................................................... 33
Removal of Directors.................................................................................... 33
Filling of Vacancies on the Board of Directors and Newly Created Directorships.......................... 33
Call of Special Meetings of Shareholders................................................................ 33
Amendments to Articles of Agreement or Articles of Incorporation........................................ 34
Amendments to By-laws................................................................................... 34
INDEMNIFICATION OF BANCSHARES' AND LIBERTY'S DIRECTORS AND OFFICERS............................................. 34
BUSINESS OF BANCSHARES.......................................................................................... 34
General................................................................................................. 34
Employees............................................................................................... 35
Description of Liberty's Property....................................................................... 35
Competition............................................................................................. 35
Regulation and Supervision of Bancshares................................................................ 35
Regulation and Supervision of Liberty................................................................... 35
Dividends............................................................................................... 36
DIRECTORS AND EXECUTIVE OFFICERS OF BANCSHARES.................................................................. 36
SECURITY OWNERSHIP OF BANCSHARES' AND LIBERTY'S MANAGEMENT...................................................... 38
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PRINCIPAL SHAREHOLDERS OF BANCSHARES............................................................................ 39
COMPENSATION OF BANCSHARES' MANAGEMENT.......................................................................... 39
Fiscal Year End Options................................................................................. 40
Compensation of Directors and Committees of the Board of Directors...................................... 41
BANCSHARES' LEGAL PROCEEDINGS................................................................................... 42
BANCSHARES' MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............................................ 42
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF BANCSHARES....................................................... 42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF LIBERTY BANCSHARES............................................................................. 44
RESULTS OF OPERATIONS....................................................................................... 44
General................................................................................................. 44
FINANCIAL CONDITION......................................................................................... 45
Total Assets............................................................................................ 45
Net Loans............................................................................................... 45
Investment Securities................................................................................... 45
Deposits................................................................................................ 46
Short-term Borrowings................................................................................... 46
Stockholders Equity..................................................................................... 46
RESULTS OF OPERATIONS....................................................................................... 46
Net Income.............................................................................................. 46
Interest Income......................................................................................... 47
Interest Expense........................................................................................ 47
Noninterest Income and Expense.......................................................................... 47
Net Interest Income..................................................................................... 47
Investment Securities Portfolio Analysis................................................................ 50
Loan Portfolio.......................................................................................... 52
Risk Elements of Loan Portfolio......................................................................... 53
Provision for Loan Losses............................................................................... 54
Allowance for Loan Losses............................................................................... 56
Deposits................................................................................................ 56
Return on Equity and Assets............................................................................. 58
Short-Term Borrowings................................................................................... 58
Liquidity and Capital Resources......................................................................... 58
Year 2000............................................................................................... 59
Interest Rate Sensitivity............................................................................... 59
Capital Adequacy........................................................................................ 61
Impact of Recently Issued Accounting Standards.......................................................... 61
Effect of Economic Conditions........................................................................... 61
BUSINESS OF SAC RIVER....................................................................................... 62
General................................................................................................. 62
Employees............................................................................................... 62
Description of Sac River's Property..................................................................... 62
Competition............................................................................................. 62
Regulation and Supervision of Sac River................................................................. 62
Dividends............................................................................................... 63
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INDEMNIFICATION OF SAC RIVER'S OFFICERS AND DIRECTORS........................................................... 63
DIRECTORS AND EXECUTIVE OFFICERS OF SAC RIVER................................................................... 63
Certain Business Relationships.......................................................................... 64
SECURITY OWNERSHIP OF SAC RIVER'S MANAGEMENT.................................................................... 64
PRINCIPAL SHAREHOLDERS OF SAC RIVER............................................................................. 65
COMPENSATION OF SAC RIVER'S MANAGEMENT.......................................................................... 66
Executive Compensation.................................................................................. 66
Compensation of Directors............................................................................... 67
SAC RIVER'S LEGAL PROCEEDINGS................................................................................... 67
SAC RIVER'S MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS................................................................................. 67
SELECTED FINANCIAL INFORMATION.................................................................................. 68
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF SAC RIVER...................................................................................... 69
General................................................................................................. 69
FINANCIAL CONDITION......................................................................................... 70
Total Assets............................................................................................ 70
Net Loans............................................................................................... 70
Investment Securities................................................................................... 70
Deposits................................................................................................ 70
Short-term Borrowings................................................................................... 70
Stockholders' Equity.................................................................................... 71
RESULTS OF OPERATIONS....................................................................................... 71
Net Income.............................................................................................. 71
Interest Income......................................................................................... 71
Noninterest Income and Expense.......................................................................... 71
Net Interest Income..................................................................................... 72
Investment Securities Portfolio Analysis................................................................ 74
Loan Portfolio.......................................................................................... 76
Risk Elements of Loan Portfolio......................................................................... 78
Provision for Loan Losses............................................................................... 79
Allowance for Loan Losses............................................................................... 80
Deposits................................................................................................ 81
Return on Equity and Assets............................................................................. 82
Short-term Borrowings................................................................................... 83
Liquidity and Capital Resources......................................................................... 83
Year 2000............................................................................................... 84
Interest Rate Sensitivity............................................................................... 84
Capital Adequacy........................................................................................ 86
Impact of Recently Issued Accounting Standards.......................................................... 86
Effect of Economic Conditions........................................................................... 86
ADJOURNMENT OF SPECIAL MEETING.................................................................................. 87
LEGAL OPINIONS.................................................................................................. 87
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INDEX TO FINANCIAL STATEMENTS................................................................................... 89
INDEX TO APPENDICES............................................................................................. 90
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SUMMARY
This Summary contains a brief summary of certain information contained
elsewhere in this Proxy Statement-Prospectus. This summary does not contain a
complete statement of that information or of all material aspects of the Merger.
Sac River shareholders should read this Proxy Statement-Prospectus in
conjunction with the detailed information and financial statements in this Proxy
Statement-Prospectus. Consult the Glossary for the definitions of certain
capitalized terms used in this summary and elsewhere in this Proxy
Statement-Prospectus.
All information contained in this Proxy Statement-Prospectus about
Bancshares Common Stock gives effect to a ten-for-one stock split of Bancshares
Common Stock that became effective June 17, 1998.
THE COMPANIES
BANCSHARES. Bancshares is a Missouri corporation organized in 1995.
Bancshares owns all the outstanding capital stock of Liberty. At March 31, 1998,
Bancshares had consolidated total assets of $93.5 million and stockholders'
equity of $6.2 million. Bancshares' maintains its executive offices at 1414
East Primrose, Springfield, Missouri 65804, and its telephone number is (417)
888-3000. The only subsidiary and principal asset of Bancshares is Liberty.
Bancshares, through its ownership of Liberty, engages in commercial banking and
related businesses and its sole source of earnings is income generated by
Liberty. As a bank holding company, Bancshares is subject to regulation by the
Board of Governors of the Federal Reserve System (the "FRS Board")
LIBERTY. Liberty is a Missouri banking corporation organized in 1995.
Liberty maintains its executive offices at 1414 East Primrose, Springfield,
Missouri 65804 and its telephone number is (417) 888-3000. Liberty engages in
commercial banking and related businesses. Liberty has no subsidiaries. Liberty
derives most of its income from the interest and fees earned in connection with
lending activities and interest and dividends from investment securities and
short-term investments. The Federal Deposit Insurance Corporation ("FDIC")
insures Liberty's deposits to the extent permitted by law. The Missouri Division
of Finance ("Division of Finance") and the FDIC share regulatory oversight of
Liberty.
SAC RIVER. Sac River is a Missouri banking corporation organized in 1912.
At March 31, 1998, Sac River had total assets of $99.9 million and stockholders'
equity of $11.6 million. Sac River maintains its executive offices at 14 Public
Square, Stockton, Missouri 65785, and its telephone number is (417) 276-3115.
Sac River engages in commercial banking and related businesses. Sac River has no
subsidiaries. Sac River derives most of its income from interest and fees earned
in connection with lending activities and interest and dividends from investment
securities and short-term investments. The FDIC insures Sac River's deposits to
the extent permitted by law. Sac River is a member of the Federal Reserve System
(the "FRS"). The FDIC, FRS and the Division of Finance share regulatory
oversight of Sac River.
THE SPECIAL MEETING
Sac River will hold the Special Meeting at its main office located at 14
Public Square, Stockton, Missouri on October _____, 1998, at 9:00 a.m., local
time, for the purpose of considering and voting upon the Merger Agreement. Only
holders of record of Sac River Common Stock at the close of business on
_____________ (the "Record Date") will receive notice of, and may vote at, the
Special Meeting. As of the Record Date, 10,000 shares of Sac River Common Stock
were issued and outstanding. See "THE SPECIAL MEETING - Introduction; Purpose;
Record Date; Votes Required."
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THE MERGER
The Merger Agreement provides for the merger of Sac River with Liberty.
Liberty will be the surviving corporation. The separate existence of Sac River
will cease after the Merger.
Except as described under "THE MERGER - Terms of the Merger," upon
consummation of the Merger, each outstanding share of Sac River Common Stock
will be converted into the right to receive from Bancshares cash in the amount
of Four Hundred Eighty-Five Dollars and 70/100 ($485.70) per share (the
"Mandatory Per Share Cash Amount") plus, at the election of the shareholder,
cash in the amount of $1,050 per share or Bancshares Common Stock at a
conversion ratio of 35.516 shares of Bancshares Common Stock for each share of
Sac River Common Stock. Sac River shareholders can also elect to receive cash
for some of their shares of Sac River Common Stock and Bancshares Common Stock
for the balance. Bancshares' payment of the Mandatory Per Share cash amount
requires approval by the FRS Board. See "THE MERGER-Terms of the Merger," and
"THE MERGER - Certain Federal Income Tax Consequences of the Merger."
RISK FACTORS
There are certain risks associated with the proposed Merger as more fully
described in the section of this Proxy Statement-Prospectus entitled "RISK
FACTORS." These risks include the lack of any established trading market for
Bancshares Common Stock and the risks associated with Sac River's and Liberty's
commercial lending activities. There is also no established public trading
market for the shares of Sac River Common Stock. To the knowledge of the
management of Bancshares, the most recent trade involving shares of the
Bancshares Common Stock occurred in February 1997. To the knowledge of the
management of Sac River, the most recent trade involving shares of the Sac River
Common Stock occurred in February 1998. Due to the lack of an active trading
market for the shares of Bancshares, the shareholders of Sac River may be unable
to resell the shares of Bancshares Common Stock to be issued in the Merger.
Affiliates of Sac River and Bancshares will be subject to additional limitations
on resales of Bancshares Common Stock. See "THE MERGER-Resales of Bancshares
Common Stock Issued in the Merger."
CONDITIONS TO THE MERGER
The parties' mutual obligations to consummate the Merger are subject to the
satisfaction (or waiver, to the extent permitted by law) of various conditions
set forth in the Merger Agreement, including:
(i) approval of the transactions contemplated by the Merger Agreement by
the FRS Board, the Division of Finance and FDIC upon terms and
conditions that are reasonably satisfactory to Sac River and
Bancshares,
(ii) the Sac River shareholders' approval of the Merger Agreement at the
Special Meeting,
(iii) the S-4 becoming effective under the Securities Act of 1933,
(iv) receipt of a tax opinion of Husch and Eppenberger, LLC, in a form
satisfactory to Sac River that the Merger will be treated as a
reorganization for federal tax purposes, and
(v) no injunctions or restraints issued by any court preventing the
Merger are in effect.
2
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The obligation of Sac River to consummate the Merger is subject to the
conditions, among others, that:
(i) the representations and warranties made by Bancshares in the Merger
Agreement are true and correct,
(ii) Bancshares has received all necessary consents to the Merger,
(iii) there has been no material adverse change in Bancshares' business,
and
(iv) Sac River reasonably believes that the Merger will qualify as one or
more reorganizations for federal tax purposes.
The obligation of Bancshares to consummate the Merger is subject to the
conditions, among others, that:
(i) the representations and warranties made by Sac River in the Merger
Agreement are true and correct,
(ii) Sac River has received all necessary consents to the Merger,
(iii) there has been no material adverse change in Sac River's business,
(iv) no material action shall be pending against Bancshares, Liberty or
Sac River, and
(v) the total cash paid out by Bancshares to Sac River's shareholders
shall not exceed $7,657,000.
Sac River and Bancshares cannot provide assurances about when or whether
all of the conditions precedent to the Merger can or will be satisfied or waived
by the party permitted to waive such conditions. See "THE MERGER - Terms of the
Merger."
VOTING RIGHTS AND VOTES REQUIRED FOR APPROVAL
The holders of two-thirds of the outstanding shares of Sac River Common
Stock must approve the Merger. Each share of Sac River Common Stock has one vote
on the Merger.
EFFECTIVE TIME, CASH PAYMENTS, AND EXCHANGE OF CERTIFICATES
The Merger will be effective (the "Effective Time") as soon as the Merger
Agreement is filed with the Division of Finance, which will occur after all of
the conditions to the Merger have been met. After the Effective Time,
Bancshares' exchange agent will mail all Sac River shareholders instructions for
exchanging their stock certificates for Bancshares Stock Certificates and/or
cash payment, depending on their election under the Merger Agreement. See "THE
MERGER - Effective Time," and THE MERGER - Surrender of Sac River Common Stock
Certificates and Payment."
3
<PAGE> 13
DISSENTERS' RIGHTS
If the parties conclude the Merger, holders of Sac River Common Stock will
have dissenters' rights, if they comply with certain statutory procedures. If a
Sac River shareholder fails to take all required steps in a timely manner for
the exercise of dissenters' rights, he or she may lose or waive those rights. To
exercise dissenter's rights, a holder of Sac River Common Stock must take the
following actions: (i) not vote in favor of the Merger Agreement at the Special
Meeting, and (ii) within 60 days of the effective date of the Merger, petition
the Circuit Court in Greene County, Missouri, for the appointment of appraisers
to value the holder's stock. See "THE MERGER - Conditions to the Merger" and
"DISSENTERS' RIGHTS OF HOLDERS OF SAC RIVER COMMON STOCK."
TERMINATION
The Merger may be terminated, among other reasons,
(i) by mutual consent of the Board of Directors of Bancshares and the
Board of Directors of Sac River,
(ii) if Sac River shareholders do not approve the Merger,
(iii) if the FRS Board, Division of Finance or FDIC denies approval of
the Merger,
(iv) if any permanent injunction preventing the Merger becomes final
and nonappealable, or
(v) if there is a material breach of the representations and
warranties of Sac River or Bancshares.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF SAC RIVER
The Board of Directors of Sac River has unanimously approved the Merger
Agreement and the Merger. The Board of Directors of Sac River believes that the
Merger is fair and in the best interests of the shareholders of Sac River and
recommends a vote FOR the approval of the Merger. For a discussion of the
factors considered by the Board of Directors of Sac River in reaching its
conclusions, see "THE MERGER - Reasons of the Board of Directors of Sac River
for Approving the Merger; Recommendation of the Board of Directors of Sac
River."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The consummation of the Merger is conditioned upon, among other things, the
opinion of Husch & Eppenberger, LLC, counsel to Bancshares and Liberty, that the
Merger will qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended, for federal income tax purposes.
Based on that opinion, the principal federal income tax results of the Merger
will be as follows: (1) neither Sac River, Liberty, nor Bancshares will
recognize gain or loss as a result of the Merger; and (2) no Sac River
shareholder will recognize any gain or loss (other than gain with respect to
cash received in the Merger) upon the exchange of their Sac River Common Stock
for Bancshares Common Stock. However, the federal income tax considerations
related to the Merger may be different for particular types of Sac River
shareholders or in light of each Sac River shareholder's particular
circumstances. Consequently, Sac River shareholders are urged to consult their
own tax advisers concerning the federal income tax considerations that may be
relevant to them in connection with the
4
<PAGE> 14
Merger, and in particular the character of the income recognized upon the
receipt of cash in the Merger, as well as the application to them of any state,
local, foreign, or other tax laws. See "THE MERGER - Certain Federal Income
Tax Considerations."
REGULATORY MATTERS
The FRS Board, the Division of Finance and the FDIC must approve the
Merger. Sac River and Bancshares do not have to conclude the Merger if the terms
and conditions of these regulatory approvals are not reasonably satisfactory to
them. See "THE MERGER - Regulatory Approvals."
MANAGEMENT OF SAC RIVER AND LIBERTY FOLLOWING CONSUMMATION OF MERGER
After the consummation of the Merger, all of the existing directors of Sac
River and Bancshares will be directors of Bancshares. The existing officers of
Liberty will continue in their present positions and the officers of Sac River
will become officers of Liberty. In addition, Garry L. Robinson will serve as
the Executive Vice-President of Liberty and the Executive Vice-President of
Bancshares.
CERTAIN RELATIONSHIPS AND RELATED STOCK OWNERSHIP
No directors, officers, or principal shareholders of Sac River own shares
of Bancshares Common Stock. Richard A. Pendleton, a director of Liberty and
Bancshares, is co-trustee of the Anise C. Brasher Revocable Trust U/T/A dated
August 1, 1995, which owns shares of Sac River Common Stock. No other directors,
officers or principal shareholders of Bancshares own shares of Sac River Common
Stock. Sac River has made loans to certain directors of Bancshares in the
ordinary course of Sac River's business. Sac River has also purchased
participations in loans originated by Liberty. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS-Directors of Bancshares, Loan Participation."
COMPARISON OF SHAREHOLDERS' RIGHTS
Bancshares is a corporation organized under the laws of the State of
Missouri, and Chapter 351 of the Missouri Revised Statutes, the Articles of
Incorporation of Bancshares, and the by-laws of Bancshares govern the rights of
Bancshares shareholders. Sac River is a state chartered banking corporation
organized under Missouri Revised Statutes Chapter 362, and that statutory
section, the Articles of Association of Sac River, and the by-laws of Sac River
govern the rights of Sac River shareholders. There are relatively few
differences in shareholder rights for shareholders of Bancshares and Sac River
under the governing Missouri statutes. See "COMPARISON OF SHAREHOLDER RIGHTS."
ACCOUNTING TREATMENT OF THE MERGER
Under generally accepted accounting principles, the Merger will be treated
as a purchase by Bancshares. See "THE MERGER - Accounting Treatment."
SELECTED CONSOLIDATED FINANCIAL DATA OF BANCSHARES
The following table sets forth, on an historical basis, certain selected
consolidated financial data for Bancshares. Shareholders should read this data
in conjunction with the audited consolidated financial statements of Bancshares
and the related notes for the years ended December 31, 1997, and 1996, and the
initial period from October 27, 1995, to December 31, 1995, and the unaudited
financial statements of Bancshares for the three months ended March 31, 1998,
and 1997, all of which appear in this Proxy
5
<PAGE> 15
Statement-Prospectus and which are the source of this data. See "INDEX TO
FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
65 Days
THREE MONTHS Fiscal Year Ended
ENDED MARCH 31 Ended December December
31 31
---------------------------- ---------------------------- ------------------
1998 1997 1997 1996 1995
---------------------------- ---------------------------- ------------------
(Dollars in thousands, except for per share data)
<S> <C> <C> <C> <C> <C>
Net Interest Income $740 $283 $1,817 $709 $157
Provision for Loan Losses 50 32 447 71 6
Noninterest Income 77 34 201 47 1
Noninterest Expense 528 215 1,288 552 137
Provision for Income Taxes 85 19 117 39 4
Net Income 153 51 166 94 11
Earnings Per Common Share .32 .15 .42 .27 .03
Dividends Declared per Common Share -- -- -- -- --
Average Total Assets 87,300 36,019 53,172 20,072 10,501
</TABLE>
SELECTED FINANCIAL DATA OF SAC RIVER
The following table sets forth, on an historical basis, certain selected
consolidated financial data for Sac River. Sac River shareholders should read
this data in conjunction with, the audited financial statements and related
notes thereto of Sac River for the fiscal years ended December 31, 1997, and
1996, and the unaudited financial statements for the three months ended March
31, 1998, and 1997, all of which appear in this Proxy Statement-Prospectus and
which are the source of data presented below. Data for the fiscal years ended
December 31, 1995, 1994 and 1993 is based upon the unaudited financial
statements of Sac River for those periods. See "INDEX TO FINANCIAL STATEMENTS."
6
<PAGE> 16
<TABLE>
<CAPTION>
THREE MONTHS
ENDED Year Ended December 31
MARCH 31
------------------------ ---------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------------------------ ---------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Interest Income 913 898 3,707 3,514 3,202 3,078 3,205
Provision for Loan Losses -- 20 30 70 50 10 130
Noninterest Income 111 64 303 277 248 273 274
Noninterest Expense 340 344 1,606 1,296 1,289 1,375 1,265
Provision for Income Taxes 235 211 791 799 667 444 658
Net Income 449 387 1,584 1,626 1,446 1,522 1,426
Earnings Per Common Share 44.85 38.72 158.37 162.61 144.56 152.25 142.60
Dividends Declared Per
Common Share -- -- 80 80 80 80 80
Average Total Assets 100,840 93,696 96,384 87,969 77,479 70,747 69,817
</TABLE>
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
The following table sets forth per share data of Bancshares and Sac River
on both a historical basis and on a pro forma basis. Sac River shareholders
should read this table in conjunction with the historical consolidated financial
statements and notes thereto for Bancshares and Sac River contained in this
Proxy Statement-Prospectus. Pro forma combined and equivalent pro forma per
share data reflect the combined results of Bancshares and Sac River presented as
though they were one company for all periods shown. The pro forma amounts do not
include adjustments for estimated operating efficiencies or revenue
enhancements, if any, resulting from the Merger.
<TABLE>
<CAPTION>
HISTORICAL EQUIVALENT
PRO FORMA
---------------------------------------------- ----------
LIBERTY
BANCSHARES SAC RIVER PRO FORMA SAC RIVER
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic Net Income Per Common Equivalent
Share
Twelve Months Ended:
December 31, 1997........................... .42 158.37 2.34 14.99
December 31, 1996........................... .27 162.61 2.46 9.65
December 31, 1995 (Full Year for Sac River
and Sixty-Five Days for Liberty)............ .03 144.56 2.08 6.56
Three Months Ended:
March 31, 1998.............................. .32 44.85 0.72 11.42
March 31, 1997.............................. .15 38.72 0.63 5.38
Cash Dividends paid per share
Twelve Months Ended:
December 31, 1997........................... -- 80 1.07 --
December 31, 1996........................... -- 80 1.14 --
</TABLE>
7
<PAGE> 17
<TABLE>
<CAPTION>
HISTORICAL EQUIVALENT
PRO FORMA
----------------------------------------------
LIBERTY
BANCSHARES SAC RIVER PRO FORMA SAC RIVER
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
December 31, 1995 (Full Year for Sac River
and Sixty-Five Days for Liberty)............ -- 80 1.14 --
Three Months Ended:
March 31, 1998.............................. -- -- -- --
March 31, 1997.............................. -- -- -- --
Book value per common share at:
December 31, 1997........................... 13.43 1,113.99 21.93 476.80
December 31, 1996........................... 10.32 1,035.38 19.87 366.42
December 31, 1995........................... 10.03 957.21 18.62 356.33
March 31, 1998.............................. 12.95 1,158.84 21.35 459.83
March 31, 1997.............................. 10.38 1,070.45 20.51 368.51
</TABLE>
RISK FACTORS
LACK OF TRADING MARKET
There is no established public trading market for the shares of Bancshares
Common Stock or Sac River Common Stock. Before the Effective Time of the Merger,
the sale or exchange of Bancshares Common Stock has been and until the Merger is
effective will be substantially restricted by the terms of a Stock Purchase
Agreement entered into by Bancshares' shareholders on May 1, 1995. To the
knowledge of Bancshares's management, the most recent trade involving shares of
Bancshares Common Stock occurred in February 1997 at a price of $10.78 per
share. To the knowledge of Sac River's management, the most recent trade
involving shares of Sac River Common Stock occurred in February 1998 at a price
of $1,400 per share (in a transaction between a Sac River director and a
Bancshares director with knowledge of the possible Merger). Earlier transactions
in Sac River Common Stock have been at prices under $1,000 per share. Since
there is no active trading market for the shares of Bancshares, the shareholders
of Sac River may be unable to resell the shares of Bancshares Common Stock to be
issued in the Merger. Additional restrictions on resale will apply to affiliates
of Sac River and Bancshares. See "THE MERGER-Resales of Bancshares Common Stock
Issued in the Merger."
RISKS ASSOCIATED WITH COMMERCIAL REAL ESTATE, BUSINESS
AND CONSTRUCTION LOANS
The operations of Sac River and Liberty include funding commercial real
estate, business, and construction loans. Commercial real estate and commercial
lending involve significant additional risks compared with one-to-four family
residential mortgage lending, and therefore, for many banks account for a
disproportionate share of delinquent loans and real estate owned through
foreclosure. These kinds of loans generally involve a larger loan balance to
single borrowers or groups of related borrowers than does residential lending,
and repayment of the loan depends in part on the underlying business and
financial condition of the borrower and is more susceptible to adverse future
developments. If the cash flow from an income-producing property is reduced (for
example, because leases are not obtained or renewed), the borrower's ability to
repay the loan may be materially impaired. These risks can be significantly
affected by considerations of supply and demand in the market for office,
manufacturing, and retail space and by general economic conditions. As a result,
commercial real estate and business loans are likely to be subject, to a greater
extent than residential property loans, to adverse conditions in the economy
generally.
8
<PAGE> 18
Construction loans are, in general, subject to the same risks as commercial
real estate loans, but involve additional risks due to uncertainties inherent in
estimating construction costs, delays arising from labor problems, shortages of
material, uncertain marketability of a completed project and other unpredictable
contingencies that make it relatively difficult to determine accurately the
total loan funds required to complete a project or the value of the completed
project. Banks advance construction loan funds on the security of the project
under construction, which is of uncertain value prior to the completion of
construction. When a construction project encounters cost overruns, marketing or
other problems, it may become necessary, in order to sustain the project and to
preserve collateral values, for the lender to advance additional funds and to
extend the maturity of its loan. In a declining market, there is no assurance
that this strategy will successfully enable the lender to recover outstanding
loan amounts and interest due. Moreover, foreclosing on such properties results
in administrative expense and substantial delays in recovery of outstanding loan
amounts and provides no assurance that the lender will recover all monies due to
it, either by developing the property (subject to regulatory limitations and to
the attendant risks of development) or by selling the property to another
developer.
As of March 31, 1998, Sac River's gross loan portfolio totaled $64.3
million, or 64.4% of assets, of which $16.1 million, or 25.0%, consisted of
one-to-four family residential mortgages, $30.6 million, or 47.6%, consisted of
commercial real estate loans, $6.4 million, or 10.0%, consisted of
non-agricultural business loans, $3.4 million, or 5.3%, consisted of
agricultural loans, and $4.2 million, or 6.5%, consisted of consumer loans. As
of March 31, 1998, Liberty's gross loan portfolio totaled $65.4 million, or
69.9% of assets, of which $12.2 million, or 18.7%, consisted of residential real
estate loans, $13.1 million, or 20.0%, consisted of non-agricultural business
loans, $33.3 million, or 50.9%, consisted of commercial real estate loans, $6.0
million, or 9.2%, consisted of consumer loans and $0.7 million, or 1.1%
consisted of agricultural loans. See "Management's Discussion and Analysis of
Consolidated Financial Conditions and Results of Operations of Liberty
Bancshares - Loan Portfolio" and "Management's Discussion and Analysis of
Consolidated Financial Conditions and Results of Operations of Sac River - Loan
Portfolio."
RISKS RELATED TO GEOGRAPHIC CONCENTRATION OF LENDING OPERATIONS
Liberty's and Sac River's lending operations are concentrated primarily in
southwestern Missouri. As a result, the post-merger financial condition and
results of Liberty's operations will reflect the effects of changes in the
business cycle and downturns in the economy of the region, as well as the state
and the nation. In an economic downturn, banks tend to experience a run-off in
deposits. If economic conditions worsen after the Merger, Liberty may not be
able to originate the same volume of high quality loans. See "Business of Sac
River - Competition" and "Business of Liberty - Competition."
EFFECT OF CHANGES IN INTEREST RATES
Bancshares' operating results after the Merger will depend to a large
extent on Liberty's net interest income, which is the difference between its
interest income on interest-earning assets and its interest expense on
interest-bearing liabilities. Rapid changes in interest rates may adversely
affect Liberty's net interest income. Interest rates are highly sensitive to
many factors, including governmental monetary policies and domestic and
international economic and political conditions. Conditions such as inflation,
recession, unemployment, money supply, international economic difficulties, and
other factors beyond Bancshares' control may also affect interest rates.
Interest rate risk arises from mismatches (i.e. the interest sensitivity
gap) between repricing or maturity characteristics of assets and liabilities and
may be measured in terms of the ratio of the cumulative interest sensitivity gap
to total assets. More assets repricing or maturing than liabilities over
9
<PAGE> 19
a given time frame is considered asset-sensitive and is reflected as a positive
gap, and more liabilities repricing or maturing than assets over a given time
frame than is considered liability-sensitive and is reflected as a negative gap.
An asset-sensitive position (i.e., a positive gap) will generally enhance
earnings in a rising interest rate environment and negatively impact earnings in
a falling interest rate environment, while a liability-sensitive position (i.e.,
a negative gap) will generally enhance earnings in a falling interest rate
environment and negatively impact earnings in a rising interest rate
environment. Fluctuations in interest rates are not predictable or controllable.
At December 31, 1997, on a pro forma basis giving effect to the Merger,
Bancshares' pro forma interest-earning assets which were estimated to mature or
reprice within one year were less than Bancshares' interest-bearing liabilities
which were estimated to mature or reprice within one year by $6.7 million for a
negative one year gap position of 4.0%.
Bancshares intends to structure its asset and liability management
strategies to mitigate the impact of changes in interest rates and, in
particular, intends to manage its interest rate risk through not holding
long-term fixed rate paper, and matching length of deposits (CD's) to length of
loans. Initially, it is expected that Liberty will continue its asset liability
management strategies. There can be no assurances, however, of Bancshares'
ability to continue to achieve positive net interest income. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations of
Liberty Bancshares."
ASSET QUALITY
Industry experience indicates that a portion of a bank's loans will become
delinquent and that a portion of the delinquent loans will require partial or
entire charge-off. Regardless of the underwriting criteria that a lender uses,
it may experience losses as a result of various factors beyond its control,
including, among others, changes in market conditions affecting the value of
security and problems affecting the credit of the borrower. Sac River's and
Liberty's determination of the adequacy of their respective allowances for
possible loan losses is based on various considerations, including an analysis
of the risk characteristics of various classifications of loans, previous loan
loss experience, specific loans which would have loan loss potential,
delinquency trends, estimated fair value of the underlying collateral, current
economic conditions, the view of outside regulators, and geographic and industry
loan concentration. If, however, delinquency levels were to increase as a result
of adverse general economic conditions, particularly in southwestern Missouri
where Sac River's and Liberty's loan operations are concentrated, the loan loss
reserve determined by the two banks may not be adequate. There can be no
assurance that Liberty's allowance after the Merger will be adequate to cover
loan losses or that either bank will not experience losses in its loan
portfolios that may require significant increases to its allowance for possible
loan losses in the future. See "Management's Discussion and Analysis of
Financial Conditions and Results of Operations of Liberty Bancshares - Provision
for Loan Losses" and "Management's Discussion and Analysis of Financial
Conditions and Results of Operations of Sac River - Provision for Loan Losses."
YEAR 2000
The computer systems of Sac River and Liberty, both internal and outsourced
processing, could be affected by the "Year 2000" issue. The Year 2000 problem is
the result of computer programs being written using two digits rather than four
to define the applicable year. Computers are a fundamental part of commercial
banking in terms of information storage and retrieval, check clearings, deposit
postings, loan payment processing, interest receivable and payable calculations,
customer notice generation, documentation preparation, and other areas. Any of
the programs used by Sac River or Liberty or any
10
<PAGE> 20
of their vendors that have time-sensitive software may recognize the date using
"00" as the year 1900 rather than the year 2000. This could result in major
system failures or miscalculations. Liberty and Sac River are working to resolve
any Year 2000 problems. Year 2000 potential problems create risk for Liberty and
Sac River from unforeseen problems in their own computer systems and from third
parties such as other financial institutions, the federal government, federal
agencies, vendors and customers. Failures of Sac River, Liberty or third party
computer systems could have a material effect on the ability of Sac River and
Liberty to conduct business, especially to process and account for the transfer
of funds electronically. See "Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations of Liberty Bancshares
- - Year 2000" and "Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations of Sac River - Year 2000."
RISK ASSOCIATED WITH MERGER
Certain forward-looking statements contained in this Proxy
Statement-Prospectus include the expected benefits from the proposed
transactions (see "Recommendation of the Sac River Board;" "Sac River's Reasons
for the Merger" and "Recommendation of the Liberty Board"; "Liberty's Reasons
for the Merger"), pro forma financial data, and similar information. Such
forward-looking statements use Sac River's and Liberty's internal estimates of
growth and results of operations and generally make no provisions for any
possible negative effects of the Merger. To the extent that events differ from
the assumptions, Bancshares' actual results of operations may vary materially
from the forward-looking statements. These forward-looking statements assume
that the deposit base of both Sac River and Liberty will remain substantially
intact pending the Merger and will grow at historical rates following the
Merger. To the extent that the Merger or other factors result in either a
temporary or long-term loss of deposits for Liberty, Bancshares' actual results
of operations may vary materially from the results anticipated by the
forward-looking statements.
COMPETITION
Sac River and Liberty both face significant competition in their respective
markets. Increasing consolidation within the banking and financial services
industry, as well as increased competition from larger regional and national
out-of-state banking organizations and nonbank providers of various financial
services, may adversely affect the combined Bancshares' and Liberty's ability to
achieve the financial goals. Many of these large competitors have significantly
more financial resources, larger market share, and greater name recognition in
the market area to be served by the combined company.
LAWS AND REGULATIONS
The businesses of Bancshares, Sac River and Liberty are subject to
extensive federal and state supervision and regulation. Changes in (i) laws and
regulations, including federal and state banking laws and regulations, with
which Bancshares and its subsidiaries must comply, and the associated costs of
compliance with such laws and regulations, (ii) accounting policies and
practices, as may be adopted by the relevant regulatory agencies as well as by
the Financial Accounting Standards Board, or (iii) Bancshares' and Liberty's
organization, compensation, and benefit plans, could cause actual results to
vary from the forward-looking statements in this Proxy Statement-Prospectus. See
"Business of Bancshares - Regulation and Supervision" and "Business of Sac River
- - Regulation and Supervision."
11
<PAGE> 21
DEPENDENCE UPON KEY PERSONNEL
Bancshares' and Liberty's future success will depend upon the continued
services of its senior management as well as its ability to attract additional
members to its management team with experience in the financial services
industry. The unexpected loss of the services of any of Bancshares' or Liberty's
key management personnel, or its inability to attract new management personnel
when necessary, could have a material adverse effect upon Bancshares and
Liberty. Other than Mr. Garry L. Robinson, Sac River's President, no officer or
director of Sac River, Liberty, or Bancshares is employed under an employment
agreement. Liberty will assume Sac River's obligations under Mr. Robinson's
employment agreement when the Merger is effective. See "Business of Bancshares -
Regulation and Supervision" and "Business of Sac River - Regulation and
Supervision."
THE SPECIAL MEETING
INTRODUCTION
Sac River and Bancshares are furnishing this Proxy Statement-Prospectus to
the shareholders of Sac River in connection with the solicitation of proxies by
the Board of Directors of Sac River for use at the Special Meeting. Sac River
will hold the Special Meeting at its main office located at 14 Public Square,
Stockton, Missouri on October ____, 1998, at 9:00 a.m., local time. Sac River
will begin mailing Statement-Prospectus to its shareholders on or about
September __, 1998.
PURPOSE
Sac River has called the Special Meeting for the purpose of considering and
voting upon the Merger Agreement and the transaction of any and all other
business that may properly come before the Special Meeting or any adjournments
or postponements thereof.
THE BOARD OF DIRECTORS OF SAC RIVER HAS APPROVED THE MERGER AND THE MERGER
AGREEMENT AND RECOMMENDS A VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
RECORD DATE
Only holders of record of Sac River Common Stock at the close of business
on September ___, 1998 (the "Record Date"), are entitled to notice of, and to
vote at, the Special Meeting, or any adjournments or postponements of the
Special Meeting.
VOTES REQUIRED
As of the Record Date, there were 10,000 issued and outstanding shares of
Sac River Common Stock entitled to vote at the Special Meeting, held by
approximately 100 shareholders. Each holder of record of shares of Sac River
Common Stock at the close of business on the Record Date is entitled to cast,
for each share registered in his or her name, one vote on the Merger Agreement
and on each other matter presented to a vote of the shareholders at the Special
Meeting.
12
<PAGE> 22
The affirmative vote of the holders of two-thirds of the issued and
outstanding Sac River Common Stock, whether or not present or represented at the
Special Meeting, is required to approve the Merger Agreement. As of the Record
Date, directors and executive officers of Sac River owned 12.75% of the
outstanding shares of Sac River Common Stock. Members of the families of the
directors and executive officers of Sac River owned an additional 12.02% of the
outstanding shares of Sac River Common Stock. Sac River expects that all of its
officers and directors and their families will vote their shares in favor of
this Merger Agreement.
Abstentions and "broker non-votes" will not be counted as votes for
approval of the Merger Agreement and, therefore, will have the effect of votes
against approval. A "broker non-vote" is a proxy from a broker or other nominee
of a Sac River shareholders indicating that such person has not received
instructions from the beneficial owner or other person entitled to vote the
shares that are represented by the proxy on a matter for which the broker or
other nominee does not have discretionary voting power.
Bancshares, as the sole shareholder of Liberty, has voted in favor of the
Merger. Approval of the Merger Agreement by the stockholders of Bancshares is
not required under Missouri or other applicable law.
VOTING AND REVOCATION OF PROXIES
The appointed proxy for Sac River will vote all shares of Sac River Common
Stock represented by a proxy properly signed and received at or prior to the
Special Meeting, unless subsequently revoked, in accordance with the
instructions on the proxy. If a proxy is signed and returned without any voting
instructions, shares of Sac River Common Stock represented by the proxy will be
voted FOR the proposal to approve the Merger. A shareholder may revoke any proxy
given pursuant to this solicitation by delivering to the Secretary of Sac River,
before or at the Special Meeting, a written notice revoking the proxy or a duly
executed proxy relating to the same shares bearing a later date or by voting in
person at the Special Meeting. Address all written notices involving a proxy to:
Sac River Valley Bank, P. O. Box B, Stockton, Missouri 65785, Attention: Garry
L. Robinson. Attendance at the Special Meeting will not, in and of itself,
revoke a proxy.
The Board of Directors of Sac River is not aware of any business to be
acted upon at the Special Meeting other than as described herein. If, however,
other matters are properly brought before the Special Meeting, or any
adjournments or postponements thereof, the persons appointed as proxies will
have discretion to vote or act on such matters according to their best judgment.
Sac River's management may determine at the time of the Special Meeting
that it is in the best interest of Sac River and its shareholders to adjourn the
Special Meeting for up to 90 days if, among other reasons, at the time of the
special meeting, the holders of a sufficient number of shares of Sac River
Common Stock have indicated that they intend to elect under the Merger Agreement
to receive cash rather the right to receive shares of Bancshares Common Stock
and, as a result, the total cash payable by Bancshares to all shareholders of
Sac River would exceed $7,657,000. It is a condition to the closing of the
Merger that no more than $7,657,000 of the Merger consideration is cash. During
the adjournment representatives of Sac River would determine whether a
sufficient number of Sac River shareholders would reduce their cash election so
that the $7,657,000 condition could be satisfied.
Sac River's Management may also determine that it is in the best interest
of Sac River and its shareholders to adjourn the Special Meeting for other
reasons. The person or persons appointed as proxies will have discretion to act
or vote on such proposed adjournment according to their best judgment.
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SOLICITATION OF PROXIES
Sac River will bear all expenses of solicitation of Sac River shareholders
in connection with the Special Meeting. In addition to solicitation by use of
the mails, directors, officers and employees of Sac River may solicit proxies in
person or by telephone, telecopy or by other means of communication. Sac River
will not pay these directors, officers and employees any compensation for the
solicitation, other than the compensation which they otherwise receive in their
capacity as directors, officers and employees, but Sac River may reimburse them
for out-of-pocket expenses in connection with the solicitation.
THE MERGER
This section describes all material provisions of the Merger Agreement, as
well as certain other aspects of the Merger. It is qualified by reference to the
Merger Agreement, included as Appendix A to this Proxy Statement-Prospectus,
which is incorporated herein by reference. Sac River shareholders should read
the Merger Agreement in its entirety.
BACKGROUND OF THE MERGER
Beginning in late 1996, Gary E. Metzger, President of Bancshares, and Garry
L. Robinson, President of Sac River, began occasional discussions of a
possible merger of Sac River and Liberty. Sac River and Liberty have had
depository, loan participation, and other relationships since Liberty opened in
1995, and Mr. Robinson and Mr. Metzger had worked together at other banks in
the 1980's. During the period of the discussions between Mr. Robinson and Mr.
Metzger, the directors of both Sac River and Bancshares were considering a
variety of alternatives to expand their market bases, including internal
expansion and merger possibilities.
Sac River's Board of Directors believed that opportunities for significant
growth in the Stockton market areas were limited and therefore evaluated other
markets. The directors believed that the Springfield area offered the greatest
possibilities for growth, whether through new branches, acquisitions, or a
merger.
In the fall of 1997, Bancshares' Board of Directors adopted a strategic
plan to expand Bancshares through the addition of new locations. At that time,
Bancshares began looking for potential merger candidates, and its Board
authorized Mr. Metzger to begin discussions with potential candidates.
Bancshares was interested in merging with a bank that had a similar
business philosophy, diverse ownership, was small to medium sized, had available
capital and was in a market complimentary to, but not significantly overlapping
with, Bancshares existing market. Mr. Metzger identified a number of potential
candidates, but determined that Sac River was the best candidate for merger
based on these factors and on the existing relationship between Sac River and
Liberty. Following the adoption of Bancshares' strategic plan, Mr. Metzger again
approached Mr. Robinson about a potential merger.
On December 11, 1997, the Sac River Board unanimously agreed to explore the
possibility of a merger with Bancshares. In deciding to pursue a merger, the Sac
River Board of Directors considered a number of factors, including the
opportunities for expansion presented by a merger, particularly given
Liberty's existing locations, the need for Sac River to obtain updated
technology, which Liberty had, the creation of a greater market for the
shareholders of Sac River should they wish to sell their Sac River shares,
provision for succession of management, the ability for most Sac River
shareholders to realize
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capital gains treatment upon the disposition of their Sac River shares, and the
retention of Sac River management and board members by the surviving entity.
On January 11, 1998, Gary Metzger met with the members of the Sac River
Board of Directors and management, including Garry Robinson, Stephen Wrenn,
Neale Johnson and Mike Neale to further discuss the Merger. Based upon those
discussions, Bancshares presented an oral merger proposal to the Sac River Board
on March 5, 1998. The proposal outlined the reasons for merger as previously
considered by the Sac River Board and outlined the basic pricing structure of
the merger, with the stock of Sac River being valued at 1.5 times book value and
Bancshares Common Stock being valued at 2 times book value of Liberty less
Bancshares' debt. Bancshares made its valuation based on the valuation of
similar transactions in the area and its knowledge of the financial position and
growth potential of both Sac River and Liberty, including Liberty's rapid growth
in the Springfield market and the absence of further significant growth
opportunities in Sac River's market area.
The Sac River Board reviewed the merger proposal on March 5, 1998, and
agreed to pursue the merger, with modifications to the price structure initially
proposed by Bancshares. Sac River recommended that Sac River stock be valued at
1.5 times book value and Bancshares stock be valued at 1.8 times book value of
Liberty less Bancshares' debt.
On March 17, 1998, the Bancshares and Liberty Boards of Directors approved
the terms of the Merger with a valuation of Bancshares stock at 1.85 times book
value of Liberty less Bancshares' debt. On April 9, 1998, the Board of Sac River
approved the execution of a letter of intent, outlining the terms of the Merger
Agreement and the Boards of Bancshares and Liberty approved execution of the
letter of intent on April 21, 1998. On June 11, 1998, the Sac River Board voted
unanimously to approve the Merger Agreement and to recommend that the
shareholders of Sac River approve the Merger. On June 16, 1998, the Boards of
Bancshares and Liberty approved the Merger Agreement.
REASONS OF THE BOARD OF DIRECTORS OF SAC RIVER FOR APPROVING THE MERGER
In its deliberations concerning the Merger, the Board of Directors of Sac
River considered among other factors:
- similarities of the companies' management and operational styles and
philosophies,
- the reputations of the banks in their communities,
- the proposed members of the boards of directors, which would include
all Sac River directors,
- the identity and experience of post-merger management,
- possible uses of the combined banks' capital,
- the technology needs and resources of both banks,
- the relative size and competitive position of each bank, and the
location of Liberty's branches,
- the price to be received by the Sac River shareholders and the
relative valuations of the Sac River Common Stock and Bancshares'
Common Stock,
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- the $986 per share appraised value for a minority holding by the ESOP,
at December 31, 1997,
- the outlook for each bank in its current market environment,
- consolidation trends in the banking industry,
- the competitive position of the combined banks and the possibilities
for internal growth and growth through acquisitions,
- the social and economic effects of the merger on the banks' customers,
employees and communities,
- the amount and source of earnings of each bank,
- the expected pro-forma earnings of the combined banks,
- the financial condition and risk profile of each bank,
- each bank's relative contribution to the combined entity's assets,
liabilities and income,
- the tax free nature of the exchange of Sac River Common Stock for
Bancshares Common Stock,
- the capital gains treatment of the cash consideration in the Merger
for most Sac River shareholders,
- cost savings and economics of scale that may be related by the merger,
- the capitalization of the resulting entity and compliance with
regulatory capital requirements,
- terms of comparable transactions,
- the likelihood that the merger will be approved by the regulatory
authorities without undue conditions or delay,
- the terms and conditions of the Merger Agreement,
- the financial statements and quarterly call reports of both banks, and
- the potential impact of legislative and regulatory changes on banks.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF SAC RIVER
The Board of Directors of Sac River has determined that the Merger is in
the best interests of Sac River and its shareholders. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF SAC RIVER VOTE IN FAVOR OF THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
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REASONS OF THE BOARDS OF DIRECTORS OF BANCSHARES AND LIBERTY FOR APPROVING THE
MERGER
The directors of Liberty and Bancshares unanimously approved the Merger and
the Merger Agreement at a joint meeting held on June 16, 1998.
In approving the Merger and the Merger Agreement, the Boards of Directors
of Bancshares and Liberty took into account substantially the same factors
addressed by the Sac River Board of Directors. Of particular importance to the
Bancshares' directors were the capitalization of Sac River, the prior
relationships between the two banks, the purchase price, the economies of scale
that could be realized by nearly doubling Liberty's size, Bancshares' strategic
plan and Sac River's fit with that plan, Sac River's location, and consolidation
trends in the banking industry. Following consideration of these and other
factors, Bancshares' Board of Directors determined that the Merger would be in
the best interest of Liberty, Bancshares, and its shareholders.
TERMS OF THE MERGER
On the Effective Time (as defined below), Sac River will merge with and
into Liberty and Liberty will be the surviving corporation. The separate
existence of Sac River will cease after the Effective Time. The Articles of
Agreement and by-laws of Liberty, as in effect immediately prior to the
Effective Time, will continue in effect as the Articles of Agreement and the
by-laws of the surviving corporation until amended or repealed in accordance
with applicable law.
All shares of Bancshares capital stock issued and outstanding immediately
before the effective Date will remain issued and outstanding and unchanged by
the Merger. Upon the Effective Time, each share of Sac River Common Stock issued
and outstanding immediately prior to the Effective Time shall cease to be
outstanding, and shall be automatically canceled and retired and shall be
converted into the right to receive:
(i) cash in the amount of $485.70 per share (the "Mandatory Per Share
Cash Amount") subject, however, to the approval or consent of all
regulatory authorities having authority over the Merger; and
(ii) at the election of each shareholder, cash in an amount of $1,050
per share (the "Optional Per Share Amount"), the right to receive 35.516
shares of Bancshares Common Stock, or a combination of cash and shares.
The aggregate Mandatory Per Share Cash Amount will not exceed $4,857,000,
and the total cash payable by Bancshares as to the Optional Per Share Amount to
all shareholders of Sac River cannot exceed $2,800,000 less cash distributed in
lieu of fractional shares.
DISSENTERS' RIGHTS
The issued and outstanding shares of Sac River Common Stock held by a
shareholder who has validly exercised dissenters' rights under the Missouri
Revised Statutes Section 362.730 will not be converted into the right to receive
cash or Bancshares Common Stock, as described above, but instead a shareholder
who validly exercises dissenter rights will receive payment for his or her
shares of Sac River Common Stock as set forth in Section 362.730. See
"Dissenters' Rights of Sac River Shareholders."
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EFFECTIVE TIME OF THE MERGER
The Merger will become effective on a date (the "Effective Time") as soon
as the Merger Agreement is filed with the Division of Finance, which will occur
as soon as possible after the closing of the Merger. The closing of the Merger
will take place after the satisfaction of all of the conditions to the Merger
set forth in the Merger Agreement. There can be no assurance about whether or
when the Merger will occur. See "Condition to the Merger," "Regulatory
Approvals" and "Termination."
SURRENDER OF SAC RIVER COMMON STOCK CERTIFICATES AND PAYMENT
Promptly after the Effective Time, Husch & Eppenberger, LLC, the transfer
agent selected by Bancshares and Sac River, will mail to each former holder of
record of shares of Sac River Common Stock (other than a shareholder who has
exercised dissenters' rights, as described below) a notice and transmittal form,
together with instructions for the exchange of stock certificates evidencing Sac
River Common Stock for stock certificates evidencing Bancshares Common Stock or
cash.
SHAREHOLDERS SHOULD NOT SEND IN THEIR SAC RIVER STOCK CERTIFICATES UNTIL
THEY RECEIVE THE TRANSMITTAL FORM AND INSTRUCTIONS.
CONDITIONS TO THE MERGER
The Merger will occur only if the Merger Agreement is approved by the vote
of the holders of two-thirds of the issued and outstanding shares of Sac River
Common Stock. The parties' mutual obligations of the parties to consummate the
Merger are subject to:
(a) Board Approvals. The Boards of Directors of Sac River, Liberty and
Bancshares must have approved and adopted the Merger Agreement by a vote of
a majority of each board's members. This condition has been satisfied.
(b) Shareholder Approval. The holders two-thirds of the issued and
outstanding shares of Sac River Common Stock and Liberty Common Stock must
have approved and adopted the Merger Agreement. The Liberty shareholder
approval requirement has been satisfied.
(c) Regulatory Action. The FRS Board, the Division of Finance, and the
FDIC, as applicable, and any other applicable bank regulatory authorities,
must have approved the Merger Agreement without any condition not
reasonably satisfactory to Bancshares and Sac River. All conditions
required to be satisfied before the Effective Time under these regulatory
approvals must be satisfied and all related waiting regulatory period must
have expired before the closing may occur.
(d) S-4: Securities Laws. The S-4 must have become effective under the
Securities Act and not been the subject of any stop order or proceedings
seeking a stop order. Bancshares must have received all state securities or
"blue sky" permits or exemptions necessary to issue the Bancshares Common
Stock in exchange for the Sac River Common Stock and to consummate the
Merger.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger can be in effect.
(f) Tax Opinion. The Boards of Directors of Sac River and Bancshares
must have received an opinion of Husch and Eppenberger, LLC, in a form
satisfactory to Sac River, to the
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effect that (i) the Merger will be treated for federal income tax purposes
as one or more reorganizations within the meaning of Code Section 368(a),
(ii) that Bancshares, Liberty and Sac River will each be a party to that
reorganization within the meaning of Code Section 368(b), and (iii) no
gain or loss will be recognized by the shareholders of Sac River upon the
receipt solely of Bancshares Common Stock in the Merger in exchange of
their shares of Sac River Common Stock. The date of the opinion will be
the date of this Proxy Statement-Prospectus. The opinion will be in
substantially the form of Appendix B to this Proxy Statement-Prospectus.
The obligation of Sac River to consummate the Merger is also subject to the
condition that as of the Closing Date:
(a) Representations and Warranties. Each of the representations and
warranties of Bancshares set forth in the Merger Agreement, without giving
effect to any update, must be true and correct in all material respects as
of the date of the Merger Agreement and (except to the extent such
representations speak as of an earlier date) as of the closing date of the
Merger Agreement as though made on and as of the closing date of the Merger
Agreement. Bancshares' chief executive officer must give Sac River a
certificate to such effect.
(b) Performance of Obligations of Bancshares. Bancshares must have
performed in all material respects each of the obligations it is required
to perform under the Merger Agreement at or before the closing date under
the Merger Agreement. Bancshares' chief executive officer must give Sac
River a certificate to that effect.
(c) Consents Under Agreements. Each person whose consent or approval
is required in connection with the transactions contemplated by the Merger
Agreement under any loan or credit agreement, note, mortgage, indenture,
lease or other agreement or instrument must have given Bancshares their
consent or approval, except those consents and approvals that if not
obtained would not, individually or in the aggregate, have a material
adverse effect on Bancshares.
(d) No Material Adverse Change. Since the date of the Merger
Agreement, no material adverse change in the business, operations,
prospects or financial condition of Bancshares or Liberty may occur other
than any such change attributable to or resulting from any change in law,
regulation or generally accepted accounting principles that impairs both
Sac River and Liberty in a substantially similar manner. At closing,
Bancshares' chief executive officer must give Sac River a certificate to
that effect.
(e) No Proceeding or Litigation. No material action, suit or
proceeding before any court or any governmental or regulatory authority can
be pending against Bancshares, Liberty, Sac River or any affiliate,
associate, officer or director of any of them seeking to restrain, enjoin,
prevent, change or rescind the transactions under the Merger Agreement or
questioning their validity or legality.
(f) Allowance for Losses on Loans. If Sac River believes that
Liberty's allowance for loan losses is inadequate, not later than ten (10)
days before the closing of the Merger Sac River must recommend to the Board
of Directors of Liberty an adjustment in the amount of the allowance. If
the Liberty Board of Directors determines that the adjustment is reasonable
and consistent with prudent banking practices, it must adopt the
adjustment. If Liberty's Board of Director's does not adopt the adjustment,
Sac River has the option to not consummate the Merger.
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(g) Optional Cash Payment Limitation. The aggregate Optional Per Share
Cash Amounts elected by the Sac River shareholders as of the closing date
cannot exceed $2,800,000, less any amount paid for fractional shares.
(h) Tax Treatment. Sac River must reasonably believe, as of the
Closing Date, that the Merger will qualify as one or more reorganizations
under Code Section 368(a)(1).
The obligation of Bancshares to consummate the Merger is also subject to:
(a) Representations and Warranties. Each of the representations and
warranties of Sac River set forth in the Merger Agreement, without giving
effect to any update, must be true and correct in all material respects as
of the date of the Merger Agreement, and (except to the extent such
representations and warranties speak as of an earlier date) as of the
closing date of the Merger Agreement as though made on and as of the
closing date. Sac River's chief executive officer must give Bancshares a
certificate to that effect.
(b) Performance of Obligations of Sac River. Sac River shall have
performed in all material respects each of the obligations it is required
to perform under the Merger Agreement at or before the closing date under
the Merger Agreement. Sac River's chief executive officer must give
Bancshares a certificate to that effect.
(c) Consents Under Agreements. Each person whose consent or approval
shall be required in order to permit the succession by Liberty pursuant to
the Merger Agreement to any obligation, right or interest of Sac River
under any loan or credit agreement, note, mortgage, indenture, lease or
other agreement or instrument must have given Sac River their consent or
approval, except those for consents and approvals that if not obtained
would not, individually or in the aggregate, have a material adverse effect
on Sac River or Liberty.
(d) No Material Adverse Change. Since the date of the Merger
Agreement, there must have been no material adverse change in the business,
operations, prospects or financial condition of Sac River other than any
such change attributable to or resulting from any change in law, regulation
or generally accepted accounting principles that impairs both Sac River and
Liberty in a substantially similar manner. Sac River's chief executive
officer must give Bancshares a certificate to that effect.
(e) No Proceeding or Litigation. No material action, suit or
proceeding before any court or any governmental or regulatory authority can
be pending against Bancshares, Liberty, Sac River or any affiliate,
associate, officer or director of any of them seeking to restrain, enjoin,
prevent, change or rescind the transactions under the Merger Agreement
questioning their validity or legality.
(f) Allowance for Losses on Loans. If Bancshares believes that Sac
River's allowance for loan losses is inadequate, not later than ten (10)
days before the closing of the Merger, Bancshares will recommend to the
Board of Directors of Sac River an adjustment in the amount of the
allowance. If the Sac River Board of Directors determines that the
adjustment is reasonable and consistent with prudent banking practices, it
must adopt the adjustment. If Sac River's Board of Directors does not adopt
the adjustment, Bancshares has the option to not consummate the Merger.
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(g) Outstanding Common Stock. As of the Closing Date, no more than ten
thousand (10,000) shares of Sac River Common Stock can be outstanding, and
the Optional Per Share Cash Amount cannot exceed $2,800,000, less any
amount paid for fractional shares.
Sac River and Bancshares cannot provide assurances about when or whether
all of the conditions precedent to the Merger can or will be satisfied, or
waived by the party permitted to waive them.
CONDUCT OF BUSINESS PENDING THE MERGER
Under the Merger Agreement, Sac River must conduct its business in the
usual and ordinary course consistent with its past practice until the Merger is
concluded. Sac River has agreed to use its best efforts to preserve its business
organization and assets and maintain its rights and to use its reasonable best
efforts to retain the services of its officers and key employees.
WAIVER AND AMENDMENT
The parties to the Merger Agreement may amend it by action taken or
authorized by their respective Boards of Directors at any time before approval
of the Merger by the shareholders of Sac River and Liberty. After those
approvals the parties cannot adopt an amendment that changes the consideration
the shareholders will receive in the Merger in a way that is adverse to the
shareholders interests. Any amendment must be in writing and signed by each of
the parties.
If authorized by their respective Boards of Directors, and to the extent
legally allowed, before the Effective Time, Sac River or Bancshares may: (i)
extend the time for the performance of any of the obligations or other acts of
the other party under the Merger Agreement, (ii) waive any inaccuracies in the
representations and warranties of the other contained in the Merger Agreement or
in any document delivered by the other pursuant to the Merger Agreement, and
(iii) waive compliance by the other with any of the agreements or conditions
contained in the Merger Agreement. Any agreement on the part of a party to any
extension or waiver is valid only if set forth in a written instrument signed on
behalf of that party.
Sac River represents in the Merger Agreement, among other things, that it
is duly organized and in good standing, that it has the authority to enter into
the Merger Agreement, that its capital stock is accurately described in the
Merger Agreement, that it has provided Bancshares with accurate financial
statements, that it has all necessary authorizations to conduct its business,
that it has paid all of its taxes and that it is not involved in any litigation.
Bancshares and Liberty make similar representations. These representations and
warranties do not survive following the Effective Time of the Merger. If any of
the representations and warranties are not true, the other party is not entitled
to indemnification from the party making the representation and warranty for any
loss suffered as a result.
TERMINATION
The Merger Agreement and the Merger may be terminated at any time before
the Effective Time, both before or after the Sac River shareholders have
approved the Merger Agreement:
(a) by mutual consent of the Boards of Directors of Bancshares and of
Sac River;
(b) by Bancshares or Sac River (i) if there has been a material breach
of any representation, warranty, covenant or agreement contained in the
Merger Agreement by Sac River, on the one hand, or Bancshares, on the other
hand, or (ii) if the representations and
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warranties of Sac River, on the one hand, or Bancshares, on the other hand,
are or have become materially untrue in the aggregate, and in either case
the breach or other condition has not been cured within thirty (30)
business days following receipt of the non-terminating party of notice of
the breach or other condition;
(c) by Bancshares, on the one hand, or Sac River, on the other hand,
if any permanent injunction preventing the consummation of the Merger has
become final and nonappealable;
(d) subject to the Merger Agreement, by the Board of Directors of
Bancshares or the Board of Directors of Sac River if the Merger shall not
have been consummated before March 31, 1999, for a reason other than the
failure of the terminating party to comply with its obligations under the
Merger Agreement;
(e) by the Board of Directors of Bancshares or the Board of Directors
of Sac River if (i) the Federal Reserve Board, the Division of Finance, the
FDIC or other applicable bank regulatory authority has denied approval of
the Merger and neither Bancshares nor Sac River has, within thirty days
after the entry of the order denying approval, filed a petition seeking
review of such order as provided by applicable law or (ii) if the parties
petition for review, relief is denied; and
(f) by Sac River or Bancshares, if the shareholders of Sac River and
Liberty do not approve the Merger Agreement and the Merger after a vote at
a meeting of Sac River's or Liberty's shareholders (or any adjournment
thereof) called and held for the purpose of acting on the Merger Agreement.
EXPENSES
Except for printing and regulatory filing fees, Bancshares and Sac River
are responsible for the payment of their respective expenses in connection with
the Merger. Bancshares will pay the total printing and regulatory filing fees
required for the Merger. If Sac River has not paid certain expenses by the time
of the Merger, Liberty will pay them following the Merger.
EFFECT ON EMPLOYEE BENEFIT PLANS
Bancshares Incentive Stock Option Plan. In 1995, Bancshares established an
incentive stock option plan for key employees of Bancshares and Liberty (the
"ISO Plan"). Under the ISO Plan only employees of Liberty and Bancshares
selected by the Incentive Stock Option Committee of Bancshares are eligible to
receive options. Each option granted by the Incentive Stock Option Committee is
evidenced by a written agreement. The purchase price of the stock under each
option is the fair market value of the stock at the time of the grant of the
option. All outstanding option agreements provide that the option recipients
must exercise their options within ten (10) or fewer years after the options
were granted.
Options granted under the ISO Plan are intended to be treated as incentive
stock options under I.R.C. Section 422. At the time of option grant or
exercise, the option holder incurs no income tax liability. Generally, when
the option holder sells the shares obtained upon exercise of the option, he or
she will be taxed at capital gains rates on the difference between the sale
price and the option exercise price. However, if the employee disposes of ISO
stock before the statutory holding period expires, it is considered a
disqualifying disposition. The effect of a disqualifying disposition on the
employee is that
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the employee must recognize as compensation income the gain on the disposition.
For this purpose, the gain is equal to the difference between the option
exercise price and the stock's fair market value at the time of option exercise.
The statutory holding period is the later of two years from the date of the
granting of the ISO to the employee or one year from the date that the shares
were transferred to the employee upon exercise.
Bancshares, as the grantor of the option, does not recognize any
compensation expense upon the grant or exercise of incentive stock options or
upon the sale of any shares issued upon the exercise of the options. However,
upon a disqualifying disposition of ISO stock, the employer may deduct from
income in the year of the disqualifying disposition an amount equal to the
amount that the employee recognizes as compensation income due to the
disqualifying disposition.
As of June 1, 1998, Bancshares has issued options to purchase 16,000 shares
of Bancshares common stock under the ISO plan to five (5) employees. The options
have an average exercise price of $12.88 per share. As of June 1, 1998, none of
these options had been exercised.
Bancshares intends to continue the ISO Plan after the Merger is concluded
and may, from time to time, issue additional options to employees of Bancshares
and Liberty, including former employees of Sac River who become employees of
Liberty or Bancshares.
Sac River's Employee Stock Ownership Plan. Effective January 1, 1989, Sac
River established an employee stock ownership plan (the "ESOP"). The ESOP is a
qualified retirement plan within the meaning of I.R.C. Section 401. As of
December 31, 1997, the ESOP held 433 1/3 shares of Sac River Common Stock and
had 22 participants who were employees (or former employees) of Sac River.
Sac River established the ESOP to provide retirement benefits to eligible
employees. The ESOP is designed to invest primarily in Sac River common stock
(commonly referred to as "employer securities"). The plan year for the ESOP is
the calendar year.
The sole trustee of the ESOP is Garry Robinson, President and a director of
Sac River. As trustee, Mr. Robinson has certain fiduciary duties to the
participants of the ESOP, including a duty to discharge his duties solely in the
interests of the participants and their beneficiaries and for the exclusive
purpose of providing benefits to participants and their beneficiaries, with the
care, skill, prudence and diligence under the circumstances then prevailing that
a prudent person acting in a like capacity and familiar with such matters would
use.
Sac River Common Stock held by the ESOP is allocated to the accounts of the
participants (commonly referred to as "employer securities accounts"). In
addition to employer securities accounts, participants also have general
investments accounts, to which are allocated all assets of the ESOP other than
Sac River Common Stock. A participant has the right to direct the trustee
regarding the voting of the Sac River Common Stock allocated to his or her
account with respect to the approval or disapproval of the Merger. The trustee
does not have the right to vote any Sac River Common Stock for which he
receives no direction.
Although the ESOP does not provide that the ESOP participants may direct
the trustee as to the investment of their accounts, the trustee has determined
to allow ESOP participants to elect to receive cash or Bancshares Common Stock
for the shares of Sac River Common Stock allocated to their accounts. Any cash
received by the trustee for shares of Sac River Common Stock allocated to the
accounts of participants will be allocated to the general investments accounts
of those participants, and will be invested by the trustee in a manner similar
to the current investment of the general investment accounts of the
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participants. As to any participants who fail to make an election, the trustee
has determined to elect to receive cash for the shares of Sac River common stock
allocated to their accounts. The trustee believes such investment to be prudent
and reasonable and to be in the best interests of the participants.
Following the Merger, Liberty will be considered the employer with respect
to the ESOP, and any shares of Bancshares Common Stock allocated to the accounts
of the participants will be considered "employer securities" under the ESOP.
Under the ESOP, the employer issues a "put option" to each participant receiving
a distribution of employer securities from the ESOP. The put option permits the
participant to sell the employer securities to the employer, at any time during
two (2) option periods, at the current fair market value of the employer
securities. The first put option period runs for a period of at least sixty days
commencing on the date of distribution of employer securities to the
participant. The second put option period runs for a period of at least sixty
days commencing after a new determination of the fair market value of the
employer securities and notice to the participants of the new fair market value.
If a participant exercises his or her put option, the employer must purchase the
employer securities at fair market value upon the terms as set forth in the
ESOP. If a participant of the ESOP elects to exercise his or her put option,
Bancshares will purchase the employer securities held by the participant at fair
market value as provided in the ESOP. "Fair market value", for purposes of the
ESOP, means the value of the employer securities determined as of the last day
of the preceding plan year (except for certain individuals, such as officers,
directors, or highly compensated employees of the employer, in which case, fair
market value shall be determined as of the date of the exercise of the put
option).
Following the merger, the trustee must value the assets of the ESOP as of
the last day of each plan year to determine the fair market value of each
participant's accrued benefit in the ESOP. An independent appraiser must perform
all valuations of employer securities which are not readily tradeable on an
established securities market.
Liberty's and Sac River's 401(k) Plans. Each of Liberty and Sac River
maintains a defined contribution plan that is qualified under IRC Section
401(k). Section 401(k) plans allow participants who have met certain eligibility
requirements to defer a percentage of their compensation each year (up to a
maximum dollar amount allowed by law--$10,000 for 1998) instead of receiving
such amount in cash. The amount elected to be deferred, and any earnings on that
amount, will not be subject to income tax until it is actually distributed to
the participant.
Sac River's Section 401(k) Plan. Sac River's Section 401(k) Plan was
originally adopted as of January 1, 1988, and was subsequently amended as of
January 1, 1996. The plan specifications are as follows:
1. Plan Contributions. Plan contributions to a participant's account
may consist of one or more of the following: (a) Employee salary deferrals
(maximum of $10,000 in 1998); (b) Employer discretionary matching
contributions equal to an employee's salary deferrals up to a maximum of
six percent (6%) of compensation (employee need not be employed on last day
of plan year to receive this contribution); (c) Employer qualified
non-elective contributions on behalf of non-highly compensated employees
(employee must be employed on last day to receive contribution); and (d)
Employer discretionary non-elective contributions (employee must be
employed on last day of plan year to receive contribution.)
Any employer contributions will be allocated based on the
participant's pro rata share of compensation in relation to all
participants' total compensation.
2. Eligibility Requirements. An employee is eligible to participate in
the Section 401(k) plan upon completion of six (6) months of service and
has attained the age of 20 1/2. If the
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employee is in the employ of the employer six (6) months after his/her
employment commencement date, then the employee will have completed six (6)
months of service.
3. Effective Date of Participation. An employee will become a
participant of the Section 401(k) plan on the first day of the plan year
following the date the employee satisfies the eligibility requirements.
4. Vesting Schedule. An employee's "vested percentage" in his
Section 401(k) account shall be determined on a seven (7) year graded
vesting schedule (20% after second year of service and 100% after seven
years of service); provided, however, the employee shall always be 100%
vested in any salary reduction amounts, direct roll overs from another
qualified plan and any special qualified non-elective contributions by the
employer. A six (6) year graded vested schedule (20% after first year of
service and 100% after six years of service) shall be used for "top-heavy"
plans.
For vesting purposes, an employee will have completed a year of
service if credited with 1,000 hours of service during the plan year.
5. Participant Loans. An employee is eligible to receive a loan from
his or her Section 401(k) plan subject to the lesser of (i) $50,000 or (ii)
one-half of his or her account balance (but in no event shall a loan be
made for less than $1,000); provided, such loan is adequately secured,
bears a reasonable interest rate and is paid over a reasonable period of
time, not to exceed five (5) years.
6. Retirement Benefits. Upon reaching the age of 65, an employee shall
be 100% vested in his or her Section 401(k) account; provided, however, an
employee shall be eligible for an early retirement at age 55 if such
employee has completed 10 years of service.
Liberty's Section 401(k) Plan. Liberty's Section 401(k) plan was adopted
on January 1, 1998, and the plan specifications are as follows:
1. Plan Contributions. Plan contributions to a participant's account
may consist of one or more of the following: (a) Employee salary reductions
subject to a maximum of 15% of compensation but not to exceed the amount
allowed by law (maximum of $10,000 in 1998); (b) Employer discretionary
matching contributions based upon the employee's salary deferrals; (c)
Employer discretionary qualified non-elective contributions on behalf of
non-highly compensated employees; and (d) Employer discretionary
non-elective contributions.
Employer discretionary contributions shall be based on an employee's
pro rata share of compensation as it relates to the total compensation paid
to all employees.
2. Plan Year. The plan year begins on January 1 and ends on December
31 of each year.
3. Eligibility Requirements. An employee shall be eligible to
participate in the Section 401(k) plan upon completion of one year of
service and has attained the age of eighteen (18). An employee shall be
credited with one year of service upon completion of 1,000 hours of
service.
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4. Effective Date of Participation. The plan provides for semi-annual
entry dates (January 1 or July 1) whereby the employee shall commence
participation in the plan on the earlier of such date after the employee
satisfies the eligibility requirements.
5. Vesting Schedule. An employee's "vested percentage" in his or her
Section 401(k) account shall be 100% after six years of service for any
non-qualified employer contributions; provided, however, the employee shall
have a 100% nonforfeitable interest at all times in any salary deferral
contributions, any employer qualified non-elective contributions, and any
qualified matching contributions. For "top-heavy" plans, a six (6) year
graded vesting schedule shall apply (20% after the first year of service
and 100% after five years of service).
6. Participant Loans. Employee loans are not allowed.
7. Retirement Benefits. Upon attaining the age of 65, an employee
shall be 100% vested in his or her Section 401(k) account.
As soon as administratively practicable following the merger, Sac River's
Section 401(k) plan shall be terminated or merged with Liberty's 401(k) plan at
the discretion of Liberty's Board of Directors.
BANK REGULATORY MATTERS
Under the Merger Agreement, it is a condition to each party's obligation to
effect the Merger that all regulatory approvals, authorizations, and consents
required to consummate the Merger (collectively the "Requisite Regulatory
Approvals") have been obtained and are in full force and effect and all waiting
periods associated with them have expired. Bancshares and Sac River have agreed
to use all reasonable efforts to obtain the approvals discussed below. There can
be no assurance that any or all regulatory approvals will be obtained, and, if
obtained, there can be no assurance about the date of any of them. It is also
possible that some or all of the Requisite Regulatory Approvals will impose a
condition or restriction that would materially adversely affect the benefits of
the Merger to Bancshares or Sac River or their shareholders and render the
consummation of the Merger inadvisable. It is also possible that a third party
could challenge the approvals through litigation.
Bancshares must submit an application (the "FDIC Application") to the FDIC
pursuant to Section 18(c) of the Federal Deposit Insurance Act (the "FDIA")
seeking the prior approval of the FDIC to the Merger of Sac River with and into
Liberty. Under applicable law, the FDIC may not approve any transaction under
Section 18(c) of the FDIA: (i) that would result in a monopoly or which would be
in furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States; or (ii) the
effect of which in any section of the United States may be substantially to
lessen competition, or to tend to create a monopoly, or result in a restraint of
trade, unless the FDIC finds that the anti-competitive effects of the
transaction are clearly outweighed in the public interest of the probable effect
of the transaction in meeting the convenience and needs of the communities to be
served.
In addition, the FDIC must also take into consideration the financial and
managerial resources and future prospects of Sac River and Liberty, and the
convenience and needs of the communities to be served. A merger subject to
Section 18(c) of the FDIA may not be consummated before thirty days following
approval by the FDIC or any shorter period that the FDIC permits, during the
waiting period the Attorney General of the United States may object to the
merger on antitrust grounds.
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Bancshares and Sac River must also submit applications (the "Division of
Finance Applications") to the Division of Finance. The Division of Finance has
full power to approve or disapprove the Merger. The Division of Finance looks at
substantially the same considerations as the FDIC in determining whether to
approve the Merger.
Bancshares must also submit an application (the "FRB Application") to the
Federal Reserve Board pursuant to Sections 3(a)(3) of the Bank Holding Company
Act of 1956, as amended (the "BHCA") seeking the prior approval of the Federal
Reserve Board to consummate the Merger. Assuming the Federal Reserve Board
approves the FRB Application, the Merger may not be consummated for up to 30
days after such approval, during which time the United States Department of
Justice may challenge the Merger on antitrust grounds.
The FRS Board is prohibited from approving any acquisition or merger
pursuant to Section 3 of the BHCA: (i) that would result in a monopoly or that
would be in furtherance of any combination or conspiracy to monopolize or to
attempt to monopolize the business of banking in any part of the United States;
or (ii) the effect of which in any section of the United States may be
substantially to lessen competition, or to tend to create a monopoly, or result
in a restraint of trade, unless the Federal Reserve Board finds that the
anti-competitive effects of the transaction are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the convenience
and needs of the communities to be served.
In reviewing the FRB Application, the FRS Board also considers the
financial condition and future prospects of Bancshares, Liberty and Sac River,
the convenience and needs of the community to be served, and the competency,
experience and integrity of their respective officers and directors. In
addition, the FRS Board will disapprove an application if the applicant has
failed to provide the FRS Board with adequate assurances it will make available
information about its operations and activities as the Board determined to be
appropriate.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary contains a description of the material United States
Federal Income Tax considerations for Bancshares, Liberty, Sac River, and Sac
River shareholders with respect to the Merger, in reliance upon the opinion of
Husch & Eppenberger, LLC, counsel for Bancshares and Liberty as to certain
federal income tax matters with respect to the Merger. The conclusions discussed
herein are based on certain representations, warranties, and assumptions made by
the management of Bancshares, Liberty and Sac River, on which the management of
Bancshares, Liberty and Sac River expressly authorized Husch & Eppenberger, LLC
to rely in preparing this summary and its tax opinion. The conclusions are also
based on the Internal Revenue Code of 1986, as amended (the "Code"),
regulations, rulings and decisions in effect on the date of this Proxy
Statement-Prospectus, all of which are subject to change. This summary does not
discuss any aspect of state, local, or foreign taxation and does not discuss all
the tax considerations that may be relevant to Sac River shareholders in light
of their particular circumstances, or to certain types of shareholders that may
be subject to special tax rules, such as financial institutions, tax exempt
organizations, insurance companies, dealers in stock or securities, foreign
corporations, and individuals who are not citizens or residents of the United
States. The discussion with respect to Sac River shareholders is limited to
those shareholders who have held Sac River Common Stock and who will hold the
Bancshares Common Stock received in the Merger as "capital assets" within the
meaning of Section 1221 of the Code.
SAC RIVER SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS IN DETERMINING
THE TAX CONSIDERATIONS THAT MAY BE RELEVANT IN CONNECTION
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WITH THE PROPOSED MERGER, INCLUDING THE APPLICATION TO THEIR PARTICULAR
SITUATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE APPLICATION
OF STATE, LOCAL, FOREIGN, OR OTHER TAX LAWS.
The Merger of Sac River into Liberty in exchange for voting stock of
Bancshares will be treated as a forward triangular merger for federal income tax
purposes under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, provided the
transaction meets the requirements of a valid forward triangular merger. The
most significant requirements of a valid forward triangular merger are that: (i)
the surviving corporation must acquire substantially all the properties of the
merged corporation; and (ii) the nonstatutory rules regarding continuity of
proprietary interest, continuity of business enterprise, and business purpose
have been satisfied. Based on the information contained in this Proxy Statement-
Prospectus, the Merger Agreement, and the representations, warranties and
assumptions that the management of Bancshares has authorized Husch &
Eppenberger, LLC to rely upon in preparing this summary, the Merger of Sac River
into Liberty will constitute a forward triangular merger under Sections
368(a)(1)(A) and 368 (a)(2)(D) of the Code.
Accordingly, the material federal income tax consequences of the Merger
will be:
1. No gain or loss will be recognized by Bancshares, Liberty, or Sac
River as a result of the Merger.
2. Sac River shareholders will not recognize any gain or loss upon the
receipt of Bancshares Common Stock (as opposed to cash) in exchange for
their Sac River Common Stock.
3. The tax basis of the Bancshares Common Stock received by a Sac
River shareholder will be the same as the basis of the Sac River Common
Stock surrendered in exchange therefor reduced by the portion of the basis
allocable to the fractional share of Bancshares stock received in the
Merger.
4. The holding period for Bancshares stock received by a Sac River
shareholder in the Merger will include the period during which the Sac
River Common Stock surrendered in exchange therefor was held.
5. Each Sac River shareholder will recognize gain equal to the lesser
of (i) the amount of cash received in the Merger or (ii) the amount, if
any, by which the sum of the cash plus the fair market value of the
Bancshares stock received in the Merger exceeds the stockholder's basis in
the Sac River shares surrendered. For purposes of determining the character
of such gain, the cash received in the Merger will be treated as if shares
of Bancshares Common Stock equal in value to the cash had been distributed
to the Sac River shareholder as part of the Merger and then immediately
after the Merger such shares were redeemed by Bancshares. Depending upon
the particular circumstances of each shareholder, such cash payments will
be characterized as either having been received as a distribution in full
payment in exchange for the Bancshares stock deemed to have been redeemed
or as having been received as a dividend, as provided in Section 302 of the
Code. A cash payment will be treated as a distribution in full payment in
exchange for the Bancshares stock if the deemed redemption is
"substantially disproportionate" within the meaning of Section 302(b)(2) of
the Code, is in complete termination of the shareholder's interest in the
corporation within the meaning of Section 302(b)(3) of the Code or is "not
essentially equivalent to a dividend" within the meaning of Section
302(b)(1) of the Code. A redemption is treated as "substantially
disproportionate" if: (1) the shareholder owns less than 50% of the total
combined voting power of all classes of stock immediately after the
redemption; (2) the ratio of
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the shareholder's holdings of voting stock immediately after the redemption
to all the voting stock in the corporation at that time is less than 80% of
the ratio which the voting stock the shareholder owned immediately before
the redemption bore to the entire voting stock in the corporation at that
time (the "80% Test"); and (3) the shareholder's ownership of common stock
(whether voting or nonvoting) after and before the redemption also meets
the 80% test. A redemption is treated as "not essentially equivalent to a
dividend" if it results in a meaningful reduction of the shareholder's
proportionate interest in the corporation. When making a determination as
to whether a redemption is substantially disproportionate or not
essentially equivalent to a dividend, or, subject to certain exceptions,
whether the redemption terminates the shareholder's entire interest in the
corporation, the constructive ownership rules of Section 318 of the Code
apply. If the cash payment is treated as having been received by a Sac
River shareholder as a distribution in full payment in exchange for
redeemed shares, such shareholder's gain recognized on the Merger will be
short-term, mid-term or long-term capital gain, depending upon the Sac
River shareholder's holding period for the Sac River stock. If the cash
payment is treated as having been received by a Sac River shareholder as a
dividend, the shareholder's gain on the Merger will be recognized as
ordinary income. Sac River shareholders should consult their tax advisors
on the tax treatment of the cash payments that they receive.
RESALES OF BANCSHARES COMMON STOCK ISSUED IN THE MERGER
The shares of Bancshares Common Stock issued pursuant to the Merger will be
freely transferable under the Securities Act immediately following the Merger,
except for shares issued to any Sac River shareholder who may be deemed to be an
"affiliate" of Sac River or Bancshares for purposes of Rule 145 under the
Securities Act. This Proxy Statement/Prospectus does not cover resales of shares
of Bancshares Common Stock received in the Merger by any person who may be
deemed to be an affiliate of Sac River or Bancshares. At the time of the Sac
River Special Meeting (in the case of Sac River affiliates) or at the Effective
Time (in the case of Bancshares affiliates), persons who may be deemed to be
affiliates of Sac River or Bancshares generally include individuals who, or
entities which, control, are controlled by or are under common control with Sac
River or Bancshares and will include directors and certain executive officers of
Sac River and Bancshares and may include principal shareholders of Sac River or
Bancshares.
Securities Act Rules 144 and 145 restrict the sale of Bancshares Common
Stock received in the Merger by Sac River affiliates and certain of their family
members and related interests.
Generally, during the one year period following the Effective Time,
affiliates of Sac River who are not affiliates of Bancshares may publicly resell
Bancshares Common Stock received by them in the Merger, subject to certain
limitations on the number of shares they can sell in any three month period and
subject to the requirement that they sell the shares in broker transactions.
Bancshares is under no obligation to insure that any registered broker-dealer
will be available to conduct sales in accordance with Rule 144.
Following the initial one year period, affiliates of Sac River who are not
affiliates of Bancshares and all other Sac River shareholders who received
Bancshares Common Stock in the Merger may resell their shares without these
restrictions so long as there is adequate current public information available
about Bancshares. Bancshares, however, is under no obligation to make such
information available and does not presently plan to do so. Accordingly, resales
under Rule 144 may not be possible, and the former Sac River shareholders should
consult their counsel about the availability of other exemptions under the
Securities Act before they attempt to sell their Bancshares stock.
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Sac River shareholders who become affiliates as a result of the Merger will
be subject to the same restrictions on resale that apply to Sac River affiliates
during the year following the Merger that are described above, but in the case
of these Bancshares' affiliates, the restrictions will continue until they have
ceased to be affiliates. These shareholders should also consult their counsel
about the availability of exemptions under the Securities Act before they
attempt to resell any of their Bancshares stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATED STOCK OWNERSHIP
Richard A. Pendleton, a director of Liberty and Bancshares, is co-trustee
of the Anise C. Brasher Revocable Trust U/T/A dated August 1, 1995, which owns
shares of Sac River Common Stock. No other directors, executive officers or
principal shareholders of Bancshares own shares of Sac River Common Stock. No
directors, executive officers or principal shareholders of Sac River own shares
of Bancshares Common Stock.
LOAN PARTICIPATION
Sac River has purchased participations in loans originated by Liberty. The
outstanding balance of these participations as of March 31, 1998 was $7,009,152.
Liberty has purchased participations in loans originated by Sac River. The
outstanding balance of these participations as of March 31, 1998 was $1,146,187.
These loan participations were made in the ordinary course of business of
Liberty and Sac River and were made on an "arm's length" basis. None were past
due or nonperforming, and neither Sac River or Liberty has had to write off all
or any portion of a loan participation it has purchased from the other.
LEGAL COUNSEL
The law firm of Husch & Eppenberger, LLC, has represented Bancshares
throughout the negotiation of the proposed acquisition. Members of Husch &
Eppenberger, LLC, have also represented Sac River in connection with the
establishment and administration of Sac River's ESOP. Sac River engaged the law
firm of Yates, Mauck, Bohrer, Ellif, Croessmann, Wieland, P.C. ("Yates, Mauck")
to assist Sac River in negotiating the terms of the Merger Agreement and to
provide legal advice with respect to the Merger. Yates, Mauck represented
Bancshares in the formation of Bancshares in 1995. Yates, Mauck ceased
representing Bancshares in 1996. Sac River and Bancshares have waived all actual
and potential conflicts of interest on the part of both firms.
DIRECTORS OF BANCSHARES
Sac River has made loans to the following directors or officers of
Bancshares, either personally or to businesses that are owned in whole or in
part by them: Gary E. Metzger, William T. Gaut, Lyle D. Graesser, Kenneth E.
Hamilton, Howard Jackson Hoke, Dixie F. Letsch, Richard A. Pendleton, Wayne A.
Scheer and Charles Talbert Wooten, Jr. These loans were made in the ordinary
course of business of Sac River and were made on an "arm's length" basis on
terms equivalent to those extended to similar borrowers. The outstanding balance
of those loans at March 31, 1998, was $8,164,005. None of these loans are
past due or nonperforming. Liberty has not made any loans to officers or
directors of Sac River.
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DISSENTERS' RIGHTS OF HOLDERS
OF SAC RIVER COMMON STOCK
If Sac River Shareholders approve the Merger and the Merger occurs, any
shareholder of Sac River who properly dissents from the Merger at the Special
Meeting may be entitled to receive in cash the reasonable value of his or her
shares of Sac River Common Stock determined immediately prior to the Merger,
excluding any appreciation or depreciation in anticipation of the Merger.
FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES PRESCRIBED BY APPLICABLE LAW WILL
RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Pursuant to Missouri Revised Statutes Section 362.730, any shareholder of
Sac River who does not vote in favor of the agreement to merge at the
shareholders' meeting called for that purpose is entitled to receive from
Bancshares the reasonable value of such shareholder's shares of Sac River
Common Stock at the time of the Merger. The value of Sac River Common Stock
will be determined as follows:
(1) Within sixty (60) days after the Effective Time of the Merger, the
dissenting shareholder may apply to the Circuit Court of Greene County,
Missouri, by petition for the appointment of appraisers to value the
dissenter's stock.
(2) At any time during the sixty (60) day period any other dissenting
shareholder of Sac River may file his or her petition in the Circuit Court
of Greene County for the determination of his or her shares of stock.
(3) Any shareholder who does not become a party to a proceeding in
Greene County, within sixty (60) days from the Effective Time of the Merger
shall be conclusively presumed to have assented to the Merger.
After expiration of the sixty (60) days from the Effective Time of the
Merger, the Circuit Court of Greene County will appoint three appraisers to
determine the value of the dissenting shareholders' share of Sac River Common
Stock.
DESCRIPTION OF BANCSHARES COMMON STOCK
Bancshares is authorized to issue 5,000,000 shares of common stock, par
value $1 per share, of which 511,090 shares were issued and outstanding as of
June 30, 1998. Bancshares held no shares in its treasury on that date.
Bancshares has no other class of authorized or issued capital stock.
Each share of Bancshares Common Stock has the same rights, privileges and
preferences as every other share of Bancshares Common Stock. Each shareholder is
entitled to one vote per share in any matter requiring a vote at any meeting,
including the election of directors, and is entitled to participate in the
liquidation, dissolution or winding up on the basis of such shareholder's pro
rata holdings of the Bancshares Common Stock. Shareholders do not have
cumulative voting rights in the election of directors, and, as of the Effective
Time of the Merger, Bancshares' shareholders will not have preemptive rights
when Bancshares issues shares of the Common Stock to other persons.
Each Bancshares shareholder participates equally in dividends, which are
payable when and as declared by the board of directors of Bancshares out of
funds that are legally available for that purpose. Bancshares has never declared
or paid any cash dividends and has no present intention to do so after the
Merger.
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COMPARISON OF SHAREHOLDER RIGHTS
Bancshares is a corporation incorporated under Chapter 351 of the Revised
Missouri Statutes and, as a result, the rights of stockholders of Bancshares are
governed by Missouri law, the Articles of Incorporation of Bancshares (the
"Bancshares Articles") and the by-laws of Bancshares (the"Bancshares By-laws").
Sac River is a state chartered banking corporation formed under Chapter 362 of
the Revised Missouri Statutes and, as a result, the rights of shareholders of
Sac River are governed by Missouri law, the Articles of Agreement of Sac River
(the "Sac River Articles"), and the by-laws of Sac River (the"Sac River
By-laws"). If the Merger is consummated, each shareholder of Sac River will
become a shareholder of Bancshares, unless the shareholder elects to receive
cash in exchange for his shares of Sac River Common Stock, as provided in the
Merger Agreement, or exercises dissenters' rights. The following is a summary of
the material differences between the rights of holders of Sac River Common Stock
and the rights of holders of Bancshares Common Stock. These differences arise
from differences between the treatment of corporations and banks under Missouri
law, as well as from differences between the corporate governing instruments of
Bancshares and Sac River.
CAPITAL STOCK
BANCSHARES. The Bancshares Articles authorize the issuance of 5,000,000
shares of Bancshares Common Stock, of which 511,090 shares were outstanding as
of the date of this Proxy Statement- Prospectus. Bancshares does not have any
authorized shares of preferred stock.
SAC RIVER. Sac River is authorized to issue 10,000 shares of Sac River
Common Stock, of which 10,000 shares were outstanding as of the date of this
Proxy Statement-Prospectus. Sac River does not have any authorized shares of
preferred stock.
PREEMPTIVE RIGHTS
BANCSHARES. As of the Effective Time, the Bancshares Articles will provide
that when Bancshares issues shares for any reason no Bancshares shareholder will
have any preemptive right to subscribe for or acquire additional shares of
Bancshares capital stock of the same or any other class. Prior to the Effective
Time, Bancshares shareholders have preemptive rights.
SAC RIVER. The Sac River Articles provide that when Sac River issues shares
for any reason no Sac River shareholder will have any preemptive right to
subscribe for or acquire additional shares of Sac River capital stock of the
same or any other class.
VOTING RIGHTS OF CAPITAL STOCK
BANCSHARES. Under the Missouri law, unless a corporation's articles of
incorporation provide otherwise, each share of capital stock of the corporation
is entitled to one vote on each matter submitted to a vote of the shareholders.
The Bancshares Articles do not provide otherwise.
SAC RIVER. Under the Missouri law, unless a corporation's articles of
incorporation provide otherwise, each share of capital stock of the corporation
is entitled to one vote on each matter submitted to a vote of the shareholders.
The Sac River Articles do not provide otherwise.
BOARD OF DIRECTORS
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BANCSHARES. Under the Bancshares Articles, the Bancshares Board of
Directors is to consist of eleven directors. Shareholders elect directors at
each annual meeting and the directors serve until the next annual meeting or
until their successors are duly elected and qualified. As of the Effective Time,
the Bancshares Board of Directors will consist of eighteen directors.
SAC RIVER. Under the Sac River Articles and By-laws, the Sac River Board of
Directors is to consist of not less than 5 directors nor more than 35 directors.
The Sac River Board of Directors currently consists of seven directors.
Shareholders elect directors at each annual meeting of shareholders and the
directors serve until the next annual meeting of shareholders or until their
successors are duly elected and qualified.
CUMULATIVE VOTING
BANCSHARES. The Bancshares Articles do not provide for cumulative voting
for directors. Thus, under Missouri law, each shareholder who is entitled to
vote at an election of directors has the right to vote the number of shares
owned by him or her for as many persons as there are directors to be elected,
but a shareholder may not cumulate his or her votes for directors.
SAC RIVER. The Sac River By-laws provide for cumulative voting for
directors. In the election of directors, each shareholder has the right to cast
as many votes in the aggregate as equals the number of voting shares held by the
shareholder, multiplied by the number of directors to be elected at such
election. The shareholder may cast that aggregate number of votes for one
candidate or allocate the votes among more than one candidate.
REMOVAL OF DIRECTORS
BANCSHARES. Bancshares' By-laws provide that any director may be removed at
any time, with or without cause, by the vote of a majority of the votes cast by
the shareholders entitled to vote for the election of directors.
SAC RIVER. Sac River's Articles and By-laws do not provide for the removal
of directors. Under Missouri law, however, a director may be removed upon the
vote of the holders of a majority of shares entitled to vote at an election of a
director.
FILLING OF VACANCIES ON THE BOARD OF DIRECTORS AND NEWLY CREATED DIRECTORSHIPS
BANCSHARES. The Bancshares By-laws provide that any vacancy on the Board of
Directors or newly created directorship may be filled by the affirmative vote of
a majority of the remaining directors even though less than a quorum of the
Board, or by a sole remaining director.
SAC RIVER. The Sac River By-laws provide that vacancies on the Sac River
Board of Directors not exceeding one-third of the whole number of the Board may
be filled by the affirmative vote of a majority of the remaining directors. Any
director so elected will serve until the next election of directors by the
stockholders.
CALL OF SPECIAL MEETINGS OF SHAREHOLDERS
BANCSHARES. The Bancshares By-laws provide that special meetings of the
shareholders may be called by the Board, the Chairman of the Board or the
President, and shall be called by the President or the Secretary at the written
demand of a least twenty-five percent (25%) of all outstanding shares entitled
33
<PAGE> 43
to vote on the action proposed to be taken at such meeting, which demand must
state the purpose or purposes of the proposed meeting.
SAC RIVER. The Sac River By-laws provide that special meetings of the
stockholders may be called at any time by the Board of Directors or by written
request of the holders of a majority of outstanding capital stock of Sac River.
AMENDMENTS TO ARTICLES OF AGREEMENT OR ARTICLES OF INCORPORATION
BANCSHARES. The Articles of Incorporation of Bancshares may be amended upon
the vote of the persons holding the majority of the shares of Bancshares Common
Stock.
SAC RIVER. Pursuant to Missouri Revised Statutes Section 362.325, the
Articles of Agreement of Sac River may be amended upon the vote of the persons
holding the majority of the shares of Sac River Common Stock.
AMENDMENTS TO BY-LAWS
BANCSHARES. The Bancshares By-laws provide that they may be changed or
amended by the vote of a majority of the Board at any regular or special meeting
of the Board, provided, however, that the Board has received 10 days' notice of
the intention to change or offer an amendment to the By-laws.
SAC RIVER. The Sac River By-laws provide that they may be amended, altered
or repealed, by a vote of a majority of the whole number of the Directors.
INDEMNIFICATION OF BANCSHARES' AND LIBERTY'S DIRECTORS AND OFFICERS
Bancshares and Liberty have adopted resolutions authorizing indemnification
for the acts or omissions of Bancshares' or Liberty's directors or officers to
the fullest extent allowed under Missouri Revised Statutes Section 351.355.
Section 351.355 allows a corporation to indemnify its officers and directors
against all expenses incurred as a result of any action brought against such
officer or director brought because he was a director or officer of the
corporation, as long as he acted in good faith, in a manner he reasonably
believed to be in the best interests of the corporation, and, with respect to
any criminal proceeding, had no reason to believe his conduct was unlawful.
Bancshares and Liberty provide insurance covering Bancshares' and Liberty's
directors and officers for any losses suffered by them as a result of holding
such position.
BUSINESS OF BANCSHARES
GENERAL
Bancshares is a Missouri corporation formed in 1995 for the sole purpose of
becoming a single bank holding company. Liberty is the only subsidiary of
Bancshares. Although it does not have any present acquisition plans other than
the Merger, Bancshares may acquire additional subsidiaries in the future,
including other banks.
Liberty is a commercial bank that opened for business in October 1995. It
offers a diversified range of commercial banking services for customers located
principally in Christian, Green, Lawrence
34
<PAGE> 44
and Dade Counties, Missouri. Liberty's services include customary depository
products, safe deposit facilities, commercial, agricultural and personal banking
services, and commercial, construction, consumer, residential real estate, and
industrial lending. Liberty does not intend to change the banking services it
offers, except as market or regulatory conditions may dictate.
Liberty's principal sources of income are interest on loans, investments
and service fees. Its principal expenses are interest paid on deposits and
general operating expenses.
EMPLOYEES
At June 1, 1998, Liberty employed 37 full-time and 5 part-time employees.
None of those employees is covered by a collective bargaining agreement, and
management believes that its employee relations are good.
DESCRIPTION OF LIBERTY'S PROPERTY
The executive offices of Bancshares are located at 1414 East Primrose,
Springfield, Missouri 65804, which is also the main branch of Liberty. The size
of the facility is 4,830 sq. ft., and Liberty owns the facility.
Liberty operates three (3) branches at the following locations in Missouri:
2809 East Sunshine, Springfield, Missouri (2,930 sq. ft.); Greenfield, Missouri
(2,940 sq. ft.); and Mount Vernon, Missouri (3,925 sq. ft.). Liberty owns the
building occupied by each branch.
COMPETITION
Liberty's principal market areas are Christian, Greene, Lawrence and Dade
Counties, Missouri. The competition among depository institutions in this area
is strong. Liberty competes for deposits and loans with local, regional, and
national commercial banks and savings and loan associations that have facilities
in Liberty's market area and with a variety of other financial intermediaries
such as credit unions, mutual funds and brokerage firms. As of December 31,
1997, Liberty ranked 14th among Springfield area banks in total assets.
REGULATION AND SUPERVISION OF BANCSHARES
As a bank holding company, Bancshares is subject to regulation and
supervision by federal and state regulatory authorities, including the Division
of Finance and the FRS Board. Bancshares is required to file semiannual and
annual reports of its operations with the Federal Reserve Board. Under FRS Board
regulations, Bancshares can only conduct banking or bank management activities
or activities closely tied to banking, but cannot conduct activities such as
land development, real estate brokerage, insurance premium funding or any other
activities the FRS Board does not consider closely tied to banking.
REGULATION AND SUPERVISION OF LIBERTY
As a state bank whose deposits are insured by the FDIC, Liberty is subject
to regulation and supervision by federal and state regulatory authorities,
including the Division of Finance and the FDIC. Virtually every aspect of
Liberty's day-to-day operations are subject to numerous requirements and
restrictions. Applicable laws and regulations, among other things, prescribe the
nature and amount of certain investments, regulate the closure of branch
offices, and limit the amount of, and establish required
35
<PAGE> 45
approval procedures, reporting requirements and credit standards for, loans and
other extension of credit. Liberty is also subject to the FDIC's regulatory
capital requirements.
Liberty is required to submit quarterly "Call Reports" to the Division of
Finance and the FDIC, including a balance sheet, an income statement, a
statement of changes in equity capital and report of assets and liabilities. The
Division of Finance also requires Liberty to obtain prior approval of the
Division of Finance to open or operate a branch, to change par value of stock or
to acquire additional subsidiaries. The Division of Finance examines Liberty at
least once per eighteen months to ensure compliance with Division of Finance
regulations.
DIVIDENDS
Bancshares has not paid any dividends to its shareholders since its
formation. Bancshares does not anticipate declaring cash dividends following the
Merger.
DIRECTORS AND EXECUTIVE OFFICERS OF BANCSHARES AND LIBERTY
The following table sets forth certain information with respect to the
current directors and executive officers of Bancshares and Liberty.
<TABLE>
<CAPTION>
NAME AND POSITIONS AGE AT YEAR FIRST BECAME DIRECTOR
WITH BANCSHARES AND LIBERTY JUNE 1, 1998 OF BANCSHARES AND LIBERTY
- --------------------------- ------------ -------------------------
<S> <C> <C>
William P. Gaut, Director 58 1995
Robert P. Gephardt, President, 45 --
Mount Vernon's Community Bank
Lyle D. Graesser, Director 52 1995
Kenneth E. Hamilton, Director 57 1995
Howard Jackson Hoke, Director 51 1995
Dixie F. Letsch, Director 56 1997
Ronald McDowell, Senior Vice President 37 --
Gary E. Metzger, Director, President, 47 1995
Chairman of the Board of Directors
Richard A. Pendleton, Director 54 1995
Ronald K. Pender, Senior Vice President 41 --
David Petiford, Senior Vice President 42 --
Wayne A. Scheer, Director 57 1995
Patricia L. Sechler, Secretary, Director, 52 1995
Senior Vice President
Maurice L. Stiles, President, 55 --
Greenfield Community Bank
Charles Talbert Wooten, Jr., Director 55 1995
</TABLE>
36
<PAGE> 46
GARY E. METZGER has served as President and Director of Bancshares and
Liberty since their formation in 1995. Prior to 1995, Mr. Metzger was president
of Southwest Bank, a Springfield area bank, and vice president of Southwest
Bancshares, Inc.
PATRICIA L. SECHLER has served as Director and Secretary of Bancshares and
as Senior Vice President of Liberty since 1995. Prior to 1995, she was vice
president of Southwest Bank, a Springfield area bank.
WILLIAM P. GAUT has served as Director of Bancshares and Liberty since
1995. Mr. Gaut has been the President of William P. Gaut, Inc., a consulting
company, for more than five years.
ROBERT P. GEPHARDT has been President of Liberty's Branch, Mount Vernon's
Community Bank since October, 1996. Prior to that, Mr. Gephardt was employed as
Vice President by First City National Bank.
LYLE D. GRAESSER has been a Director or Bancshares and Liberty since 1995.
Mr. Graesser is the President of Micrographics Services Corporation, a bank
services corporation, a position he has held for more than five years.
KENNETH E. HAMILTON has been a Director of Bancshares and Liberty since
1995. Mr. Hamilton is the President of Hamilton Curtis Corporation, a
development company, Hamilton Properties, Inc., a property management company,
and Hamilton Contracting, Inc., a contracting company, and he is involved in a
number of apartment and real estate development companies. Mr. Hamilton has held
these positions for more than five years.
HOWARD JACKSON HOKE has been a Director of Bancshares and Liberty since
1995. Mr. Hoke has been the President of Jack Hoke Companies, Inc., a real
estate business, for more than five years. He is also the principle of Jack
Hoke, P.C., a law firm.
DIXIE F. LETSCH has been a Director of Bancshares and Liberty since 1997.
Ms. Letsch has been the Secretary/Treasurer of Letsch Advertising, Inc., an
advertising company for more than five years.
RONALD K. PENDER has been Senior Vice President at Liberty since September
1997. Prior to joining Liberty, Mr. Pender served as Vice President at Union
Planters Bank (in 1997) and at Nations Bank (from 1985 to 1997), in both
instances in Springfield.
RICHARD A. PENDLETON has been a Director of Bancshares and Liberty since
1995. Mr. Pendleton has been a director and officer of Pendleton-Talley Company,
a restaurant management company, and Restaurant Systems, Inc., a KFC
owner/operator, for more than five years. He is a partner or member in various
other real estate companies.
DAVID PETIFORD has served as Senior Vice President of Liberty since 1997.
Prior to 1997, Mr. Petiford was employed as Vice President by Boatmen's Bank of
Southern Missouri.
WAYNE A. SCHEER has been a Director of Bancshares and Liberty since 1995.
Mr. Scheer is the President of Liberty Car Rental, a Thrifty car rental
franchise, and Missouri Insulation, a building supply company, positions that he
has held for more than five years. Mr. Scheer is also Chairman of the Board of
Liberty Industries, Inc., a cultured marble manufacturer.
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<PAGE> 47
MAURICE L. STILES has been President of Liberty's Greenfield Community Bank
branch since August 31, 1997. From 1960 until joining Liberty, Mr. Stiles was
employed as community bank president at the Lockwood Boatmen's Bank.
CHARLES TALBERT WOOTEN, JR. has been a Director of Bancshares and Liberty
since 1995. Mr. Wooten owns Wooten Company, a commercial and residential
property management company, and is a partner in various residential and
commercial properties.
SECURITY OWNERSHIP OF BANCSHARES' AND LIBERTY'S MANAGEMENT
The following table sets forth, as of the date of this Proxy
Statement-Prospectus, the number of shares of Bancshares Common Stock owned
beneficially by each director and executive officer of Bancshares and Liberty,
and all directors and executive officers of Bancshares and Liberty as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
POSITIONS WITH BENEFICIALLY PERCENT
NAME BANCSHARES OWNED OF CLASS
- ---- ---------- ----- --------
<S> <C> <C> <C>
Gary E. Metzger Director, President, 11,440 2.24%
Chairman of Board of
Directors
Patricia L. Sechler Director, Secretary, 30,510 5.96%
Senior Vice President
William P. Gaut Director 15,260 2.99%
Robert P. Gephardt President, Mount Vernon 1,660 0.31%
Community Bank
Lyle D. Graesser Director 15,260 2.99%
Kenneth E. Hamilton Director 33,560 6.55%
Howard Jackson Hoke Director 22,880 4.47%
Ronald McDowell Senior Vice President 830 0.16%
Dixie F. Letsch Director 22,880 (1) 4.47%
Richard A. Pendleton Director 15,260 2.99%
David Petiford Senior Vice President 3,930 0.77%
Ronald K. Pender Senior Vice President 1,350 0.26%
Wayne A. Scheer Director 45,770 (2) 8.95%
Maurice L. Stiles President, Greenfield 0 0%
Community Bank
Charles Talbert Wooten, Jr. Director 15,260 (3) 2.99%
All directors and
executive officers
as a group 235,850 48.5%
</TABLE>
38
<PAGE> 48
- -------------------------
(1) 22,870 shares held by Dixie F. Letsch, Trustee under the Dixie F. Letsch
Trust Agreement dated August 1992, 10 shares held by Ms. Letsch.
(2) 15,760 shares held by Wayne A. Scheer, Trustee under Revocable Living Trust
Agreement of Wayne A. Scheer dated August 23, 1993, 30,000 shares held by
Liberty Properties, L.P., a limited partnership of which Mr. Scheer is the
general partner, and 10 shares held by Mr. Scheer.
(3) 15,250 held by Mr. Wooten as Trustee of the Rosalie Wooten Irrevocable
Descendant Trust, 10 shares held by Mr. Wooten.
PRINCIPAL SHAREHOLDERS OF BANCSHARES
The following table sets forth, as of the date of this Proxy
Statement-Prospectus, the persons known by Bancshares to be beneficial owners of
more than five (5%) percent of the outstanding shares of Bancshares Common
Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ---------------- ------------------ -----------------
<S> <C> <C>
Kenneth E. Hamilton 33,560 6.55%
Errett C. and Patricia L. Sechler 30,510 5.96%
Wayne A. Scheer 45,770 (1) 8.95%
</TABLE>
- -------------------------
(1) 15,760 shares held by Wayne A. Scheer, Trustee under Revocable Living Trust
Agreement of Wayne A. Scheer dated August 23, 1993, 30,000 shares held by
Liberty Properties, L.P., a limited partnership of which Mr. Scheer is the
general partner, and 10 shares held by Mr. Scheer.
COMPENSATION OF BANCSHARES' MANAGEMENT
EXECUTIVE COMPENSATION
The following table sets forth the compensation that Liberty paid to its
chief executive officer for services rendered in the fiscal year ended December
31, 1997. Bancshares paid no compensation to Mr. Metzger. Mr. Metzger is the
only executive officer of Bancshares and Liberty whose salary and bonus exceeded
$100,000 during the 1997 fiscal year.
39
<PAGE> 49
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- --------------------------- ------ ----- ------------
<S> <C> <C> <C>
Gary Metzger, President and Chief
Executive Officer
1997 $93,500 $ 18,700 (1)
1996 80,000 -- (2)
1995 75,000 -- (3)
</TABLE>
- -----------------------
(1) On January 20, 1998, Mr. Metzger was granted an option to purchase 2,500
shares of Bancshares Common Stock at a price per share of $14.79, pursuant
to the terms of the Incentive Stock Option Plan adopted by Bancshares on
October 27, 1995. See "Fiscal Year End Options."
(2) On January 21, 1997, Mr. Metzger was granted an option to purchase 2,500
shares of Bancshares Common Stock at a price per share of $12.90.
(3) On October 27, 1995, Mr. Metzger was granted an option to purchase 5,000
shares of Bancshares Common Stock at a price per share of $10.00.
The salary and bonus of the President and Chief Executive Officer of
Liberty and Bancshares is set on an annual basis by the Compensation Committee
of Liberty's Board of Directors. The current members of the Compensation
Committee are Gary E. Metzger, Richard A. Pendleton, Charles Talbert Wooten, Jr.
and William P. Gaut. The Compensation Committee considers Liberty's financial
performance as compared to budget, non-financial goals, including level of
expansion and recruitment of personnel, and the salaries of chief executive
officers at similar institutions in Missouri in setting Mr. Metzger's salary.
FISCAL YEAR END OPTIONS
The following table sets forth information regarding stock options for
shares of Bancshares Common Stock held by certain officers of Liberty as of June
1, 1998. Each option is exercisable for a period of ten years from the date such
option was granted, pursuant to the terms of an Incentive Stock Option Plan
adopted on October 27, 1995, as amended and restated. See "Effects on Employee
Benefit Plan - Bancshares Incentive Stock Option Plan."
40
<PAGE> 50
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF
NAME UNEXERCISED OPTIONS UNEXERCISED OPTIONS
- ---- ------------------- -------------------
<S> <C> <C>
Gary E. Metzger 10,000(1) $175,775
Robert P. Gephardt 1,000(2) 14,710
Ronald McDowell 2,000(3) 31,310
David Petiford 2,000(2) 29,420
Patricia L. Sechler 1,000(2) 14,710
</TABLE>
- -------------------
(1) Includes an option for 5000 shares granted on October 27, 1995, with an
exercise price of $10 per share, an option for 2,500 shares granted on
January 21, 1997, with an exercise price of $12.90 per share, and an option
for 2,500 shares granted on January 20, 1998, with an exercise price of
$14.79 per share.
(2) Option granted on January 20, 1998, with an exercise price of $14.79 per
share.
(3) Includes an option for 1,000 shares granted on January 21, 1997, with an
exercise price of $12.90 per share and an option for 1,000 shares granted
on January 20, 1998, with an exercise price of $14.79 per share.
The exercise price of each option is the fair market value of Bancshares
Common Stock as of the option grant date, as determined by the Incentive Stock
Option Committee. The Incentive Stock Option Committee's current members are
Wayne A. Scheer, Richard A. Pendleton, William P. Gaut, Howard Jackson Hoke and
Lyle D. Graesser. The Incentive Stock Option Committee also determines the
number of options to grant each year based upon recommendations from Liberty's
Compensation Committee, which takes into account the performance of each
eligible employee in making its determination.
COMPENSATION OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
The directors of Bancshares and Liberty receive $200 per meeting for
serving as directors of Bancshares and Liberty. The members of the Loan
Committee of the Liberty Board of Directors receive an additional $200 for each
meeting of the Loan Committee. In 1997, the Bancshares and Liberty Boards of
Directors held twelve (12) meetings, and the Liberty Loan Committee held twelve
(12) meetings.
The Loan Committee consists of the President, three directors who serve
permanently and one director who rotates on a quarterly basis. The Loan
Committee has the power to discount and purchase bills, notes and other
evidences of debt, and to buy and sell bills of exchange. The Committee approves
all new loans over certain limits. The permanent members of the Loan Committee
are Gary E. Metzger, Wayne A. Scheer, Richard A. Pendleton and Charles Talbert
Wooten, Jr.
Liberty's Board of Directors also has an Audit Committee, consisting of not
less than three directors of Liberty, none of whom may be an officer of Liberty.
The Audit Committee makes an examination of the affairs of Liberty and makes a
report to the Board of Directors stating whether Liberty is in sound condition,
whether adequate internal audit controls and procedures are being maintained and
recommending any changes in the manner of doing business or conducting the
affairs of Liberty as the
41
<PAGE> 51
Audit Committee deems advisable. The current members of the Audit Committee are
Richard A. Pendleton, Lyle D. Graesser, Howard Jackson Hoke and William P. Gaut.
BANCSHARES' LEGAL PROCEEDINGS
As of the date of this proxy statement/prospectus, there are no pending
actions, lawsuits or other legal proceedings involving Bancshares.
BANCSHARES' MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the shares of Bancshares
Common Stock. Until the Effective Time of the Merger, a Stock Purchase
Agreement entered into by and among the shareholders of Bancshares in 1995 will
restrict the sales of Bancshares Common Stock. That agreement will be
terminated at the Effective Time. To the knowledge of Bancshares' management,
in 1997 there was one sale involving 1,000 shares of Bancshares Common Stock at
a price of $10.78 per share. The shares of Bancshares Common Stock involved in
the sale were subject to the Stock Purchase Agreement and the purchase price
was determined in accordance with the terms of the Stock Purchase Agreement. As
of June 30, 1998, outstanding options entitled the holders thereof to acquire
16,000 shares of Bancshares Common Stock.
Upon the completion of the Merger, Bancshares will have up to 5,000,000
outstanding shares of Bancshares Common Stock. The shares of Bancshares issued
in this Merger will be freely transferable without restriction under the
Securities Act, except for certain restrictions placed on sales by "affiliates"
of Bancshares and Sac River. See "THE MERGER - Resales of Bancshares Common
Stock Issued in the Merger." As of the date of this Proxy Statement-Prospectus,
approximately 235,850 outstanding shares of Bancshares Common Stock were held by
affiliates of Bancshares and approximately 275,240 shares were held by
nonaffiliates of Bancshares.
As of June 1, 1998, the outstanding shares of Bancshares Common Stock were
held of record by 36 persons.
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF BANCSHARES
The following table sets forth certain historical financial data with respect to
Bancshares on a consolidated basis. The financial data for the fiscal years
ended December 31, 1997 and 1996 and for the 65 day period ended December 31,
1995 is derived from Bancshares' audited financial statements. The financial
data for the three months ended March 31, 1998 and 1997 is unaudited, but it
reflects all normal recurring adjustments which are, in the opinion of
management, considered necessary for a fair presentation of the financial
condition and results of operations for such interim periods. The results for
the interim period presented herein are not necessarily indicative of results to
be expected for any other period or for the entire fiscal year. The information
contained in this table should be read in conjunction with Bancshares'
Historical Consolidated Financial Statements and related notes found in this
Prospectus.
42
<PAGE> 52
<TABLE>
<CAPTION>
65 DAYS
THREE MONTHS FISCAL YEAR ENDED
ENDED MARCH 31 ENDED DECEMBER 31 DECEMBER 31
--------------------------------------------------------------------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
SELECTED CONSOLIDATED
STATEMENT OF CONDITION
INFORMATION
<S> <C> <C> <C> <C> <C>
Total Assets $93,487 $40,486 $80,025 $31,590 $12,223
Loans, net of allowance for 64,956 23,798 51,129 19,285 4,428
loan losses
Investment Securities 14,438 2,444 12,265 1,448 692
Total Deposits 78,408 34,754 64,585 27,309 8,210
Short-term borrowings 8,456 1,100 9,700 600 500
Stockholders' Equity 6,176 3,500 5,288 3,559 3,461
CONSOLIDATED STATEMENT
OF INCOME INFORMATION:
Interest Income $ 1,624 $ 610 $ 3,948 $ 1,384 $ 198
Interest Expense 884 327 2,131 675 41
Net Interest Income 740 283 1,817 709 157
Provision for Loan Losses 50 32 447 71 6
Net Interest Income after
Provision For Loan Losses 690 251 1,370 638 151
Noninterest Income 77 34 201 47 1
Noninterest Expense 528 215 1,288 552 137
Provision for Income Taxes 85 19 117 39 4
Net Income $ 153 $ 51 $ 166 $ 94 $ 11
PER SHARE DATA
Earnings per Common Share $ .32 $ .15 $ .42 $ .27 $ .03
Cash Dividends Declared per
Common Share -- -- -- -- --
</TABLE>
43
<PAGE> 53
<TABLE>
<CAPTION>
65 DAYS
THREE MONTHS FISCAL YEAR ENDED
ENDED MARCH 31 ENDED DECEMBER 31 DECEMBER 31
------------------------------------------------------------------------------------
1998 (1) 1997 (1) 1997 1996 1995
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Book Value per Common Share 12.95 10.38 13.43 10.32 10.03
Dividend Payout Ratio -- -- -- -- --
Weighted Average Number of
Common Shares Outstanding 477,060 337,330 393,900 345,000 345,000
FINANCIAL RATIOS
Return on Average Assets 0.70% 0.56% 0.31% 0.47% 0.11%
Return on Average Shareholder's
Equity(1) 11.03% 5.87% 3.63% 2.69% 1.31%
Average Equity to Average Assets 6.37% 9.67% 8.62% 17.34% 32.91%
Earnings to Fixed Charges 126.9% 121.4% 113.2% 119.7% 136.6%
Net Interest Margin 3.51% 3.61% 3.56% 3.75% 4.17%
Net Interest Spread 3.38% 2.79% 3.27% 3.24% 2.09%
</TABLE>
- -----------------------
(1) Interim ratios have been annualized for purposes of comparability with
year-end data.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF LIBERTY BANCSHARES
The following discussion of financial condition and results of operations
should be read in conjunction with the consolidated financial statements of
Liberty Bancshares and the related notes. As used in the following discussion,
the term "Company" refers to Liberty Bancshares and its subsidiary on a
consolidated basis; the term "Bank" refers to Liberty Bank; and the term
"Liberty Bancshares" refers to Liberty Bancshares, Inc., on a parent company
only basis.
RESULTS OF OPERATIONS
GENERAL
Bancshares has enjoyed rapid growth since its commencement of operations in
late October 1995. Total assets increased from $12,223,000 at December 31, 1995,
to $93,487,000 at March 31, 1998, or 664.8%. This growth is reflected in all
aspects of changes in the Company's financial condition from 1996 to 1997 and in
the quarter ended March 31, 1998, and in the results of the Company's operations
in those periods. (The following discussion does not address results of
operations in the 65 days ended December 31, 1995, and the year ended December
31, 1996, because the periods are not susceptible to meaningful comparison).
This growth is the result of a number of factors, including the opening of new
branches, hiring of experienced lending officers seeking new positions after
mergers of large banks that serve the
44
<PAGE> 54
Springfield area, the addition of depositors as a result of those bank mergers,
the economic vitality of the Springfield area, and the Bank's marketing program.
The Bank's rapid growth has required the injection of additional capital
from time to time to ensure that the Bank remains well capitalized. (See Note 10
to the Company's financial statements for the year ended December 31, 1997, for
information about the Bank's capital position for regulatory purposes.)
Bancshares has provided additional capital for the Bank by borrowing under its
line of credit and by issuing additional shares of capital stock to Bancshares'
existing shareholders. In May 1998, Bancshares borrowed $875,000 under its line
of credit and issued $375,000 of additional shares of Bancshares Common Stock.
Bancshares contributed the resulting $1,250,000 to the Bank's capital. At June
30, 1998, Bancshares' $4,500,000 line of credit had $4,125,000 of outstanding
borrowings.
FINANCIAL CONDITION
TOTAL ASSETS
The Company's total assets increased from $31,590,000 at December 31, 1996,
to $80,025,000 at December 31, 1997, or 153.3%. This increase was driven by the
growth of total deposits during the period.
At March 31, 1998, total assets were $93,487,000, a $53,001,000, or 130.9%,
increase over the same date a year earlier, and $13,462,000, or 16.8%, greater
than total assets at December 31, 1997. Again, increases in deposits underlay
the increase in total assets.
NET LOANS
Loans net of loan allowances were the principal component of Bancshares'
asset growth. Net loans increased from $19,285,000 at December 31, 1996, to
$51,129,000 at December 31, 1997, or 165.1%. At March 31, 1998, net loans were
$64,956,000, an increase of $41,158,000, or 172.9%, over net loans at March 31,
1997, and a $13,827,000, or 27.0%, increase over net loans at December 31, 1997.
INVESTMENT SECURITIES
The growth in investment securities was a result of the rapid increase in
the Bank's deposits, which were not fully absorbed by loan production. The
increase from December 31, 1996, to December 31, 1997, was $10,817,000, or
747.0%. The increase from March 31, 1997, to March 31, 1998, was $11,994,000, or
490.8%, and from December 31, 1997, to March 31, 1998, was $2,173,000, or 17.7%.
45
<PAGE> 55
DEPOSITS
Deposits grew as a result of the Bank's opening new branches and its
marketing efforts as well as the addition of customer deposits of new borrowers
and individuals and businesses moving their accounts in the aftermath of bank
mergers that affected the Springfield market. Total deposits at December 31,
1998, were $64,585,000, a $37,276,000, or 136.5%, increase over $27,309,000 at
December 31, 1996. At March 31, 1998, total deposits were $78,408,000, an
increase of $43,654,000, or 125.6% from March 31, 1997. Total deposits at
March 31, 1998, also were $13,823,000, or 21.4%, greater than those at
December 31, 1997.
SHORT-TERM BORROWINGS
Short-term borrowings, which were primarily repurchase agreements, also
paralleled the Bank's growth, rising from $600,000 at December 31, 1996, to
$9,700,000 at December 31, 1997, a 1,517.7% increase. Similarly, short term
borrowings rose from $1,100,000 at March 31, 1997, to $8,456,000 at March 31,
1998, a 668.7% increase.
STOCKHOLDERS EQUITY
As a result of both growth of retained earnings and sales of Bancshares
Common Stock to existing stockholders, Bancshares' stockholders' equity
increased by $1,729,000, or 48.6%, from $3,559,000 at December 31, 1996, to
$5,288,000 at December 31, 1997. At March 31, 1998, stockholders' equity was
$6,176,000, a $2,676,000, or 76.5% increase over the amount at March 31, 1996,
and a $888,000, or 16.8%, increase over stockholders' equity at December 31,
1997.
RESULTS OF OPERATIONS
NET INCOME
Since Bancshares' sole subsidiary is a newly formed bank, the Company's
income and returns on average assets and stockholders' equity have lagged those
of longer established comparably sized institutions. For the year ended
December 31, 1997, net income was $166,000, an increase of $72,000, or 76.6%,
over $94,000 in the prior year. As a result of the costs of opening two new
branches in 1997 plus the addition of retail and secondary market home loan
servicing departments in the same year, average return on assets declined from
.47% for 1996, to .31% for 1997, and return on average shareholders' equity
increased only slightly from 2.69% to 3.63%.
Net income for the quarter ended March 31, 1998, was $153,000, compared to
$51,000 for the same quarter a year earlier, a 200% increase. As a result of the
increase in the Bank's assets, return on average assets increased to .70% for
the quarter ended March 31, 1998, over .56% in the same quarter a year earlier,
and return on shareholders' equity grew to 11.03% from 5.87%.
The Company's net income growth has been restrained by the need to build
the Bank's provision for loan losses to an amount equal to 1% of the Bank's
total loans (less the SBA guaranteed portion of loans and less loans secured by
borrowers' deposits at the Bank). Under applicable bank regulations, the Bank
had three years from inception to reach the 1% level. At June 30, 1998, the
Bank's allowance for loan losses equaled or exceeded that level.
46
<PAGE> 56
INTEREST INCOME
The Company's interest income has increased with the Bank's asset growth.
Interest income in the year ended December 31, 1997, was $3,948,000, a
$2,564,000, or 185.3%, increase over the prior year. For the quarter ended March
31, 1998, the increase was $1,014,000, or 166.2%, over the same quarter a year
earlier.
INTEREST EXPENSE
Interest expense primarily reflected the growth in the Bank's interest
bearing deposits. Interest expense in the year ended December 31, 1997, was
$2,131,000, an increase of $1,456,000, or 215.7%, over the prior year. For the
quarter ended March 31, 1998, interest expense was $884,000, an increase of
$557,000, or 170.3% over the same quarter a year earlier.
NONINTEREST INCOME AND EXPENSE
Noninterest income has been provided primarily by overdraft charges,
account servicing charges, safe deposit box fees, and other sources. While not
material in comparison to interest income, noninterest income grew by 327.7% in
the year ended December 31, 1997, over the prior year, and by 126.5% in the
quarter ended March 31, 1998, over the same quarter in the prior year.
Noninterest expense includes the cost of operations, including overhead and
expenses associated with the opening of new branches and departments in the
Bank, including the costs of additional personnel. For the year ended December
31, 1997, when the Bank opened two branches and added two departments,
noninterest expense was $1,288,000, an increase of $736,000, or 133.3%, over the
prior year. In the quarter ended March 31, 1998, noninterest expense was
$528,000, an increase of $313,000, or 145.6%, over the same quarter a year
earlier.
NET INTEREST INCOME
Net interest income, the primary source of earnings for the Company, is the
difference between interest income earned on loans and other earning assets, and
interest paid on deposits and other interest bearing liabilities. Earning assets
include loans, investment securities and federal funds sold. Interest bearing
liabilities include interest-bearing deposits (NOW accounts, MMDA, savings and
others), time deposits, federal funds purchased and securities sold under
agreements to repurchase.
The following table sets forth the Company's average balance of assets,
liabilities and stockholders' equity as well as the amount of interest income or
interest expense and the average rate for each category of interest earning
assets and interest bearing liabilities. Included in the average balances are
non-accruing loans. Loan fees are included in interest income. Average balances
are computed on a daily basis.
47
<PAGE> 57
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------------------------------------------------------
1997 1996
-------------------------------------------------- -----------------------------------------
Interest Interest
Average and Average Average and Average
Balance Fees Rate Balance Fees Rate
-------------- -------------- ------------- --------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS................ (Dollars in Thousands)
Cash and Due $ -- --%
from Banks(1)...... $ 2,326 -- --% $ 922
Federal Funds Sold
and Securities
Purchased under
Agreements to
Resell............. 9,284 534 5.75 5,853 324 5.54
Taxable Investment
Securities......... 4,585 282 6.15 1,134 64 5.64
Non-taxable
Investment
Securities......... 7 1 14.29 -- -- --
Loans, Net(2)...... 34,801 3,131 9.00 10,993 996 9.06
------- ----- ----- ------- ---- ----
Total
Interest
Earning
Assets....... 51,003 3,948 7.74% 18,902 1,384 7.32%
Bank Premises and
Equipment.......... 1,875 1,075
Other Assets....... 294 95
------- -------
Total
Assets....... $53,172 $20,072
======= =======
</TABLE>
48
<PAGE> 58
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------------------------------------------------------
1997 1996
-------------------------------------------------- -----------------------------------------
Interest Interest
Average and Average Average and Average
Balance Fees Rate Balance Fees Rate
-------------- -------------- ------------- --------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND (Dollars in Thousands)
SHAREHOLDER'S
EQUITY
Non-interest Bearing
Deposits ................. $ 7,366 $ -- --% 2,765 $ -- --%
Interest Bearing
Deposits ................. 12,237 488 3.99 5,682 226 3.98
Time Deposits ............ 25,754 1,438 5.58 7,459 414 5.55
Federal Funds
Purchased and
Securities Sold under
Agreements to
Repurchase ............... 2,434 121 4.97 653 35 5.36
Notes Payable ............ 990 84 8.48
------- ------- ---- ------- ------ ----
Total Interest Bearing
Liabilities .............. 48,781 2,131 4.46 16,559 675 4.08
Other Liabilities ........ 293 83
Stockholders' Equity 4,098 3,430
------- -------
Total Liabilities and
Stockholders' Equity $53,172 $20,072
======= =======
NET INTEREST
INCOME, NET
INTEREST SPREAD ............. $ 1,817 3.27% $ 709 3.24%
NET INTEREST
YIELD(3) .................... 3.56% 3.75%
</TABLE>
(1) Includes non-interest bearing balances, cash and cash items.
(2) Loans, net of loan losses.
(3) Net interest yield is net interest earnings divided by total
interest-earning assets, with net interest earnings equal to the difference
between total interest earned and total interest paid.
During 1997, average deposit growth, particularly time deposits, exceeded
the growth of loans. Total average interest bearing liabilities grew by 194.6%
in 1997 over 1996, and total average interest earning assets grew at a less
rapid 169.8% in the same period. The difference reflected, in part, the opening
of new branches and the addition of new depository accounts as a result of
large bank mergers that affected the Springfield market area. The net interest
spread over that time period was virtually unchanged and the net interest yield
declined by 5.1% to 3.56%.
The effect of changes in average balance and rate from the corresponding
prior period on interest income, interest expense and net interest income for
the year ended December 31, 1997 is set forth below. The effect of a change in
average balance has been determined by applying the average rate for the earlier
period to the change in the average balance for the later period, as compared
with the earlier period. The effect of a change in the average rate has been
determined by applying the average balance for the earlier period to the change
in the average rate for the later period, as compared with the earlier period.
The variances attributable to simultaneous balance and rate changes have been
allocated in proportion to the relationship of the dollar amount of change in
each category.
49
<PAGE> 59
<TABLE>
<CAPTION>
1997 COMPARED WITH 1996
--------------------------------------------------------------
Increase (decrease)
Due to a Change in
--------------------------------------------------------------
Average Average
Balance Rate Total
----------------- -------------- -----------------
(Dollars in Thousands)
<S> <C> <C> <C>
Interest earned on:
Federal Funds Sold and Securities Purchased
under Agreements to Resell ......................... $ 197 $ 13 $ 210
Taxable Investment Securities ...................... 210 8 218
Non-taxable Investment Securities .................. 1 -- 1
Loans, Net ......................................... 2,143 (8) 2,135
------ ------ ------
Total Interest Income .............................. $2,551 $ 13 $2,564
------ ------ ------
Interest Paid on:
Interest-bearing Deposits (NOW accounts, MMDA,
savings and other) ................................. $ 261 $ 1 $ 262
Time Deposits ...................................... 1,022 2 1,024
Federal Funds Purchased and Securities Sold
under Agreements to Repurchase ..................... 90 (4) 86
Note Payable ....................................... 84 -- 84
------ ------ ------
Total Interest Expense ............................. 1,457 (1) 1,456
------ ------ ------
Change in Net Interest Income ............................... $1,094 $ 14 $1,108
====== ====== ======
Percent Increase in Net Interest Income over the Prior Period 156.28%
</TABLE>
INVESTMENT SECURITIES PORTFOLIO ANALYSIS
The Company invests a portion of its available funds in short-term and
longer-term instruments, including federal funds sold and investment securities.
Investment securities include obligations of the U.S. Government or its
agencies, obligations of state and political subdivisions and debt securities.
Federal funds sold are used primarily for daily cash management purposes.
The Company's investment securities portfolio is utilized to collateralize
certain of the Bank's line of credit and public and fiduciary deposits. It also
provides liquidity through proceeds from scheduled maturities. The majority of
the Company's investment securities carry fixed interest rates, and at December
31, 1997 and March 31, 1998, the Company's investment portfolio reflected a net
unrealized loss of approximately $504 and $25,223, respectively.
50
<PAGE> 60
The following table presents the Company's investments in certain
securities accounted for as held to maturity ("HTM") or as available for sale
("AFS") on the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1997 1996
-------- --------
BOOK VALUE
(IN THOUSANDS)
<S> <C> <C>
U.S. Government,HTM ................................................ $ 0 $ 0
U.S. Government, AFS ............................................... 600 849
U.S. Agencies, HTM ................................................. 0 0
U.S. Agencies, AFS ................................................. 10,445 599
Mortgage Backed Bonds, HTM ......................................... 0 0
Mortgage Backed Bonds, AFS ......................................... 0 0
Municipal Securities, HTM .......................................... 0 0
Municipal Securities, AFS .......................................... 1,220 0
Corporates ......................................................... 0 0
------- -------
Total Securities ............................................ 12,265 1,448
Federal Funds Sold and Securities Purchased under
Agreements to Resell ........................................ 8,373 6,450
------- -------
Total Investments............................................ $20,638 $ 7,898
</TABLE>
The following table sets forth the amounts by book value and weighted
average yields, as of December 31, 1997, of each category of investment listed
in the preceding table maturing during certain time periods.
<TABLE>
<CAPTION>
MATURING
-----------------------------------------------------------------------------------------
AFTER FIVE
AFTER ONE YEAR YEARS BUT
WITHIN ONE BUT WITHIN WITHIN TEN AFTER TEN
YEAR FIVE YEARS YEARS YEARS TOTAL
------------ -------------- ------------ -------------- -----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held to Maturity:
U.S. Government ....... $ 0 -- $ 0 -- $ 0 -- 0 0 -
U.S. Agencies ......... 0 -- 0 -- 0 -- 0 -- 0 -
Mortgaged Backed Bonds 0 -- 0 -- 0 -- 0 -- 0 -
Municipal Securities .. 0 -- 0 -- 0 -- 0 -- 0 -
Corporates ............ 0 -- 0 -- 0 -- 0 -- 0 --
Available for Sale:
U.S. Government ....... $ 600 5.38 600 5.38
U.S. Agencies ......... 500 5.98 9,945 6.28 10,445 6.26
Mortgaged Backed
Bonds ............... 0 -- 0 -- 0 -- 0 -- 0 --
Municipal Securities .. 1,220 4.66 1,220 4.66
------- ------
$12,265 6.06%
======= ======
</TABLE>
On December 31, 1997, the Company had no investments in the debt securities
of any issuer (excluding U.S. Government and U.S. Agencies and corporations)
with a book value of more than ten percent (10%) of the Company's shareholders'
equity.
51
<PAGE> 61
LOAN PORTFOLIO
The following table presents the amount of loans outstanding at the dates
indicated, according to loan category:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1997 1996
----------------- ----------------
(In Thousands)
<S> <C> <C>
Real Estate Loans; Construction....... $ 7,052 $ 2,787
Real Estate Loans; Mortgage........... 32,159 12,556
Installment Loans..................... 2,594 549
Commercial Loans and Other............ 9,848 3,470
--------- --------
Total Loans.................. $ 51,653 $ 19,362
========= ========
</TABLE>
The 166.8% increase in total loans generally reflects the rapid increase in
the Bank's deposit base, the demand for loans in the Bank's market area, and the
Bank's marketing efforts, which were enhanced by the addition of experienced
lending officers hired from other area banks.
Real Estate construction loans consist primarily of residential and
commercial construction loans for properties located in Greene County, Missouri.
Real estate mortgage loans, including 1-4 family and multi-family loans, are
collateralized by residential properties that are principally located in Greene
County, Missouri. Real estate-non-farm, non-residential loans are secured by
commercial properties principally located in Greene County, Missouri.
Commercial and industrial loans are comprised primarily of loans to
customers in the southwest Missouri trade area and are diversified from an
industry and customer standpoint, which helps to minimize risk. Consistent with
management's emphasis on relationship banking, most borrowing customers also
maintain deposit accounts and utilize other banking service.
The consumer loan portfolio consists of both secured and unsecured loans to
individuals for various personal reasons such as automobile financing, home
improvements, education and recreational purposes.
52
<PAGE> 62
The following table presents the repricing frequency of certain loan
categories at December 31, 1997.
<TABLE>
<CAPTION>
WITHIN 1-5 Over 5
ONE YEAR Years Years Total
----------------- ------------------- ----------------- -----------
(In Thousands)
<S> <C> <C> <C> <C>
Real Estate Loans; Construction............ $ 7,052 $ -- $ -- $ 7,052
Real Estate Loans; Mortgage................ 30,547 1,535 77 32,159
Installment Loans.......................... 1,305 1,255 34 2,594
Commercial Loans and Other................. 9,323 525 -- 9,848
------- ------ ---- --------
Total Loans.............. $48,227 $3,315 $111 $ 51,653
======= ====== ==== ========
</TABLE>
The table below presents the interest rate sensitivity at December 31,
1997, on loans contractually due after one year in the following categories.
<TABLE>
<CAPTION>
FIXED ADJUSTABLE
INTEREST RATE INTEREST RATE
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Real Estate Loans; Construction ................ $ -- $ 22
Real Estate Loans; Mortgage .................... 1,459 22,135
Installment Loans .............................. 1,700 22
Commercial Loans and Other ..................... 701 2,721
------- -------
Total loans ........................... $ 3,860 $24,900
======= =======
</TABLE>
The Company's loan portfolio is varied, with no undue concentration in any
single industry, although most of the loans in the Company's portfolio have been
made to borrowers in the Greene County area.
RISK ELEMENTS OF LOAN PORTFOLIO
Management reviews the Company's loan portfolio continuously for problem
loans. During the ordinary course of business, management becomes aware of
borrowers that may not be able to meet contractual requirements of loan
agreements. Such loans are placed under close supervision, with consideration
given to placing the loan on a nonaccrual status. Management then determines the
need for additions to the allowance for loan loss or, if appropriate, partial or
full charge-off. Those loans on which management does not expect to collect
interest in the normal course of business, or which are 90 days or more past due
as to principal or interest, are generally placed on nonaccrual status. After a
loan is placed on nonaccrual status, interest income is recognized only on a
cash basis so long as management is satisfied there is not impairment of the
book value of the loan. The loan is returned to accrual status only when the
borrower has brought all past due principal and interest payments current, and
in the opinion of management, the borrower has demonstrated the ability to make
future payments of principal and interest as scheduled.
The following table presents the amount of non-performing loans outstanding
at the dates indicated, by category:
53
<PAGE> 63
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------
1997 1996
-------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual Loans........................................... $0 $0
Loans 90 Days Past Due and Still Accruing.................. 0 0
Restructured Loans......................................... 0 0
Total Non-performing Loans........................ 0 0
-- --
$0 $0
== ==
</TABLE>
It is the Bank's stated policy that when a loan becomes over 90 days
delinquent, it is automatically placed on nonaccrual status. In addition, other
loans showing a high apparent risk and potential for deterioration in financial
strength or collateral value may be placed on a nonaccrual status.
As of December 31, 1997, the gross interest income on loans recorded for
the year then ended was $3,130,609. The amount of interest income on the
above-referenced loans accounted for in nonaccrual status that would have been
recorded during such year if such loans had been current in accordance with
their terms was $0.
As of December 31, 1996, the gross interest income on loans recorded for
the year then ended was $995,765. The amount of interest income on the
above-referenced loans accounted for in nonaccrual status that would have been
recorded during such year if such loans had been current in accordance with
their terms was $0.
The following table presents the book value of certain loans excluded from
the previous table but classified by the Bank, as of December 31, 1997, as
potential problem loans.
<TABLE>
<CAPTION>
BOOK VALUE
----------------------
(IN THOUSANDS)
<S> <C>
Installment Loans.......................................................... $ 0
Real Estate Loans; Construction............................................ 0
Real Estate Loans; Mortgage................................................ 0
Commercial Loans and Other................................................. 600
-----
Total Loans....................................................... $ 600
=====
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses represents management's determination of the
amount necessary to be charged against the current period's earnings, in order
to maintain the allowance for loan losses at a level which is considered
adequate, in relation to the estimated risk inherent in the loan portfolio.
Since the Bank was formed in 1995, it has been building its loan loss reserves
up to 1% of total loans. The loan loss reserve at December 31, 1997, and June
30, 1998 equaled or exceeded the 1% level. Notwithstanding the process of
building a loan loss reserve, management believes its provision for loan losses
has been sufficient since 1995. See "Financial Condition - Allowances for Loan
Losses."
The following table presents an analysis of the Company's loss experience
for the periods indicated.
54
<PAGE> 64
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1997 1996
----- -----
(Dollars in Thousands)
<S> <C> <C>
Balance at Beginning of Period.................................................. $ 77 $ 6
Charge-offs:
Real Estate Loans; Construction........................................ 0 0
Real Estate Loans; Mortgage............................................ 0 0
Installment Loans...................................................... 0 0
Commercial Loans and Other............................................. 0 0
Recoveries:
Real Estate Loans; Construction........................................ 0 0
Real Estate Loans; Mortgage............................................ 0 0
Installment Loans...................................................... 0 0
Commercial Loans and Other............................................. 0 0
Net Provision For Loan Losses.......................................... 447 71
Additional Provision for Loan Losses................................... 0 0
Additional Charged to Operations....................................... 0 0
---- ---
Balance at End of Period........................................................ $524 $77
==== ===
Ratio of Net Charge-offs During the Period to Average Net Loans
Outstanding During the Period................................................. 0% 0%
</TABLE>
The following table presents a breakdown of the allowance for loan losses
for the period indicated.
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------------------------------------
1997 1996
------------------------------------------- --------------------------------
PERCENT OF PERCENT
LOANS OF LOANS
IN EACH IN EACH
CATEGORY CATEGORY
TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS
-------- --------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at End of Period Applicable to:
Real Estate Loans: Construction..... $ -- -- % $ -- -- %
Real Estate Loans; Mortgage......... -- -- -- --
Installment Loans................... -- -- -- --
Commercial Loans and Other.......... 42 0.43 -- --
Unallocated Allowance............... 482 99.57 77 100.00
-------- ------ ------ ------
Total...................... $ 524 100.00% $ 77 100.00%
======== ====== ====== ======
</TABLE>
55
<PAGE> 65
The following table presents an analysis of the activity in the foreclosed
assets held for sale account for the period indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1997 1996
---- ----
(Dollars in Thousands)
<S> <C> <C>
Balance at Beginning of Period............................... $0 $0
Foreclosures During the Year................................. 0 0
Writedowns During the Year................................... 0 0
Proceeds from Sales.......................................... 0 0
Gain (Loss) on Sales (Net)................................... 0 0
-- --
Balance at End of Period..................................... $0 $0
== ==
Ratio of Foreclosed Assets to Loans Outstanding.............. 0% 0%
</TABLE>
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of the risk inherent in its loan
portfolio and the general economy. Such evaluation, which includes a review of
all loans on which full collectibility may not be reasonably assured, considers
among other matters, the estimated fair value of the underlying collateral,
economic conditions, historical loan loss experience, and other factors that
warrant recognition in providing for an adequate loan loss allowance. In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review the Bank's allowance for loan losses and valuation
of foreclosed assets held for sale. Such agencies may require the Bank to
recognize additions to the allowance based on their judgments about information
available to them at the time of their examination.
Management has established an allowance for loan losses which reduces the
total loans outstanding by an estimate of potential loan losses, plus an excess
margin for potential future uncertainties. Loans deemed uncollectible are
charged against and reduce the allowance. Provisions for loan losses are
expensed against current income. The provision replenishes the allowance for
loan losses and maintains the allowance at acceptable levels based upon the
judgment of management. The allowance for loan losses is based upon current
economic conditions, risks in the loan portfolio, historical loan loss
experience and other factors which, in management's opinion, deserve current
recognition. See "-Results of Operations-Provision for Loan Losses."
DEPOSITS
The Bank's deposit base is its primary source of funds. The Bank offers a
broad range of deposit products, including noninterest demand deposits, NOW
accounts, saving deposits, individual retirement accounts and certificates of
deposit.
56
<PAGE> 66
At December 31, 1997, 17.1% of total deposits were in noninterest bearing
accounts, 25.2 % in savings and interest bearing demand accounts and 57.7% in
certificates of deposit.
The following table presents the average balances of and the average rate
paid on certain categories of deposits for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------------
1997 1996
----------------------------------------- --------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE(1) RATE BALANCE(1) RATE
------------------ ---------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Non-interest Bearing: (In Thousands)
Demand Deposit Accounts..................... $ 7,366 --% $ 2,765 --%
Interest Bearing:
MMDA and NOW Accounts....................... 11,894 4.02 5,628 3.99
Savings Deposits............................ 343 2.92 54 3.00
IRA......................................... 852 5.87 205 5.85
CDS Under $100,000.......................... 12,016 5.47 3,116 5.36
CDS Over $100,000........................... 12,886 5.70 4,138 5.68
------- -------
Total Average Deposits................. $45,357 $15,906
======= =======
</TABLE>
- ------------------
(1) Averages are computed on a daily basis.
Overall total average deposits increased by 185.2% from 1996 to 1997, with
certificates of deposit accounting for 59.9% of the total growth.
The following table presents the amount outstanding as of December 31,
1997, of certain deposits in excess of $100,000 and the maturities thereof. The
Bank does not purchase brokered deposits, and the Bank's board of directors
review all deposits of $100,000 or more each month to monitor volatility, which,
historically, has been nominal.
<TABLE>
<CAPTION>
MATURING IN
3 MONTHS 3 TO 12 OVER 12 TOTAL
OR LESS MONTHS MONTHS
-------------------- --------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Type of Deposit:
Certificate of Deposit......... $ 5,606 $10,222 $3,118 $18,946
Other Deposits................. 11,086 -- - 11,086
------- ------- ------ -------
Total................. $16,692 $10,222 $3,118 $30,032
======= ======= ====== =======
</TABLE>
57
<PAGE> 67
RETURN ON EQUITY AND ASSETS
The following table presents the company's return on equity and assets for
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1997 1996
---- ----
<S> <C> <C>
Return on Assets (net income divided by average total assets)....... .31% .47%
Return on Equity (net income divided by average equity)............. 3.63% 2.69%
Dividend Payout Ratio (dividends declared per share divided by net
income per share)................................................... -- --
Equity to Assets Ratio (average equity divided by average total assets) 8.62% 17.34%
</TABLE>
SHORT-TERM BORROWINGS
Short-term borrowings consist mainly of federal funds purchased and
securities sold under agreements to repurchase. These amounted to $7,200,361 at
December 31, 1997, and $600,000 at December 31, 1996. The average yield on
short-term borrowings was 4.96% and 5.36% during 1997 and 1996, respectively.
The majority of these investments have terms ranging from one to 30 days. The
maximum amounts of short-term borrowings outstanding at any month end during
1997 and 1996 were $10,645,000 and $950,200. Information regarding the levels of
short-term borrowings for 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------------------------
1997 1996
----------------------------------------- ---------------------------------
FEDERAL FEDERAL
FUNDS SECURITIES FUNDS SECURITIES
PURCHASED SOLD PURCHASED SOLD
----------------- ----------------- ----------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at End of Period............. $ -- $ 7,200 -- $ 600
Maximum outstanding during the --
period at any month end............ $ 865 $ 10,645 $ 950
Average interest rate end of period.. -- 4.70% -- 5.52%
Average outstanding during period.... $ 43 $ 2,391 -- $ 653
Average interest rate for the period. 4.86% 4.97% -- 5.36%
</TABLE>
The average amount outstanding was computed from daily averages and the
average interest rates for the period were computed by dividing the respective
interest expense by the average balance outstanding.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity risk is managed by the Company through the composition of its
assets and liabilities in an effort to meet efficiently the borrowing needs and
withdrawal requirements of its customers. Cash and cash equivalents include
cash, due from banks and federal funds sold. The primary sources of the
Company's liquidity are cash and cash equivalents, investment securities with
short-term maturities, $375,000 of remaining availability on its letter of
credit and the Bank's unsecured $1,300,000 line of
58
<PAGE> 68
credit (under which there were no outstanding borrowings at December 31, 1997
and March 31, 1998). The Company can also increase its liquidity by causing the
Bank to sell SBA guaranteed loans and participations in commercial loans. The
Company believes its process of asset/liability management allows adequate
reaction time for trends in the marketplace as they occur, minimizing the
negative impact of such trends on the net interest margin.
As of March 31, 1998, the Company had cash and cash equivalents of
$10,501,163 and investment securities maturing in less than one year of
$600,000. These amounts represent approximately 11% of the Company's total
assets at March 31, 1998 and in management's opinion, provide the Company with
sufficient resources to handle unforeseen deposit outflows and loan
requirements.
The Company's cash and cash equivalents decreased $2,645,000 during the
three-month period ended March 31, 1998. Net cash used in operating activities
aggregated $538,000. Net cash used in investing activities for this period
approximated $15,437,000, primarily as a result of net loan originations. Net
cash provided by financing activities approximated $13,329,000 for this time
period primarily as a result of increased deposits of $13,823,000.
YEAR 2000
The Company has assessed the Year 2000 compliance status of all material
software, firmware and hardware used in the ordinary course of business. The
Company relies heavily on software and services provided by outside suppliers,
and management is coordinating with, and monitoring the efforts of, major
suppliers to become Year 2000 compliant. In addition, the Company is assessing
the Year 2000 effect on the Bank's loan portfolio and its security and other
mechanical systems. Based on information presently known to management, it is
estimated that the Company's cost of implementing the Year 2000 compliance
internally will not be material. The Company's software and service providers
have advised the Company's managers that they plan to achieve Year 2000
compliance during 1999, but there can be no assurances that all will do so. The
Company would be materially adversely affected if these third parties do not
achieve timely compliance.
INTEREST RATE SENSITIVITY
Asset and liability management encompasses both interest rate risk and
liquidity management. The Company's net interest margin can be vulnerable to
wide fluctuations arising from a change in the general level of interest rates
which may affect the yield on interest earning assets differently than the cost
of the interest bearing liabilities. The Company monitors its asset and
liability mix in an effort to maintain a consistent earnings performance through
control of interest rate risk.
Below is the "Static gap" table for the Company as of December 31, 1997.
This is just one of several tools which may be used to measure and manage
interest rate sensitivity. Earning assets and interest bearing liabilities are
presented below within selected time intervals based on their repricing and
maturity characteristics. In this view, the sensitivity position is perfectly
matched when an equal amount of assets and liabilities reprice during any given
period. Excess assets or liabilities repricing in a given time period result in
the "Interest Sensitivity Gap" shown at the bottom of the table. A positive gap
indicates more assets than liabilities will reprice in that time period, while a
negative gap indicates more liabilities than assets will reprice.
The table indicates the Company is liability sensitive in the after three
months through twelve months period and is asset sensitive in all other periods.
This means that during the after three months through twelve months period,
interest bearing liabilities are repricing faster than earning assets, thereby
59
<PAGE> 69
improving net interest income when rates are declining and reducing net interest
income when rates are rising. While the "static gap" is a widely used measure of
interest sensitivity, it is not, in management's opinion, the only indicator of
the Company's sensitivity position.
The following table indicates as of December 31, 1997, the time period
in which interest earning assets and interest bearing liabilities are scheduled
to mature or reprice in accordance with their contractual terms.
<TABLE>
<CAPTION>
AFTER AFTER
THREE THREE ONE
MONTHS THROUGH THROUGH AFTER
OR TWELVE FIVE FIVE
LESS MONTHS YEARS YEARS
--------------- ------------------ --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Federal Funds Sold and Securities
Purchased under Agreements to
Resell............................... $ 8,373 $ - $ - $ -
Taxable Investment Securities........ 500 600 9,937 -
Non-taxable Investment Securities.... - - 1,228
Loans, Net........................... 31,955 15,314 3,559 301
Other Assets......................... - - - -
------- -------- -------- --------
Total Assets................ $40,828 $ 15,914 $ 13,496 $ 1,529
======= ======== ======== ========
Liabilities:
Interest-bearing Deposits
(NOW, MMDA, Savings and
Other)............................... $16,278 $ - $ - $ -
Time Deposits........................ 10,813 19,598 6,864 -
Securities Sold under Agreements to
Repurchase......................... 6,200 1,000 - -
Long-term Debt....................... 2,500 - -
Other Liabilities.................... - - - -
------- -------- -------- --------
Total Liabilities........... 33,291 $ 23,098 $ 6,864 $ -
======= ======== ======== ========
Sensitivity gap...................... $ 7,537 $ (7,184) $ 6,632 $ 1,529
Gap as a percentage of assets........ 10.50% (10.01)% 9.24% 2.13%
Cumulative sensitivity gap........... $ 7,537 $ 353 $ 6,985 $ 8,514
Cumulative gap as a percentage of
assets............................. 10.50% 0.49% 9.73% 11.86%
Cumulative sensitivity ratio......... 122.64% 100.63% 1 11.04% 113.46%
<CAPTION>
TOTAL
--------------
<S> <C>
Assets:
Federal Funds Sold and Securities
Purchased under Agreements to $ 8,373
Resell...............................
Taxable Investment Securities........ 11,037
Non-taxable Investment Securities.... 1,228
Loans, Net........................... 51,129
Other Assets......................... -
--------
Total Assets................ $ 71,767
========
Liabilities:
Interest-bearing Deposits
(NOW, MMDA, Savings and
Other)............................... $ 16,278
Time Deposits........................ 37,275
Securities Sold under Agreements to
Repurchase......................... 7,200
Long-term Debt....................... 2,500
Other Liabilities.................... -
--------
Total Liabilities........... $ 63,253
========
Sensitivity gap...................... $ 8,514
Gap as a percentage of assets........ 11.86%
Cumulative sensitivity gap........... $ _
Cumulative gap as a percentage of
assets............................. _
Cumulative sensitivity ratio......... 113.46%
</TABLE>
An interest sensitivity table is not a complete picture of the possible
effect of interest rate changes on net interest income. First, changes in the
general level of interest rates will not affect all categories of assets and
liabilities equally or simultaneously. Second, the table represents a one-day
position; variations occur daily as the Company adjusts its interest sensitivity
throughout the year. Third, the repricing distribution of interest sensitive
assets may not be indicative of the liquidity of those assets. Finally, since
this table is based on contractual maturities, it does not include required
principal payments or estimates of early principal payments on residential
mortgages, installment loans and investment securities.
60
<PAGE> 70
CAPITAL ADEQUACY
Stockholders' equity represented 6.61% of total assets at March 31, 1998.
Risk-based capital and leverage ratios of the Bank exceeded minimum requirements
of regulatory banking authorities.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The FASB recently adopted Statement of Financial Accounting Standards
("SFAS") 128, "Earnings Per Share." This statement replaces the presentation of
primary earnings per share with a presentation of basic earnings per share. The
statement also requires dual presentation of basic and diluted earnings per
shares by entities with complex capital structures and requires a reconciliation
of the numerators and denominators between the two calculations. SFAS 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. Management has presented earnings per share in
accordance with SFAS 128 in its December 31, 1997 financial statements. The
adoption of SFAS 128 did not have a material impact on the Company's financial
statements.
The FASB recently adopted SFAS 129, "Disclosure of Information about
Capital Structure." This statement establishes standards for disclosing
information about capital structure, including pertinent rights and privileges
of various securities outstanding. SFAS 129 is effective for financial
statements issued for periods ending after December 15, 1997. The adoption of
SFAS 129 did not have a material impact on the Company's financial statements.
The FASB recently adopted SFAS 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting and display of comprehensive
income and its components, in a full set of financial statements. It does not
address issues of recognition or measurement. SFAS 130 is effective for fiscal
years beginning after December 15, 1997. The adoption of SFAS 130 did not have a
material impact on the Company's financial statements.
The FASB recently adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement establishes standards for
the way that public business enterprises report information about operating
segments in both annual financial statements and interim financial reports
issued to shareholders. The statement also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS 131 is effective for financial statements issued for periods beginning
after December 15, 1997. The adoption of SFAS 131 is not expected to have a
material impact on the Company's financial statements.
The FASB recently adopted SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management has not yet determined the impact, if any, of SFAS 133 on the
Company's financial statements.
EFFECT OF ECONOMIC CONDITIONS
The Company's financial statements have been prepared in accordance with
generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
consideration for changes in the relative purchasing power of money over time
due to inflation. The assets and liabilities of the Company are primarily
monetary and interest rates have a greater impact on the Company's performance
than does the effect of inflation. The local economy of the southwest Missouri
area has experienced growth over the last several years. The area has a good mix
of retail, agricultural related and industrial business.
61
<PAGE> 71
BUSINESS OF SAC RIVER
GENERAL
Sac River is a state bank organized in Missouri in 1912, located in
Stockton, Missouri, which is approximately 65 miles northeast of Springfield and
has a population of approximately 1,050. Sac River offers a full range of
commercial banking services including customary depository products, safe
deposit facilities, and commercial, consumer, residential real estate,
agricultural and industrial lending.
EMPLOYEES
As of June 1, 1998, Sac River employed 24 full-time employees. None of
these employees is covered by a collective bargaining agreement and management
believes that its employee relations are good.
DESCRIPTION OF SAC RIVER'S PROPERTY
The executive offices of Sac River are located at 14 Public Square,
Stockton, Missouri, which is also the location of Sac River's only banking
facility. Sac River owns the property and the building at this location, as well
as two adjacent buildings, currently vacant, and adjacent parking lots. In
addition, Sac River owns 1.9 undeveloped acres south of Stockton.
COMPETITION
Sac River's principal market area is within a 20 mile radius of Stockton
and includes portions of Cedar, Dade, Polk, Barton and Vernon Counties,
Missouri. In recent years, Sac River has also become a lender in the Springfield
market. The competition among depository institutions in the Stockton area is
strong. Sac River competes for deposits and loans with Tri-County State Bank and
Great Southern Bank, a savings association, both of which have branches in
Stockton. Sac River also competes in the Stockton area with a number of other
area, regional, and national commercial banks and savings and loans associations
and a variety of other financial intermediaries such as credit unions, mutual
funds and brokerage firms. In Springfield, Sac River competes for loans with a
large number of local, regional, and national banks and financial institutions.
Many of these competing institutions are much larger and have more resources
than Sac River. Sac River competes by providing personal service, pricing of
interest rates, advertising, and referrals from its customers.
REGULATION AND SUPERVISION OF SAC RIVER
Sac River is subject to regulation and supervision by the Division of
Finance, the FDIC and the FRS Board. Virtually every aspect of Sac River's
day-to-day operations are subject to numerous requirements and restrictions. Sac
River is subject to laws and regulations that, among other things, prescribe the
nature and amount of certain investments, regulate the closure of branch
offices, and limit the amount of, and establish required approval procedures,
reporting requirements and credit standards for, loans and other extension of
credit. Sac River is also subject to the FDIC's and the FRS Board's regulatory
capital requirements. Sac River submits quarterly "Call Reports" to the FDIC.
See "BUSINESS OF BANCSHARES - Regulation and Supervision of Liberty. The FRS
Board examines Sac River for safety and soundness at least once every two years.
In addition, Missouri law regulates the day to day activities of Sac River,
including deposit taking, lending and investment activities. The Division of
Finance and the FRS Board share results of their yearly examinations. The
Division of Finance examines Sac River at least every two years.
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<PAGE> 72
DIVIDENDS
Sac River has paid dividends to its shareholders yearly for over forty
years. In 1997, Sac River paid dividends of $80 per each share of Sac River
Common Stock.
INDEMNIFICATION OF SAC RIVER'S OFFICERS AND DIRECTORS
Sac River's Articles and By-laws do not provide for any indemnification for
the acts or omissions of Sac River's directors or officers. Sac River provides
insurance covering its directors and officers for losses related to the
performance of their duties. Under Missouri law, a bank may indemnify its
directors and officers for all expenses, fees and amounts paid as a result of a
suit, claim or other action brought against the officer or director because of
his service as an officer or director, as long as the officer or director acted
in good faith and in a manner he believed to be in the best interest of the bank
and had no reason to believe was unlawful. If the director or officer is
successful on the merits in any suit, claim or proceeding described above, he or
she shall be indemnified against expenses incurred in connection with the
action.
DIRECTORS AND EXECUTIVE OFFICERS OF SAC RIVER
The following table sets forth certain information with respect to the
current directors and executive officers of Sac River.
<TABLE>
<CAPTION>
Name and Positions AGE AT YEAR FIRST BECAME
With Sac River JUNE 1, 1998 DIRECTOR OF SAC RIVER
- -------------- ------------ ---------------------
<S> <C> <C>
Garry L. Robinson, President 37 1989
Howard K. Johnson, Director 70 1969
Neale W. Johnson, Director 52 1996
Charles W. Neale, Director 66 1985
Charles L. Skaggs, Director 59 1998
Franklin H. Smith, Director 62 1973
Stephen T. Wrenn, Director, 45 1996
Vice President
</TABLE>
GARRY L. ROBINSON has been a Director of Sac River since 1989. He is the
President of Sac River and has held that position since 1989.
HOWARD K. JOHNSON has been a Director of Sac River since 1969. Mr. Johnson
farms near Stockton.
NEALE W. JOHNSON has been a Director of Sac River since 1985. Dr. Johnson
is a dentist and has been practicing since 1973 in Stockton.
CHARLES W. NEALE has been a Director of Sac River since 1985. Dr. Neale, a
dentist, is retired from his dental practice. Dr. Neale has served as the
coroner for Cedar County, Missouri since 1997.
63
<PAGE> 73
CHARLES L. SKAGGS, has been a Director of Sac River since 1998. Mr. Skaggs
is retired. Prior to 1994, Mr. Skaggs was Merchandising Service Manager for
Mobil Oil Corporation.
FRANKLIN H. SMITH has been a Director of Sac River since 1973. Mr. Smith
has owned and operated Sac River Lumber Company for more than five years.
STEPHEN T. WRENN has been a Director of Sac River since 1996. Mr. Wrenn is
Vice President of Sac River. Mr. Wrenn has been employed by Sac River since
1975.
CERTAIN BUSINESS RELATIONSHIPS
At December 31, 1997 and 1996, Sac River had loans outstanding to officers,
directors, employees and companies in which the bank's executive officers or
directors were principal owners, in the amount of $624,000 and $562,000,
respectively.
Such loans and other extensions of credit and deposits were made in the
ordinary course of business and were made on substantially the same terms
(including interest rates and collateral) as those prevailing at the time for
comparable transactions with other persons. Further, these loans did not involve
more than normal risk of collectibility or present other unfavorable features.
Effective June 1996, Sac River entered into a loan servicing agreement with
a company that was controlled by Garry Robinson. The agreement called for the
company to service certain of the Bank's existing loan portfolio for a fee.
Expense recognized by the Bank relating to this agreement was $161,513 and
$40,770 for 1997 and 1996, respectively. Included in the 1997 expense was a
payment of $66,000 made to terminate the contract effective December 31, 1997.
Fees under the agreement were set at a rate of 1/2% per month on the outstanding
balance of all loans serviced.
SECURITY OWNERSHIP OF SAC RIVER'S MANAGEMENT
The following table sets forth, as of the date of this Proxy
Statement-Prospectus, the number of shares of Sac River Common Stock owned
beneficially by each director and executive officer of Sac River, and all
directors and executive officers of Sac River as a group.
<TABLE>
<CAPTION>
POSITIONS WITH NUMBER OF SHARES PERCENT
NAME SAC RIVER BENEFICIALLY OWNED OF CLASS
- ---- --------- ------------------ --------
<S> <C> <C> <C>
Garry L. Robinson Director, 32.000 (1) .32%
President
Howard K. Johnson Director 71.667 (2) 0.72%
Neale W. Johnson Director 574.111 (3) 5.74%
Charles W. ("Bill") Neale Director 413.330 (4) 4.13%
Franklin H. Smith Director 182.3333 (5) 1.82%
Charles L. Skaggs Director 1.000 (6) 0.01%
Stephen T. Wrenn Director, Vice 1.000 (7) 0.01%
President
</TABLE>
64
<PAGE> 74
All directors and executive
officers as a group 1,275.441 12.75%
- -----------------------
(1) Does not include 433.333 shares held by the Sac River ESOP of which Mr.
Robinson is the sole trustee. See "The Merger - Effect on Employee Benefit
Plans".
(2) Held by Howard K. Johnson, Trustee of Revocable Trust U/T/A dated April
28,1995.
(3) 1 share held by Neale W. Johnson, 51 shares held jointly with Frances A.
Johnson, and 522.111 held by Neale W. Johnson and Piper Price as
Co-Trustees of the Darrell W. Johnson and Betty L. Johnson Family Trust
dated May 7, 1993.
(4) 1 share is held by Charles W. Neale and 412.33 shares held by Charles W.
Neale Revocable Living Trust dated May 28, 1992. Does not include an
additional 330 shares held by Janet Neale, Mr. Neale's wife, as Trustee of
the Janet Neale Revocable Living Trust dated May 28, 1992.
(5) Does not include 83 shares held by Mary Ruth Smith, Mr. Smith's wife.
(6) Does not include 75 shares held by Charlotte Ann Skaggs, Mr. Skagg's wife.
(7) Does not include 2 shares held by Cede & Company for the benefit of Rhonda
Wrenn, Mr. Wrenn's wife, or 712.333 shares held by Thomas C. Wrenn, Trustee
under the Thomas C. Wrenn U/T/A dated April 26, 1996, of which Stephen
Wrenn is successor Trustee.
PRINCIPAL SHAREHOLDERS OF SAC RIVER
The following table sets forth, as of the date of this Proxy
Statement-Prospectus, the persons known by Sac River to be beneficial owners of
more than five (5%) percent of the outstanding shares of Sac River Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ---------------- ------------------ ----------------
<S> <C> <C>
Thomas C. Wrenn 712.333 (1) 7.12%
P.O. Box E
Stockton, MO 65785
Georgia Higgins 533.334 5.33%
707 South High
Stockton, MO 65785
Betty L. Johnson, Trustee of the Betty L. 527.111 5.27%
Johnson Trust dated February 2, 1997
Rt. 1, Box 60
Stockton, MO 65785
</TABLE>
65
<PAGE> 75
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------- ------------------ ----------------
<S> <C> <C>
Neale W. Johnson and Piper Price, 522.111 5.22%
Trustees of the Darrell W. Johnson
and Betty L. Johnston Family Trust
dated May 7, 1993
RR 1, Box 60
Stockton, MO 65785
Dorothy Smith 515.333 (2) 5.15%
P.O. Box 94
Stockton, MO 65788
Darrell D. Church 501.000 (3) 5.01%
2860 Versailles
Springfield, MO 65804
Nancy Church 500.000 (4) 5.00%
2860 Versailles
Springfield, MO 65804
</TABLE>
-----------------------
(1) Includes 712.333 shares held by Thomas C. Wrenn, Trustee under the Thomas
C. Wrenn U/T/A dated April 26, 1996.
(2) Includes 432 shares held by Dorothy Smith as Trustee of the Dorothy Smith
Revocable Living Trust and 83.333 shares held by Dorothy Smith as guardian
of Susan Smith.
(3) Includes 500 shares held by Darrell Church as Trustee for the Darrell D.
Church U/T/A dated November 21, 1997.
(4) Includes 500 shares held by Darrell Church as Trustee for the Nancy Church
U/T/A dated June 10, 1980.
COMPENSATION OF SAC RIVER'S MANAGEMENT
EXECUTIVE COMPENSATION
The following table sets forth the compensation that Sac River paid to its
chief executive officer for services rendered in the fiscal year ended December
31, 1997. Mr. Robinson is the only executive officer of Sac River whose salary
and bonus exceeded $100,000 during 1997.
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<PAGE> 76
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION SALARY BONUS ALL OTHER COMPENSATION
- --------------------------- ------ ----- ----------------------
<S> <C> <C> <C>
Garry Robinson, President and Chief
Executive Officer
1997 $83,041 $27,500 $ 0
1996 $75,000 $25,000 $ 0
1995 $68,958 $20,000 $ 0
</TABLE>
Mr. Robinson's compensation is set pursuant to an employment contract
between Sac River and Mr. Robinson. Mr. Robinson's current employment contract
will terminate on July 1, 1998, and a new contract will become effective.
Pursuant to the terms of the employment contract effective July 1, 1998, Mr.
Robinson will be entitled to receive compensation in the first year of $144,000,
with an annual raise of 5%. If the after-tax net profit of Sac River drops below
$1,000,000 in any year, Mr. Robinson's salary for the following year will be
reduced by 10% of the total salary for each $100,000 the profit is below
$1,000,000 for the previous year. The minimum salary paid to Mr. Robinson under
this formula is $50,000. In the event that the contract payment is reduced to
$50,000 or below, Sac River may terminate Mr. Robinson's employment in its sole
discretion. Mr. Robinson will not be entitled to any bonuses under the contract.
The term of the contract is for nine (9) years. Mr. Robinson's employment
contract will continue in force after the Merger.
COMPENSATION OF DIRECTORS
The directors of Sac River receive $200 per month plus a $2,000 annual
bonus for serving as directors of Sac River. The Sac River Board of Directors
held twelve (12) meetings in 1997. The full Board of Directors acts as the
Discount Committee of the Board of Directors and approves all loans that do not
adhere to the current loan policy of Sac River or loans that are above the
current loan limits of each of the officers of Sac River.
SAC RIVER'S LEGAL PROCEEDINGS
As of the date of this prospectus, there are no pending actions, lawsuits
or other legal proceedings involving Sac River.
SAC RIVER'S MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the shares of Sac River
Common Stock. To the knowledge of Sac River's management, in 1997 shares of Sac
River Common Stock were purchased by the ESOP at a price of $936.40 per share.
One sale of 88 8/9 shares of Sac River Common Stock occurred in February 1998 at
a price of $1,400 per share. (The transaction was between a Sac River director
and a
67
<PAGE> 77
Bancshares director who were aware of Liberty Bancshares overtures to Sac
River.) As of March 31, 1998, there were 10,000 shares of Sac River Common Stock
authorized, issued and outstanding.
As of June 1, 1998, approximately 5,411.881 outstanding shares of Sac River
Common Stock were held by affiliates of Sac River and approximately 4,588.119
shares were held by nonaffiliates of Sac River. On that date there were
approximately 100 shareholders of Sac River.
SELECTED FINANCIAL INFORMATION OF SAC RIVER
The following table sets forth certain historical financial data with
respect to Sac River. The financial data for the fiscal years ended December 31,
1997, and 1996, is derived from Sac River's audited financial statements. The
financial data for the three months ended March 31, 1998 and 1997, and the years
ended 1995, 1994 and 1993 is unaudited, but it reflects all normal recurring
adjustments which are, in the opinion of management, considered necessary for a
fair presentation of the financial condition and results of operations for such
interim periods. The results for the interim period presented herein are not
necessarily indicative of results to be expected for any other period or for the
entire fiscal year. The information contained in this table should be read in
conjunction with Sac River's Historical Financial Statements and related notes
found in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS Year
ENDED MARCH 31 Ended December 31
--------------------------------- ----------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except for per share data)
SELECTED STATEMENT
OF CONDITION
INFORMATION:
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets................. $99,859 $95,681 $103,044 $92,535 $85,026 $68,814 $70,666
Loans, Net of Allowance for
Loan Losses.................. 63,450 60,159 63,389 60,953 52,526 45,278 42,742
Investment Securities........ 24,579 22,403 29,696 22,785 19,603 18,706 19,458
Total Deposits............... 75,941 72,744 73,999 72,903 67,345 58,875 59,989
Short-term Borrowings........ 9,047 11,451 14,875 8,751 7,563 936 2,206
Stockholders' Equity......... 11,588 10,704 11,140 10,354 9,572 8,680 8,136
STATEMENT OF
INCOME INFORMATION:
Interest Income............. $ 1,906 $ 1,780 $ 7,358 $ 6,928 $ 6,036 $ 5,051 $ 5,152
Interest Expense............ 993 882 3,651 3,414 2,834 1,973 1,947
Net Interest Income......... 913 898 3,707 3,514 3,202 3,078 3,205
Provision for Loan Losses... - 20 30 70 50 10 130
Net Interest Income After
Provision for Loan Losses... 913 878 3,677 3,444 3,152 3,068 3,075
Noninterest Income ......... 111 64 303 277 248 273 274
Noninterest Expense......... 340 344 1,606 1,296 1,289 1,375 1,265
</TABLE>
68
<PAGE> 78
<TABLE>
<CAPTION>
THREE MONTHS YEAR
ENDED MARCH 31 ENDED DECEMBER 31
------------------------ -------------------------------------------------------------------
STATEMENT OF
INCOME INFORMATION 1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income............. $ 1,906 $ 1,780 $ 7,358 $ 6,928 $ 6,036 $ 5,051 $ 5,152
Interest Expense............ 993 882 3,651 3,414 2,834 1,973 1,947
Provision for Income Taxes.. 235 211 791 799 667 444 658
Net Income.................. 449 387 1,584 1,626 1,446 1,522 1,426
PER SHARE DATA
Earnings per Common Share... $ 44.85 $ 38.72 $ 158.37 $ 162.61 $144.56 $152.25 $142.60
Cash Dividends Declared per
Common Share................ - - 80.00 80.00 80.00 80.00 80.00
Book Value per Common
Share....................... 1,158.84 1,070.45 1,113.99 1,035.38 957.21 863.60 813.60
Dividend Payout Ratio....... - - 50.5% 49.2% 55.3% 52.5% 56.1%
Weighted Average Number of
Common Shares Outstanding... 10,000 10,000 10,000 10,000 10,000 10,000 10,000
FINANCIAL RATIOS
Return on Average Assets(1). 1.78% 1.65% 1.66% 1.85% 1.87% 2.15% 2.04%
Return on Average
Shareholders' Equity(1)..... 15.75% 14.55% 14.45% 16.05% 15.49% 17.48% 17.53%
Average Equity to Average
Assets...................... 11.29% 11.35% 11.4% 11.51% 12.05% 12.31% 11.65%
Earnings to Fixed Charges... 168.9% 167.8% 165.1% 171.0% 174.6% 199.6% 207.0%
Net Interest Margin......... 3.75% 3.91% 3.92% 4.06% 4.33% 4.51% 4.72%
Net Interest Spread......... 3.21% 3.47% 3.46% 3.58% 3.70% 3.95% 4.18%
</TABLE>
- ------------------------
(1) Interim ratios have been annualized for purposes of comparability with
year-end data.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF SAC RIVER
The following discussion of financial condition and results of operations
should be read in conjunction with the financial statements of Sac River and the
related notes. As used in the following discussion, the term "Bank" refers to
Sac River.
GENERAL
Sac River's Stockton market area has not experienced the rapid population
and economic growth of the Springfield area. Nonetheless in 1997, two other
banking institutions opened branches in the Stockton market area, increasing
competitive pressures on Sac River.
69
<PAGE> 79
FINANCIAL CONDITION
TOTAL ASSETS
Sac River's total assets at December 31, 1997, were $103,044,000, an
increase of $10,509,000, or 11.4%, over total assets of $92,535,000 at December
31, 1996. $ 6,124,000 of this increase resulted from the proceeds of
repurchase agreements with Liberty Bank and another southwest Missouri bank.
Under these agreements, Sac River sold Liberty Bank and the other institution
securities subject to Sac River's obligation to repurchase the securities on a
specified date. The balance of the increase in Sac River's assets reflected
growth in local deposits.
For the quarter ended March 31, 1998, Sac River's total assets were
$99,859,000, an increase of $4,178,000, or 4.4%, over the same quarter in the
prior year. This increase reflected both the repurchase agreements with Liberty
Bank and the other financial institution, and growth in Sac River's local
deposits. Total assets at March 31, 1998, were lower by $3,185,000, or 3.1%,
over total assets at December 31, 1997. This decrease reflected a reduction of
the level of repurchase agreements with Liberty Bank, partly offset by growth
in total deposits.
NET LOANS
Sac River's loans net of loan allowances grew by $2,436,000, or 4.0%, from
December 31, 1996, to December 31, 1997, and by $3,291,000, or 5.5%, from March
31, 1997, to March 31, 1998. At March 31, 1998, net loans were virtually
unchanged from the level at December 31, 1997.
INVESTMENT SECURITIES
Sac River's total investment securities increased $6,911,000, or 30.3%, to
$29,696,000 at December 31, 1997, from $22,785,000 at December 31, 1996. This
increase largely reflected Sac River's investment of the proceeds of repurchase
agreements with Liberty Bank and the other southwest Missouri bank. For the
quarter ended March 31, 1998, investment securities totaled $24,579,000, an
increase of $2,176,000, or 9.7%, over $22,403,000 of investment securities at
March 31, 1997. At March 31, 1998, however, investment securities were
$5,117,000 lower than three months earlier at December 31, 1997, as Liberty Bank
liquidated some of its repurchase agreements with Sac River to make funds
available for loan production.
DEPOSITS
Sac River's deposits increased slightly from December 31, 1996, to December
31, 1997, rising to $73,999,000 from $72,903,000, or 1.5%. From March 31, 1997,
to March 31, 1998, total deposits grew by $3,197,000, or 4.4%, to $75,941,000,
with $1,942,000, or 60.7%, of the growth occurring in the quarter ended March
31, 1998.
SHORT-TERM BORROWINGS
Sac River's short-term borrowings grew from $8,751,000, at December 31,
1996, to $14,875,000 at December 31, 1997, an increase of 70.00. For the quarter
ended March 31, 1998, short-term borrowings were $9,047,000 compared to
$11,451,000 on the same date a year earlier, a decrease of 21.0%. At March 31,
1998, short-term borrowings were 39.2% lower than at December 31, 1997. The
increase in short-term borrowings in 1997 resulted from the increase in the
amount of repurchase agreements with Liberty Bank and
70
<PAGE> 80
the other southwest Missouri bank, while the decrease in the first quarter of
1998 reflected Liberty Bank's reduction of the amount of repurchase agreements
with Sac River.
STOCKHOLDERS' EQUITY
The $786,000 growth in Sac River's stockholders' equity in 1997, and the
$884,000 growth from March 31, 1997, to March 31, 1998, paralleled Sac River's
net income after payment of dividends.
RESULTS OF OPERATIONS
NET INCOME
Sac River's net income for the year ended December 31, 1997, decreased
slightly to $1,584,000 from $1,626,000 for the year ended December 31, 1996. The
$42,000 decrease resulted from narrowing net interest margins and an increase in
noninterest expense associated with a computer conversion project and the
addition of personnel to administer new loans and loan participations. Net
income for the year ended December 31, 1996, was $180,000 or 12.4%, greater than
that realized in the year ended December 31, 1995.
For the quarter ended March 31, 1998, net income increased by 16.0% over
net income in the quarter ended March 31, 1997, growing from $387,000 to
$449,000.
INTEREST INCOME
Interest income has increased as total assets have grown. Interest income
of $7,358,000 for the year ended December 31, 1997, represented a 6.2%, or
$430,000, increase over interest income of $6,928,000 for the year ended
December 31, 1996. Interest income for 1996 represented an $892,000, or 14.8%,
increase of interest income of $6,036,000 for the year ended December 31, 1995.
In the quarter ended March 31, 1998, interest income reached $1,906,000, an
increase of $126,000, or 7.1%, over interest income of $1,780,000 for the
quarter ended March 31, 1997.
NONINTEREST INCOME AND EXPENSE
Noninterest income has been provided primarily by overdraft charges,
service charges on depository accounts, safety deposit box fees, and other
similar charges, and while not material in comparison to interest income,
noninterest income grew by 9.4% in the year ended December 31, 1997, 11.7% in
the year ended December 31, 1996, and 73.4% in the quarter ended March 31, 1998,
when compared to the quarter ended March 31, 1997.
Noninterest expense includes the costs of operations, including overhead
and added personnel expenses as employees are added to administer additional
loans and loan participations. Noninterest expense in the year ended December
31, 1997, also included the costs of a computer conversion project and totaled
$1,606,000, an increase of $310,000, or 23.9%, over noninterest expense of
$1,296,000 in the year ended December 31, 1996. Noninterest expense in 1996 grew
a nominal $7,000 over noninterest expense in the year ended December 31, 1995.
For the quarter ended March 31, 1998, noninterest expense declined by $4,000 to
$340,000 over the noninterest expense in the same quarter a year earlier.
71
<PAGE> 81
NET INTEREST INCOME
Net interest income, the primary source of earnings for the Bank, is the
difference between interest income earned on loans and other earning assets, and
interest paid on deposits and other interest bearing liabilities. Earning assets
include loans, investment securities and federal funds sold. Interest bearing
liabilities include interest-bearing deposits (NOW accounts, MMDA, savings and
others), time deposits, federal funds purchased and securities sold under
agreements to repurchase.
The following table sets forth the Bank's average balance of assets,
liabilities and stockholders' equity as well as the amount of interest income or
interest expense and the average rate for each category of interest earning
assets and interest bearing liabilities. Included in the average balances are
non-accruing loans. Loan fees are included in interest income. Average balances
are computed on a daily basis.
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------------------------------------------------------
1997 1996
----------------------------------------------------- -------------------------------------
Average Interest Average Average Interest Average
Balance and Fees Rate Balance and Fees Rate
------- -------- ------- ------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS............................
Cash and Due From Banks(1)..... $ 2,451 $ -- --% $ 1,756 $ -- -- %
Federal Funds Sold and
Securities Purchased Under
Agreements to Resell........... 5,463 302 5.53 6,882 398 5.78
Deposits with Banks 600 32 5.33 400 23 5.75
Taxable Investment Securities.. 20,943 1,264 6.04 15,449 922 5.97
Non-taxable Investment 5,097 290 5.69 5,342 310 5.80
Securities.....................
Loans, Net(2).................. 59,987 5,470 9.12 56,423 5,275 9.35
------- -------- ------- --------
Total Interest Earning
Assets................... 94,541 7,358 7.78 86,652 6,928 8.00
Bank Premises and
Equipment...................... 453 -- 351 --
Other Assets................... 1,390 -- 1,366 --
------- -------
Total Assets............. $96,384 $87,969
======= =======
</TABLE>
72
<PAGE> 82
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------------------------------------------------------
1997 1996
-------------------------------------------- --------------------------------------------
Interest
Average and Average Average Interest Average
Balance Fees Rate Balance and Fees Rate
------- ---- ---- ------- -------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDER'S EQUITY
Non-interest Bearing Deposits... $ 4,854 $ 4,700
Interest Bearing Deposits....... 24,486 $ 672 2.74% 23,642 $ 657 2.78%
Time Deposits................... 43,549 2,351 5.40 40,803 2,299 5.63%
Federal Funds Purchased and
Securities Sold Under Agreements
to Repurchase................... 11,653 627 5.38 8,057 458 5.68%
------- ------- -------- ------
Total Interest Bearing
Liabilities............... 84,542 3,651 4.32 77,202 3,414 4.42
------- ------
Other Liabilities............... 881 639
Stockholders' Equity............ 10,961 10,128
------- --------
Total Liabilities and
Stockholders' Equity...... $96,384 $ 87,969
======= ========
NET INTEREST INCOME, NET
INTEREST SPREAD.................... $ 3,707 3.46% $3,514 3.58%
NET INTEREST YIELD(3).............. 3.92% 4.06%
</TABLE>
(1) Includes non-interest bearing balances, cash and cash items.
(2) Loans, net of loan losses.
(3) Net interest yield is net interest earnings divided by total
interest-earning assets, with net interest earnings equal to the difference
between total interest earned and total interest paid.
Total average interest bearing liabilities and average interest earning
assets grew by 9.5% and 9.1%, respectively, in 1997 over 1996. The net interest
spread and net interest yield each declined slightly, primarily reflecting the
effects of the loans made in the more price-competitive Springfield market.
The effect of changes in average balance and rate from the corresponding
prior period on interest income, interest expense and net interest income for
the year ended December 31, 1997 is set forth below. The effect of a change in
average balance has been determined by applying the average rate for the earlier
period to the change in the average balance for the later period, as compared
with the earlier period. The effect of a change in the average rate has been
determined by applying the average balance for the earlier period to the change
in the average rate for the later period, as compared with the earlier period.
The variances attributable to simultaneous balance and rate changes have been
allocated in proportion to the relationship of the dollar amount of change in
each category.
73
<PAGE> 83
<TABLE>
<CAPTION>
1997 COMPARED WITH 1996
Increase (decrease)
Due to a Change in
Average Average
Balance Rate Total
------- ------------------- -----
(Dollars in Thousands)
<S> <C> <C> <C>
Interest Earned On:
Federal Funds Sold and Securities Purchased Under Agreements to Resell $ (119) $ 23 $ (96)
Deposits with Banks................................................. 11 (2) 9
Taxable Investment Securities....................................... 331 11 342
Non-taxable Investment Securities................................... (14) (6) (20)
Loans, Net.......................................................... 327 (132) 195
------ ------ -------
Total Interest Income............................................... 536 (106) 430
------ ------ -------
Interest Paid on:
Interest-bearing Deposits (NOW accounts, MMDA, savings and other)... 24 (9) 15
Time Deposits....................................................... 150 (97) 53
Federal Funds Purchased and Securities Sold under Agreements to Repurchase
159 10 169
------ ------ -------
Total Interest Expense.............................................. 333 (96) 237
------ ------ -------
Change in Net Interest Income........................................... $ 203 $ (10) $ 193
====== ====== =======
Percent Increase in Net Interest Income over the Prior Period........... 5.49%
</TABLE>
INVESTMENT SECURITIES PORTFOLIO ANALYSIS
The Bank invests a portion of its available funds in short-term and
longer-term instruments, including federal funds sold and investment securities.
Investment securities include obligations of the U.S. Government or its
agencies, obligations of state and political subdivisions and debt securities.
Federal funds sold are used primarily for daily cash management purposes.
The Bank's investment securities portfolio is utilized to collateralize certain
of the Bank's line of credit and public and fiduciary deposits. It also provides
liquidity through proceeds from scheduled maturities. The majority of the Bank's
investment securities carry fixed interest rates, and at December 31, 1997 and
March 31, 1998, the Bank's investment portfolio reflected a net unrealized gain
of approximately $187,000 and $181,000, respectively.
The following table presents the Bank's investments in certain securities
accounted for as held to maturity ("HTM") or as available for sale ("AFS") on
the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------
1997 1996
------------------ -------------------
BOOK VALUE
(IN THOUSANDS)
<S> <C> <C>
U.S. Government, HTM............................................ $ -- $ --
U.S. Government, AFS............................................ 11,497 8,748
U.S. Agencies, HTM.............................................. -- --
U.S. Agencies, AFS.............................................. 11,754 9,001
Mortgage Backed Bonds, HTM...................................... -- --
Mortgage Backed Bonds, AFS...................................... -- --
Municipal Securities, HTM....................................... 6,445 5,036
</TABLE>
74
<PAGE> 84
<TABLE>
<CAPTION>
December 31
----------------------------------------------
1997 1996
-------------------- -------------------
Book Value
(In Thousands)
<S> <C> <C>
Municipal Securities, AFS....................................... - -
Corporates...................................................... - -
------- -------
Total Securities........................................... 29,696 22,785
Federal Funds Sold and Securities Purchased under
Agreements to Resell....................................... 5,585 3,850
------- -------
Total Investments.......................................... $35,281 $26,635
======= =======
</TABLE>
The increase in total investments primarily reflected the growth of the
Bank.
The following table sets forth the amounts by book value and weighted
average yields, as of December 31, 1997, of each category of investment listed
in the preceding table maturing during certain time periods.
<TABLE>
<CAPTION>
MATURING
-----------------------------------------------------------------------------------------------------
AFTER ONE YEAR AFTER FIVE YEARS
BUT WITHIN BUT WITHIN
WITHIN ONE YEAR FIVE YEARS TEN YEARS TOTAL
--------------- ---------- --------- ---------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ----- ------ ----- ------ ----- ------ -----
(IN THOUSANDS)
Held to Maturity:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government............... $ -- --% $ -- --% $ -- --% $ -- --%
U.S. Agencies................. -- -- -- -- -- -- -- --
Mortgage Backed Bonds......... -- -- -- -- -- -- -- --
Municipal Securities.......... 420 5.79% 3,701 5.31% 2,324 5.48% 6,445 5.40%
Corporates.................... -- -- -- -- -- -- -- --
------- ----
$ 6,445 5.40%
======= ====
Available for Sale:
U.S. Government............... $10,753 5.97% $ 744 5.68% $ -- --% $11,497 5.95%
U.S. Agencies................. 4,256 6.16% 7,498 6.08% -- -- 11,754 6.11%
Mortgage Backed
Bonds....................... -- -- -- -- -- -- -- --
Municipal Securities.......... -- -- -- -- -- -- -- --
------- ----
$23,251 6.03%
======= ====
</TABLE>
On December 31, 1997, the Bank had no investments in the debt securities of
any issuer (excluding U.S. Government and U.S. Agencies and corporations) with a
book value of more than ten percent (10%) of the Bank's shareholders' equity.
75
<PAGE> 85
LOAN PORTFOLIO
The following table presents the amount of loans outstanding at the dates
indicated, according to loan category:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1997 1996
---- ----
(Dollars in Thousands)
<S> <C> <C>
Real Estate Loans; Construction........................... $ 2,394 $ 2,854
Real Estate Loans; Mortgage............................... 44,507 42,240
Installment Loans......................................... 3,238 3,381
Commercial Loans and Other................................ 14,102 13,311
-------- --------
Total Loans...................................... $ 64,241 $ 61,786
======== ========
</TABLE>
Real Estate construction loans consist primarily of residential and
commercial construction loans for properties located in southwest Missouri.
Real estate mortgage loans, including 1-4 family and multi-family loans,
are collateralized by residential properties that are principally located in
southwest Missouri.
Real estate-non-farm, non-residential loans are secured by commercial
properties principally located in Springfield, Missouri.
Sac River's commercial and industrial loans are primarily loans to
customers in the southwest Missouri trade area and are diversified from an
industry and customer standpoint, which helps to minimize risk. Consistent with
management's emphasis on relationship banking, most borrowing customers also
maintain deposit accounts and use other banking services. Management believes
the inherent risks of commercial and industrial loans to be relatively low,
given the diversity of the portfolio and collateral margins. Sac River holds
Small Business Administration guarantees of slightly more than half of the
amount of its commercial loans.
The consumer loan portfolio consists of both secured and unsecured loans to
individuals for various personal reasons such as automobile financing, home
improvements, education and recreational purposes. New charge-offs of consumer
loans have been relatively low for the past several years. Management believes
the inherent risks associated with these loans to be relatively low and that net
charge-offs on these loans will continue to be below industry averages, due to
sufficient collateral margins and the diversity of the portfolio.
76
<PAGE> 86
The following table presents the repricing frequency of certain loan
categories at December 31, 1997.
<TABLE>
<CAPTION>
WITHIN 1-5 Over 5
ONE YEAR Years Years Total
----------------- ---------------- -------------- ------------
(In Thousands)
<S> <C> <C> <C> <C>
Real Estate Loans; Construction......... $ 2,394 $ - $ - $ 2,394
Real Estate Loans; Mortgage............. 41,778 2,445 284 44,507
Installment Loans....................... 2,056 1,180 2 3,238
Commercial Loans and Other.............. 13,335 431 336 14,102
-------- ------- ----- --------
Total Loans.................... $ 59,563 $ 4,056 $ 622 $ 64,241
======== ======= ====== ========
</TABLE>
The table below presents the interest rate sensitivity at December 31,
1997, on loans contractually due after one year in the following categories.
<TABLE>
<CAPTION>
FIXED
INTEREST Adjustable
RATE Interest
Rate
---------------- --------------------
(In Thousands)
<S> <C> <C>
Real Estate Loans; Construction................................... $ -- $ --
Real Estate Loans; Mortgage....................................... 2,810 11,216
Installment Loans................................................. 1,262 1,653
Commercial Loans and Other........................................ 586 7,685
-------- ---------
Total Loans.............................................. $ 4,658 $ 20,554
======== =========
</TABLE>
The Bank's loan portfolio is varied, with no undue concentration in any
single industry, although most of the loans in the Bank's portfolio have been
made to borrowers in the southwest Missouri area.
77
<PAGE> 87
RISK ELEMENTS OF LOAN PORTFOLIO
Management reviews the Bank's loan portfolio on a regular basis for problem
loans. During the ordinary course of business, management becomes aware of
borrowers that may not be able to meet contractual requirements of loan
agreements. Such loans are placed on the Bank's watch list, which is reviewed by
the Bank's Board of Directors on a monthly basis. Management then determines the
need for additions to the allowance for loan loss. The Bank's allowance for loan
loss is determined as 50% of loans management considers doubtful, 10% of loans
on the watch list, and 1 1/2% of the remainder of the Bank's loan portfolio.
Those loans on which management does not expect to collect interest in the
normal course of business, or which are 90 days or more past due as to principal
or interest, are generally placed on nonaccrual status and management determines
the need for a partial or full charge-off of such loans. After a loan is placed
on nonaccrual status, interest income is recognized only on a cash basis so long
as management is satisfied there is not impairment of the book value of the
loan. The loan is returned to accrual status only when the borrower has brought
all past due principal and interest payments current, and in the opinion of
management, the borrower has demonstrated the ability to make future payments of
principal and interest as scheduled.
The following table presents the amount of non-performing loans outstanding
at the dates indicated, by category:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Nonaccrual Loans........................................... $0 $ 10
Loans 90 Days Past Due and Still Accruing.................. 0 150
Restructured Loans......................................... 0 0
-- ----
Total Non-performing Loans........................ $0 $160
== ====
</TABLE>
As of December 31, 1997, the gross interest income on loans recorded for
the year then ended was $5,469,502. The amount of interest income on the
above-referenced loans accounted for in nonaccrual status that would have been
recorded during such year if such loans had been current in accordance with
their terms was $0.
As of December 31, 1996, the gross interest income on loans recorded for
the year then ended was $5,274,519. The amount of interest income on the
above-referenced loans accounted for in nonaccrual status that would have been
recorded during such year if such loans had been current in accordance with
their terms was $0.
The following table presents the book value of loans excluded from the
previous table but classified by the Bank, as of December 31, 1997, as watch
list loans.
78
<PAGE> 88
<TABLE>
<CAPTION>
BOOK VALUE
------------------
(IN
THOUSANDS)
<S> <C>
Installment Loans.......................................................... $ 0
Real Estate Loans; Construction............................................ 0
Real Estate Loans; Mortgage................................................ 882
Commercial Loans and Other................................................. 65
----
Total Loans....................................................... $947
====
</TABLE>
PROVISION FOR LOAN LOSSES
The provision for loan losses represents management's determination of the
amount necessary to be charged against the current period's earnings, in order
to maintain the allowance for loan losses at a level which is considered
adequate, in relation to the estimated risk inherent in the loan portfolio. The
Bank determines its allowance for loan loss as 50% of loans the management
considers doubtful, 10% of loans on the watch list and 1 1/2% of all other loans
in the Bank's portfolio. See "Financial Condition-Allowances for Loan Losses."
The following table presents an analysis of the Bank's loss experience for
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-----------
1997 1996
---- ----
<S> <C> <C>
(Dollars in
Thousands)
Balance at Beginning of Period...................................................... $833 $792
Charge-offs:
Real Estate Loans; Construction............................................ -- --
Real Estate Loans; Mortgage................................................ (33) (20)
Installment Loans.......................................................... (1) (7)
Commercial Loans and Other................................................. (6) (29)
---- ----
(40) (56)
---- ----
Recoveries:
Real Estate Loans; Construction............................................ -- --
Real Estate Loans; Mortgage................................................ 12 --
Installment Loans.......................................................... 1 5
Commercial Loans and Other................................................. 16 22
---- ----
Net recovery .............................................................. 29 27
---- ----
Net Provision for Loan Losses.............................................. 30 70
Balance at End of Period............................................................ $852 $833
==== ====
Ratio of Net Charge-offs During the Period to Average Net Loans
Outstanding During the Period..................................................... .02% .05%
==== ====
</TABLE>
79
<PAGE> 89
The following table presents a breakdown of the allowance for loan losses
for the period indicated.
<TABLE>
<CAPTION>
DECEMBER 31 December 31
-----------------------------------------------------------------------------------
1997 1996
-------------------------------------- --------------------------------------
Percent Percent
of loans of loans
in each in each
category category
to total to total
Amount loans Amount loans
--------------- --------------- --------------- ----------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Balance at end of Period Applicable to:
Real Estate Loans: $ - - % $ - - %
Construction...................
Real Estate Loans; Mortgage.... 88 10.33 115 13.81
Installment Loans.............. - - - -
Commercial Loans and Other..... 7 .82 7 .84
Unallocated Allowance.......... 757 88.85 711 85.35
------- ------ ------ ------
Total................. $ 852 100.00% $ 833 100.00%
======= ====== ====== ======
</TABLE>
The following table presents an analysis of the activity in the foreclosed
assets held for sale account for the period indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1997 1996
---- ----
(Dollars in Thousands)
<S> <C> <C>
Balance at Beginning of Period............................. $45 $65
Foreclosures During the Year............................... 3 -
Writedowns During the Year................................. (10) (20)
Proceeds from Sales........................................ (28) -
Gain (Loss) on Sales (Net)................................. (6) -
--- ---
Balance at End of Period................................... $ 4 $45
=== ===
Ratio of Foreclosed Assets to Loans Outstanding............ .01% .07%
=== ===
</TABLE>
ALLOWANCE FOR LOAN LOSSES
Management establishes the allowance for loan losses through a provision for
loan losses based on its evaluation of the risk inherent in its loan portfolio
and the general economy. This evaluation, which includes a review of all
loans on which full collectibility may not be reasonably assured, considers
among other matters, the estimated fair value of the underlying collateral,
economic conditions, historical loan loss experience, and other factors that
warrant recognition in providing for an adequate loan loss allowance. In
addition, various regulatory agencies, as an integral part of their
80
<PAGE> 90
examination process, periodically review the Bank's allowance for loan losses
and valuation of foreclosed assets held for sale. These agencies may require the
Bank to recognize additions to the allowance based on their judgments about
information available to them at the time of their examination.
Management has established an allowance for loan losses which reduces the
total loans outstanding by an estimate of potential loan losses, plus an excess
margin for potential future uncertainties. Loans deemed uncollectible are
charged against and reduce the allowance. Sac River expenses its provisions for
loan losses against current income. The provision replenishes the allowance for
loan losses and maintains the allowance at acceptable levels based upon the
judgment of management. Sac River bases the allowance for loan losses upon
current economic conditions, risks in the loan portfolio, historical loan loss
experience and other factors that, in management's opinion, deserve current
recognition. See "Results of Operations-Provision for Loan Losses."
DEPOSITS
The Bank's deposit base is its primary source of funds. The Bank offers a
broad range of deposit products, including noninterest demand deposits, NOW
accounts, savings deposits, individual retirement accounts and certificates of
deposit.
At December 31, 1997, 6.9% of total deposits were in noninterest bearing
accounts, 32.2% in savings and interest bearing demand accounts and 60.9% in
certificates of deposit.
The following table presents the average balances of and the average rate
paid on certain categories of deposits for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------------
1997 1996
----------------------------------------- ----------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE(1) RATE BALANCE(1) RATE
------------------ ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Noninterest Bearing: (IN THOUSANDS)
Demand Deposit Accounts....... $ 4,854 -- $ 4,700 --
Interest Bearing:
MMDA and NOW Accounts......... 19,583 2.68% 19,275 2.73%
Savings Deposits.............. 4,903 2.99 4,367 3.00
IRA........................... 2,409 5.50 2,931 5.60
CD's under $100,000........... 33,428 5.58 31,262 5.71
CD's over $100,000............ 7,712 4.57 6,610 5.30
------- -------
Total Average
Deposits............. $72,889 $69,145
======= =======
</TABLE>
- --------------------
(1) Averages are computed on a daily basis.
Total average deposits grew by $3,744,000, or 5.4%, in 1997 over 1996, with
87.3% of the growth in certificates of deposit.
81
<PAGE> 91
The following table presents the amount outstanding as of December 31,
1997, of certain deposits in excess of $100,000 and the maturities thereof.
<TABLE>
<CAPTION>
MATURING IN
-----------------------------------------------------------------------------------------------
OVER
THREE MONTHS THREE TO TWELVE
OR LESS TWELVE MONTHS MONTHS TOTAL
--------------------- ---------------------- ------------------ ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Type of Deposit:
Certificate of Deposit..... $3,592 $4,732 $644 $8,968
Other Deposits............. 852 -- -- 852
------ ------ ---- ------
Total............. $4,444 $4,732 $644 $9,820
====== ====== ==== ======
</TABLE>
RETURN ON EQUITY AND ASSETS
The following table presents the Bank's return on equity and assets for the
periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
----------------------------------------
1997 1996
---------------- ----------------
(Dollars in Thousands)
<S> <C> <C>
Return on Assets (net income divided by average total assets)....... 1.66% 1.85%
Return on Equity (net income divided by average equity)............. 14.45% 16.05%
Dividend Payout Ratio (dividends declared per share divided by
net income per share)............................................... 50.5% 49.2%
Equity to Assets Ratio (average equity divided by average total 11.4% 11.51%
assets).............................................................
</TABLE>
The decreases in return on assets and return on equity reflected the
effects of increases in non-interest expenses associated with a computer
conversion project and increased personnel costs, growth in the Bank's
size, and increased competition.
82
<PAGE> 92
SHORT-TERM BORROWINGS
Short-term borrowings consist of securities sold under agreements to
repurchase. These amounted to $14,875,000 at December 31, 1997, and $8,751,000
at December 31, 1996. The average yield on short-term borrowings was 5.38% and
5.68% during 1997 and 1996, respectively. The majority of these instruments have
terms ranging from one to 365 days. The maximum amounts of short-term borrowings
outstanding at any month end during 1997 and 1996 were $14,875,000 and
$9,936,000. Information regarding the levels of short-term borrowings for 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------------------
1997 1996
----------------------------------------- ----------------------------------
FEDERAL FEDERAL
FUNDS SECURITIES FUNDS SECURITIES
PURCHASED SOLD PURCHASED SOLD
----------------- ----------------- ----------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at End of Period............. -- $ 14,875 -- $ 8,751
Maximum Outstanding During the
Period at any Month-end............ -- $ 14,875 -- $ 9,936
Average Interest Rate End of Period.. -- 5.93% -- 5.71%
Average Outstanding During Period.... -- $ 11,602 -- $ 8,056
Average Interest Rate For the Period. -- 5.38% -- 5.68%
</TABLE>
The average amount outstanding was computed from daily averages and the
average interest rates for the period were computed by dividing the respective
interest expense by the average balance outstanding. The increase in securities
sold under agreements to repurchase in 1997 resulted primarily from repurchase
agreements with Liberty Bank and another southwest Missouri bank.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity risk is managed by the Bank through the composition of its assets
and liabilities in an effort to meet efficiently the borrowing needs and
withdrawal requirements of its customers. Cash and cash equivalents include
cash, due from banks and federal funds sold. The primary sources of the Bank's
liquidity are cash and cash equivalents and investment securities with
short-term maturities. The Bank's primary method of asset/liability management
is the matching of the length of assets (loans) to the length of liabilities
(deposits). The Bank believes its process of asset/liability management allows
adequate reaction time for trends in the marketplace as they occur, minimizing
the negative impact of such trends on the net interest margin.
As of March 31, 1998, the Bank had cash and cash equivalents of $8,730,000
and investment securities maturing in less than one year of $16,480,000. These
amounts represent approximately 26.0% of the Bank's total assets at March 31,
1998, and, in management's opinion, provide the Bank with sufficient resources
to handle unforeseen deposit outflows and loan requirements.
The Bank's cash and cash equivalents increased $1,932,000 during the three
month period ended March 31, 1998. Net cash provided by operating activities
aggregated $659,000. Net cash provided by investing activities for this period
approximated $5,159,000, primarily as a result of maturing investment
securities. Net cash used in financing activities approximated $3,886,000 for
this time period primarily as a result of increased deposits of $1,942,000 and a
decrease of $5,828,000 in short-term borrowings.
83
<PAGE> 93
YEAR 2000
Sac River has assessed the Year 2000 compliance status of all material
software, firmware and hardware used in the ordinary course of business. Sac
River relies heavily on software provided by outside suppliers, and management
is coordinating with and monitoring the efforts of major suppliers to become
Year 2000 compliant. In addition, Sac River is assessing the Year 2000 effect on
the loan portfolio and its security and other computer controlled mechanical
equipment. Based on information presently known to management, it is estimated
that Sac River's cost of implementing the Year 2000 compliance will be
immaterial. Sac River's software and service providers have advised management
that they expect to be Year 2000 compliant in 1999, but there can be no
assurances that all will be. Sac River could be materially adversely affected if
these third parties do not achieve timely compliance.
INTEREST RATE SENSITIVITY
Asset and liability management encompasses both interest rate risk and
liquidity management. Sac River's net interest margin can be vulnerable to wide
fluctuations arising from a change in the general level of interest rates which
may affect the yield on interest earning assets differently than the cost of the
interest bearing liabilities. Sac River monitors its asset and liability mix in
an effort to maintain a consistent earnings performance through control of
interest rate risk.
Below is the "Static gap" table for Sac River as of December 31, 1997. This
is just one of several tools which may be used to measure and manage interest
rate sensitivity. Earning assets and interest bearing liabilities are presented
below within selected time intervals based on their repricing and maturity
characteristics. In this view, the sensitivity position is perfectly matched
when an equal amount of assets and liabilities reprice during any given period.
Excess assets or liabilities repricing in a given time period result in the
"Interest Sensitivity Gap" shown at the bottom of the table. A positive gap
indicates more assets than liabilities will reprice in that time period, while a
negative gap indicates more liabilities than assets will reprice.
The table indicates Sac River is liability sensitive in the three months or
less period and is asset sensitive in all other periods. This means that during
the three months or less period, interest bearing liabilities are repricing
faster than earning assets, thereby improving net interest income when rates are
declining and reducing net interest income when rates are rising. While the
"static gap" is a widely used measure of interest sensitivity, it is not, in
management's opinion, the only indicator of Sac River's sensitivity position.
84
<PAGE> 94
The following table indicates as of December 31, 1997, the time period in
which interest earning assets and interest bearing liabilities are scheduled to
mature or reprice in accordance with their contractual terms.
<TABLE>
<CAPTION>
AFTER AFTER
THREE THREE ONE
MONTHS THROUGH THROUGH
OR TWELVE FIVE
LESS MONTHS YEARS
----------------- ---------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Assets:
Deposits with Banks............... $ 100 $ 550 $ 200
Federal Funds Sold and
Securities Purchased Under
Agreements to Resell.............. 2,100 -- --
Taxable Investment Securities..... 2,249 12,759 8,243
Non-taxable Investment
Securities........................ 265 155 3,701
Loans, Net........................ 31,906 26,667 3,834
Other Assets...................... -- -- --
--------- -------- -------
Total Assets............. $ 36,620 $ 40,131 $15,978
========= ======== =======
Liabilities:
Interest-bearing Deposits (NOW,
MMDA, Savings and Other).......... $ 29,248 $ -- $ --
Time Deposits..................... 14,203 23,298 7,580
Securities Sold Under
Agreements to Repurchase.......... 11,801 2,774 300
Long-term Debt.................... -- 2,500 --
Other Liabilities ................ -- -- --
--------- --------- --------
Total Liabilities........ $ 55,252 $ 28,572 $ 7,880
========= ========= ========
Sensitivity Gap................... $ (18,632) $ 11,559 $ 8,098
Gap as a Percentage of Assets..... (19.40)% 12.04% 8.43%
Cumulative Sensitivity Gap........ $ (18,632) $ (7,073) $ 1,025
Cumulative Gap as a Percentage
of Assets......................... (19.40)% (7.37)% 1.07%
Cumulative Sensitivity Ratio...... (66.28)% (91.56)% 101.12%
<CAPTION>
AFTER
FIVE
YEARS TOTAL
---------------- ----------------
<S> <C> <C>
Assets:
Deposits with Banks............... $ -- $ 850
Federal Funds Sold and
Securities Purchased Under 2,100
Agreements to Resell.............. --
Taxable Investment Securities..... -- 23,251
Non-taxable Investment
Securities........................ 2,323 6,444
Loans, Net........................ 982 63,389
Other Assets...................... -- --
-------- --------
Total Assets............. $ 3,305 $ 96,034
======== ========
Liabilities:
Interest-bearing Deposits (NOW,
MMDA, Savings and Other).......... $ -- $ 29,248
Time Deposits..................... -- 45,081
Securities Sold Under
Agreements to Repurchase.......... -- 14,875
Long-term Debt.................... -- 2,500
Other Liabilities ................ -- --
-------- --------
Total Liabilities........ $ -- $ 91,704
======== ========
Sensitivity Gap................... $ 3,305 $ 4,330
Gap as a Percentage of Assets..... 3.44% 4.51%
Cumulative Sensitivity Gap........ $ 4,330 $ --
Cumulative Gap as a Percentage
of Assets......................... 4.51% --%
Cumulative Sensitivity Ratio...... 104.72% 104.72%
</TABLE>
An interest sensitivity table is not a complete picture of the possible
effect of interest rate changes on net interest income. First, changes in the
general level of interest rates will not affect all categories of assets and
liabilities equally or simultaneously. Second, the table represents a one-day
position; variations occur daily as the Company adjusts its interest sensitivity
throughout the year. Third, the repricing distribution of interest sensitive
assets may not be indicative of the liquidity of those assets. Finally, since
this table is based on contractual maturities, it does not include required
principal payments or estimates of early principal payments on residential
mortgages, installment loans and investment securities.
85
<PAGE> 95
CAPITAL ADEQUACY
Stockholders' equity represented 11.6% of total assets at March 31, 1998.
Risk-based capital and leverage ratios of the Bank exceeded minimum requirements
of regulatory banking authorities. See note 10 to Sac River's financial
statements for the years ended December 31, 1997 and 1996 for additional
information about Sac River's capitalization and regulatory capital
requirements.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The FASB recently adopted Statement of Financial Accounting Standards
("SFAS") 128, "Earnings Per Share." This statement replaces the presentation of
primary earnings per share with a presentation of basic earnings per share. The
statement also requires dual presentation of basic and diluted earnings per
shares by entities with complex capital structures and requires a reconciliation
of the numerators and denominators between the two calculations. SFAS 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. Management has presented earnings per share in
accordance with SFAS 128 in its December 31, 1997 financial statements. The
adoption of SFAS 128 did not have a material impact on the Bank's financial
statements.
The FASB recently adopted SFAS 129, "Disclosure of Information about
Capital Structure." This statement establishes standards for disclosing
information about capital structure, including pertinent rights and privileges
of various securities outstanding. SFAS 129 is effective for financial
statements issued for periods ending after December 15, 1997. The adoption of
SFAS 129 did not have a material impact on the Bank's financial statements.
The FASB recently adopted SFAS 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting and display of comprehensive
income and its components, in a full set of financial statements. It does not
address issues of recognition or measurement. SFAS is effective for fiscal years
beginning after December 15, 1997. The adoption of SFAS 130 did not have a
material impact on the Bank's financial statements.
The FASB recently adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement establishes standards for
the way that public business enterprises report information about operating
segments in both annual financial statements and interim financial reports
issued to shareholders. The statement also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS 131 is effective for financial statements issued for periods beginning
after December 15, 1997. The adoption of SFAS 131 is not expected to have a
material impact on the Bank's financial statements.
The FASB recently adopted SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management has not yet determined impact, if any, of SFAS 133 on the Bank's
financial statements.
EFFECT OF ECONOMIC CONDITIONS
The Bank's financial statements have been prepared in accordance with
generally accepted accounting principles, which required the measurement of
financial position and operating results in terms of historical dollars without
consideration for changes in the relative purchasing power of money over time
due to inflation. The assets and liabilities of the Bank are primarily monetary
and interest rates have a greater impact on the Bank's performance than does the
effect of inflation. The local economy of the Southwest Missouri
86
<PAGE> 96
area has experienced growth over the last several years. The area has a good mix
of retail, agricultural related and industrial business.
ADJOURNMENT OF SPECIAL MEETING
Under certain circumstances, Sac River's management may determine at the
time of the Special Meeting that it is in the best interest of Sac River and its
shareholders to adjourn the Special Meeting to a later date. For example, in the
event that the number of shares present, in person or by proxy, at the Special
Meeting is insufficient to constitute a quorum or to approve the Merger
Agreement, Sac River might decide to adjourn the Special Meeting to permit
further solicitation of proxies. Sac River might also decide to adjourn the
Special Meeting in the event that the parties determine that events occurring
subsequent to the date of this Proxy Statement require Sac River to furnish
additional proxy soliciting information to the shareholders and to give the
shareholders an opportunity to assimilate such information. If the Special
Meeting is adjourned, no further notice of the time and place of the adjourned
meeting is required to be given to Sac River shareholders other than an
announcement of such time and place at the Special Meeting. The vote of the
holders of a majority of shares of Sac River Common Stock present at the Special
Meeting in person or by proxy, whether or not a quorum is present, is required
to approve a proposal for adjournment at the Special Meeting.
Sac River's management also may determine at the time of the Special
Meeting that it is in the best interest of Sac River and its shareholders to
adjourn the Special Meeting for up to 90 days if, at the time of the Special
Meeting, the holders of a sufficient number of Sac River Common Stock have
indicated that they intend to elect under the Merger Agreement to receive the
Optional Per Share Cash Amount rather than the right to receive shares of
Bancshares Common Stock, and, as a result, the total cash payable by Bancshares
as the Optional Per Share Cash Amount to all shareholders of Sac River would
exceed $2,800,000. During the adjournment, representatives of Sac River would
ascertain whether a sufficient number of shareholders would change their
election so that the Option Per Share Cash Amount would not exceed $2,800,000.
The board of directors of Sac River recommends that shareholders vote FOR
the proposal to adjourn the Special Meeting so that such proxies may be voted in
favor of such adjournment under such circumstances.
LEGAL OPINIONS
The legality of the Bancshares Common Stock to be issued pursuant to the
Merger will be passed upon for Bancshares by Husch & Eppenberger, LLC. Husch &
Eppenberger has also delivered an opinion to Bancshares and Sac River concerning
certain federal income tax consequences of the Merger. See "THE MERGER-Certain
Federal Income Tax Consequences."
EXPERTS
Bancshares' financial statements at December 31, 1995, 1996, and 1997, and
for the 65 days and years then respectively ended, in the Proxy
Statement-Prospectus and Registration Statement have been audited by Baird,
Kurtz & Dobson, independent accountants as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
Sac River's financial statements at December 31, 1996, and 1997, and for
the years then ended, in the Proxy Statement-Prospectus and Registration
Statement have been audited by Baird, Kurtz & Dobson, independent accountants as
set forth in their report thereon appearing elsewhere herein and in the
Registration
87
<PAGE> 97
Statement, and are included in reliance upon such report given the authority of
such firm as experts in accounting and auditing.
88
<PAGE> 98
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
LIBERTY BANCSHARES, INC. AND SUBSIDIARY...........................................................................LF-1
Independent Accountants' Report..........................................................................LF-2
Consolidated Balance Sheets at March 31, 1998 and December 31, 1997 and 1996.............................LF-3
Consolidated Statements of Income for Three Months Ended March 31, 1998 and 1997 and Years
Ended December 31, 1997 and 1996 and 65 Days Ended December 31, 1995.....................................LF-4
Consolidated Statements of Changes in Stockholders' Equity for Three Months Ended March 31,
1998 and 1997 and Years Ended December 31, 1997 and 1996 and 65 Days Ended December 31,
1995.....................................................................................................LF-5
Consolidated Statements of Cash Flows for Three Months Ended March 31, 1998 and 1997 and Years
Ended December 31, 1997 and 1996 and 65 Days Ended December 31, 1995.....................................LF-6
Notes to Financial Statements............................................................................LF-7
SAC RIVER VALLEY BANK.............................................................................................SF-1
Independent Accountant's Report..........................................................................SF-2
Balance Sheets at December 31, 1997 and 1996.............................................................SF-3
Statements of Income for Years Ended December 31, 1997 and 1996..........................................SF-4
Statements of Changes in Stockholders' Equity
for Years Ended December 31, 1997 and 1996...............................................................SF-5
Statements of Cash Flow for the Three Months Ended March 31, 1998, and 1997, and Years Ended
December 31, 1997 and 1996...............................................................................SF-6
Notes to Financial Statements............................................................................SF-8
LIBERTY BANCSHARES, INC. AND SUBSIDIARIES PRO-FORMA CONDENSED, CONSOLIDATED
FINANCIAL STATEMENTS..............................................................................................PF-1
Pro-forma Condensed, Consolidated Balance Sheet at March 31, 1998........................................PF-2
Pro-forma Condensed, Consolidated Statements of Income for Three Months Ended March 31,
1998.....................................................................................................PF-3
Pro-forma Condensed, Consolidated Statements of Income for Twelve Months Ended December 31,
1997.....................................................................................................PF-4
Notes to Pro-form Condensed, Consolidated Financial Statements...........................................____
</TABLE>
89
<PAGE> 99
INDEX TO FINANCIAL STATEMENTS OF LIBERTY BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<S> <C>
Independent Accountants' Report...........................................................................LF-2
Consolidated Balance Sheets March 31, 1998 and December 31, 1997 and 1996.................................LF-3
Consolidated Statements of Income.........................................................................LF-4
Consolidated Statements of Changes in Stockholders' Equity................................................LF-5
Consolidated Statements of Cash Flows.....................................................................LF-6
Notes to Consolidated Financial Statements................................................................LF-7
</TABLE>
LF-1
<PAGE> 100
Independent Accountants' Report
Board of Directors
Liberty Bancshares, Inc.
and Subsidiary
Springfield, Missouri
We have audited the accompanying consolidated balance sheets of LIBERTY
BANCSHARES, INC. AND SUBSIDIARY as of December 31, 1997 and 1996, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the years ended December 31, 1997 and 1996, and for the 65-day
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LIBERTY
BANCSHARES, INC. AND SUBSIDIARY as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for each of the two years ended
December 31, 1997 and 1996, and for the 65-day period ended December 31, 1995,
in conformity with generally accepted accounting principles.
Baird, Kurtz & Dobson
Springfield, Missouri
February 27, 1998
LF-2
<PAGE> 101
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS
March 31,
1998 December 31,
---------- -----------------------------------
(Unaudited) 1997 1996
---- ----
<S> <C> <C> <C>
Cash $ 433,372 $ 362,519 $ 206,238
Due from banks 4,732,392 4,410,937 1,800,015
Securities purchased under agreements to resell 4,900,000 7,600,000 6,100,000
Federal funds sold 435,399 772,710 350,000
-------------- -------------- ---------------
Cash and cash equivalents 10,501,163 13,146,166 8,456,253
Available-for-sale securities 14,438,042 12,264,610 1,448,052
Mortgage loans held for sale 1,134,638 625,000 587,000
Loans, net of allowance for loan losses 63,821,162 51,129,119 19,284,811
Premises and equipment, net 2,689,534 2,204,038 1,599,584
Interest receivable 639,069 455,783 120,606
Deferred income taxes 100,451 53,869 --
Other 162,952 146,730 93,432
-------------- -------------- ---------------
Total Assets $ 93,487,011 $ 80,025,315 $ 31,589,738
============== ============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand deposits $ 11,283,049 $ 11,032,300 $ 4,874,735
Savings, NOW and money market deposits 20,236,934 16,277,598 8,003,295
Time deposits 46,887,808 37,274,872 14,430,677
-------------- -------------- --------------
Total Deposits 78,407,791 64,584,770 27,308,707
Securities sold under agreements to repurchase 4,706,045 7,200,361 600,000
Note payable 3,750,000 2,500,000 --
Accrued interest payable 313,676 250,463 89,471
Income taxes payable 112,837 181,241 2,722
Deferred income taxes -- -- 18,000
Accrued expenses and other liabilities 20,219 20,328 11,582
-------------- -------------- --------------
Total Liabilities 87,310,568 74,737,163 28,030,482
-------------- -------------- --------------
STOCKHOLDERS' EQUITY
Capital stock
Class A common, par value $5 a share;
March 31, 1998, authorized 556,090 shares,
issued 521,090 shares; December 31, 1997,
authorized 505,200 shares, issued 470,280
shares; December 31, 1996, authorized 360,000
shares, issued 345,000 shares 2,605,450 2,351,400 1,725,000
Additional paid-in capital 3,269,950 2,773,600 1,725,000
Retained earnings 424,764 271,330 105,045
Treasury stock, at cost; March 31, 1998 and
December 31, 1997 - 10,000 shares (107,830) (107,830) --
-------------- -------------- --------------
6,192,334 5,288,500 3,555,045
Unrealized appreciation (depreciation) on
available-for-sale securities, net of income taxes (15,891) (348) 4,211
-------------- -------------- --------------
Total Stockholders' Equity 6,176,443 5,288,152 3,559,256
-------------- -------------- --------------
Total Liabilities and Stockholders' Equity $ 93,487,011 $ 80,025,315 $ 31,589,738
============== ============== ==============
</TABLE>
See Notes to Consolidated Financial Statements
LF-3
<PAGE> 102
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
AND YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
March 31, December 31,
------------------------------- -----------------------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 1,307,833 $ 477,182 $3,130,609 $ 995,765 $ 38,161
Available-for-sale securities 205,118 24,870 283,400 63,687 5,188
Federal funds sold and securities
purchased under agreements to resell 111,272 108,336 533,891 324,158 59,128
Deposits with banks -- -- -- -- 95,758
-------------- ---------- ---------- --------- ---------
1,624,223 610,388 3,947,900 1,383,610 198,235
-------------- ---------- ---------- --------- ---------
INTEREST EXPENSE
Deposits 789,032 316,879 1,926,555 639,642 40,364
Federal funds purchased and securities
sold under agreements to repurchase 73,296 10,618 120,640 35,464 815
Notes payable 21,840 -- 83,756 -- --
-------------- ---------- ---------- --------- ---------
884,168 327,497 2,130,951 675,106 41,179
-------------- ---------- ---------- --------- ---------
NET INTEREST INCOME 740,055 282,891 1,816,949 708,504 157,056
PROVISION FOR LOAN LOSSES 50,000 31,500 447,000 70,800 6,000
-------------- ---------- ---------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 690,055 251,391 1,369,949 637,704 151,056
-------------- ---------- ---------- --------- ---------
NONINTEREST INCOME
Service charges and fees 74,164 33,027 170,981 43,191 1,064
Other income 2,475 618 30,517 3,587 22
-------------- ---------- ---------- --------- ---------
76,639 33,645 201,498 46,778 1,086
-------------- ---------- ---------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits 319,133 124,561 671,290 258,516 77,801
Net occupancy expense 22,206 14,421 67,795 45,225 7,384
Equipment expense 28,541 15,225 80,828 45,017 3,859
Deposit assessments and fees 4,462 1,853 13,603 5,039 --
Other operating expenses 153,918 58,860 454,646 197,777 48,061
-------------- ---------- ---------- --------- ---------
528,260 214,920 1,288,162 551,574 137,105
-------------- ---------- ---------- --------- ---------
INCOME BEFORE INCOME TAXES 238,434 70,116 283,285 132,908 15,037
PROVISION FOR INCOME TAXES 85,000 19,000 117,000 39,200 3,700
-------------- ---------- ---------- --------- ---------
NET INCOME 153,434 51,116 166,285 93,708 11,337
OTHER COMPREHENSIVE INCOME
Unrealized appreciation (depreciation) on
available-for-sale securities, net of
income taxes (15,543) (2,432) (4,559) 4,211 --
-------------- ---------- ---------- --------- ---------
COMPREHENSIVE INCOME $ 137,891 $ 48,684 $ 161,726 $ 97,919 $ 11,337
============== ========== ========== ========= =========
BASIC EARNINGS PER SHARE $ .32 $ .15 $ .42 $ .27 $ .03
============== ========== ========== ========= =========
</TABLE>
LF-4
<PAGE> 103
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
AND YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Appreciation
(Depreciation)
Additional on Available-
Common Paid-in Retained Treasury for-Sale
Stock Capital Earnings Stock Securities, Net Total
---------- ---------- ------------ ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, INCEPTION $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Issuance of common stock for
cash 1,725,000 1,725,000 -- -- -- 3,450,000
Net income -- -- 11,337 -- -- 11,337
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1995 1,725,000 1,725,000 11,337 -- -- 3,461,337
Net income -- -- 93,708 -- -- 93,708
Change in unrealized
appreciation on
available-for-sale
securities, net of
income taxes -- -- -- -- 4,211 4,211
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1996 1,725,000 1,725,000 105,045 -- 4,211 3,559,256
Issuance of common stock
for cash 626,400 1,048,600 -- -- -- 1,675,000
Net income -- -- 166,285 -- -- 166,285
Treasury stock purchased -- -- -- (107,830) -- (107,830)
Change in unrealized
depreciation on
available-for-sale
securities, net of
income taxes -- -- -- -- (4,559) (4,559)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1997 2,351,400 2,773,600 271,330 (107,830) (348) 5,288,152
Issuance of common stock
for cash (unaudited) 254,050 496,350 -- -- -- 750,400
Net income (unaudited) -- -- 153,434 -- -- 153,434
Change in unrealized
depreciation on
available-for-sale
securities, net of
income taxes (unaudited) -- -- -- -- (15,543) (15,543)
---------- ---------- ------------ ------------ ------------ ------------
BALANCE, MARCH 31, 1998
(UNAUDITED) $2,605,450 $3,269,950 $ 424,764 $ (107,830) $ (15,891) $ 6,176,443
========== ========== ============ ============ ============ ============
</TABLE>
LF-5
<PAGE> 104
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
AND YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------- -----------------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net income $ 153,434 $ 51,116 $ 166,285 $ 93,708 $ 11,337
Items not requiring (providing) cash:
Depreciation and amortization 15,350 14,581 78,660 42,940 3,144
Provision for loan losses 50,000 31,500 447,000 70,800 6,000
Amortization of premiums and discounts on
securities (3,181) (291) (2,864) (314) (2,553)
Deferred income taxes (20,117) (8,265) (71,713) 15,000 3,000
Gain on sale of loans (17,669) -- (71,373) -- --
Gain on sale of premises and equipment -- -- (22,666) -- --
Changes in:
Accrued interest receivable (183,286) (35,921) (335,177) (98,691) (21,915)
Mortgage loans held for sale (509,638) 587,000 (38,000) (587,000) --
Prepaid expenses and other (17,145) (2,683) (51,989) (20,778) (77,412)
Accrued interest payable 63,213 36,468 160,992 68,117 21,354
Accounts payable and accrued expenses (109) (2,246) 8,746 (15,127) 26,709
Income taxes payable (receivable) (68,404) 26,435 178,519 2,022 700
----------- ----------- ----------- ----------- ----------
Net cash provided by (used in) operating
activities (537,552) 697,694 446,420 (429,323) (29,636)
----------- ----------- ----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net originations of loans (12,724,374) (4,544,806) (40,149,252) (14,927,187) (4,434,424)
Proceeds from sales of loans -- -- 7,929,317 -- --
Purchase of premises and equipment (499,923) (62,046) (822,583) (1,002,112) (638,798)
Proceeds from sales of premises and
equipment -- -- 165,826 -- --
Proceeds from maturities of available-for-sale
securities 500,000 -- 350,000 700,000 --
Proceeds from sales of available-for-sale
securities -- -- 500,000 -- --
Purchases of available-for-sale securities (2,712,259) (998,126) (11,668,409) (1,451,089) (689,885)
Investment in trust company -- -- (5,000) -- --
----------- ----------- ----------- ----------- ----------
Net cash used in investing activities (15,436,556) (5,604,978) (43,700,101) (16,680,388) (5,763,107)
----------- ----------- ----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, money
market, NOW and savings deposits 4,210,085 1,715,700 14,431,868 7,853,403 5,024,627
Net increase in time deposits 9,612,936 5,729,579 22,844,195 11,245,232 3,185,445
Proceeds from notes payable 1,250,000 958,000 2,500,000 -- --
Proceeds from issuance of common stock 750,400 -- 1,675,000 -- 3,450,000
Purchase of treasury stock -- (107,830) (107,830) -- --
Net increase (decrease) in securities sold
under agreements to repurchase (2,494,316) 500,000 6,600,361 100,008 499,992
----------- ----------- ----------- ----------- ----------
Net cash provided by financing
activities 13,329,105 8,795,449 47,943,594 19,198,643 12,160,064
----------- ----------- ----------- ----------- ----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,645,003) 3,888,165 4,689,913 2,088,932 6,367,321
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 13,146,166 8,456,253 8,456,253 6,367,321 -0-
----------- ----------- ----------- ----------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $10,501,163 $12,344,418 $13,146,166 $ 8,456,253 $6,367,321
=========== =========== =========== =========== ==========
</TABLE>
LF-6
<PAGE> 105
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF OPERATIONS
Liberty Bancshares, Inc. (the Company) operates as a one-bank holding
company. Liberty Bank (the Bank) opened for business on October 27, 1995, and is
primarily engaged in providing a full range of banking and mortgage services to
individual and corporate customers in southwest Missouri. The Bank is subject to
competition from other financial institutions. The Bank also is subject to the
regulation of certain federal and state agencies and undergoes periodic
examinations by those regulatory authorities.
The consolidated financial statements as of March 31, 1998, and for the
periods ended March 31, 1998 and 1997, are unaudited, but in the opinion of
management, include all adjustments, consisting only of normal, recurring items,
necessary for fair presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses and the valuation
of real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowance for loan losses and
the valuation of foreclosed assets held for sale, management obtains independent
appraisals for significant properties.
Management believes that the allowances for losses on loans are adequate.
While management uses available information to recognize losses on loans,
changes in economic conditions may necessitate revision of these estimates in
future years. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowances for losses
on loans. Such agencies may require the Bank to recognize additional losses
based on their judgments of information available to them at the time of their
examination.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Liberty
Bancshares, Inc. and its 100%-owned subsidiary, Liberty Bank. Significant
intercompany accounts and transactions have been eliminated in consolidation.
CASH EQUIVALENTS
The Bank considers all liquid investments with original maturities of three
months or less to be cash equivalents. At December 31, 1997 and 1996, cash
equivalents consisted of federal funds sold and securities purchased under
agreements to resell.
LF-7
<PAGE> 106
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
INVESTMENTS IN DEBT AND EQUITY SECURITIES
Available-for-sale securities, which include any security for which the Bank
has no immediate plan to sell but which may be sold in the future, are carried
at fair value. Realized gains and losses, based on specifically identified
amortized cost of the specific security, are included in other income.
Unrealized gains and losses are recorded, net of related income tax effects, in
stockholders' equity. Premiums and discounts are amortized and accreted,
respectively, to interest income using the level-yield method over the period to
maturity. The Bank has classified all of its investment securities as
available-for-sale.
Interest and dividends on investments in debt and equity securities are
included in income when earned.
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of cost or fair value,
determined using an aggregate basis. Write-downs to fair value are recognized as
a charge to earnings at the time the decline in value occurs. Forward
commitments to sell mortgage loans are acquired to reduce market risk on
mortgage loans in the process of origination and mortgage loans held for sale.
Amounts paid to investors to obtain forward commitments are deferred until such
time as the related loans are sold. The fair values of the forward commitments
are not recognized in the financial statements. Gains and losses resulting from
sales of mortgage loans are recognized when the respective loans are sold to
investors. Gains and losses are determined by the difference between the selling
price and the carrying amount of the loans sold, net of discounts collected or
paid, commitment fees paid and considering a normal servicing rate. Fees
received from borrowers to guarantee the funding of mortgage loans held for sale
and fees paid to investors to ensure the ultimate sale of such mortgage loans
are recognized as income or expense when the loans are sold or when it becomes
evident that the commitment will not be used.
LOANS
Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-offs are reported at their outstanding principal
adjusted for any charge-offs, the allowance for loan losses and any deferred
fees or costs on originated loans and unamortized premiums or discounts on
purchased loans.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by provisions charged to expense
and reduced by loans charged off, net of recoveries. The allowance is maintained
at a level considered adequate to provide for potential loan losses, based on
management's evaluation of the loan portfolio, as well as on prevailing and
anticipated economic conditions and historical losses by loan category. General
allowances have been established, based upon the aforementioned factors, and
allocated to the individual loan categories. Allowances are accrued on specific
loans evaluated for impairment for which the basis of each loan, including
accrued interest, exceeds the discounted amount of expected future collections
of interest and principal or, alternatively, the fair value of loan collateral.
A loan is considered impaired when it is probable that the Bank will not
receive all amounts due according to the contractual terms of the loan. This
includes loans that are delinquent 90 days or more (nonaccrual loans) and
certain other loans identified by management. Accrual of interest is
discontinued, and interest accrued and unpaid is removed, at the time such
amounts are delinquent 90 days. Interest is recognized for nonaccrual loans only
upon receipt, and only after all principal amounts are current according to the
terms of the contract.
LF-8
<PAGE> 107
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
PREMISES AND EQUIPMENT
Depreciable assets are stated at cost less accumulated depreciation.
Depreciation is charged to expense using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are capitalized and
amortized using the straight-line method over the terms of the respective leases
or the estimated useful lives of the improvements, whichever is shorter.
FEE INCOME
Loan origination fees, net of direct origination costs, are recognized as
income over the term of the loans.
EARNINGS PER SHARE
Effective December 15, 1997, the Company adopted the provisions of SFAS No.
128, Earnings Per Share (EPS), which requires dual presentation of basic and
diluted EPS for all entities with complex capital structures. Basic earnings per
share is computed based on the weighted average number of shares outstanding
during each year. Diluted earnings per share is computed using the weighted
average common shares and all potential dilutive common shares outstanding
during the period.
The computation of per share earnings is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------- ---------------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net income $ 153,434 $ 51,116 $ 166,285 $ 93,708 $ 11,337
========== ========= ========== ========== =========
Average common shares outstanding 477,060 337,330 393,900 345,000 345,000
Average common share stock options outstanding 3,270 1,165 2,831 1,123 1,013
---------- --------- ---------- ---------- ---------
Average diluted common shares 480,330 338,495 396,731 346,123 346,013
========== ========= ========== ========== =========
Basic earnings per share $ .32 $ .15 $ .42 $ .27 $ .03
========== ========= ========== ========== =========
Diluted earnings per share $ .32 $ .15 $ .42 $ .27 $ .03
========== ========= ========== ========== =========
</TABLE>
Subsequent to December 31, 1997, the Company declared a 10 for 1 stock split
effective in the form of a dividend on the outstanding common stock of the
Company. Historical per share disclosures have been updated where applicable to
account for the stock split.
INCOME TAXES
Deferred tax liabilities and assets are recognized for the tax effect of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.
LF-9
<PAGE> 108
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
ADOPTION OF NEW ACCOUNTING STANDARD
During the quarter ended March 31, 1998, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" by reclassification adjustments of prior periods presented.
NOTE 2: INVESTMENTS IN DEBT SECURITIES
The amortized cost and approximate fair value of available-for-sale
securities are as follows:
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury $ 599,949 $ -- $ 75 $ 599,874
U.S. government agencies 10,437,349 18,200 10,339 10,445,210
State and political subdivisions 1,227,816 -- 8,290 1,219,526
----------- ----------- ---------- -----------
$12,265,114 $ 18,200 $ 18,704 $12,264,610
=========== =========== ========== ===========
<CAPTION>
December 31, 1996
---------------------------------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury $ 849,199 $ 903 $ 1,318 $ 848,784
U.S. government agencies 594,642 4,626 -- 599,268
------------ ------------ ------------ ------------
$ 1,443,841 $ 5,529 $ 1,318 $ 1,448,052
============ ============ ============ ============
</TABLE>
Maturities of available-for-sale debt instruments at December 31, 1997:
<TABLE>
<CAPTION>
Amortized Approximate
Cost Fair Value
----------- -----------
<S> <C> <C>
One year or less $ 1,099,809 $ 1,100,029
After one through five years 9,937,489 9,945,054
After ten years 1,227,816 1,219,527
----------- -----------
$12,265,114 $12,264,610
=========== ===========
</TABLE>
The book value of securities pledged as collateral to secure public deposits
amounted to $3,988,000 and $749,300 at December 31, 1997 and 1996, respectively.
The approximate fair value of pledged securities amounted to $3,989,000 at
December 31, 1997, and $752,000 at December 31, 1996.
LF-10
<PAGE> 109
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
The book value of securities sold under agreements to repurchase amounted to
$7,586,000 and $593,700 at December 31, 1997 and 1996, respectively (see Note
7).
There were no gains or losses realized from sales of available-for-sale
securities for the years ended December 31, 1997 and 1996, and for the 65-day
period ended December 31, 1995.
NOTE 3: SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Securities purchased under agreements to resell at December 31, 1997 and
1996, are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
State and political subdivision securities with
an estimated fair value of $5,146,000 $ -- $ 5,100,000
U.S. government securities with an estimated
fair value of $7,589,000 and $997,600, respectively 7,600,000 1,000,000
------------ ------------
$ 7,600,000 $ 6,100,000
============ ============
</TABLE>
The Bank enters into purchases of securities under agreements to resell. The
amounts advanced under these agreements represent short-term loans and are
reflected as a receivable in the balance sheet. The securities underlying the
agreements are book-entry securities. During the period, the securities were
delivered by appropriate entry into a third-party custodian's account designated
by the Bank under a written custodial agreement that explicitly recognizes the
Bank's interest in the securities. These agreements mature on demand. At
December 31, 1997 and 1996, all agreements to resell securities purchased were
with one correspondent bank. Securities purchased under agreements to resell
averaged $8,010,000 and $5,327,000 during 1997 and 1996, and the maximum amount
outstanding at any month end during 1997 and 1996 was $12,520,000 and
$6,900,000, respectively.
NOTE 4: LOANS AND ALLOWANCE FOR LOAN LOSSES
Categories of loans at December 31, 1997 and 1996, include:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Commercial $ 9,803,933 $ 3,452,940
Real estate construction and development 7,052,362 2,787,188
Commercial real estate and agricultural 23,464,589 9,054,430
Residential real estate 8,694,785 3,501,261
Consumer 2,594,039 548,578
Other 43,211 17,214
----------- -----------
Total loans 51,652,919 19,361,611
Less: Allowance for loan losses 523,800 76,800
----------- -----------
Net loans $51,129,119 $19,284,811
=========== ===========
</TABLE>
LF-11
<PAGE> 110
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
Loans sold and serviced for others totaled $5,212,984 and $6,967,120 at
December 31, 1997 and 1996, respectively. The Bank has not had any loans
considered impaired since inception.
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of period $ 76,800 $ 6,000 $ -0-
Provision charged to expense 447,000 70,800 6,000
---------- ---------- ----------
Balance, end of period $ 523,800 $ 76,800 $ 6,000
========== ========== ==========
</TABLE>
NOTE 5: PREMISES AND EQUIPMENT
Major classifications of premises and equipment, stated at cost, at December
31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Land $ 632,340 $ 734,753
Buildings and improvements 956,629 489,759
Vehicles 101,415 53,591
Equipment 629,949 362,807
---------- ----------
2,320,333 1,640,910
Less accumulated depreciation 116,295 41,326
---------- ----------
Net premises and equipment $2,204,038 $1,599,584
========== ==========
</TABLE>
Depreciation expense totaled $74,969 and $38,182 for the years ended
December 31, 1997 and 1996, and $3,144 for the 65-day period ended December 31,
1995.
NOTE 6: INTEREST BEARING TIME DEPOSITS
Interest bearing time deposits in denominations of $100,000 or more were
$18,946,000 and $7,813,000 on December 31, 1997 and 1996, respectively.
At December 31, 1997, the scheduled maturities of certificates of deposit are
as follows:
<TABLE>
<S> <C>
1998 $30,411,000
1999 6,000,000
2000 510,000
Thereafter 353,872
-----------
$37,274,872
===========
</TABLE>
LF-12
<PAGE> 111
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
NOTE 7: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Bank enters into sales of securities under agreements to repurchase.
These agreements are treated as financings, and the obligations to repurchase
securities sold are reflected as a liability in the balance sheet. The dollar
amount of securities underlying the agreements remains in the asset accounts.
Securities sold under agreements to repurchase totaled $7,200,361 and $600,000
at December 31, 1997 and 1996, respectively. At December 31, 1997 and 1996, no
material amount of agreements to repurchase securities sold was outstanding with
any individual dealer. Securities sold under agreements to repurchase averaged
$2,392,000 and $551,800 during 1997 and 1996, and the maximum amount outstanding
at any month end during 1997 and 1996 was $10,645,000 and $950,200,
respectively.
NOTE 8: NOTE PAYABLE
The note payable to bank, secured by 34,000 shares of Liberty Bank, is due
December 24, 1998, with interest payable quarterly and rates adjusted daily to
the then prime rate offered by Chase Manhattan in New York, which as adjusted at
December 31, 1997, was 8.50%.
NOTE 9: INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Taxes currently payable $ 188,713 $ 24,200 $ 700
Deferred income taxes (71,713) 15,000 3,000
---------- ---------- ----------
$ 117,000 $ 39,200 $ 3,700
========== ========== ==========
</TABLE>
The tax effects of temporary differences related to deferred taxes shown on
the balance sheets were:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 121,500 $ 23,800
Unrealized depreciation on available-for-sale securities 156 --
---------- ---------
121,656 23,800
Deferred tax liability:
Accumulated depreciation (67,787) (41,800)
---------- ---------
Net deferred tax liability $ 53,869 $ (18,000)
========== =========
</TABLE>
LF-13
<PAGE> 112
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
A reconciliation of income tax expense at the statutory rate to the Bank's
actual income tax expense is shown below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Computed at the statutory rate (34%) $ 96,300 $ 45,200 $ 5,100
Increase (decrease) resulting from:
Nondeductible officers' life insurance costs 1,100 1,000 --
Nondeductible expenses 3,800 1,300 --
State income taxes - net of federal tax benefit 19,500 6,800 300
Graduated rates -- (14,900) (1,700)
Other (3,700) (200) --
--------- --------- ---------
Actual tax provision $ 117,000 $ 39,200 $ 3,700
========= ========= =========
</TABLE>
NOTE 10: REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory--and possible additional discretionary--actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined) and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1997, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank must
maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios
as set forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
The Bank's actual capital amounts and ratios are also presented in the
table.
LF-14
<PAGE> 113
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------ ------------------ -------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollar Amounts In Thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total Risk Based Capital
(to Risk Weighted Assets) $8,114 15.8% $4,109 8.0% $5,136 10.0%
Tier I Capital
(to Risk Weighted Assets) 7,590 14.8% 2,055 4.0% 3,082 6.0%
Tier I Capital
(to Average Assets) 7,590 10.4% 2,920 4.0% 3,650 5.0%
As of December 31, 1996:
Total Risk Based Capital
(to Risk Weighted Assets) 3,579 12.9% 2,226 8.0% 2,783 10.0%
Tier I Capital
(to Risk Weighted Assets) 3,502 12.6% 1,113 4.0% 1,670 6.0%
Tier I Capital
(to Average Assets) 3,502 12.7% 1,105 4.0% 1,381 5.0%
</TABLE>
Additionally, the Bank is subject to certain restrictions on the amount of
dividends that it may pay without prior regulatory approval. Currently, the Bank
may not pay dividends which would reduce Tier I Capital below 10.0%.
Subsequent to December 31, 1997, the Company's Board of Directors voted to
inject additional capital of $750,400 into the Bank during 1998.
NOTE 11: STOCK OPTION PLAN
Under the Company's stock option plan, 15,000 shares of common stock were
reserved for issuance upon exercise of options granted to officers and key
employees. The plan basically provides that the option price will be no less
than fair market value of the stock at the date of the grant. Options granted
are exercisable immediately after the date of grant and expire October 27, 2006.
A summary of the status of the plan at December 31, 1997 and 1996, and
changes during the periods then ended is presented below:
LF-15
<PAGE> 114
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1997 1996
----------------------------- -------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------- ------- ------- -------
<S> <C> <C> <C> <C>
Outstanding, Beginning of Year 5,000 $ 10 -- $ --
Granted 3,500 13 5,000 10
-------- -------- -------- --------
Outstanding, End of Year 8,500 $ 11 5,000 $ 10
======== ======== ======== ========
Options Exercisable, End of Year 8,500 $ 11 5,000 $ 10
======== ======== ======== ========
</TABLE>
The following table summarizes information about stock options under the
plan outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Weighted- Weighted- Weighted-
Average Average Average
Range of Number Remaining Exercise Number Exercise
Exercise Prices Outstanding Contractual Life Price Exercisable Price
--------------- ----------- ---------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$10 5,000 8.8 years $10 5,000 $10
$13 3,500 8.8 years $13 3,500 $13
</TABLE>
The Company applies APB Opinion 25 and related Interpretations in accounting
for the plan, and no compensation cost has been recognized. No fair value
disclosures with respect to stock options are presented because in the opinion
of management such values do not have a material effect.
NOTE 12: TRANSACTIONS WITH RELATED PARTIES
At December 31, 1997 and 1996, the Bank had loans outstanding to employees,
executive officers, directors and companies in which the bank's executive
officers or directors were principal owners, in the amount of $11,862,000 and
$3,042,000, respectively.
In management's opinion, such loans and other extensions of credit and
deposits were made in the ordinary course of business and were made on
substantially the same terms (including interest rates and collateral) as those
prevailing at the time for comparable transactions with other persons. Further,
in management's opinion, these loans did not involve more than normal risk of
collectibility or present other unfavorable features.
NOTE 13: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
ADDITIONAL CASH PAYMENT INFORMATION
Interest paid $1,969,959 $607,354 $19,460
Income taxes paid $13,468 $21,832 --
</TABLE>
LF-16
<PAGE> 115
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
NOTE 14: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations.
Estimates related to the allowance for loan losses are reflected in the footnote
regarding loans. Current vulnerabilities due to certain concentrations of credit
risk are discussed in the footnote on commitments and credit risk.
NOTE 15: COMMITMENTS AND CREDIT RISK
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since a portion of the commitments may expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. Each customer's credit worthiness is evaluated on a
case-by-case basis. The amount of collateral obtained, if deemed necessary, is
based on management's credit evaluation of the counterparty. Collateral held
varies, but may include accounts receivable, inventory, property, plant and
equipment, commercial real estate and residential real estate.
At December 31, 1997 and 1996, the Bank had outstanding commitments to
originate loans aggregating approximately $3,927,000 and $4,110,000,
respectively. The commitments extended over varying periods of time with the
majority being disbursed within a one-year period.
Letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing and similar transactions. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loans to customers.
The Bank had total outstanding letters of credit amounting to $218,000 and
$846,000 at December 31, 1997 and 1996, with terms ranging from 30 days to 24
months.
Lines of credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Lines of credit
generally have fixed expiration dates. Since a portion of the line may expire
without being drawn upon, the total unused lines do not necessarily represent
future cash requirements. Each customer's credit worthiness is evaluated on a
case-by-case basis. The amount of collateral obtained, if deemed necessary, is
based on management's credit evaluation of the counterparty. Collateral held
varies but may include accounts receivable, inventory, property, plant and
equipment, commercial real estate and residential real estate. Management uses
the same credit policies in granting lines of credit as it does for on-balance
sheet instruments.
At December 31, 1997 and 1996, the Bank had granted unused lines of credit
to borrowers aggregating approximately $2,927,000 and $797,000, respectively,
for commercial lines and open-end consumer lines.
LF-17
<PAGE> 116
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
NOTE 16: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term instruments, the carrying amount approximates fair
value.
INVESTMENT SECURITIES
Fair values for investment securities equal quoted market prices, if
available. If quoted market prices are not available, fair values are estimated
based on quoted market prices of similar securities.
LOANS
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. Loans with similar
characteristics were aggregated for purposes of the calculations. The carrying
amount of accrued interest receivable approximates its fair value.
DEPOSITS
The fair value of demand deposits, savings accounts, NOW accounts and
certain money market deposits is the amount payable on demand at the reporting
date (i.e., their carrying amount). The fair value of fixed-maturity time
deposits is estimated using a discounted cash flow calculation that applies the
rates currently offered for deposits of similar remaining maturities. The
carrying amount of accrued interest payable approximates its fair value.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
For these short-term instruments, the carrying amount is a reasonable
estimate of fair value.
NOTE PAYABLE
Rates currently available to the Bank for debt with similar terms and
remaining maturities are used to estimate fair value of the existing note
payable.
LETTERS OF CREDIT AND LINES OF CREDIT
The fair value of letters of credit and lines of credit is based on fees
currently charged for similar agreements or on the estimated cost to terminate
or otherwise settle the obligations with the counterparties at the reporting
date.
LF-18
<PAGE> 117
LIBERTY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND 65 DAYS ENDED DECEMBER 31, 1995
The following table presents estimated fair values of the Company's
financial instruments. The fair values of certain of these instruments were
calculated by discounting expected cash flows, which method involves significant
judgments by management and uncertainties. Fair value is the estimated amount at
which financial assets or liabilities could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
Because no market exists for certain of these financial instruments and because
management does not intend to sell these financial instruments, the Company does
not know whether the fair values shown below represent values at which the
respective financial instruments could be sold individually or in the aggregate.
<TABLE>
<CAPTION>
December 31, 1997
-------------------------------
Carrying
Amount Fair Value
-------- ----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $13,146,166 $13,146,166
Available-for-sale securities 12,264,610 12,264,610
Interest receivable 455,783 455,783
Loans held for sale 625,000 625,000
Loans, net of allowance for loan losses 51,129,119 51,173,000
Financial liabilities:
Deposits 64,584,770 64,652,000
Securities sold under agreements to repurchase 7,200,361 7,200,361
Note payable 2,500,000 2,500,000
Interest payable 250,463 250,463
Unrecognized financial instruments (net of contract amount):
Letters of credit -- --
Lines of credit -- --
Loan commitments -- --
</TABLE>
NOTE 17: PARENT COMPANY FINANCIAL INFORMATION
The financial statements of Liberty Bancshares, Inc. (Parent) reflect its
investment in Liberty Bank (Bank) and its equity in the Bank's distributed and
undistributed net assets. The Parent has no other significant assets,
liabilities or operating activities. At December 31, 1997 and 1996, the equity
in undistributed earnings of the Bank was $7,589,931 and $3,502,290,
respectively. The Bank distributed dividends to the Parent of $28,000 and $-0-
during the years ended December 31, 1997 and 1996, respectively.
LF-19
<PAGE> 118
Sac River Valley Bank
Accountants' Report and
Financial Statements
December 31, 1997 and 1996
<PAGE> 119
INDEX TO FINANCIAL STATEMENTS OF SAC RIVER VALLEY BANK
Independent Accountants' Report.......................................SF-2
Balance Sheets March 31, 1998 and December 31, 1997 and 1996..........SF-3
Statements of Income..................................................SF-4
Statements of Changes in Stockholders' Equity.........................SF-5
Statements of Cash Flows..............................................SF-6
Notes to Financial Statements.........................................SF-8
SF-1
<PAGE> 120
[BAIRD, KURTZ & DOBSON LETTERHEAD]
Independent Accountants' Report
Board of Directors
Sac River Valley Bank
Springfield, Missouri
We have audited the accompanying balance sheets of SAC RIVER VALLEY BANK as
of December 31, 1997 and 1996, and the related statements of income, changes in
stockholders' equity and cash flows for each of the years then ended. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SAC RIVER VALLEY BANK as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the years then ended in conformity with generally accepted
accounting principles.
Baird, Kurtz & Dobson
Springfield, Missouri
May 13, 1998
SF-2
<PAGE> 121
SAC RIVER VALLEY BANK
BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
March 31,
1998 December 31,
--------- -----------------------------------
(Unaudited) 1997 1996
---- ----
<S> <C> <C> <C>
Cash $ 200,763 $ 239,342 $ 286,335
Due from banks 764,550 973,741 1,684,850
Securities purchased under agreements to resell -- 2,100,000 600,000
Federal funds sold 7,765,000 3,485,000 3,250,000
---------------- ---------------- ---------------
Cash and cash equivalents 8,730,313 6,798,083 5,821,185
Interest bearing deposits with banks 750,000 850,000 550,000
Available-for-sale securities 18,521,641 23,251,031 17,748,410
Held-to-maturity securities 6,057,356 6,444,524 5,036,475
Loans held for sale -- 15,812 257,055
Loans, net of allowance for loan losses 63,450,361 63,389,112 60,952,945
Premises and equipment, net 501,451 448,117 422,869
Foreclosed assets held for sale, net 21,192 4,013 44,544
Interest receivable 1,239,416 1,327,381 1,232,966
Deferred income taxes 182,560 182,554 179,450
Refundable income taxes -- 18,756 --
Other 404,950 315,012 289,114
---------------- ---------------- ----------------
Total Assets $ 99,859,240 $ 103,044,395 $ 92,535,013
================ ================ ================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand deposits $ 5,138,446 $ 5,127,563 $ 5,454,460
Savings, NOW and money market deposits 24,109,476 23,790,546 24,423,983
Time deposits 46,693,194 45,080,763 43,024,866
---------------- ---------------- ----------------
75,941,116 73,998,872 72,903,309
Securities sold under agreements to repurchase 9,046,598 14,875,049 8,751,000
Advances from Federal Home Loan Bank 2,500,000 2,500,000 --
Income taxes payable 158,730 -- 51,973
Accrued interest and other liabilities 624,370 530,542 474,898
---------------- ---------------- ----------------
Total Liabilities 88,270,814 91,904,463 82,181,180
---------------- ---------------- ----------------
STOCKHOLDERS' EQUITY
Capital stock
Class A common, par value $30 a share,
authorized, issued and outstanding 10,000 shares 300,000 300,000 300,000
Additional paid-in capital 500,000 500,000 500,000
Retained earnings 10,762,855 10,314,351 9,530,649
---------------- ---------------- ----------------
11,562,855 11,114,351 10,330,649
Unrealized appreciation on available-for-sale securities, net
of income taxes of $15,018 at March 31, 1998 and
$15,024 and $13,616 at December 31, 1997 and 1996,
respectively 25,571 25,581 23,184
--------------- --------------- ---------------
Total Stockholders' Equity 11,588,426 11,139,932 10,353,833
--------------- --------------- ---------------
Total Liabilities and Stockholders' Equity $ 99,859,240 $ 103,044,395 $ 92,535,013
=============== =============== ===============
</TABLE>
See Notes to Financial Statements
SF-3
<PAGE> 122
SAC RIVER VALLEY BANK
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 AND
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
March 31, December 31,
------------------------------ ---------------------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 1,400,366 $ 1,356,294 $ 5,469,502 $ 5,274,519
Available-for-sale securities 330,804 263,158 1,263,971 922,593
Held-to-maturity securities 88,986 71,623 290,110 309,963
Federal funds sold and securities purchased
under agreements to resell 73,390 72,382 302,333 376,198
Deposits with banks 12,434 16,956 32,431 44,744
--------------- --------------- --------------- ---------------
1,905,980 1,780,413 7,358,347 6,928,017
--------------- --------------- --------------- ---------------
INTEREST EXPENSE
Deposits 772,282 746,348 3,024,209 2,955,761
Federal funds purchased and
securities sold under agreements to repurchase 174,903 136,041 626,915 457,951
Advances from Federal Home
Loan Bank 45,462 -- -- --
--------------- --------------- --------------- ---------------
992,647 882,389 3,651,124 3,413,712
--------------- --------------- --------------- ---------------
NET INTEREST INCOME 913,333 898,024 3,707,223 3,514,305
PROVISION FOR LOAN LOSSES -- 20,000 30,000 70,000
--------------- --------------- --------------- ---------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 913,333 878,024 3,677,223 3,444,305
--------------- --------------- --------------- ---------------
NONINTEREST INCOME
Service charges and fees 92,514 54,140 267,196 226,592
Other income 18,071 9,614 36,254 50,706
--------------- --------------- --------------- ---------------
110,585 63,754 303,450 277,298
--------------- --------------- --------------- ---------------
NONINTEREST EXPENSE
Salaries and employee benefits 207,773 186,464 831,754 797,432
Net occupancy expense 10,042 9,294 44,860 34,877
Equipment expense 10,647 10,659 51,158 30,946
Deposit assessments and fees 2,265 4,059 10,933 2,000
Outside processing fees 46,643 31,788 305,382 135,978
Other operating expenses 62,844 101,831 361,984 294,943
--------------- --------------- --------------- ---------------
340,214 344,095 1,606,071 1,296,176
--------------- --------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 683,704 597,683 2,374,602 2,425,427
PROVISION FOR INCOME TAXES 235,200 210,500 790,900 799,300
--------------- --------------- --------------- ---------------
NET INCOME 448,504 387,183 1,583,702 1,626,127
OTHER COMPREHENSIVE INCOME
Unrealized appreciation (depreciation)
on available-for-sale securities,
net of income taxes (10) 2,605 2,397 (44,405)
--------------- --------------- --------------- ---------------
COMPREHENSIVE INCOME $ 448,494 $ 389,788 $ 1,586,099 $ 1,581,722
=============== =============== =============== ===============
BASIC EARNINGS PER SHARE $ 44.85 $ 38.72 $ 158.37 $ 162.61
=============== =============== =============== ===============
</TABLE>
See Notes to Financial Statements
SF-4
<PAGE> 123
SAC RIVER VALLEY BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 AND
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
Unrealized
Appreciation
(Depreciation)
Additional on Available-
Common Paid-in Retained for-Sale
Stock Capital Earnings Securities, Net Total
----- ------- -------- --------------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 $ 300,000 $ 500,000 $ 8,704,522 $ 67,589 $ 9,572,111
Net income -- -- 1,626,127 -- 1,626,127
Dividends on common stock, $80 per share -- -- (800,000) -- (800,000)
Change in unrealized appreciation
on available-for-sale securities, net of
income taxes of $26,079 -- -- -- (44,405) (44,405)
------------ ------------ ------------- -------------- --------------
BALANCE, JANUARY 1, 1997 300,000 500,000 9,530,649 23,184 10,353,833
Net income -- -- 1,583,702 -- 1,583,702
Dividends on common stock, (800,000) -- (800,000)
$80 per share -- --
Change in unrealized appreciation
on available-for-sale securities, net
of income taxes of $1,408 -- -- -- 2,397 2,397
------------ ------------ ------------- -------------- --------------
BALANCE, DECEMBER 31, 1997 300,000 500,000 10,314,351 25,581 11,139,932
Net income (unaudited) -- -- 448,504 -- 448,504
Change in unrealized appreciation
on available-for-sale securities,
net of income taxes of $6 -- -- -- (10) (10)
------------ ------------ ------------- -------------- --------------
BALANCE, MARCH 31, 1998
(UNAUDITED) $ 300,000 $ 500,000 $ 10,762,855 $ 25,571 $ 11,588,426
============ ============ ============= ============== ==============
</TABLE>
See Notes to Financial Statements
SF-5
<PAGE> 124
SAC RIVER VALLEY BANK
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 AND
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
March 31, December 31,
------------------------------ ------------------------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 448,504 $ 387,183 $ 1,583,702 $ 1,626,127
Items not requiring (providing) cash:
Depreciation 7,700 8,895 43,267 24,636
Amortization of premiums and
discounts on securities (19,558) (3,771) 12,766 1,561
Provision for loan losses -- 20,000 30,000 70,000
Deferred income taxes -- (2,623) (4,512) (18,100)
Loss on sale of foreclosed assets -- -- 15,589 --
Gain on loans sold (30,881) -- -- --
Changes in:
Accrued interest receivable 87,965 154,714 (94,415) (48,209)
Loans held for sale (15,812) (204,562) 241,243 (80,559)
Prepaid expenses (89,938) (34,452) (25,898) (42,105)
Accrued interest and other accrued
expenses 93,828 44,511 55,644 36,827
Income taxes (payable) refundable 177,486 210,501 (70,729) (11,364)
---------------- ----------------- ----------------- -----------------
Net cash provided by
operating activities 659,294 580,396 1,786,657 1,558,814
---------------- ----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Net originations of loans (1,940,977) (358,312) (5,027,400) (10,792,250)
Proceeds from sales of loans 1,925,054 1,634,223 2,557,939 2,074,105
Purchase of premises and equipment (61,034) (14,196) (68,515) (171,928)
Proceeds from sale of foreclosed assets -- -- 28,236 --
Proceeds from maturities of available-for-
sale securities 4,750,000 1,500,000 6,500,000 5,500,000
Purchases of available-for-sale securities -- (1,492,734) (12,003,405) (9,469,375)
Proceeds from maturities of held-to-
maturity securities 386,100 320,000 395,750 975,000
Purchases of held-to-maturity securities -- -- (1,811,976) (260,000)
Purchases of interest bearing deposits
with banks -- (100,000) (400,000) (300,000)
Maturities of interest bearing deposits
with banks 100,000 -- 100,000 --
---------------- ----------------- ----------------- -----------------
Net cash provided by (used in)
investing activities 5,159,143 1,488,981 (9,729,371) (12,444,448)
---------------- ----------------- ----------------- -----------------
</TABLE>
See Notes to Financial Statements
SF-6
<PAGE> 125
SAC RIVER VALLEY BANK
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 AND
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------------- ----------------------------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Net increase (decrease) in demand
deposits, money market, NOW and savings
accounts $ 329,813 $ (1,120,727) $ (960,334) $ 785,743
Net increase in time deposits 1,612,431 961,000 2,055,897 4,773,026
Proceeds from FHLB advances -- -- 2,500,000 --
Dividends paid -- -- (800,000) (800,000)
Net increase (decrease) in securities sold
under agreements to repurchase (5,828,451) 2,700,000 6,124,049 1,188,000
----------------- ----------------- ----------------- -----------------
Net cash provided by
(used in) financing activities (3,886,207) 2,540,273 8,919,612 5,946,769
----------------- ----------------- ----------------- -----------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,932,230 4,609,650 976,898 (4,938,865)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 6,798,083 5,821,185 5,821,185 10,760,050
----------------- ----------------- ----------------- -----------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 8,730,313 $ 10,430,835 $ 6,798,083 $ 5,821,185
================= ================= ================= ==================
</TABLE>
See Notes to Financial Statements
SF-7
<PAGE> 126
SAC RIVER VALLEY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF OPERATIONS
Sac River Valley Bank is primarily engaged in providing a full range of
banking and mortgage services to individual and corporate customers in southwest
Missouri. The Bank is subject to competition from other financial institutions.
The Bank also is subject to the regulation of certain federal and state agencies
and undergoes periodic examinations by those regulatory authorities.
The consolidated financial statements as of March 31, 1998, and for the
periods ended March 31, 1998 and 1997, are unaudited, but in the opinion of
management, include all adjustments, consisting only of normal, recurring items,
necessary for fair presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses and the valuation
of real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowance for loan losses and
the valuation of foreclosed assets held for sale, management obtains independent
appraisals for significant properties.
Management believes that the allowances for losses on loans and the valuation
of foreclosed assets held for sale are adequate. While management uses available
information to recognize losses on loans and foreclosed assets held for sale,
changes in economic conditions may necessitate revision of these estimates in
future years. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowances for losses
on loans and valuation of foreclosed assets held for sale. Such agencies may
require the Bank to recognize additional losses based on their judgments of
information available to them at the time of their examination.
CASH EQUIVALENTS
The Bank considers all liquid investments with original maturities of three
months or less to be cash equivalents. At December 31, 1997 and 1996, cash
equivalents consisted of federal funds sold and securities purchased under
agreements to resell.
INVESTMENTS IN DEBT SECURITIES
Available-for-sale securities, which include any security for which the Bank
has no immediate plan to sell but which may be sold in the future, are carried
at fair value. Realized gains and losses, based on specifically identified
amortized cost of the specific security, are included in other income.
Unrealized gains and losses are recorded, net of related income tax effects, in
stockholders' equity. Premiums and discounts are amortized and accreted,
respectively, to interest income using the level-yield method over the period to
maturity.
SF-8
<PAGE> 127
SAC RIVER VALLEY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
Held-to-maturity securities, which include any security for which the Bank
has the positive intent and ability to hold until maturity, are carried at
historical cost adjusted for amortization of premiums and accretion of
discounts. Premiums and discounts are amortized and accreted, respectively, to
interest income using the level-yield method over the period to maturity.
Interest and dividends on investments in debt and equity securities are
included in income when earned.
LOANS HELD FOR SALE
Loans held for sale are carried at the lower of cost or fair value,
determined using an aggregate basis. Write-downs to fair value are recognized as
a charge to earnings at the time the decline in value occurs. Gains and losses
resulting from sales of loans are recognized when the respective loans are sold
to investors. Gains and losses are determined by the difference between the
selling price and the carrying amount of the loans sold, net of discounts
collected or paid and considering a normal servicing rate. Fees received from
borrowers to guarantee the funding of loans held for sale and fees paid to
investors to ensure the ultimate sale of such loans are recognized as income or
expense when the loans are sold or when it becomes evident that the commitment
will not be used.
LOANS
Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-off are reported at their outstanding principal
adjusted for any charge-offs, the allowance for loan losses, and any deferred
fees or costs on originated loans and unamortized premiums or discounts on
purchased loans.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by provisions charged to expense
and reduced by loans charged off, net of recoveries. The allowance is maintained
at a level considered adequate to provide for potential loan losses, based on
management's evaluation of the loan portfolio, as well as on prevailing and
anticipated economic conditions and historical losses by loan category. General
allowances have been established, based upon the aforementioned factors and
allocated to the individual loan categories. Allowances are accrued on specific
loans evaluated for impairment for which the basis of each loan, including
accrued interest, exceeds the discounted amount of expected future collections
of interest and principal or, alternatively, the fair value of loan collateral.
A loan is considered impaired when it is probable that the Bank will not
receive all amounts due according to the contractual terms of the loan. This
includes loans that are delinquent 90 days or more (nonaccrual loans) and
certain other loans identified by management. Accrual of interest is
discontinued and interest accrued and unpaid is removed at the time such amounts
are delinquent 90 days. Interest is recognized for nonaccrual loans only upon
receipt, and only after all principal amounts are current according to the terms
of the contract.
PREMISES AND EQUIPMENT
Depreciable assets are stated at cost less accumulated depreciation.
Depreciation is charged to expense using straight-line and accelerated methods
over the estimated useful lives of the assets.
SF-9
<PAGE> 128
SAC RIVER VALLEY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
FORECLOSED ASSETS HELD FOR SALE
Assets acquired by foreclosure or in settlement of debt and held for sale are
valued at estimated fair value as of the date of foreclosure, and a related
valuation allowance is provided for estimated costs to sell the assets.
Management evaluates the value of foreclosed assets held for sale periodically
and increases the valuation allowance for any subsequent declines in fair value.
Increases in the valuation allowance and gains/losses on sales of foreclosed
assets are included in noninterest expense.
INCOME TAXES
Deferred tax liabilities and assets are the tax effect of differences between
the financial statement and tax bases of assets and liabilities. A valuation
allowance is established to reduce deferred tax assets if it is more likely than
not that a deferred tax asset will not be realized.
ADOPTION OF NEW ACCOUNTING STANDARD
During the quarter ended March 31, 1998, the Bank adopted the provisions of
Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income" by reclassification adjustments of prior periods presented.
NOTE 2: INVESTMENTS IN DEBT SECURITIES
The amortized cost and approximate fair value of available-for-sale
securities are as follows:
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury $ 11,480,747 $ 17,899 $ (1,849) $ 11,496,797
U.S. Government agencies 11,729,679 25,333 (778) 11,754,234
----------------- ----------------- ----------------- -----------------
$ 23,210,426 $ 43,232 $ (2,627) $ 23,251,031
================= ================= ================= =================
<CAPTION>
December 31, 1996
--------------------------------------------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
U.S. Treasury $ 8,732,889 $ 26,737 $ (12,086) $ 8,747,540
U.S. Government agencies 8,978,721 26,531 (4,382) 9,000,870
----------------- ----------------- ----------------- -----------------
$ 17,711,610 $ 53,268 $ (16,468) $ 17,748,410
================= ================= ================= =================
</TABLE>
Maturities of available-for-sale securities at December 31, 1997:
<TABLE>
<CAPTION>
Approximate
Amortized Fair
Cost Value
--------- -----------
<S> <C> <C>
One year or less $ 14,980,211 $ 15,008,018
After one through five years 8,230,215 8,243,013
----------------- ----------------
$ 23,210,426 $ 23,251,031
================= ================
</TABLE>
SF-10
<PAGE> 129
SAC RIVER VALLEY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
The amortized cost and approximate fair value of held-to-maturity securities
are as follows:
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
State and political subdivisions $ 6,444,523 $ 158,589 $ (12,112) $ 6,591,000
================= ================ ================ ================
<CAPTION>
December 31, 1996
--------------------------------------------------------------------------------
Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
State and political subdivisions $ 5,036,475 $ 130,327 $ (20,802) $ 5,146,000
================= ================ ================ ================
</TABLE>
Maturities of held-to-maturity securities at December 31, 1997:
<TABLE>
<CAPTION>
Approximate
Amortized Fair
Cost Value
--------- -----------
<S> <C> <C>
One year or less $ 420,363 $ 421,000
After one through five years 3,701,200 3,753,000
After five through ten years 2,322,960 2,417,000
---------------- ----------------
$ 6,444,523 $ 6,591,000
================ ================
</TABLE>
The book value of securities pledged as collateral, to secure public deposits
and for other purposes, amounted to $8,529,545 at December 31, 1997, and
$7,462,630 at December 31, 1996. The approximate fair value of pledged
securities amounted to $8,647,000 at December 31, 1997, and $7,479,000 at
December 31, 1996.
The book value of securities sold under agreements to repurchase amounted
to $16,517,443 and $9,374,420 at December 31, 1997 and 1996, respectively
(See Note 7).
There were no sales of available-for-sale securities during 1997 or 1996.
NOTE 3: SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
The Bank enters into purchases of securities under agreements to resell. The
amounts advanced under these agreements represent short-term loans and are
reflected as a receivable in the balance sheet. The securities underlying the
agreements are book-entry securities. During the period, the securities were
delivered by appropriate entry into a third-party custodian's account designated
by the Bank under a written custodial agreement that explicitly recognizes the
Bank's interest in the securities. These agreements have a weighted average
remaining maturity of three months. At December 31, 1997 and 1996, these
agreements to resell securities purchased were all outstanding with one entity.
The Bank's policy requires that all securities purchased under agreements to
resell be fully collateralized.
SF-11
<PAGE> 130
SAC RIVER VALLEY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 4: LOANS AND ALLOWANCE FOR LOAN LOSSES
Categories of loans at December 31, 1997 and 1996, include:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Commercial $ 13,975,657 $ 13,260,000
Real estate construction and development 2,394,077 2,854,000
Commercial real estate and agricultural 27,963,916 25,524,940
Residential real estate 16,543,001 16,715,000
Consumer 3,237,988 3,380,944
Other 126,464 51,000
------------------- -------------------
64,241,103 61,785,884
Less: Allowance for loan losses 851,991 832,939
------------------- -------------------
Net loans $ 63,389,112 $ 60,952,945
=================== ===================
</TABLE>
Impaired loans totaled $-0- and $10,118 at December 31, 1997 and 1996,
respectively. There was no allowance for loan losses related to these impaired
loans at December 31, 1997 or 1996.
Interest of $2,343 and $6,661 was received on a cash basis on average
impaired loans of $6,200 and $16,900 for 1997 and 1996. The amount of interest
recognized on these loans was not materially different from amounts received on
a cash basis.
Transactions in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Balance, beginning of year $ 832,939 $ 791,904
Provision charged to expense 30,000 70,000
Losses charged off (39,830) (55,796)
Recoveries 28,882 26,831
------------------- -------------------
Balance, end of year $ 851,991 $ 832,939
=================== ===================
</TABLE>
The amount of loans serviced for others amounted to $3,509,000 and
$2,412,000 at December 31, 1997 and 1996, respectively.
NOTE 5: PREMISES AND EQUIPMENT
Major classifications of premises and equipment, stated at cost, at December
31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Land $ 34,305 $ 34,305
Buildings and improvements 400,230 384,502
Equipment 479,244 426,457
------------------- -------------------
913,779 845,264
Less accumulated depreciation 465,662 422,395
------------------- -------------------
$ 448,117 $ 422,869
=================== ===================
</TABLE>
SF-12
<PAGE> 131
SAC RIVER VALLEY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 6: INTEREST BEARING TIME DEPOSITS
Interest bearing time deposits in denominations of $100,000 or more were
$8,968,000 and $7,460,000 on December 31, 1997 and 1996, respectively.
At December 31, 1997, the scheduled maturities of certificates of deposit are
as follows:
<TABLE>
<S> <C>
1998 $ 37,501,000
1999 6,036,000
2000 1,543,763
----------------
$ 45,080,763
================
</TABLE>
NOTE 7: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase totaled $14,875,049 and
$8,751,000 at December 31, 1997 and 1996, respectively.
At December 31, 1997, the maturities of securities sold under agreements to
repurchase are as follows:
<TABLE>
<S> <C>
U.S. government securities:
Maturing on demand $ 4,600,651
Maturing 0-30 days 6,000,000
Maturing 31-90 days 1,200,000
Maturing >90 days 3,074,398
-----------------
$ 14,875,049
=================
</TABLE>
The Bank enters into sales of securities under agreements to repurchase.
These agreements are treated as financings, and the obligations to repurchase
securities sold are reflected as a liability in the balance sheet. The dollar
amount of securities underlying the agreements remains in the asset accounts.
Securities sold under agreements to repurchase had book values including accrued
interest of $16,691,092 and $9,513,559 and fair values of $16,517,000 and
$9,500,000 at December 31, 1997 and 1996, respectively. Securities sold under
agreements to repurchase averaged $11,602,000 and $8,056,000 during 1997 and
1996, and the maximum amount outstanding at any month end during 1997 and 1996
was $14,875,000 and $9,936,000, respectively. The weighted average interest
rates on securities sold under agreements to repurchase was 5.93% and 5.71% at
December 31, 1997 and 1996, respectively.
NOTE 8: ADVANCES FROM FEDERAL HOME LOAN BANK
The Bank has an advance from the Federal Home Loan Bank outstanding at
December 31, 1997, in the amount of $2,500,000, with an interest rate of 5.81%.
This advance matures December 31, 1998.
Although no loans are specifically pledged, the FHLB requires the Bank to
maintain mortgage loans free of other pledges, liens and encumbrances in an
amount equal to at least 150% of outstanding advances as collateral for such
borrowings.
SF-13
<PAGE> 132
SAC RIVER VALLEY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 9: INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Taxes currently payable $ 795,412 $ 817,400
Deferred income taxes (4,512) (18,100)
---------------- ----------------
$ 790,900 $ 799,300
================ ================
</TABLE>
A reconciliation of income tax expense at the statutory rate to the Bank's
actual income tax expense is shown below:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Computed at the statutory rate (34%) $ 807,365 $ 824,645
Increase (decrease) resulting from:
Tax-exempt interest (80,200) (92,051)
State income taxes - net of federal tax benefit 60,477 67,880
Other 3,258 (1,174)
------------- -------------
Actual tax provision $ 790,900 $ 799,300
============= =============
</TABLE>
The tax effects of temporary differences related to deferred taxes shown on
the balance sheets are:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 217,181 $ 206,068
---------------- ----------------
217,181 206,068
---------------- ----------------
Deferred tax liabilities:
Accumulated depreciation (19,603) (13,002)
Unrealized appreciation on available-for-sale securities (15,024) (13,616)
---------------- ----------------
(34,627) (26,618)
---------------- ----------------
Net deferred tax asset $ 182,554 $ 179,450
================ ================
</TABLE>
NOTE 10: REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory--and possible additional discretionary--actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain
SF-14
<PAGE> 133
SAC RIVER VALLEY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
minimum amounts and ratios (set forth in the table below) of total and Tier I
capital (as defined in the regulations) to risk-weighted assets (as defined) and
of Tier I capital (as defined) to average assets (as defined). Management
believes, as of December 31, 1997, that the Bank meets all capital adequacy
requirements to which it is subject.
As of December 31, 1997, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank must
maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios
as set forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
The Bank's actual capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------ ------------------ -------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollar Amounts In Thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total Risk-Based Capital
(to Risk Weighted Assets) $11,891 19.2% $4,964 8.0% $6,205 10.0%
Tier I Capital
(to Risk Weighted Assets) 11,114 17.9% 2,482 4.0% 3,723 6.0%
Tier I Capital
(to Average Assets) 11,114 11.2% 3,979 4.0% 4,974 5.0%
As of December 31, 1996:
Total Risk-Based Capital
(to Risk Weighted Assets) 11,099 18.1% 4,916 8.0% 6,145 10.0%
Tier I Capital
(to Risk Weighted Assets) 10,331 16.8% 2,458 4.0% 3,687 6.0%
Tier I Capital
(to Average Assets) 10,331 11.2% 3,696 4.0% 4,620 5.0%
</TABLE>
The Bank is subject to certain restrictions on the amount of dividends that
it may declare without prior regulatory approval. At December 31, 1997 and 1996,
the Bank exceeded its minimum capital requirements. The Bank may not pay
dividends which would reduce capital below the minimum requirements shown above.
SF-15
<PAGE> 134
SAC RIVER VALLEY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 11: TRANSACTIONS WITH RELATED PARTIES
At December 31, 1997 and 1996, the Bank had loans outstanding to officers,
directors and employees and companies in which the bank's executive officers or
directors were principal owners, in the amount of $624,000 and $562,000,
respectively.
A reconciliation of the activity in these loans for the year ended December
31, 1997, is as follows:
<TABLE>
<S> <C>
Balance, beginning of year $ 562,000
New loans 300,000
Repayments (238,000)
--------------
Balance, end of year $ 624,000
==============
</TABLE>
In management's opinion, such loans and other extensions of credit and
deposits were made in the ordinary course of business and were made on
substantially the same terms (including interest rates and collateral) as those
prevailing at the time for comparable transactions with other persons. Further,
in management's opinion, these loans did not involve more than normal risk of
collectibility or present other unfavorable features.
Effective June 1996, the Bank entered into a loan servicing agreement with a
company that was controlled by one of the executive officers of the Bank. The
agreement called for the outside company to service certain of the Bank's
existing loan portfolio for a fee. Expense recognized by the Bank relating to
this agreement was $161,513 and $40,770 for 1997 and 1996, respectively.
Included in the 1997 expense was a payment of $66,000 made to terminate the
contract effective December 31, 1997.
NOTE 12: EMPLOYEE BENEFIT PLANS
The Bank has a defined contribution pension plan covering substantially all
employees. Employees may contribute up to $9,500 of their compensation with the
Bank matching a discretionary amount determined annually by the Board of
Directors up to the first 6% of the employee's compensation. Employer
contributions charged to expense for 1997 and 1996 were $11,191 and $9,174,
respectively.
The Bank has in place an Employee Stock Ownership Plan (ESOP) for full-time
employees age 21 years or older who have at least one year of credited service.
Annual contributions to the ESOP are discretionary and are determined annually
by the Bank's Board of Directors. Contributions are credited to participants'
individual accounts based proportionally on each participant's compensation for
the plan year to total compensation of all participants in that plan year.
Benefits become 100% vested after seven years of service. Forfeitures are
reallocated among remaining participating employees. Benefits are payable upon
retirement, disability or separation from service. Distributions may be paid in
shares of the Bank's stock or in cash. The Plan includes a stock repurchase
option, whereby a participant electing to receive a distribution can elect to
sell the vested shares back to the Bank at its determined fair market value. At
December 31, 1997, the repurchase option was $986 per share. All shares are
considered outstanding for Earnings Per Share computations. The ESOP holds
433.33 shares of the Bank's stock at December 31, 1997.
Compensation expense was $41,000 and $43,000 for the years ended December 31,
1997 and 1996, respectively. Dividends declared on ESOP shares were $34,666 for
both 1997 and 1996.
SF-16
<PAGE> 135
SAC RIVER VALLEY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 13: ADDITIONAL CASH FLOW INFORMATION
1997 1996
---- ----
NONCASH INVESTING AND FINANCING ACTIVITIES
Real estate acquired in settlement of loans $ 3,294 $ 64,919
ADDITIONAL CASH PAYMENT INFORMATION
Interest paid 3,573,461 3,372,833
Income taxes paid 864,753 830,217
NOTE 14: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term instruments, the carrying amount approximates fair
value.
INVESTMENT SECURITIES
Fair values for investment securities equal quoted market prices, if
available. If quoted market prices are not available, fair values are estimated
based on quoted market prices of similar securities.
LOANS
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. Loans with similar
characteristics were aggregated for purposes of the calculations. The carrying
amount of accrued interest receivable approximates its fair value.
DEPOSITS
The fair value of demand deposits, savings accounts, NOW accounts and certain
money market deposits is the amount payable on demand at the reporting date
(i.e., their carrying amount). The fair value of fixed-maturity time deposits is
estimated using a discounted cash flow calculation that applies the rates
currently offered for deposits of similar remaining maturities. The carrying
amount of accrued interest payable approximates its fair value.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
For these short-term instruments, the carrying amount is a reasonable
estimate of fair value.
ADVANCES FROM FEDERAL HOME LOAN BANK
Rates currently available to the Bank for debt with similar terms and
remaining maturities are used to estimate fair value of existing advances.
SF-17
<PAGE> 136
SAC RIVER VALLEY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
LETTERS OF CREDIT AND LINES OF CREDIT
The fair value of letters of credit and lines of credit is based on fees
currently charged for similar agreements or on the estimated cost to terminate
or otherwise settle the obligations with the counterparties at the reporting
date.
The following table presents estimated fair values of the Bank's financial
instruments. The fair values of certain of these instruments were calculated by
discounting expected cash flows, which method involves significant judgments by
management and uncertainties. Fair value is the estimated amount at which
financial assets or liabilities could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. Because no
market exists for certain of these financial instruments and because management
does not intend to sell these financial instruments, the Bank does not know
whether the fair values shown below represent values at which the respective
financial instruments could be sold individually or in the aggregate.
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------
Carrying
Amount Fair Value
------ ----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $6,798,083 $6,798,083
Interest bearing deposits with banks 850,000 850,000
Available-for-sale securities 23,251,031 23,251,031
Held-to-maturity securities 6,444,524 6,591,000
Interest receivable 1,327,381 1,327,381
Loans held for sale 15,812 15,812
Loans, net of allowance for loan losses 63,389,112 63,355,000
Financial liabilities:
Deposits 73,998,872 74,081,000
Securities sold under agreements to repurchase 14,875,049 14,875,049
Advances from Federal Home Loan Bank 2,500,000 2,500,000
Interest payable 530,542 530,542
Unrecognized financial instruments (net of contract amount):
Letters of credit -- --
Lines of credit -- --
</TABLE>
NOTE 15: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations.
Estimates related to the allowance for loan losses are reflected in the footnote
regarding loans. Current vulnerabilities due to certain concentrations of credit
risk are discussed in the footnote on commitments and credit risk.
SF-18
<PAGE> 137
SAC RIVER VALLEY BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 16: COMMITMENTS AND CREDIT RISK
Letters of credit are conditional commitments issued by the Bank to guarantee
the performance of a customer to a third party. Those guarantees are primarily
issued to support public and private borrowing arrangements, including
commercial paper, bond financing and similar transactions. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loans to customers.
The Bank had total outstanding letters of credit amounting to $686,000 and
$800,000 at December 31, 1997 and 1996, respectively, with terms ranging from
five months to five years.
Lines of credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Lines of credit
generally have fixed expiration dates. Since a portion of the line may expire
without being drawn upon, the total unused lines do not necessarily represent
future cash requirements. Each customer's creditworthiness is evaluated on a
case-by-case basis. The amount of collateral obtained, if deemed necessary, is
based on management's credit evaluation of the counterparty. Collateral held
varies but may include accounts receivable, inventory, property, plant and
equipment, commercial real estate and residential real estate. Management uses
the same credit policies in granting lines of credit as it does for
on-balance-sheet instruments.
At December 31, 1997 and 1996, the Bank had granted unused lines of credit to
borrowers aggregating approximately $4,375,000 and $6,735,000 for commercial
lines and open-end consumer lines, respectively.
NOTE 17: MERGER AGREEMENT
On April 9, 1998, the Bank entered into a letter of intent to merge with
Liberty Bancshares, Inc., a Missouri based one-bank holding company with
approximately $80 million in total assets. The agreement formulates a
transaction whereby all of the outstanding stock of Sac River Valley Bank would
be exchanged for shares of Liberty Bancshares, Inc. The merger is subject to
regulatory and shareholder approval and, if approved, is anticipated to occur in
late 1998.
SF-19
<PAGE> 138
LIBERTY BANCSHARES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Liberty
Bancshares, Sac River Pro Forma
Inc. Valley Bank Adjustment Pro Forma
----------- ----------- ---------- ---------
ASSETS
<S> <C> <C> <C> <C>
Earning Assets:
Loans - net $ 64,956 $63,450 $ -- $128,406
Securities available-for-sale 14,438 18,522 -- 32,960
Other earning assets 5,335 14,572 (4,900) 15,007
----------- ----------- --------- ---------
Total Earning Assets 84,729 96,544 (4,900) 176,373
Other 8,758 3,315 (1,125) 10,948
----------- ----------- --------- ---------
Total Assets $ 93,487 $99,859 $(6,025) $187,321
=========== =========== ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing Liabilities:
Interest Bearing Deposits:
Interest checking $ 19,253 $ 23,744 $ -- $ 42,997
Certificates of deposit and other 47,872 47,058 -- 94,930
----------- ----------- --------- ---------
Total Interest Bearing Deposits 67,125 70,802 -- 137,927
Other interest bearing liabilities 8,456 11,547 (2,100) 17,903
----------- ----------- --------- ---------
Total Interest Bearing Liabilities 75,581 82,349 (2,100) 155,830
Demand deposits 11,283 5,138 (37) 16,384
----------- ----------- --------- ---------
Total Sources of Funds 86,864 87,487 (2,137) 172,214
Other liabilities 447 784 -- 1,231
----------- ----------- --------- ---------
Total Liabilities 87,311 88,271 (2,137) 173,445
----------- ----------- --------- ---------
Stockholders' Equity
Common stock 2,605 300 (2,124) 781
Capital surplus 3,270 500 9,024 12,794
Retained earnings 425 10,763 (10,763) 425
Treasury stock (108) -- -- (108)
Unrealized appreciation (depreciation)
on available-for-sale securities (16) 25 (25) (16)
----------- ----------- --------- ---------
Total Stockholders' Equity 6,176 11,588 (3,888) 13,876
----------- ----------- --------- ---------
Total Liabilities and
Stockholders' Equity $ 93,487 $ 99,859 $ (6,025) $ 187,321
=========== =========== ========= =========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements
PF-1
<PAGE> 139
LIBERTY BANCSHARES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS
OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
Liberty
Bancshares, Sac River Pro Forma
Inc. Valley Bank Adjustment Pro Forma
----------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 1,308 $ 1,400 $ -- $ 2,708
Available-for-sale securities 205 331 -- 536
Held-to-maturity securities -- 89 -- 89
Federal funds sold and securities purchased
under agreements to resell 111 73 -- 184
Other -- 13 -- 13
----------- ----------- --------- ---------
1,624 1,906 -- 3,530
----------- ----------- --------- ---------
INTEREST EXPENSE
Deposits 789 772 -- 1,561
Federal funds purchased and securities sold
under agreements to repurchase 73 175 -- 248
Notes payable 22 -- -- 22
Advances from Federal Home Loan Bank -- 46 -- 46
----------- ----------- --------- ---------
884 993 -- 1,877
----------- ----------- --------- ---------
NET INTEREST INCOME 740 913 -- 1,653
PROVISION FOR LOAN LOSSES 50 -- -- 50
----------- ----------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 690 913 -- 1,603
----------- ----------- --------- ---------
NONINTEREST INCOME
Service charges and fees 74 93 -- 167
Other income 2 18 -- 20
----------- ----------- --------- ---------
76 111 -- 187
----------- ----------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits 319 208 -- 527
Net occupancy expense 22 10 -- 32
Equipment expense 29 11 -- 40
Outside processing fees -- 46 -- 46
Other operating expenses 158 65 63 286
----------- ----------- --------- ---------
528 340 63 931
----------- ----------- --------- ---------
INCOME BEFORE INCOME TAXES 238 684 -- 859
PROVISION FOR INCOME TAXES 85 235 -- 320
----------- ----------- --------- ---------
NET INCOME $ 153 $ 449 $ (63) $ 539
=========== =========== ========= =========
BASIC EARNINGS PER SHARE $ .32 $ 44.85 $ -- $ .72
=========== =========== ========= =========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements
PF-2
<PAGE> 140
LIBERTY BANCSHARES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS
OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Liberty
Bancshares, Sac River Pro Forma
Inc. Valley Bank Adjustment Pro Forma
----------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 3,131 $ 5,470 $ -- $ 8,601
Available-for-sale securities 283 1,264 -- 1,547
Held-to-maturity securities -- 290 -- 290
Federal funds sold and securities purchased
under agreements to resell 534 302 -- 836
Deposits with banks -- 33 -- 33
----------- ----------- --------- ---------
3,948 7,359 -- 11,307
----------- ----------- --------- ---------
INTEREST EXPENSE
Deposits 1,926 3,024 -- 4,950
Federal funds purchased and securities sold
under agreements to repurchase 121 627 -- 748
Notes payable 84 -- -- 84
----------- ----------- --------- ---------
2,131 3,651 -- 5,782
----------- ----------- --------- ---------
NET INTEREST INCOME 1,817 3,708 -- 5,525
PROVISION FOR LOAN LOSSES 447 30 -- 477
----------- ----------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,370 3,678 -- 5,048
----------- ----------- --------- ---------
NONINTEREST INCOME
Service charges and fees 171 267 -- 438
Other income 30 36 -- 66
----------- ----------- --------- ---------
201 303 -- 504
----------- ----------- --------- ---------
NONINTEREST EXPENSE
Salaries and employee benefits 671 832 -- 1,503
Net occupancy expense 68 45 -- 113
Equipment expense 81 51 -- 132
Outside processing fees -- 305 -- 305
Other operating expenses 468 373 252 1,093
----------- ----------- --------- ---------
1,288 1,606 252 3,146
----------- ----------- --------- ---------
INCOME BEFORE INCOME TAXES 283 2,375 -- 2,406
PROVISION FOR INCOME TAXES 117 791 -- 908
----------- ----------- --------- ---------
NET INCOME $ 166 $ 1,584 $ (252) $ 1,498
=========== =========== ========= =========
BASIC EARNINGS PER SHARE $ .42 $ 158.37 $ -- $ 2.34
=========== =========== ========= =========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements
PF-3
<PAGE> 141
LIBERTY BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: PRO FORMA PRESENTATION
The unaudited pro forma combined financial statements assume a business
transaction between Liberty Bancshares, Inc. (Bancshares) and Sac River Valley
Bank (Sac River) (in the form of a merger) accounted for as a purchase. The
pro forma condensed balance sheet combines Bancshares' and Sac River's
unaudited balance sheets at March 31, 1998, giving effect to the merger as if
such transaction had occurred as of that date. The pro forma condensed
consolidated statements of income combine Bancshares historical consolidated
statements of income for the unaudited three month period as of March 31, 1998,
and the year ended December 31, 1997, with the corresponding Sac River
historical statements of income for such periods, giving effect to the merger
as if such transaction had happened at the beginning of the earliest period.
The unaudited historical consolidated financial statement data of
Bancshares as of March 31, 1998, and for the three months ended March 31, 1998,
and the unaudited historical financial statements of Sac River as of March 31,
1998, and for the three months ended March 31, 1998, have been prepared on the
same basis as the historical information derived from audited financial
statements, and in the opinion of their respective managements, reflects all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation of the financial position and results of operations for such
periods.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the actual operating results or financial
position of the combined entity that would have been achieved had the merger
been consummated at the dates presented, nor is it necessarily indicative of
the combined entity's future operating results or financial position. The
unaudited pro forma condensed financial statements do not incorporate any
benefits from cost savings or synergies of operations of the combined entity
that may occur. Bancshares and Sac River anticipate incurring direct
transaction costs and integration costs related to the merger.
The pro forma condensed financial statements are based on the historical
consolidated financial statements of Bancshares and notes thereto and the
historical financial statements of Sac River and the notes thereto, and should
be read in conjunction with the financial statements of Bancshares and Sac
River included elsewhere in this Form S-4 filing.
PF-4
<PAGE> 142
LIBERTY BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2: PRO FORMA BALANCE SHEET ADJUSTMENTS
The following pro forma balance sheet adjustments were made in the pro
forma condensed consolidated financial statements.
<TABLE>
<CAPTION>
Debit Credit
------ ------
<S> <C> <C> <C>
1. Demand deposits $ 37 $
Other interest bearing liabilities 4,900
Other earning assets 4,900
Other assets 37
To eliminate interbank items (repo agreement
and DDA account).
2. Other assets 3,787
Capital surplus 3,787
To record goodwill associated with purchase of
Sac River Valley Bank.
3. Capital surplus 4,875
Other assets 4,875
To record payment of one-time dividend to Sac River
shareholders by Bancshares
4. Capital surplus 2,800
Other interest-bearing liabilities 2,800
To record estimated cash out of approximately 28%
of Sac River shareholders, funded by borrowings on
note payable
5. Unrealized appreciation on AFS securities 25
6. Common stock 300
Retained earnings 10,763
Capital surplus 11,088
To eliminate the capital accounts of
Sac River Valley Bank.
</TABLE>
PF-5
<PAGE> 143
LIBERTY BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2: PRO FORMA BALANCE SHEET ADJUSTMENTS (CONTINUED)
<TABLE>
<CAPTION>
Debit Credit
----- ------
<S> <C> <C> <C>
6. Capital surplus $ 260 $
Common stock 260
To record par value of 260,450 shares issued at $1 par.
7. Common stock 2,084
Capital surplus 2,084
To record change in Liberty's par value to $1 per share.
</TABLE>
NOTE 3: PRO FORMA INCOME STATEMENT ADJUSTMENTS
The pro forma income statement adjustment shown in the pro forma condensed
consolidated financial statements reflects goodwill amortization as if the
transaction had occurred as of the beginning of the applicable period
presented.
NOTE 4: CALCULATION OF GOODWILL
As stated in Note 1, the pending merger is accounted for utilizing the
purchase method of accounting and, accordingly, the net assets of Sac River are
adjusted to fair value. The components of the transaction assumed in the pro
forma condensed consolidated balance sheet are outlined as follows:
Cash paid $ 4,875,000
Debt origination 2,800,000
Issuance of common stock 7,700,000
-------------
15,375,000
Historical book value of Sac River (11,588,000)
-------------
Excess of cost over fair value of net
assets acquired $ 3,787,000
=============
PF-6
<PAGE> 144
Glossary of Terms
1. BANCSHARES: Liberty Bancshares, Inc.
2. BANCSHARES ARTICLES: The articles of incorporation of Liberty
Bancshares, Inc., as amended.
3. BANCSHARES BY-LAWS: The By-laws of Liberty Bancshares, Inc., as
amended.
4. BANCSHARES COMMON STOCK: Common Stock, $5.00 par value per share, of
Liberty Bancshares, Inc.
5. BHCA: Bank Holding Company Act of 1956, as amended.
6. COMMISSION: Securities and Exchange Commission.
7. DIVISION OF FINANCE: Missouri Division of Finance.
8. DIVISION OF FINANCE APPLICATIONS: Applications to be filed with the
Division of Finance for approval of the Merger.
9. EFFECTIVE TIME: The time at which the Merger becomes effective,
immediately upon filing of the Merger Agreement with the Division of Finance.
10.ESOP: Sac River Valley Bank's Employee Stock Option Plan, adopted
in 1989.
11.EXCHANGE ACT: Securities Exchange Act of 1934, as amended.
12.FDIA: Federal Deposit Insurance Act.
13.FDIC: Federal Deposit Insurance Corporation.
14.FDIC APPLICATION: Application to be filed with the FDIC for
approval of the Merger.
15.FRB APPLICATION: Application to be filed with the FRS Board for
approval of the Merger.
16.FRS: Federal Reserve System.
17.FRS BOARD: Board of Governors of the Federal Reserve System.
18.ISO PLAN: Liberty Bank's Incentive Stock Option Plan, adopted in
1995.
19.LIBERTY: Liberty Bank.
20.MANDATORY PER SHARE CASH AMOUNT: $485.70 per share of Sac River
Common Stock each Sac River Shareholder will receive in the Merger.
<PAGE> 145
21. MERGER: Merger of Sac River with and into Liberty pursuant to the
terms of the Merger Agreement.
22. MERGER AGREEMENT: Agreement and Plan of Merger between
Bancshares , Liberty and Sac River.
23. OPTIONAL PER SHARE CASH AMOUNT: $1,050 per share of Sac River
Common Stock each Sac River Shareholder may elect to receive in the Merger.
24. RECORD DATE: September ____, 1998.
25. REGISTRATION STATEMENT: Registration Statement on Form S-4 filed by
Bancshares with the Commission.
26. REQUISITE REGULATORY APPROVALS: Regulatory approvals required
before Merger can be consummated.
27. SAC RIVER: Sac River Valley Bank.
28. SAC RIVER BY-LAWS: By-laws of Sac River Valley Bank.
29. SAC RIVER COMMON STOCK: Common Stock of Sac River Valley Bank,
par value $30 per share.
30. SECURITIES ACT: Securities Act of 1933, as amended.
31. SPECIAL DIVIDEND: Special cash dividend per share in the amount of
$485.70 that Sac River will declare and pay immediately before the Effective
Time if regulatory approvals are not obtained for the Mandatory Per Share Cash
Amount.
32. SPECIAL MEETING: Special meeting of the shareholders of Sac River
Valley Bank for purpose of considering and voting on a proposal to approve the
Merger Agreement, to be held on October ___, 1998.
33. YATES MAUCK: Yates, Mauck, Bohrer, Elliff, Croessmann & Wieland,
P.C., counsel for Sac River Valley Bank.
<PAGE> 146
INDEX TO APPENDICIES
APPENDIX A: AGREEMENT AND PLAN OF MERGER - SEE EXHIBIT 2.1
APPENDIX B: FORM OF TAX OPINION - SEE EXHIBIT 8.1
<PAGE> 147
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
See pages 34 and 63 of the Proxy Statement-Prospectus.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The exhibits filed as part of this registration statement are
listed on the exhibit index set forth on page _____.
(b) The financial statement schedules are set forth on pages
LF-1 through 19, SF-1 through 19, and PF-1 through PF-6.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-1
<PAGE> 148
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Springfield, State of
Missouri, on July 16, 1998.
LIBERTY BANCSHARES, INC.
By:/s/ Gary E. Metzger
---------------------
Gary E. Metzger
President and Chairman
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities on July 16, 1998.
Signatures Title
---------- -----
/s/ Gary Metzger President and Chairman
- -------------------- (Principal Executive Officer)
Gary E. Metzger
/S/ Ron McDowell Senior Vice President,
- -------------------- (Principal Financial Officer)
Ron McDowell
/s/ William P. Gaut
- --------------------
William P. Gaut Director
/s/ Lyle D. Graesser
- --------------------
Lyle D. Graesser Director
/s/ Kenneth E. Hamilton
- --------------------
Kenneth E. Hamilton Director
/s/ Howard Jackson Hoke
- --------------------
Howard Jackson Hoke Director
/s/ Dixie F. Letsch
- --------------------
Dixie F. Letsch Director
/s/ Richard A. Pendleton
- --------------------
Richard A. Pendleton Director
/s/ Wayne A. Scheer
- --------------------
Wayne A. Scheer Director
/s/ Patricia L. Sechler
- --------------------
Patricia L. Sechler Director
/s/ Charles Talbert Wooten, Jr
- --------------------
Charles Talbert Wooten, Jr Director
II-2
<PAGE> 149
EXHIBIT INDEX
NO. TITLE
2.1 Agreement and Plan of Merger
3.1 and 4.1 Articles of Incorporation, Liberty Bancshares, Inc.
3.2 and 4.2 By-Laws, Liberty Bancshares, Inc.
*5.1 Form of Opinion Regarding Legality
8.1 Form of Opinion Regarding Tax Matters
10.1 Garry Robinson Employment Agreement
10.2 Restated Liberty Bank Incentive Stock Option Plan
10.3 Amendment to Restatement of Incentive Stock Option Plan
10.4 Second Amendment to Restatement of Incentive Stock Option Plan
10.5 Sac River Valley Bank Stock Employees Ownership Plan and
Trust Agreement
10.6 First Amendment to Sac River Valley Bank Stock Ownership Plan
and Trust Agreement
11.1 Statement re Computation of per share earnings (Libery
Bancshares)
11.2 Statement re Computation of per share earnings (Sac River
Valley Bank)
21.1 Subsidiaries of Registrant
23.1 Consent of Baird, Kurtz & Dobson (Liberty Bancshares)
23.2 Consent of Baird, Kurtz & Dobson (Sac River Valley Bank)
23.3 Consent of Husch and Eppenberger, LLC, is included in
Exhibit 5.1
27.1 Financial Data Schedule, Liberty Bank
27.2 Financial Data Schedule, Sac River Valley Bank
99.1 Articles of Agreement, Liberty Bank
99.2 By-laws, Liberty Bank
99.3 Articles of Agreement, Sac River Valley Bank
99.4 By-laws, Sac River Valley Bank
* To be filed by amendment
II-3
<PAGE> 1
EXHIBIT 2.1
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SAC RIVER VALLEY BANK
AND
LIBERTY BANCSHARES, INC.
AND
LIBERTY BANK
DATED JUNE 18, 1998
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
THE MERGER
1.1 Merger
1.2 Closing ............................................................ 2
1.3 Effective Time ..................................................... 2
ARTICLE II
TERMS OF MERGER
2.1 Charter ............................................................ 3
2.2 By-Laws ............................................................ 3
2.3 Directors .......................................................... 3
2.4 Officers ........................................................... 3
2.5 Principal Office ................................................... 4
2.6 Capital Structure .................................................. 4
ARTICLE III
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares................................................ 4
3.2 Adjustments to Exchange Ratio....................................... 5
3.3 Fractional Shares................................................... 5
3.4 Election to Receive Optional Per Share Cash Amount.................. 6
3.5 Exchange Procedures................................................. 6
3.6 Rights of Former Sac River Shareholders............................. 7
3.7 Termination of Exchange Fund........................................ 8
3.8 Lost or Destroyed Shares............................................ 8
3.9 Dissenters' Rights.................................................. 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SAC RIVER
4.1 Organization, Standing, and Power................................... 9
4.2 Subsidiaries........................................................ 9
4.3 Capital Structure................................................... 9
4.4 Authority.......................................................... 10
4.5 Financial Statements............................................... 11
4.6 Reports ........................................................... 13
4.7 Authorizations; Compliance with Applicable Laws.................... 13
4.8 Litigation and Claims.............................................. 15
4.9 Taxes.............................................................. 15
4.10 Certain Agreements................................................. 16
4.11 Benefit Plans...................................................... 17
4.12 Insurance.......................................................... 19
4.13 Absence of Certain Changes or Events............................... 19
4.14 Properties, Leases and Other Agreements............................ 21
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
4.15 Votes Required..................................................... 21
4.16 Tax Matters........................................................ 22
4.17 Regulatory Impediments............................................. 22
4.18 Full Disclosure.................................................... 22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BANCSHARES AND LIBERTY
5.1 Organization, Standing and Power................................... 22
5.2 Subsidiaries....................................................... 22
5.3 Capital Structure.................................................. 23
5.4 Authority.......................................................... 24
5.5 Bancshares Financial Statements.................................... 24
5.6 Reports............................................................ 26
5.7 Authorizations; Compliance with Applicable Laws.................... 26
5.8 Litigation and Claims.............................................. 28
5.9 Taxes.............................................................. 28
5.10 Certain Agreements................................................. 29
5.11 Benefit Plans...................................................... 30
5.12 Insurance.......................................................... 31
5.13 Absence of Certain Changes or Events............................... 32
5.14 Properties, Leases and Other Agreements............................ 33
5.15 Votes Required..................................................... 34
5.16 Tax Matters........................................................ 34
5.17 Regulatory Impediments............................................. 34
5.18 Full Disclosure.................................................... 34
ARTICLE VI
COVENANTS OF SAC RIVER
6.1 Affirmative Covenants.............................................. 34
6.2 Negative Covenants................................................. 35
6.3 Access and Information............................................. 38
6.4 Update Disclosure; Breaches........................................ 39
6.5 Tax Treatment...................................................... 39
6.6 Dissent Process.................................................... 39
6.7 Expenses........................................................... 40
6.8 Delivery of Shareholder Lists...................................... 40
6.9 Shareholder Meetings............................................... 40
6.10 Processing Contracts............................................... 40
ARTICLE VII
COVENANTS OF LIBERTY AND BANCSHARES
7.1 Affirmative Covenants.............................................. 41
7.2 Negative Covenants................................................. 42
7.3 Access and Information............................................. 44
7.4 Update Disclosure; Breaches........................................ 45
7.5 Liberty Benefit Plans.............................................. 45
7.6 Tax Treatment...................................................... 46
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Filings and Approvals.............................................. 46
8.2 Registration Statement............................................. 47
8.3 Reports............................................................ 49
8.4 Brokers and Finders................................................ 49
8.5 Additional Agreements; Reasonable Efforts.......................... 49
ARTICLE IX
CONDITIONS PRECEDENT
9.1 Conditions to Each Party's Obligation
to Effect the Merger............................................... 50
9.2 Conditions to Obligations of Bancshares............................ 51
9.3 Conditions to Obligations of Sac River............................. 53
ARTICLE X
TERMINATION AND AMENDMENT
10.1 Termination........................................................ 54
10.2 Investigation and Review........................................... 55
10.3 Effect of Termination.............................................. 56
10.4 Amendment.......................................................... 56
10.5 Extension; Waiver.................................................. 56
ARTICLE XI
GENERAL PROVISIONS
11.1 Non-Survival of Representations, Warranties and
Agreements......................................................... 56
11.2 Notices............................................................ 56
11.3 Counterparts....................................................... 57
11.4 Entire Agreement; No Third Party Beneficiaries..................... 57
11.5 Governing Law...................................................... 57
11.6 Publicity.......................................................... 57
11.7 Assignment......................................................... 57
11.8 Knowledge of the Parties........................................... 58
11.9 Confidentiality.................................................... 58
</TABLE>
Exhibit A, Agreement to Merge
Exhibit B, List of Directors of Surviving Bank
-iii-
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), made and entered into the
18th day of June, 1998, by and among Sac River Valley Bank, a banking
corporation organized under the laws of the State of Missouri ("Sac River"),
Liberty Bank, a banking corporation organized under the laws of the State of
Missouri (hereinafter referred to as "Liberty") and Liberty Bancshares, Inc., a
Missouri corporation (hereinafter referred to as "Bancshares"), a one bank
holding company owning all of the issued and outstanding capital stock of
Liberty (all of said corporations being hereinafter sometimes referred to
collectively as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, as of December 31, 1997, the equity capital of Sac River was
$11,140,000.00, divided into 10,000 shares of common stock, each of a par value
of $30.00 each, surplus of $500,000.00, undivided profits, including capital
reserves, of $10,315,000.00, and net unrealized holding gains on
available-for-sale securities of $25,000.00; and
WHEREAS, as of December 31, 1997, the equity capital of Liberty was
$7,603,000.00, divided into 34,000 shares of common stock, each of a par value
of $50.00 each, surplus of $5,592,000.00, and undivided profits, including
capital reserves, of $311,000.00; and
WHEREAS, Bancshares has, on the date hereof, authorized capital
consisting of 5,000,000 shares of common stock, par value of $1.00 per share (as
approved by the shareholders of Bancshares on May 19, 1998), of which on the
date hereof 511,090 shares are issued and outstanding; and
WHEREAS, subject to full due diligence and final approval by the
respective Boards of Directors of Sac River and Bancshares, the respective
Boards of Directors of Sac River and Bancshares are of the opinion that the
transactions described herein are in the best interests of the parties and their
respective shareholders. This Agreement provides for the acquisition of Sac
River by Bancshares pursuant to the merger of Sac River with and into Liberty.
At the effective time of such merger, the outstanding shares of common stock of
Sac River shall be converted into the right to receive shares of common stock of
Bancshares, cash, or a combination thereof, subject to the limitations set forth
herein. As a result, shareholders of Sac River shall become shareholders of
Bancshares, and Liberty, as the wholly owned subsidiary of Bancshares, shall
continue to conduct, under its charter, its banking business and
<PAGE> 6
the banking business formerly conducted by Sac River. The transactions described
in this Agreement are subject to the approvals of the shareholders of Sac River
and Liberty, the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the Missouri Division of Finance, and other
applicable federal and state regulatory authorities, and the satisfaction of
certain other conditions described in this Agreement. It is the intention of the
parties to this Agreement that the Merger, for federal income tax purposes,
shall qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Constituent Corporations desire to make certain
representations, warranties and agreements in connection with the Merger and to
set forth the terms and conditions of the Merger;
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement,
at the Closing Date (as hereinafter defined), Sac River shall be merged with and
into Liberty (the "Merger"). Liberty shall be the surviving bank (the "Surviving
Bank") resulting from the Merger and shall operate under its charter. The
corporate identity and existence of Sac River, separate and apart from Liberty,
shall cease on consummation of the Merger.
1.2 Closing. The closing of the Merger (the "Closing") shall take
place at 9:00 a.m. on a date (the "Closing Date") to be specified by the
parties, which, unless all parties agree, shall be no later than thirty (30)
days after the latest to occur of (i) receipt of all necessary consent and
approvals from the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), the Federal Deposit Insurance Corporation (the
"FDIC"), the Missouri Division of Finance (the "Division of Finance") and any
other applicable bank regulatory or other governmental authorities and the
expiration of any waiting periods imposed by law, (ii) the date on which the
Shareholders of Sac River approve the Merger, (iii) the date on which
Bancshares, as the sole shareholder of Liberty, approves the Merger, and (iv)
the date on which all other conditions precedent to each party's obligations
hereunder shall have been satisfied and waived. The Closing shall be held at
such place as may be mutually agreed upon by the parties.
1.3 Effective Time. On or as soon as practicable after the Closing
Date, this Agreement (or, in lieu thereof, a separate merger agreement,
substantially in the form attached hereto as
2
<PAGE> 7
Exhibit "A", and made a part hereof by this reference (the "Merger Agreement")),
a copy of the minutes of the respective shareholders' meetings at which the
Merger was approved, with a copy of the approval of the Boards of Directors of
the Constituent Corporations, all certified and verified by the respective
secretaries of the meetings, shall be filed with the Division of Finance and in
and with such additional offices as required by RSMo. Section 362.700, and upon
such filing, the Merger shall be effective (the "Effective Time"). In the
event of any inconsistency between the Merger Agreement and this Agreement, the
terms of this Agreement shall control.
ARTICLE II
TERMS OF MERGER
2.1 Charter. The charter of Liberty in effect immediately prior to
the Effective Time shall be the charter of the Surviving Bank until otherwise
amended or repealed. The name of the Surviving Bank shall be Liberty Bank.
2.2 By-Laws. The By-Laws of Liberty in effect immediately prior to
the Effective Time shall be the By-Laws of the Surviving Bank until otherwise
amended or repealed.
2.3 Directors. The directors of Sac River and Liberty in office
immediately prior to the Effective Time, as listed on Exhibit "B" attached
hereto and made a part hereof by this reference, shall serve as the directors of
the Surviving Bank from and after the Effective Time in accordance with the
By-Laws of the Surviving Bank.
The directors of Sac River and Bancshares in office immediately prior
to the Effective Time, together with such additional persons as may thereafter
be elected, shall serve as the directors of Bancshares, from and after the
Effective Time, in accordance with the By-Laws of the Bancshares.
2.4 Officers. The officers of Bancshares in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the officers of Bancshares from and after
the Effective Time in accordance with the By-Laws of Bancshares. In addition,
Garry L. Robinson shall serve as the Executive Vice-President of Bancshares, in
accordance with the By-Laws of Bancshares.
The officers of Liberty in office immediately prior to the Effective
Time shall serve in the same capacities with the Surviving Bank from and after
the Effective Time in accordance with the By-Laws of the Surviving Bank. In
addition, Garry L. Robinson shall serve as the Executive Vice-President of the
Surviving Bank, and all current vice-presidents of Sac River shall serve as
vice-
3
<PAGE> 8
presidents of the Surviving Bank, in accordance with the By-Laws of the
Surviving Bank.
2.5 Principal Office. The business of the Surviving Bank shall be
conducted as its main office which shall be located at 1414 E. Primrose,
Springfield, Missouri, and its legally established branches, shall include all
of the existing locations of Sac River.
2.6 Capital Structure. As of the Effective Time of the Merger, the
amount of the capital stock of the Surviving Bank, surplus and undivided
profits, will be equal to the combined capital structures of Liberty and Sac
River as stated in the recitals of this Agreement, adjusted, however, for (i)
normal earnings and expenses between December 31, 1997 and the Effective Time of
the Merger (and, if applicable, purchase accounting adjustments), (ii) the
amount of the Mandatory Per Share Cash Amounts (as hereafter defined), Optional
Per Share Cash Amounts (as hereafter defined) (if any) and cash distributed in
lieu of fractional shares, and (iii) regular cash dividends paid by Sac River
and Liberty with respect to their capital stock between December 31, 1997 and
the Effective Time of the Merger. All assets as they exist at the Effective Time
of the Merger shall pass to and vest in the Surviving Bank without any
conveyance or other transfer. The Surviving Bank shall be responsible for all of
the liabilities of every kind and description of Sac River and Liberty existing
as of the Effective Time of the Merger.
ARTICLE III
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. As of the Effective Time, by virtue of
the Merger and without any action on the part of a Constituent Corporation, or
the shareholders of a Constituent Corporation, but subject to RSMo. Section
362.730 with respect to the rights of dissenting shareholders and subject to
adjustment as provided herein, the shares of the Constituent Corporations
shall be converted and exchanged as follows:
(a) Each share of common stock of Bancshares issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
(b) Each share of common stock of Liberty issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
(c) Each share of Sac River common stock issued and
outstanding at the Effective Time shall cease to be outstanding, and
shall be automatically cancelled and retired
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and shall cease to exist, and shall be converted into and exchanged for
the right to receive common stock of Bancshares, fully paid and
nonassessable, and cash from Bancshares, as follows:
(i) Cash in the amount of Four Hundred Eighty
Five Dollars & 70/100 ($485.70) per share (the "Mandatory Per
Share Cash Amount"). In no event shall the Mandatory Per Share
Cash Amounts exceed, in the aggregate, Four Million Eight
Hundred Fifty-Thousand Dollars ($4,857,000.00); and
(ii) At the election of the each shareholder of
Sac River, with respect to each share of common stock of Sac
River:
(A) Cash in the amount of One Thousand
Fifty Dollars ($1,050.00) per share (the " Optional
Per Share Cash Amount"); provided, however, that the
total cash payable by Bancshares with respect to the
Optional Per Share Cash Amount to all shareholders of
Sac River shall not exceed Two Million Eight Hundred
Thousand Dollars ($2,800,000.00), less cash
distributed in lieu of fractional shares (the
"Optional Cash Payment Limitation"); or
(B) The right to receive 35.516 shares
of common stock of Bancshares (the "Exchange Ratio").
3.2 Adjstments to Exchange Ratio. In the event Bancshares changes
the number of shares of Bancshares common stock issued and outstanding prior to
the Effective Time as a result of a stock split, stock dividend, or similar
recapitalization with respect to such stock and the record date therefore (in
the case of a stock dividend) or the effective date thereof (in the case of a
stock split or similar recapitalization for which a record date is not
established) shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted.
3.3 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Sac River common stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of Bancshares 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 such fractional part of a shares of Bancshares
common stock multiplied by the value of one share of Bancshares common stock at
the Effective Time. For purposes of this Agreement, the value of one share of
Bancshares common stock at the Effective Time shall be $29.56 (subject to
adjustment as provided in Section 3.2 hereof). No such holder shall be entitled
to
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dividends, voting rights, or any other rights as a shareholder in respect of
any fractional shares.
3.4 Election to Receive Optional Per Share Cash Amount. Elections
by shareholders of Sac River to receive Optional Per Share Cash Amounts shall be
made by mailing or delivering to the Exchange Agent (as defined below) the Form
of Election delivered to the shareholders of Sac River with the Proxy Statement
(as defined in Section 8.2 hereof). To be effective, a Form of Election must be
properly completed, signed and submitted by the shareholder no later than the
date of the special meeting of the shareholders of Sac River held to approve the
Merger (the "Election Deadline"). In the event the special shareholders meeting
is adjourned to a specified date no longer than ninety (90) days after such
adjournment, the Election Deadline shall be such specified date (the "Extended
Electing Deadline"). Sac River and Bancshares shall mail the Form of Election
with the Proxy Statement to all holders of Sac River common stock on the record
date of the Sac River special shareholders' meeting and shall make the Form of
Election available to all persons who become holders of Sac River common stock
subsequent to such day and no later than the close of business on the business
day prior to the Extended Election Deadline. All elections by shareholders to
receive Optional Per Share Cash Amounts may be revoked or amended until the
Extended Election Deadline. If no such election is filed by a Sac River
shareholder, no Optional Per Share Cash Amount shall be made to the shareholder,
and all of the Sac River shares held by the shareholder shall be exchanged for
Bancshares common stock in accordance with the Exchange Ratio (except for the
Mandatory Per Share Cash Amount) Each Sac River shareholder who does not vote in
favor of the Merger as of the Extended Election Deadline shall be deemed,
subject to the right hereinabove provided for amendment or revocation of the
election and subject to the provisions of Section 3.9 hereof, to have made an
election to receive Optional Per Share Cash Amounts with respect to his or her
shares, regardless of the actual Forms of Election submitted by said
shareholder.
3.5 Exchange Procedures. At the Closing, Bancshares shall deposit
with Husch & Eppenberger, LLC (the "Exchange Agent"), for the benefit of the
then holders of shares of Sac River common stock, certificates dated as of the
Closing Date representing the shares of Bancshares common stock, the cash to be
paid in lieu of fractional shares, the Optional Per Share Cash Amounts (if any),
and the Mandatory Per Share Cash Amounts (such cash and certificates of
Bancshares common stock, together with any dividend or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund") to be
issued and paid pursuant to Section 3.1 hereof in exchange for the outstanding
shares of Sac River common stock. Within five (5) business days after the
Closing Date, Bancshares shall cause the Exchange Agent to mail to each holder
of record as of the Closing Date of a Sac River certificate or certificates (i)
a letter of transmittal which will
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specify that delivery shall be effective, and risk of loss and title to the Sac
River certificate(s) shall pass, only upon delivery of the Sac River
certificate(s) to the Exchange Agent and which shall be in such form and have
such other provisions as Bancshares and Sac River may reasonably specify, and
(ii) instructions for use in effecting the surrender of the Sac River
certificate(s) in exchange for a certificate representing shares of Bancshares
common stock, cash to be paid in lieu of any fractional share, the Optional Per
Share Cash Amount (if any) and the Mandatory Per Share Cash Amount. Upon
surrender of a shareholder's Sac River certificate or certificates for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, the holder of such Sac River certificate(s) shall be entitled to
receive in exchange therefore, within ten (10) business days following said
surrender, (1) a certificate representing the applicable number of whole shares
of Bancshares common stock, and (2) a check representing the amount of the cash
to be paid in lieu of a fractional share, if any, the Optional Per Share Cash
Amount (if any) and the Mandatory Per Share Cash Amount, and the Sac River
certificate(s) so surrendered shall forthwith be cancelled; provided, however,
that any Sac River shareholder who does not vote in favor of the Merger shall
not be entitled to receive said cash earlier than sixty (60) days after the
Effective Time. Except for said shareholders (who, except as provided in Section
3.9 hereof, shall receive interest at the rate of 9% per annum during the period
of sixty (60) days following the Effective Time), no interest will be paid on
cash in lieu of fractional shares, the Optional Per Share Cash Amount (if any),
and the Mandatory Per Share Cash Amount. Any applicable stock transfer taxes
shall be paid by Bancshares. Adoption of this Agreement by the shareholders of
Sac River and Liberty shall constitute ratification of the appointment of the
Exchange Agent.
3.6 Rights of Former Sac River Shareholders. At the Effective Time,
the stock transfer books of Sac River shall be closed as to holders of Sac River
common stock immediately prior to the Effective Time and no transfer of Sac
River common stock by any such holder shall thereafter be made or recognized.
Until surrendered for exchange in accordance with the provisions of Section 3.5
hereof, each certificate theretofore representing shares of Sac River common
stock shall from and after the Effective Time represent for all purposes only
the right to receive the consideration provided in Section 3.1 hereof in
exchange therefore, subject, however, to Bancshares' obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which have been declared or made by Sac River in respect of such
shares of Sac River common stock in accordance with the terms of this Agreement
and which remain unpaid at the Effective Time. Whenever a dividend or other
distribution is declared by Bancshares on the Bancshares common stock, the
record date for which is at or after the Effective Time, the declaration shall
include dividends or other distributions on all shares of
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Bancshares common stock issuable pursuant to this Agreement, but beginning
thirty (30) days after the Effective Time no dividend or other distribution
payable to the holders of record of Bancshares common stock as of any time
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of Sac River common stock issued and outstanding
at the Effective Time until such holder surrenders such certificate (or an
affidavit in lieu thereof pursuant to Section 3.8 hereof) for exchange as
provided in Section 3.5 of this Agreement. However, upon surrender of Sac River
common stock certificate, both the Bancshares common stock certificate (together
with all such undelivered dividends or other distributions without interest) and
any undelivered dividends and cash payments payable thereunder (without
interest) shall be delivered and paid with respect to each share represented by
such certificate.
3.7 Termination of Exchange Fund. Any portion of the Exchange Fund
that remains unclaimed by the shareholders of Sac River for twelve (12) months
after the Closing Date shall be paid to Bancshares. Any shareholders of Sac
River who have not theretofore complied with this Article III shall thereafter
look only to Bancshares for payment of their shares of Bancshares common stock,
cash in lieu of any fractional share of Bancshares common stock, Optional Per
Share Cash Amount (if any) and Mandatory Per Share Cash Amount, without any
interest thereon. Notwithstanding the foregoing, neither the Exchange Agent nor
Bancshares shall be liable to any former holder of shares of Sac River common
stock for any amount properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar laws.
3.8 Lost or Destroyed Shares. In the event any Sac River
certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Sac River certificate to be
lost, stolen or destroyed and, if required by the Exchange Agent, the execution
and delivery of an indemnity agreement whereby said person shall agree to
indemnify the Exchange Agent and Bancshares against any claim which may be made
against it with respect to such Sac River certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Sac River certificate the
shares of Bancshares common stock and cash in an amount as determined in
accordance with Section 3.1 hereof, deliverable in respect thereof pursuant to
this Agreement.
3.9 Dissenters' Rights. Each issued and outstanding share of Sac
River common stock, the holder of which has validly asserted dissenters' rights
pursuant to RSMo. Section 362.730 and has not effectively withdrawn or lost such
rights, shall not be converted into or represent a right to receive the
consideration specified in Section 3.1 hereof, but the holder thereof shall be
entitled only to such rights as are granted by RSMo. Section 362.730. In the
event the holder of Sac River common stock validly asserts dissenter's rights
pursuant to RSMo. Section 362.730, any cash held by the Exchange Agent
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with respect to said shareholder's shares shall be paid by the Exchange Agent to
the Surviving Bank. Each shareholder entitled, pursuant to the provisions of
RSMo. Section 362.730, to payment for his or her shares of Sac River common
stock, shall receive payment therefore from the Surviving Bank (but only after
the amount thereof shall have been agreed upon or determined pursuant to
such provisions) and such shares of Sac River common stock shall be cancelled.
If any holder of shares of Sac River common stock who asserts dissenters'
rights under RSMo. Section 362.730 effectively withdraws or loses (through
failure to perfect or otherwise) such rights, each such share of Sac River
common stock shall be converted into the right to receive the consideration
specified in Section 3.1 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SAC RIVER
Sac River hereby represents and warrants to Liberty and Bancshares as
follows:
4.1 Organization, Standing, and Power. Sac River is a banking
corporation duly organized, validly existing, and in good standing under the
laws of the State of Missouri, and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Copies of the charter and by-laws of Sac River, as
certified by the secretary of Sac River, have heretofore been delivered to
Bancshares, and are complete and correct as of the date of this Agreement.
4.2 Subsidiaries. Sac River has no subsidiaries.
4.3 Capital Structure.
(a) As of the date hereof, the authorized capital stock of
Sac River consists of ten thousand (10,000) shares, of common stock,
par value $30.00 per share.
(b) As of the date hereof, ten thousand (10,000) shares
of common stock of Sac river are issued and outstanding, and no shares
of common stock are held in treasury.
(c) Except as set forth in the Sac River Disclosure Letter
(which is a letter delivered by Sac River to Bancshares within thirty
(30) days after the date hereof, the receipt of whereof to be
acknowledged by Bancshares, and which identifies, as to each matter
disclosed therein, the Section of this Agreement to which the matter
relates), as of the date hereof, Sac River has not issued any
outstanding bonds, debentures, notes or other indebtedness having the
right to vote (or convertible into securities having the right to vote)
on any matters on which shareholders may vote ("Voting Debt").
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All outstanding shares of Sac River capital stock are validly issued,
fully paid and non-assessable and not subject to or issued in violation
of any preemptive rights, and there are no options, warrants, calls,
rights, or agreements of any character whatsoever to which Sac River is
a party or by which it is bound obligating Sac River to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of
its capital stock or Voting Debt or obligating Sac River to grant,
extend or enter into any such option, warrant, call, right, or
agreement. Immediately after the Effective Time, there will be no
option, warrant, call, right or agreement obligating Sac River to
issue, deliver or sell, or cause to be issued, delivered or sold, any
shares of its capital stock or Voting Debt or obligating Sac River to
grant, extend or enter into any such option, warrant, call, right or
agreement.
(d) Sac River has not purchased, redeemed, cancelled or
otherwise acquired any of its capital stock or Voting Debt during the
two (2) years preceding the date hereof, and there are no obligations,
contingent or otherwise, of Sac River to repurchase, redeem or
otherwise acquire any shares of its capital stock or Voting Debt.
(e) As of December 31, 1997, Sac River had capital of
$11,140,000.00, divided into ten thousand (10,000) shares of common
stock, surplus of $500,000.00, and undivided profits, including capital
reserves, of $10,315,000.00, and net unrealized holding gains on
available-for-sale securities of $25,000.00.
4.4 Authority.
(a) Sac River has all requisite corporate power and
authority necessary to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery, and performance of this Agreement, and
the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Sac River, subject
to the approval of this Agreement by the Board of Directors and the
holders of two-thirds (2/3) of the outstanding shares of Sac River
common stock, which is the only shareholder vote required for approval
of this Agreement and consummation of the Merger by Sac River. This
Agreement has been duly executed and delivered by Sac River, and
constitutes a valid and binding obligation of Sac River enforceable in
accordance with its terms, subject to such requisite Board of Directors
and shareholder approval and compliance with the provisions of RSMo.
Sections 362.610 to 362.810, inclusive (the "Missouri Bank Merger
Laws"), the Securities Act of 1933 (the "Securities Act"), the
Securities Exchange Act of 1934 (the "Exchange
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Act"), and the securities or "blue sky" laws of the various states
(collectively the "Securities Laws") and consents, authorizations or
approvals required from regulatory authorities.
(b) The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated herein, will not,
conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or
the loss of a benefit under, or the creation of a lien, pledge,
security interest or other encumbrance on assets (any such conflict,
violation, default, right of termination, cancellation or acceleration
loss or creation, a "Violation"), pursuant to the provisions of (i) the
charter or by-laws of Sac River, or (ii) any loan or credit agreement,
note, mortgage, indenture, lease, Sac River Benefit Plan (as
hereinafter defined) or other agreement, obligation, instrument,
permit, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Sac River, or its
properties or assets, which Violation would have a material adverse
effect on the business, operations, prospects or financial condition of
Sac River (a "Sac River Material Adverse Effect").
4.5 Financial Statements.
(a) The statement of financial condition of Sac River as
of December 31, 1997, and the related statements of income, cash flow
and shareholder's equity for the period ending December 31, 1997 (the
"Sac River Latest Statement Date"), in the form prepared for Sac
River's internal use, copies which have been furnished by Sac River to
Bancshares, and the statement of financial condition of Sac River, as
of March 31, 1998, and the related statements of income, cash flow and
shareholder's equity for the three (3) months then ended, in the form
prepared for Sac River's internal use, copies of which have been
furnished by Sac River to Bancshares (collectively the "Sac River
Financial Statements") have been prepared in accordance with generally
accepted accounting principles as utilized in the Sac River Financial
Statements applied on a consistent basis (except as may be indicated
therein or in the notes thereto), and present fairly the financial
position of Sac River, at the dates and results of operations, changes
in shareholder's equity and cash flows for the periods stated therein.
In the case of interim fiscal periods, all adjustments, consisting only
of normal reoccurring items, which management of Sac River believes
necessary for a fair presentation of such financial information, have
been made, subject to year end audit
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adjustments, none of which could reasonably be expected to have a Sac
River Material Adverse Effect.
(b) Except as and to the extent set forth in the statement
of financial condition of Sac River as of March 31, 1998, or in the
notes thereto, Sac River has no liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would
be required to be reflected on a statement of financial condition, or
in the notes thereto, prepared in accordance with generally accepted
accounting principles, except (i) for liabilities or obligations
incurred in the ordinary course of business since the Sac River Latest
Statement Date that would not, individually or in the aggregate, have a
Sac River Material Adverse Effect, or (ii) as otherwise reflected in
the Sac River Reports (as defined below) filed prior to the date of
this Agreement. Except as set forth in the Sac River Disclosure Letter,
Sac River has no liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that are not required to be
reflected on a balance sheet, or in the notes thereto, except for
liabilities or obligations that do not, individually or in the
aggregate, have a Sac River Material Adverse Effect.
(c) Without limitation to the foregoing, Sac River's
allowance for loan losses included in the Sac River Financial
Statements as of March 31, 1998, was $854,231.02. To the knowledge of
sac River, the amount of such allowance for loan losses was adequate to
absorb reasonably expected losses in the loan portfolio of Sac River.
To the knowledge of Sac River, there are no facts which would cause it
to increase the level of such allowance for loan losses. To the
knowledge of Sac River, the documentation relating to loans made by Sac
River and relating to all security interests, mortgages and other liens
with respect to all collateral for such loans, taken as a whole is
adequate for the enforcement of the material terms of such loans and of
the related security interests, mortgages and other liens, except as
enforcement may be limited by bankruptcy or similar laws or principles
of equity. To the knowledge of Sac River, the terms of such loans and
of the related security interests, mortgages and other liens comply in
all material respects with all applicable laws, rules and regulations
(including laws, rules and regulations relating to the extension of
credit). Except as set forth in the Sac River Disclosure Letter, (i) as
of March 31, 1998, there are no loans, leases, other extensions of
credit or commitments to extend credit of Sac River that have been or
should be, in accordance with generally accepted accounting principles,
classified by Sac River as non-accrual, as restructured, as ninety days
past due, as still accruing and doubtful of collection or any
comparable classification, and (ii) Sac River has provided Bancshares
true, correct and
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complete in all material respects, such written information concerning
the loan portfolio of Sac River as requested. Notwithstanding any
provision in this Section 4.5(c) to the contrary, Sac River makes no
representation or warranty with respect to the collectability of any
loan.
4.6 Reports. Sac River has filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that were or are required to be filed with (i) the FDIC, (ii) the
Division of Finance, and (iii) any other applicable federal or state agencies or
bank authorities (all such reports and statements are collectively referred to
herein as the "Sac River Reports"). As of their respective dates, the Sac River
Reports filed prior to the date hereof complied in all material respects with
all of the statutes, rules and regulations enforced or promulgated by any
regulatory authority which they are 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 were made, not misleading.
4.7 Authorizations; Compliance With Applicable Laws.
(a) Sac River holds all authorizations, permits, licenses,
variances, exemptions, orders and approvals of all governmental
entities which are material to the operations of its business (the "Sac
River Permits"). All such Sac River Permits are in full force and
effect as of the Closing Date, and Sac River is in compliance with the
terms of the Sac River Permits, except where the failure to so comply
could not reasonably be expected to have a Sac River Material Adverse
Effect. Except as disclosed in the Sac River Reports filed prior to the
date of this Agreement or in the Sac River Disclosure Letter, the
business of Sac River is not deemed, and has not been, conducted in
violation of any domestic (federal, state or local) law, statute,
ordinance or regulation of any governmental entity (collectively
"Laws") except for possible violations which individually or in the
aggregate do not and, insofar as reasonably can be foreseen, in the
future will not, have a Sac River Material Adverse Effect. Except as
set forth in the Sac River Disclosure Letter, as of the date hereof, no
investigation or review by any governmental entity with respect to Sac
River is pending or, to the knowledge of Sac River, threatened, nor has
any governmental entity indicated an intention to conduct the same. The
deposits of Sac River are insured by the FDIC to the extent provided by
law.
(b) The Sac River Disclosure Letter identifies each parcel of
real estate currently owned, leased or otherwise possessed or
controlled by Sac River on the date of this Agreement, including real
estate owned as a result of
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foreclosure and properties managed or controlled by Sac River in
connection with its lending or fiduciary obligations (collectively, the
"Sac River Property"). Except as set forth in the Sac River Disclosure
Letter, to the knowledge of Sac River, none of the Sac River Property
owned or leased by Sac River for use in the operation of its business
is in violation of any applicable zoning ordinance or other law,
regulation or requirement relating to operation of any properties used,
including, without limitation, applicable federal, state and local
laws, rules and regulations relating to the environment or to human
health and safety associated with the environment (collectively
"Environmental Laws"), other than violations that, in the aggregate,
would not have a Sac River Material Adverse Effect; and Sac River has
not received any notice of any such violation, or the existence of any
condemnation proceeding with respect to any Sac River Property. Except
as set forth in the Sac River Disclosure Letter, to the knowledge of
Sac River, no Toxic Substances (as defined below) have been deposited
or disposed in, on or under any Sac River Property during the period in
which Sac River has owned, occupied, managed, controlled or operated
such properties, except to the extent the same would not have a
Material Adverse Effect. Except as set forth in the Disclosure Letter,
to Sac Rivers' knowledge, no portion of the Sac River Property has ever
been used as a dump or gasoline service station by any person,
including past owners, occupants and operators of such properties. To
the knowledge of Sac River, there are no underground or aboveground
storage tanks (whether or not currently in use) located on or under the
Sac River Property, and no underground tank previously located on the
Sac River Property has been removed therefrom. To the knowledge of Sac
River, there are no conditions or circumstances in connection with the
Sac River Property that could reasonably be anticipated to (i) cause
any Sac River Property to be subject to any restrictions on ownership,
occupancy, use or transferability under any applicable Environmental
laws, or (ii) materially reduce the value of any Sac River Property. To
the knowledge of Sac River, Sac River has not been identified as a
potentially responsible party in a matter arising under any
Environmental Laws. For purposes of this Agreement, (1) "Toxic
Substances" shall mean petroleum or petroleum based substance or waste,
solid waste, PCBs, pesticides, herbicides, lead, radioactive materials,
asbestos or asbestos containing materials, ureaformaldehyde foam
installation, or substances defined as "hazardous substances" or "toxic
substances" in any Environmental Laws, and (2) materials will be
considered to be deposited or disposed in, on or under any real
property if such materials have been stored, treated, recycled, used or
accidentally or intentionally spilled, released, dumped, emitted, or
otherwise placed, deposited or disposed of, or used in any
construction, in, on or under such property.
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4.8 Litigation and Claims. Except as disclosed in the Sac River
Reports filed prior to the date of this Agreement or in the Sac River Disclosure
Letter:
(a) Sac River is not subject to any continuing order of, or
written agreement or memorandum or understanding with any federal or
state banking or insurance authority or other governmental entity, or
any judgment, order, writ, injunction, decree or award of any
governmental entity or arbitrator, including, without limitation,
cease-and-desist or other orders of any banking authority,
(b) There is no action, suit, litigation, proceeding or
arbitration against or affecting Sac River, or to the knowledge of Sac
River, any directors, officers, employees or agents of Sac River (in
their respective capacities as directors, officers, employees or
agents) pending or, to the knowledge of Sac River, threatened, which
would, if adversely determined, have a Sac River Material Adverse
Effect or, to the knowledge of Sac River, any basis therefore, and
(c) There are no uncured material violations, or violations
with respect to which material refunds or restitutions may be required,
cited in any compliance report to Sac River as a result of the
examination by any bank regulatory authority.
4.9 Taxes. Sac River has filed all tax returns required to be filed by
it and has paid or has set up an adequate reserve for the payment of, all taxes
required to be paid as shown on such returns, except to the extent such
nonpayment did not result in a Sac River Material Adverse Effect. The most
recent Sac River financial statements contained in the Sac River Reports reflect
an adequate reserve for all taxes payable by Sac River accrued to the date of
such financial statements. The Sac River Disclosure Letter sets forth, as of the
date hereof, the following information with respect to Sac River:
(a) Whether there is an examination pending by the Internal
Revenue Service ("IRS") with respect to Sac River and, if so, the tax
years involved,
(b) Whether Sac River has executed or filed with the IRS any
agreement which is still in effect extending the period for assessment
and collection of any federal tax, and if so, the tax years covered by
such agreement and the expiration of such extension, and
(c) Whether there are any existing material disputes as to
state or local taxes.
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There are no liens for taxes upon the assets of Sac River,
except for statutory liens for taxes not yet delinquent or the validity
of which is being contested in good faith by appropriate proceedings
and, in either case, only if adequate reserves therefor have been
established on Sac River's books in accordance with generally accepted
accounting principals. Except as disclosed in the Sac River Disclosure
Letter, Sac River is not a party to any action or proceeding by any
governmental authority for assessment and collection of taxes, and no
claim for assessment and collection of taxes has been asserted against
it. For purposes of this Agreement, the term "tax" shall include all
federal, state and local income, profits, franchise, gross receipts,
payroll, sales, employment, use, personal and real property,
withholding, excise and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions
imposed with respect to such amounts. Sac River has withheld from its
employees (and timely paid to the appropriate governmental agency)
amounts which are proper and accurate in all material respects for all
periods through the date hereof in material compliance with all tax
withholding provisions of applicable federal, state and local laws
(including, without limitation, income, social security and employment
tax withholding for all types of compensation).
4.10 Certain Agreements. Except as discussed in the Sac River
Reports filed prior to the date of this Agreement or as disclosed in the Sac
River Disclosure Letter, and except for this Agreement, Sac River is not a party
to any oral or written (i) consulting or employment agreement or other agreement
providing any term of employment, compensation guarantee, or severance benefit,
(ii) union or collective bargaining agreement, (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
option or stock purchase plan, any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of the transactions
contemplated by this Agreement, (iv) contract, agreement or understanding to
repurchase assets previously sold (or to indemnify or otherwise compensate the
purchaser in respect of such assets) (other than contracts entered into in the
ordinary course of business,), (v) contract containing covenants which limit the
liability of Sac River to compete in any line of business or with any person or
which involve any restriction of the geographical area in which, or method by
which, Sac River may carry on its business (other than as may be required by law
for applicable regulatory authorities), (vi) any contract, agreement or other
instrument or undertaking which is not terminable by Sac River without
additional payment or penalty within sixty (60) days and obligates Sac River for
payments or other consideration for a value in excess of $10,000.00, other than
loan agreements entered
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into in the ordinary course of business, or (vii) other executory material
agreement. Except as set forth in the Sac River Disclosure Letter, Sac River is
not in Violation of any loan or credit agreement, note, mortgage, indenture or
other agreement, obligation or instrument applicable to Sac River or its
properties or assets, except for any such Violations that would not,
individually or in the aggregate, have a Sac River Material Adverse Effect.
4.11 Benefit Plans.
(a) The Sac River Disclosure Letter lists (i) each employee
bonus, incentive, deferred compensation, stock purchase, stock
appreciation right, stock option, fringe benefit and severance pay
plan, (ii) each pension, profit sharing, stock bonus, thrift, savings
and employee stock ownership plan, (iii) each health, welfare,
disability, vacation, leave, perquisite or executive plan, program,
policy or practice, and (iv) every other employee benefit plan (within
the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (collectively "Sac River Benefit
Plans"), which Sac River maintains or to which Sac River contributes on
behalf of current or former employees. Except as disclosed in the Sac
River Disclosure Letter, to the knowledge of Sac River, all of the Sac
River Benefit Plans listed in the Sac River Disclosure Letter comply
with all applicable requirements of the Internal Revenue Code, ERISA
and all other applicable federal and state laws and regulations,
including, without limitation, the reporting and disclosure
requirements of ERISA. Each of the Sac River Benefit Plans that is
intended to be a pension, profit sharing, stock bonus, thrift, savings
or employee stock ownership plan that is qualified under Code
Section 401(a), has been determined by the IRS to so qualify under Code
Section 401(a), and, except as disclosed in the Sac River Disclosure
Letter, to the knowledge of Sac River, there exists no circumstances
that would adversely affect the qualified status of any Sac River
Benefit Plan under that Section. Except as set forth in the Sac River
Disclosure Letter, there is no pending or, to the knowledge of Sac
River, threatened litigation, governmental proceeding or investigation
against or relating to any Sac River Benefit Plan, and to the
knowledge of Sac River there is no reasonable basis for any material
proceedings, claims, actions or proceedings against Sac River, any Sac
River Benefit Plan, or any fiduciary of any Sac River Benefit Plan.
Except as set forth in the Sac River Disclosure Letter, neither Sac
River nor any party in interest (as defined in Section 3(14) of ERISA
and Code Section 4975(e)) nor any Sac River Benefit Plan has engaged
in a "prohibited transaction" (as defined in Section 406 of ERISA and
Code Section 4975(c)) since the date on which said Sections became
applicable to such Plan, and no Sac River Benefit Plan has engaged in
a transaction
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involving the purchase or sale of employer securities by such Plan
from or to a "disqualified person" (within the meaning of Code Section
4975), other than pursuant to an exemption provided therein. All Sac
River Benefit Plans that are group health plans, within the meaning of
Code Section 4980B or Section 601 of ERISA, have been operated in
material compliance with the group health plan continuation coverage
requirements of Code Section 4980B and Section 601 of ERISA to the
extent such requirements are applicable.
(b) There has been no amendment to, written interpretation
of, or announcement (whether or not written) relating to, or any change
in employee participation or coverage under, any Sac River Benefit Plan
that is not reflected in the text of such Sac River Benefit Plan which
would materially increase the expense (whether or not such expense is
recognized under generally accepted accounting principles) to the
employer whose employees are covered by such Sac River Benefit Plan.
Except as expressly provided by applicable law or the terms of a Sac
River Benefit Plan, no condition exists that would prevent the
amendment or termination of any Sac River Benefit Plan with respect to
any employee. All employee and employer contributions with respect to
employees which are due and owing as of the Closing Date pursuant to
the Sac River Benefit Plans have been made or will be accrued on the
Closing Date Financial Statements and, except for such accrued
liabilities, there are as of the Closing Date no other liabilities of
Sac River with respect to the Sac River Benefit Plans.
(c) Sac River has delivered to Bancshares copies of (i) each
Sac River Benefit Plan or if no plan document exists, a written
summary of the material terms thereof, (ii) current summary plan
descriptions of each Sac River Benefit Plan for which they are
required, (iii) each trust agreement, insurance policy or other
instrument relating to the funding of any Sac River Benefit Plan, (iv)
the most recent Annual Reports (Form 5500 Series) and accompanying
schedules filed with the IRS or the United States Department of Labor
with respect to each Sac River Benefit Plan for which they are
required, (v) the most recent determination letter issued by the IRS
with respect to each Sac River Benefit Plan that is intended to
qualify under Code Section 401, (vi) the most recent available
financial statements for each Sac River Benefit Plan that has assets,
and (vii) the most recent audited financial statements for each Sac
River Benefit Plan for which audited financial statements are required
by ERISA.
(d) The Sac River Disclosure Letter describes any obligation
that Sac River has to provide health and welfare benefits to retirees
or other former employees or their dependents (other than rights
arising solely under Section 601
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of ERISA or Code Section 4980B) including information as to the number
of retirees, other former employees and dependents entitled to
such coverage and their ages.
4.12 Insurance. Sac River is presently insured, and during each of
the past five calendar years has been insured, for reasonable amounts with
financially sound and reputable insurance companies against such risks as, to
the knowledge of Sac River, companies engaged in the similar business would, in
accordance with good business practice, customarily be insured. Sac River does
not have any liability for material unpaid premiums or premium adjustments not
properly reflected on the Sac River Financial Statements and no notice of
cancellation or termination has been received by Sac River with respect to any
material insurance policy currently in effect. Within the last five years,
except as disclosed in the Sac River Disclosure Letter, Sac River has not been
refused any insurance with respect to any assets or operations, nor has any
coverage been limited in any material respect as to any assets or operations, by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance during the last five years.
4.13 Absence of Certain Changes or Events. Except as disclosed in
the Sac River Reports filed prior to the date of this Agreement or in the Sac
River Disclosure Letter, and except as contemplated by this Agreement, from and
after January 1, 1998 through the date of this Agreement:
(a) Sac River has carried on its business in the ordinary
and usual course consistent with past practices;
(b) Sac River has not amended its charter;
(c) Sac River has not issued or sold any of its capital
stock, or issued or sold any corporate debt securities or otherwise
incurred debt which would be classified as long term debt on its
balance sheet;
(d) Sac River has not granted any option for the purchase of
its capital stock, effected any stock split, or otherwise changed its
capitalization;
(e) Sac River has not declared, set aside, or paid a dividend
or other distribution in respect of its capital stock, other than its
normal 1998 cash dividend in the amount of not more than $80.00 per
share with usual record and payment dates (except as otherwise provided
herein), or, directly or indirectly, redeemed or otherwise acquired any
of its capital stock;
(f) Sac River has not (i) incurred any material obligations
or liability (absolute or contingent), except
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obligations or liabilities incurred in the ordinary course of business,
or (ii) mortgaged, pledged, or subjected to lien, claim, security
interest, charge, encumbrance or restriction any of its assets or
properties;
(g) Sac River has not discharged or set aside any material
lien, mortgage, pledge, claim, security interest, charge, encumbrance,
or restriction or paid any material obligation or liability (absolute
or contingent), other than in the ordinary course of business;
(h) Sac River has not sold, assigned, transferred, leased,
exchanged, or otherwise disposed of, other than in the ordinary course
of business, any of its properties or assets;
(i) Sac River has not increased the rate of compensation of,
or paid any bonus to, any of its directors or officers, except merit or
promotion increases in accordance with existing policy; entered into
any new, or amended or supplemented any existing, employment,
management, consulting, deferred compensation, severance, or other
similar contract not heretofore provided to Bancshares; adopted,
entered into, terminated, amended or modified any Sac River Benefit
Plan in respect of any of its present or former directors, officers or
other employees; or agreed to any of the foregoing;
(j) Sac River has not suffered any material damage,
destruction or loss as a result of fire, accident, casualty, labor
trouble, or taking of property by any government or any agency of any
government, flood, or other similar or dissimilar casualty or event or
otherwise, and whether or not covered by insurance;
(k) Sac River has not cancelled or compromised any debt to
the extent exceeding $10,000.00 owed to Sac River or claim to an extent
exceeding $10,000.00 asserted by Sac River;
(l) Sac River has not entered, or agreed to enter, into any
agreement or arrangement granting any right of refusal or other
preferential right to purchase any of its material assets, properties
or rights or requiring the consent of any party to the transfer or
assignment of any such material assets, properties or rights;
(m) There has not been any other transaction, commitment,
dispute or other event or condition of any character (whether or not in
the ordinary course of business) individually or in the aggregate
having or which, insofar as reasonably can be foreseen, in the future
is reasonably likely to have, a Sac River Material Adverse Effect; and
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(n) There has not been any change in the method of accounting
or accounting practices of Sac River, except as may be required by law
or generally accepted accounting principles. Except as set forth in the
Sac River Disclosure Letter, Sac River has no knowledge of the
announced or anticipated resignation of any executive officer or key
employee of Sac River. From and after the date of the latest Sac River
Financial Statement, through the date of this Agreement, no customers
of Sac River have indicated to Sac River that they will stop or
decrease the rate of business done with Sac River (except for changes
in the ordinary course of business) such as to, individually or in the
aggregate, have a Sac River Material Adverse Effect.
4.14 Properties, Leases and Other Agreements. Except as may be
reflected in the Sac River Financial Statements, for any lien for current taxes
not yet delinquent, for pledges to secure deposits and for such other liens,
security interests, claims, charges, options or other encumbrances or
imperfections of title which do not materially affect the value of personal or
real property reflected in the Sac River Financial Statements or acquired since
the date of such Financial Statements and which do not materially interfere with
or impair the present and continued use of such property, Sac River has good
title, free and clear of any liens, security interests, claims, charges, options
or other encumbrances, to all of the personal and real property reflected in the
Sac River Financial Statements, and all real and personal property acquired
since the date of such Statements, except such real and personal property as has
been disposed of in the ordinary course of business. The Sac River Disclosure
Letter lists all acquisitions or dispositions of capital assets planned as of
the date of this Agreement by Sac River, other than individual transactions with
a value not in excess of $50,000.00 each. Substantially all of Sac River's
buildings and equipment in regular use (including such buildings and equipment
as are leased) have been well maintained and are in good and serviceable
condition, reasonable wear and tear excepted. The Sac River Disclosure Letter
contains a brief description, including terms, of each lease for real or
personal property to which Sac River is a party. Sac River, as lessee, has a
valid and existing leasehold interest under each of such leases, true and
correct copies of which Sac River has delivered to Bancshares. There is not,
under any of such leases relating to real property or any other material leases,
any material existing default by Sac River, or, to the knowledge of Sac River,
any other party thereto, or any event with notice or lapse of time or both would
constitute such a material default.
4.15 Votes Required. The affirmative vote of holders of two-thirds
of the outstanding shares of Sac River common stock is the only vote of the
holders of any class of Sac River capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
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4.16 Tax Matters. Sac River, to its knowledge, has not taken or
agreed to take any action which would prevent the Merger from qualifying as one
or more reorganizations under Code Section 368(a)(1).
4.17 Regulatory Impediments. As of the date hereof, Sac River is
unaware of the existence of any factor that would materially delay or materially
hinder the issuance of any of the required regulatory approvals necessary to
consummate the Merger or the other transactions contemplated hereby, other than
any protest by any non-governmental parties.
4.18 Full Disclosure. The representation and warranties of Sac River
contained in this Agreement do not omit any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to Sac River which has not
been disclosed to Bancshares pursuant to this Agreement, the Sac River
Disclosure Letter and the Sac River Reports, all taken as a whole, which would
reasonably be expected to have a Sac River Material Adverse Effect on the
ability of Bancshares or Sac River to consummate the transactions contemplated
hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BANCSHARES AND LIBERTY
Bancshares and Liberty hereby represent and warrant to Sac River as
follows:
5.1 Organization, Standing and Power. Bancshares is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Missouri, and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Liberty is a banking corporation duly organized, validly existing, and in good
standing under the laws of the State of Missouri, and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Copies of the charters and by-laws
of Bancshares and Liberty, as certified by their respective secretaries, have
heretofore been delivered to Sac River, and are complete and correct as of the
date of this Agreement.
5.2 Subsidiaries. Bancshares owns all of the issued and outstanding
shares of Liberty. Bancshares has no other subsidiaries. All of the shares of
capital stock of Liberty owned by Bancshares are fully paid and non-assessable,
and are owned by it free and clear of any claim, lien, encumbrance or agreement
with respect thereto.
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5.3 Capital Structure.
(a) As of the date hereof, the authorized capital stock
of Bancshares consists of 5,000,000 shares of common stock, par value
$1.00 per share (as approved by the shareholders of Bancshares on May
19, 1998). As of the date hereof, the authorized capital stock of
Liberty consists of 34,000 shares of common stock, par value $50.00 per
share.
(b) As of the date hereof, 511,090 shares of common stock of
Bancshares are issued and outstanding. As of the date hereof, 34,000
shares of common stock of Liberty are issued and outstanding, all of
which are held by Bancshares, and no shares of common stock of Liberty
are held in treasury.
(c) Except as set forth in the Bancshares Disclosure Letter
(which is a letter delivered by Bancshares to Sac River within thirty
(30) days after the date hereof, the receipt whereof to be acknowledged
by Sac River, and which identifies, as to each matter disclosed
therein, the Section of this Agreement to which the matter relates), as
of the date hereof, Bancshares has not issued any outstanding bonds,
debentures, notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote) on any matters on
which shareholders may vote ("Voting Debt"). All outstanding shares of
Bancshares capital stock are validly issued, fully paid and
non-assessable and not subject to or issued in violation of any
preemptive rights, and there are no outstanding options, warrants,
calls, rights, commitments or agreements of any character whatsoever to
which Bancshares or Liberty is a party or by which it is bound
obligating Bancshares or Liberty to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or any
Voting Debt securities of Bancshares or Liberty or obligating
Bancshares or Liberty to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. The shares of Bancshares
common stock to be issued pursuant to or as specifically contemplated
by this Agreement will be validly issued, fully paid and non-assessable
and not subject to preemptive rights.
(d) Bancshares has not purchased, redeemed, cancelled or
otherwise acquired any of its capital stock or Voting Debt, except as
disclosed in the Bancshares Disclosure Letter, and there are no
obligations, contingent or otherwise, of Bancshares to repurchase,
redeem or otherwise acquire any shares of its capital stock or Voting
Debt.
(e) As of December 31, 1997, Liberty had capital of
$7,603,000.00, divided into 34,000 shares of common stock, surplus of
$5,592,000.00, and undivided profits, including capital reserves, of
$311,000.00.
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5.4 Authority. Bancshares has all requisite corporate power and
authority to enter into this Agreement and the Merger and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Bancshares. This Agreement has been duly executed and delivered by Bancshares
and, subject to appropriate Board of Directors and shareholder approval and
compliance with the Missouri Bank Merger Laws and Securities Laws and consents,
authorizations and approvals from regulatory authorities, constitutes a valid
and binding obligation of Bancshares enforceable in accordance with its terms.
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby will not, result in any Violation pursuant
to any provision of (a) the articles of incorporation, charter or by-laws of
Bancshares or Liberty or (b) any loan or credit agreement, note, mortgage,
indenture, lease, Benefit Plan maintained by Bancshares or other agreement,
obligation, instrument, permit, franchise, license, judgment, order, decree,
statute, law ordinance, rule or regulation applicable to Bancshares or Liberty
or their respective properties or assets, which Violation pursuant to this
clause (b) would have a material adverse effect on the business, operations,
prospects or financial condition of Bancshares and Liberty taken as a whole (a
"Bancshares Material Adverse Effect"). Other than in connection or in compliance
with the provisions of The General and Business Corporation Law of Missouri (the
"Missouri General Corporation Law"), the Missouri Bank Merger Laws, the
Securities Laws, and consents, authorizations, approvals, notices of exemptions
required from the FDIC, the Division of Finance, or under the federal Bank
Holding Company Act ("BHC Act"), no consent, approval, order or authorization
of, or registration, declaration or filing with, any governmental entity is
required on the part of Bancshares or Liberty in connection with the execution
and delivery of this Agreement or the consummation by Bancshares or Liberty of
the transactions contemplated hereby and thereby, the failure to obtain which
would have a Bancshares Material Adverse Effect.
5.5 Bancshares Financial Statements.
(a) The consolidated balance sheets of Bancshares and Liberty
as of December 31, 1997 and the related consolidated statements of
income, consolidated statements of cash flows and consolidated
statements of stockholders' equity for the period ended December 31,
1997 (the "Bancshares Latest Statement Date") accompanied by the
unqualified opinion of Baird, Kurtz & Dobson, copies of which have been
furnished by Bancshares to Sac River; and the unaudited consolidated
balance sheet of Bancshares and Liberty as of March 31, 1998 and the
related consolidated statement of income, consolidated statement of
cash flows and consolidated statement of stockholders' equity for the
three (3) months then ended in
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the form prepared for Bancshares internal use, copies of which have
been furnished by Bancshares to Sac River (collectively, the
"Bancshares Financial Statements"), have been prepared in accordance
with generally accepted accounting principles as utilized in the
Bancshares Financial Statements applied on a consistent basis (except
as may be indicated therein or in the notes thereto), and present
fairly the consolidated financial condition of Bancshares and Liberty
at the dates, and the consolidated results of operations, changes in
stockholders' equity and cash flows for the periods, stated therein. In
the case of interim fiscal periods, all adjustments, consisting only of
normal recurring items, which management of Bancshares believes
necessary for a fair presentation of such financial information, have
been made, subject to year-end audit adjustments, none of which could
reasonably be expected to have a Bancshares Material Adverse Effect.
(b) Except as and to the extent set forth on the consolidated
balance sheets of Bancshares and Liberty, as of March 31, 1998, or in
the notes thereto, neither, Bancshares nor Liberty has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on a balance sheet,
or in the notes thereto, prepared in accordance with generally accepted
accounting principles, except (i) for liabilities or obligations
incurred in the ordinary course of business since the Bancshares Latest
Statement Date that would not, individually or in the aggregate, have a
Bancshares Material Adverse Effect; or (ii) as otherwise reflected in
the Bancshares Reports (as defined below) filed prior to the date of
this Agreement. Except as disclosed in the Bancshares Disclosure
Letter, neither Bancshares nor Liberty has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise) that are not required to be reflected on a balance sheet, or
in the notes thereto, except for liabilities or obligations that do
not, individually or in the aggregate, have a Bancshares Material
Adverse Effect.
(c) Without limitation to the foregoing, Bancshares'
consolidated allowance for the losses on loans included in the
Bancshares Financial Statements as of March 31, 1998 was $573,800.00.
To the knowledge of Bancshares, the amount of such allowance for losses
on loans was adequate to absorb reasonably expectable losses in the
loan portfolio of Liberty. To the knowledge of Bancshares, there are no
facts which would cause it to increase the level of such allowance for
losses on loans. To the knowledge of Bancshares, the documentation
relating to loans made by Liberty and relating to all security
interests, mortgages and other liens with respect to all collateral for
such loans, taken as a whole, is adequate for the enforcement of the
material terms of such loans and of the related security interests,
mortgages and other liens, except
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as enforcement may be limited by bankruptcy or similar laws or
principles of equity. To the knowledge of Bancshares, the terms of such
loans and of the related security interests, mortgages and other liens
comply in all material respects with all applicable laws, rules and
regulations (including laws, rules and regulations relating to the
extension of credit). Except as set forth in the Bancshares Disclosure
Letter, (i) as of March 31, 1998, there are no loans, leases, other
extensions of credit or commitments to extend credit of Liberty that
have been or should be, in accordance with generally acceptable
accounting principles, classified by Liberty as non-accrual, as
restructured, as ninety (90) days past due, as still accruing and
doubtful of collection or any comparable classification; and (ii)
Bancshares has provided to Sac River true, correct and complete in all
material respects such written information concerning the loan
portfolios of Liberty as Sac River has requested. Notwithstanding any
provision in this Section 5.5(c) to the contrary, Liberty makes no
representation or warranty with respect to the collectability of any
loan.
5.6 Reports. Bancshares and Liberty have filed all reports
registrations and statements, together with any amendments required to be made
with respect thereto, that were and are required to be filed with (i) the
Federal Reserve Board (i) the Division of Finance, (iii) the FDIC and (iv) any
other applicable federal or state banking authorities (all such reports and
statements are collectively referred to herein as the "Bancshares Reports"). As
of their respective dates, the Bancshares Reports filed prior to the date hereof
complied and will comply in all material respects with all of 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 were made, not misleading.
5.7 Authorizations; Compliance with Applicable Laws.
(a) Bancshares and the Liberty hold all authorizations,
permits, licenses, variances, exemptions, orders and approvals of all
governmental entities which are material to the operation of the
businesses of Bancshares and Liberty taken as a whole (the "Bancshares
Permits"). All such Bancshares Permits are in full force and effect as
of the Closing Date, and Bancshares and Liberty are in compliance with
the terms of the Bancshares Permits, except where the failure so to
comply could not reasonably be expected to have a Bancshares Material
Adverse Effect. Except as disclosed in the Bancshares Reports filed
prior to the date of this Agreement or the Bancshares Disclosure
Letter, the businesses of Bancshares and Liberty are not being
conducted in violation of any Laws, except for
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possible violations which individually or in the aggregate do not, and,
insofar as reasonably can be foreseen, in the future will not, have a
Bancshares Material Adverse Effect. Except as set forth in the
Bancshares Disclosure Letter, as of the date hereof, no investigation
or review by a governmental entity with respect to Bancshares or to
Liberty that would cause a Bancshares Material Adverse Effect is
pending or, to the knowledge of Bancshares, threatened, nor has any
governmental entity indicated an intention to conduct the same. The
deposits of Liberty are insured by the FDIC to the extent provided by
law.
(b) The Bancshares Disclosure Letter identifies each parcel
of real estate currently owned, leased or otherwise possessed or
controlled by Bancshares or Liberty on the date of this Agreement,
including real estate owned as a result of foreclosure and properties
managed/or controlled by Liberty in connection with its lending or
fiduciary obligations (collectively the "Bancshares Property"). Except
as set forth in the Bancshares Disclosure Letter, to Bancshares'
knowledge, none of the Bancshares Property owned or leased by them for
use in the operation of their respective businesses is in violation of
any applicable zoning ordinance or other law, regulation or
requirements relating to the operation of any properties used,
including, without limitation, applicable federal, state, and local
laws, rules and regulations relating to the environment or to human
health and safety associated with the environment (collectively
"Environmental Laws"), other than violations that, in the aggregate
with any other conditions described in this Section 5.7(b), would not
have a Bancshares Material Adverse Effect; and neither Bancshares nor
Liberty has receive any notice of any such violation, or the existence
of any condemnation proceeding with respect to any Bancshares Property.
Except as set forth in the Bancshares Disclosure Letter, to the
knowledge of Bancshares, no Toxic Substances have been deposited or
disposed of in, on or under any Bancshares Property during the period
in which Bancshares or Liberty has owned, occupied, managed, controlled
or operated such properties, except to the extent the same, in the
aggregate with any other conditions described in this Section 5.7(b)
would not have a Bancshares Material Adverse Effect. Except as set
forth in the Bancshares Disclosure Letter, to Bancshares' knowledge, no
portion of the Bancshares Property has ever been used as a dump or
gasoline service station by any person, including past owners,
occupants and operators of such properties. To the knowledge of
Bancshares, there are no underground or above ground storage tanks
(whether or not currently in use) located on or under the Bancshares
Property, and no underground tanks previously located on the Bancshares
Property has been removed therefrom. To the knowledge of Bancshares,
there are no conditions or circumstances in connection with the
Bancshares Property that
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could reasonably be anticipated to (i) cause any Bancshares Property to
be subject to any restrictions on ownership, occupancy, use or
transferability under any applicable Environmental Laws; or (ii)
materially reduce the value of any Bancshares Property. To the
knowledge of Bancshares or Liberty, neither Bancshares nor Liberty has
been identified as a potentially responsible party in a matter arising
under any Environmental Laws.
5.8 Litigation and Claims. Except as disclosed in the Bancshares
Reports filed prior the date of this Agreement or in the Bancshares Disclosure
Letter, (a) neither Bancshares nor Liberty nor any Bancshares Property is
subject to any continuing order of, or written agreement or memorandum of
understanding with any federal or state banking or insurance authority or other
governmental entity, or any judgment, order, writ, injunction, decree or award
of any governmental entity or arbitrator, including, without limitation,
cease-and-desist or other orders of any banking authority; (b) there is no
action, suit, litigation, proceeding or arbitration against or affecting
Bancshares or Liberty, to the knowledge of Bancshares, any directors, officers,
employees or agents of Bancshares or Liberty (in their respective capacities as
directors, officers, employees or agents) pending or, to the knowledge of
Bancshares, threatened, which would, if adversely determined, have a Bancshares
Material Adverse Effect or, to the knowledge of Bancshares, any basis therefor;
and (c) there are no uncured material violations, or violations with respect to
which material refunds or restitutions may be required, cited in any compliance
report to Bancshares or Liberty as a result of the examination of any bank
regulatory authority.
5.9 Taxes. Bancshares and Liberty have filed all tax returns
required to be filed by them and have paid or has set up an adequate reserve
for the payment of all taxes required to be paid by them, except to the extent
which nonpayment did not result in a Bancshares Material Adverse Effect. The
most recent Bancshares financial statements contained in the Bancshares Reports
reflect an adequate reserve for all taxes payable by Bancshares and Liberty
accrued to the date of such financial statements. The Bancshares Disclosure
Letter sets forth, as of the date hereof, the following information with respect
to Bancshares and Liberty: (a) whether there is an examination pending by the
IRS with respect to such corporation and, if so, the tax years involved; (b)
whether such corporation has executed or filed with the IRS any agreement which
is still in effect extending the period for assessment and collection of any
federal tax and, if so, the tax years covered by such agreement and the
expiration date of such extension; and (c) whether there are any existing
material disputes as to state or local taxes. There are no liens for taxes upon
the assets of Bancshares or Liberty, except for statutory liens for taxes not
yet delinquent or the validity of which is being contested in good faith by
appropriate proceedings and, in either case, only if
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adequate reserves therefor have been established on Bancshares' books in
accordance with generally accepted accounting principles. Except as disclosed in
the Bancshares Disclosure Letter, neither Bancshares nor Liberty is a party to
any action or proceeding by any governmental authority for assessment and
collection of taxes, and no claim for assessment and collection of taxes has
been asserted against any of them. Bancshares and Liberty have withheld from
their employees (and timely paid to the appropriate governmental agency) amounts
which are proper and accurate in all material respects for all periods through
the date hereof in material compliance with all tax withholding provisions of
applicable federal, state, and local laws (including without limitation income,
social security and employment tax withholding for all types of compensation).
5.10 Certain Agreements. Except as discussed in the Bancshares
Reports filed prior to the date of this Agreement or as disclosed in the
Bancshares Disclosure Letter, and except for this Agreement and the agreements
expressly contemplated hereby, neither Bancshares nor Liberty is a party to any
oral or written (i) consulting or employment agreement or other agreement
providing any term of employment, compensation guarantee, or severance benefit,
(ii) union or collective bargaining agreement, (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
option or stock purchase plan, any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of the transactions
contemplated by this Agreement, (iv) any contract, agreement or other instrument
or undertaking which is not terminable by Bancshares without additional payment
or penalty within sixty (60) days and obligates Bancshares or Liberty for
payments or other consideration for a value in excess of Ten Thousand Dollars
($10,000.00), other than loan agreements entered into in the ordinary course of
business, (v) contract, agreement or understanding to repurchase assets
previously sold (or to indemnify or otherwise compensate the purchaser in
respect to such assets) (other than repurchase agreements entered into in the
normal course of business); (vi) contract containing covenants which limit the
liability of Bancshares or Liberty to compete in any line of business or with
any person or which involve any restriction of the geographical area in which,
or method by which, Bancshares or Liberty, as applicable, may carry on its
business (other than as may be required by law or applicable regulatory
authorities); or (vii) other executory material agreement. Except as set forth
in the Bancshares Disclosure Letter, neither Bancshares nor Liberty is in
Violation of any loan or credit agreement, note, mortgage, indenture or other
agreement, obligation or instrument applicable to Bancshares or Liberty or their
respective properties or assets, except for any such Violations that would not,
individually or in the aggregate, have a Bancshares Material Adverse Effect.
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5.11 Benefit Plans.
(a) The Bancshares Disclosure Letter lists (i) each
employee bonus, incentive, deferred compensation, stock purchase, stock
appreciation right, stock option, fringe benefit and severance pay
plan, (ii) each pension, profit sharing, stock bonus, thrift, savings
and employee stock ownership plan, (iii) each health, welfare,
disability, vacation, leave, perquisite or executive plan, program,
policy or practice, and (iv) every other employee benefit plan (within
the meaning of Section three (3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (collectively "Bancshares
Benefit Plans") which Bancshares or Liberty maintains or to which
Bancshares or Liberty contributes on behalf of current or former
employees. Except as disclosed in the Bancshares Disclosure Letter, to
the knowledge of Bancshares, all of the Bancshares Benefit Plans listed
in the Bancshares Disclosure Letter comply with all applicable
requirements of the Internal Revenue Code, ERISA and all other
applicable federal and state laws and regulations, including, without
limitation, the reporting and disclosure requirements of ERISA. Each of
the Bancshares Benefit Plans which is intended to be a pension, profit
sharing, stock bonus, thrift, savings or employee stock ownership plan
that is qualified under Code Section 401(a) has been determined by the
IRS who so qualify under Code Section 401(a), and, except as disclosed
in the Bancshares Disclosure Letter, to the knowledge of Bancshares,
there exists no circumstances that would adversely affect the qualified
status of any such Bancshares Benefit Plan under that Section. Except
as set forth in the Bancshares Disclosure Letter, there is no pending
or, to the knowledge of Bancshares, threatened litigation, governmental
proceeding or investigation against or relating to any Bancshares
Benefit Plan, and to the knowledge of Bancshares there is no reasonable
basis for any material proceedings, claims, actions or proceedings
against Bancshares, Liberty, any Bancshares Benefit Plan, or any
fiduciary of any Bancshares Benefit Plan. Except as set forth in the
Bancshares Disclosure Letter, neither Bancshares, Liberty nor any party
in interest (as defined in Section 3(14) of ERISA and Code Section
4975(e)) nor any Bancshares Benefit Plan has engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA and Code Section
4975(c)), and no Bancshares Benefit Plan has engaged in a transaction
involving the purchase or sale of employer securities by such Plan from
or to a "disqualified person" (within the meaning of Code Section
4975), other than pursuant to an exemption provided therein. All
Bancshares Benefit Plans that are group health plans, within the
meaning of Code Section 4980B or Section 601 of ERISA, have been
operated in material compliance with the group health plan continuation
coverage requirements of Code
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Section 4980B and Section 601 of ERISA to the extent such requirements
are applicable.
(b) There has been no amendment to, written interpretation
of, or announcement (whether or not written) relating to, or any change
in employee participation or coverage under, any Bancshares Benefit
Plan that is not reflected in the text of the Bancshares Benefit Plan
which would materially increase the expense (whether or not such
expense is recognized under generally accepted accounting principles)
to the employer whose employees are covered by such Bancshares Benefit
Plan. Except as expressly provided by applicable law where the terms of
a Bancshares Benefit Plan, no condition exists that would prevent the
amendment or termination of any Bancshares Benefit Plan with respect to
any employee. All employee and employer contributions with respect to
employees which are due and owing as of the Closing Date pursuant to
the Bancshares Benefit Plans have been made or will be accrued on the
Closing Date Financial Statements and, except for such accrued
liabilities, there are as of the Closing Date no other liabilities of
Bancshares or Liberty with respect to the Bancshares Benefit Plans.
(c) Bancshares has delivered to Sac River copies of (i) each
Bancshares Benefit Plan or if no plan document exists, a written
summary of the material terms thereof, (ii) current summary plan
descriptions of each Bancshares Benefit Plan for which they are
required, (iii) each trust agreement, insurance policy or other
instrument relating to the funding of any Bancshares Benefit Plan, (iv)
the most recent Annual Reports (Form 5500 Series) and accompanying
schedules filed with the IRS or the United States Department of Labor
with respect to each Bancshares Benefit Plan for which they are
required, (v) the most recent determination letter issued by the IRS
with respect to each Bancshares Benefit Plan that is intended to
qualify under Code Section 401, (vi) the most recent available
financial statements for each Bancshares Benefit Plan that has assets,
and (vii) the most recent audited financial statements for each
Bancshares Benefit Plan for which audited financial statements are
required by ERISA.
(d) The Bancshares Disclosure Letter describes any obligation
that Bancshares or Liberty has to provide health and welfare benefits
to retirees or other former employees or their dependents (other than
rights arising solely under Section 601 of ERISA or Code Section 4980B)
including information as to the number of retirees, other former
employees and dependents entitled to such coverage and their ages.
5.12 Insurance. Bancshares and Liberty are presently insured for
reasonable amounts with financially sound and reputable
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insurance companies against such risks as, to the knowledge of Bancshares,
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. Neither Bancshares nor Liberty has any
liability for material unpaid premiums or premium adjustments not properly
reflected on the Bancshares Financial Statements and no notice of cancellation
or termination has been received by Bancshares or Liberty with respect to any
material insurance policy currently in effect. Except as disclosed in the
Bancshares Disclosure Letter, neither Bancshares nor Liberty has been refused
any insurance with respect to any assets or operations, nor has any coverage
been limited in any material respect as to any assets or operations, by any
insurance carrier to which it has applied for any such insurance or with which
it has carried insurance.
5.13 Absence of Certain Changes or Events. Except as disclosed in
the Bancshares Reports filed prior to the date of this Agreement or in the
Bancshares Disclosure Letter, and except as contemplated by this Agreement, from
and after January 1, 1998 through the date of this Agreement: (a) Bancshares and
Liberty have conducted their respective businesses only in the ordinary and
usual course consistent with past practice, (b) neither Bancshares nor Liberty
have amended their respective charters, (c) Bancshares has not granted any
option for the purchase of its capital stock, effected any stock split, or
otherwise changed its capitalization, (d) Bancshares has not declared, set aside
or paid any dividend or other distribution in respect to any of its capital
stock, (e) neither Bancshares, nor Liberty has issued or sold any of its capital
stock, or issued or sold any corporate debt securities or otherwise incurred
debt which would be classified as long term on the balance sheet, (f) Bancshares
has not (i) incurred any material obligations or liability (absolute or
contingent), except obligations or liabilities incurred in the ordinary course
of business, or (ii) mortgaged, pledged, or subjected to lien, claim, security
interest, charge, encumbrance or restriction any of its assets or properties,
(g) Bancshares has not discharged or set aside any material lien, mortgage,
pledge, claim, security interest, charge, encumbrance, or restriction or paid
any material obligation or liability (absolute or contingent), other than in the
ordinary course of business (h) Bancshares has not sold, assigned, transferred,
leased, exchanged, or otherwise disposed of, other than in the ordinary course
of business, any of its properties or assets, (i) Bancshares has not increased
the rate of compensation of, or paid any bonus to, any of its directors or
officers, except merit or promotion increases in accordance with existing
policies; entered into any new, or amended or supplemented any existing,
employment, management, consulting, deferred compensation, severance, or other
similar contract not heretofore provided to Sac River; adopted, entered into,
terminated, amended or modified any Bancshares Benefit Plan in respect to any of
its present or former directors, officers or other employees; or agreed to any
of the foregoing, (j) Bancshares has not suffered any material damage,
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destruction or loss as a result of fire, accident, casualty, labor trouble, or
taking of property by any government or any agency of any government, flood, or
other similar or dissimilar casualty or event or otherwise, and whether or not
covered by insurance (k) neither Bancshares nor Liberty has cancelled or
compromised any debt to the extent exceeding Ten Thousand Dollars ($10,000.00)
owed to Bancshares or Liberty or claim to an extent exceeding Ten Thousand
Dollars ($10,000.00) asserted by Bancshares or Liberty, (l) neither Bancshares
nor Liberty has entered, or agreed to enter, into any agreement or arrangement
granting any right of refusal or other preferential right to purchase any of its
material assets, properties or rights or requiring the consent of any party to
the transfer or assignment of any such material assets, properties or rights,
(n) there has not been any transaction, commitment, dispute or other event or
condition of any character (whether or not in the ordinary course of business)
individually or in the aggregate having or which, insofar as reasonably can be
foreseen, in the future is reasonably likely to have, a Bancshares Material
Adverse Effect (m) there has not been any material change in the method of
accounting or accounting practices of Bancshares and Liberty, except as required
by law or generally accepted accounting principles. Except as set forth in the
Bancshares Disclosure Letter, Bancshares has no knowledge of the announced or
anticipated resignation of any executive officer or key employee of Bancshares
or Liberty. From and after the date of the latest Bancshares Financial
Statement, through the date of this Agreement, no customers of Liberty have
indicated to Liberty that they will stop or decrease the rate of business done
with Liberty (except for changes in the ordinary course of business) such as to,
individually or in the aggregate, have a Bancshares Material Adverse Effect.
5.14 Properties, Leases and Other Agreements. Except as may be
reflected in the Bancshares Financial Statements, for any lien for current taxes
not yet delinquent, for pledges to secure deposits and for such other liens,
security interests, claims, charges, options or other encumbrances and
imperfections of title which do not materially affect the value of personal or
real property reflected in the Bancshares Financial Statements or acquired since
the date of such Financial Statements and which do not materially interfere with
or impair the present and continued use of such property, Bancshares and Liberty
have good title, free and clear of any liens, security interests, claims,
charges, options or other encumbrances, to all of the personal and real property
reflected in the Bancshares Financial Statements, and all personal and real
property acquired since the date of such Statements, except such personal and
real property as has been disposed of in the ordinary course of business. The
Bancshares Disclosure Letter lists all acquisitions or dispositions of capital
assets planned as of the date of this Agreement by Bancshares or Liberty, other
than individual transactions with a value not in excess of $50,000.00 each.
Substantially all Bancshares' and
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Liberty's buildings and equipment in regular use (including such buildings and
equipment as are leased) have been well maintained and are in good and
serviceable condition, reasonable wear and tear excepted. The Bancshares
Disclosure Letter contains a brief description, including terms, of each lease
for real or personal property to which Bancshares or Liberty is a party.
Bancshares or Liberty, as lessee, has a valid and existing leasehold interest
under each of such leases, true and correct copies of which Bancshares has
delivered to Sac River. There is not, under any of such leases relating to real
property or any other material leases, any material existing default by
Bancshares, Liberty or, to the knowledge of Bancshares, any other party thereto,
or any event with notice or lapse of time or both would constitute such a
material default.
5.15 Vote Required. The affirmative vote of holders of two-thirds
(2/3) fof the outstanding shares of Liberty common stock is the only
vote of the holders of Liberty common stock necessary to approve the
Agreement and the transactions contemplated hereby.
5.16 Tax Matters. To the knowledge of Bancshares, neither Bancshares
nor any of its affiliates has through the date hereof taken or agreed to take
any action that would prevent the Merger from qualifying as one or more
reorganizations under Code Section 368(a)(1).
5.17 Regulatory Impediments. As of the date hereof, Bancshares is
unaware of the existence of any factor that would materially delay or materially
hinder the issuance of any of the required regulatory approvals necessary to
consummate the Merger or the other transactions contemplated hereby, other than
any protests by an nongovernmental parties.
5.18 Full Disclosure. The representations and warranties of
Bancshares contained in this Agreement do not omit any material fact necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading. There is no fact known to Bancshares which
has not been disclosed to Sac River pursuant to this Agreement, the Bancshares
Disclosure Letter and the Bancshares Reports, all taken together as a whole,
which would reasonably be expected to have a Bancshares Material Adverse Effect
or a material adverse effect on the ability of Bancshares or Sac River to
consummate the transactions contemplated hereby.
ARTICLE VI
COVENANTS OF SAC RIVER
6.1 Affirmative Covenants. Sac River hereby covenants and agrees
with Liberty and Bancshares that prior to the Effective Time or until the
earlier termination or abandonment of this Agreement in accordance with its
terms, unless the prior written consent of
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Liberty shall have been obtained (which consent shall not be unreasonably
withheld) and except as otherwise contemplated herein, it will:
(a) operate its business only in the usual, regular and
ordinary course consistent with past practices;
(b) preserve substantially intact its business organization
and assets (except for acquisitions and dispositions of assets in the
ordinary course of business consistent with past practices, unless
otherwise required by the terms of this Agreement), and maintain its
rights and franchises, and use its reasonable best efforts to retain
the services of its officers and key employees (except that it shall
have the right to terminate the employment of any officer or key
employee in accordance with established employment procedures) and
maintain its relationships with customers;
(c) maintain its corporate existence in good standing and
maintain all books and records in accordance with accounting principals
and practices as utilized in the Sac River Financial Statements
supplied on a consistent basis, except as may be required to implement
changes in the generally accepted accounting principles;
(d) maintain and keep its properties in as good repair and
condition as at present, except for depreciation due to ordinary wear
and tear;
(e) keep in full force and effect, insurance and bonds
comparable in amount and scope of coverage to that now maintained by
it;
(f) perform in all material respects all obligations required
to be performed by it under all material contracts, leases, and
documents relating to or affecting its assets, properties, and
business; and
(g) conduct its business in a manner but does not violate any
Laws, except for possible violations which individually or in the
aggregate do not, and, insofar as reasonably can be foreseen, in the
future will not, have a Sac River Material Adverse Effect.
6.2 Negative Covenants. Except as specifically contemplated by this
Agreement, from the date hereof unto the Effective Time, Sac River shall not do,
without the prior written consent of Bancshares (which shall not be unreasonably
withheld), any of the following:
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(a) incur any material liabilities or material obligations,
whether directly or by way of guaranty, including any obligation for
borrowed money whether or not evidenced by a note, bond, debenture or
similar instrument, except in the ordinary course of business
consistent with past practice;
(b) (i) grant any general increase in compensation to its
employees as a class, or to its officers or directors, except in
accordance with past practice or as required by law, or increases which
are not material, (ii) effect any change in retirement benefits to any
class of employees or officers (unless any such change shall be
required by applicable law) which would increase its retirement benefit
liabilities, (iii) adopt, enter into, amend or modify any Benefit Plan,
or (iv) enter into or amend any employment, severance or similar
agreements or arrangements with any directors or officers or former
directors or officers;
(c) declare or pay any dividend on, or make any other
distribution in respect to its outstanding shares of capital stock,
except its normal 1998 cash dividend not to exceed $80.00 per share,
with usual record and payment dates (provided, however, that the normal
dividend payable in December, 1998, may be paid immediately prior to
the Effective Date, if the Effective Date occurs prior to normal
December dividend payment date);
(d) (i) redeem, purchase or otherwise acquire any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options,
warrants, conversion or other rights to acquire any shares of its
capital stock or any such securities or obligations; (ii) merge with or
into any other corporation or bank, permit any other corporation or
bank to merge into it or consolidate with, any other corporation or
bank, or effect any reorganization or recapitalization; (iii) purchase
or otherwise acquire any substantial portion of the assets, or more
than 5% of any class of stock, of any corporation, bank, or other
business; (iv) liquidate, sell dispose of, or encumber any assets or
acquire any assets, except in the ordinary course of its business
consistent with past practice; or (v) split, combine or reclassify any
of its capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock;
(e) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale of, any shares of
its capital stock of any class (including shares held in treasury), any
Voting Debt or any securities convertible into, or any rights, warrants
or options to
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acquire, any such shares, Voting Debt or convertible securities;
(f) propose or adopt any amendments to its charter or by-laws
in any way adverse to Bancshares or Liberty;
(g) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in
principle with respect to any acquisition of a material amount of
assets or securities or any release or relinquishment of any material
contract rights not in the ordinary course of business;
(h) with respect to properties leased by Sac River, renew,
exercise an option to extend, cancel or surrender any lease of real
property or allow any such lease to lapse, without prior consultation
with Liberty;
(i) change any of its methods of accounting in effect at
December 31, 1997, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year
ending December 31, 1997, except as may be required by law or generally
accepted accounting principles;
(j) take action which would or is reasonably likely to (i)
adversely affect the ability of Sac River, Bancshares or Liberty to
obtain any necessary approvals of governmental authorities required for
the transactions contemplated hereby; (ii) adversely affect Sac River's
ability to perform its covenants and agreements under this Agreement;
or (iii) result in any of the conditions to the Merger set forth in
Article VIII hereof not being satisfied;
(k) change the lending, investment, liability management and
other material policies concerning the banking business of Sac River,
unless required by Law or order or unless such change does not cause a
Sac River Material Adverse Effect;
(l) (A) make, or agree to make, any loan or increase any
existing loan to any one borrower, (1) in the amount of $250,000.00; or
(2) would result in the aggregate indebtedness of said borrower to be
in excess of $500,000.00, unless said loan is made pursuant to a
properly documented and legally enforceable commitment of Sac River to
the borrower made prior to the date of this Agreement; (B) make or
agree to make, any new loan or advance on any existing loan, except of
in conformity with Sac River's current loan policies; (C) make any
change with respect to the terms of any existing loan, except in the
ordinary course of business; or (D) make or commit to make any further
advances on any loan which is
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either in default or classified, whether such classification is a
result of a federal or state bank regulatory examination or internal
classification of substandard or lower by Sac River's officers or
directors, unless Sac River is under a legal obligation to do so. With
respect to any Bancshares consent required by this Section 6.2(l),
Bancshares shall provide advice of its consent within three business
days after Bancshares has received the request for consent and
accompanying information necessary for Bancshares to consider the
request (the provisions of part A of this section shall not apply to
renewals of existing loans, advances under existing loans or increases
to existing loans for an amount below the applicable limits set forth
in part A);
(m) purchase any equity securities not in the ordinary course
of business; or
(n) agree in writing or otherwise to do any of the foregoing.
6.3 Access and Information. Except where prohibited by law, upon
reasonable prior notice, Sac River shall afford to Bancshares' officers,
employees, accountants, counsel and other representatives, access, from time to
time during normal business hours during the period prior to the Effective
Time, to all books, papers and records relating tot he assets, stock,
properties, operations, obligations and liabilities of Sac River, including
without limitation all books of account, tax records, minute books of
directors' and stockholders' meetings, contracts and agreements, filings with
any regulatory authority, accountants' work papers, litigation files (other
than attorney work product or materials protected by any attorney-client
privilege), documents relating to assets and title thereto, plans affecting
employees, securities transfer records and stockholder lists, and any books,
papers and records relating to other assets, business activities or prospects
in which Bancshares may have a reasonable interest, including without
limitation, its interest in planning for integration and transition with
respect to the business of Sac River. During such period, Sac River will cause
one or more of its representatives to confer on a regular and frequent basis
with representatives of Liberty, to report on the general status of its ongoing
operations and to consult as to the making of any decisions or the taking of
any actions in matters other than in the ordinary course of business. During
such period, Sac River shall, except where prohibited by law, furnish promptly
to Bancshares (i) Sac River Report filed or received by it during such period
pursuant to the requirements of any federal or state banking laws promptly
after such documents are available, (ii) the monthly financial statements of
Sac River (as prepared by Sac River in accordance with its normal accounting
procedures) promptly after such financial statements are available, (iii) a
summary of any action taken by the Board of Directors, or any committee
thereof,
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of Sac River, (iv) minutes of the Sac River Board of Directors meetings and the
reports of management of Sac River customarily provided to its Board of
Directors, and (v) all other information concerning its business, properties and
personnel as Bancshares may reasonably request. During such period, Sac River
shall instruct its officers, employees, counsel and accountants to be available
for, and respond to any questions of Bancshares' officers, employees,
accountants, counsel and other representatives at reasonable hours and with
reasonable notice by Bancshares to such individuals, and to cooperate fully with
Bancshares in planning for the integration of the business of Sac River with the
business of Bancshares and Liberty.
6.4 Update Disclosure; Breaches.
(a) From and after the date hereof until the Effective Time,
Sac River shall promptly, but not less frequently than monthly, update
the Sac River Disclosure Letter by notice to Bancshares to reflect any
matters which have occurred from and after the date hereof which, if
existing on the date hereof, would have been required to be described
therein; provided, however, that no such update shall affect the
conditions to the obligation of Bancshares to consummate the
transactions contemplated hereby, except as provided herein, and any
and all changes reflected in any such update shall be considered in
determining whether such conditions have been satisfied.
(b) Sac River shall, in the event it becomes aware of the
impending or threatened occurrence of any event or condition which
would cause or constitute a material breach (or would have caused or
constituted a breach had such even occurred or been known prior to the
date hereof) of any of its representations or agreements contained or
referred to herein of which would cause any of the conditions to the
obligations of any party set forth in Article IX hereof not to be
satisfied, give prompt written notice thereof to Bancshares and use its
best efforts to prevent or promptly remedy the same.
6.5 Tax Treatment. Sac River will use its best efforts to cause the
Merger to qualify as one or more reorganizations under Code Section 368(a)(1).
6.6 Dissent Process. Sac River will give to Bancshares prompt
notice of its receipt of any written notice relating to the exercise of
dissenters' rights granted under RSMo. ss.362.730, including the name of the
dissenting stockholder and the number of shares of stock to which the dissent
relates. Bancshares will have the right to participate in all negotiations and
proceedings with the Sac River stockholders relating to any such notice or the
exercise of such rights, and except as required by law, Sac River will not make
any payment with respect to, or settle or offer to
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settle, any dissent demands without the prior written consent of Bancshares.
6.7 Expenses.
(a) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including all fees and expenses of
counsel, accountants, experts and consultants to the party and its
affiliates) incurred by a party or on its behalf in connection with the
consummation of the transactions contemplated by this Agreement.
(b) Except as otherwise provided herein or by law, all
Expenses incurred by Bancshares and Sac River in connection with or
related to the authorization, preparation and execution of this
Agreement and the Merger, the solicitation of stockholder approvals and
all other matters related to the closing of the transactions
contemplated hereby, including all fees and expenses of agents,
representatives, counsel and accountants employed by either such party
or its affiliates, shall be borne solely and entirely by the party
which has incurred the same, except that Bancshares shall pay the
expense of printing the S-4 and the Proxy Statement (as defined below)
and the expense of all SEC and other regulatory filing incurred in
connection herewith.
6.8 Delivery of Shareholder Lists. Sac River shall deliver to
Bancshares or its designee, from time to time prior to the Closing Date, a true
and complete list setting forth the names and addresses of all its shareholders
of record, their holdings of such stock as of the latest practicable date, and
such other shareholder information as is reasonably available that Bancshares
may reasonably request.
6.9 Shareholder Meetings. Sac River shall call a special meeting of
its shareholders for the purpose of voting upon the Merger and related matters,
and deliver notice of such meeting, as part of the Proxy Statement (as defined
below) to Sac River shareholders in accordance with applicable law. Sac River
shall coordinate and cooperate with Bancshares with respect to the timing of
such meeting and shall use its best efforts to hold such meeting as soon as
practicable after the date hereof, and in compliance with the Missouri Bank
Merger Laws. Unless otherwise required by law, Sac River shall not, at such
shareholders' meeting, submit any other matter for approval of its shareholders
(except with the prior written consent of Bancshares). Sac River will (i)
recommend to its shareholders approval of such matters, (ii) not withdraw,
modify or amend such recommendation, and (iii) use its best efforts to obtain
such shareholder approval.
6.10 Processing Contracts. As soon as reasonably practicable after
the approval of this Agreement by the Board of Directors of
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Sac River, Sac River will give notice to the other parties under such of Sac
River's agreements for credit card and merchant processing services and data
processing services as Bancshares may designate as to the intended termination
of such parties' respective agreements as soon as reasonably practicable after,
and contingent on, the Merger. Sac River will cooperate with Bancshares in using
its best efforts to minimize any termination penalties under such agreements.
ARTICLE VII
COVENANTS OF LIBERTY AND BANCSHARES
7.1 Affirmative Covenants. Liberty and Bancshares hereby covenant
and agree with Sac River that prior to the Effective Time, unless the prior
written consent of Sac River shall have been obtained (which consent shall not
be unreasonably withheld) and except as otherwise contemplated herein, they
will:
(a) operate their business only in the usual, regular and
ordinary course consistent with past practices;
(b) preserve substantially intact their business organization
and assets (except for acquisitions and dispositions of assets in the
ordinary course of business consistent with past practices unless
otherwise required by the terms of this Agreement), and maintain their
rights and franchises, and use their reasonable best efforts to retain
the services of their officers and key employees (except that they
shall have the right to terminate the employment of any officer or key
employee in accordance with established employment procedures) and
maintain their relationships with customers.
(c) maintain their corporate existence in good standing and
maintain all books and records in accordance with accounting principles
and practices as utilized in the Bancshares and Liberty Financial
Statements applied on a consistent basis, except as may be required to
implement changes in generally accepted accounting principles;
(d) maintain and keep their properties in as good repair and
condition as at present, except for depreciation due to ordinary wear
and tear;
(e) keep in full force and effect, insurance and bonds
comparable in amount and scope of coverage to that now maintained by
them;
(f) perform in all material respects all obligations required
to be performed by them under all material contracts,leases, and
documents relating to or affecting their assets, properties, and
business; and
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(g) conduct their business in a manner that does not violate
any Laws, except for possible violations which individually or in the
aggregate do not, and, insofar as reasonably can be foreseen, in the
future will not, have a Bancshares Material Adverse Effect.
7.2 Negative Covenants. Except as specifically contemplated by this
Agreement, from the date hereof until the Effective Time, Liberty and Bancshares
shall not do, or agree or commit to do, without the prior written consent of Sac
River (which shall not be unreasonably withheld) any of the following:
(a) incur any material liabilities or material obligations,
whether directly or by way of guaranty, including any obligation for
borrowed money whether or not evidenced by a note, bond, debenture or
similar instrument, except in the ordinary course of business
consistent with past practice;
(b) (i) grant any general increase in compensation to its
employees as a class, or to its officers or directors, except in
accordance with past practice or as required by law, or increases which
are not material, (ii) effect any change in retirement benefits to any
class of employees or officers (unless any such change shall be
required by applicable law) which would increase its retirement benefit
liabilities, (iii) adopt, enter into, amend or modify any Benefit Plan,
or (iv) enter into or amend any employment, severance or similar
agreements or arrangements with any directors or officers or former
directors or officers;
(c) declare or pay any dividend on, or make any other
distribution in respect to its outstanding shares of capital stock,
except normal cash dividends declared and paid by Liberty to
Bancshares;
(d) (i) redeem, purchase or otherwise acquire any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options,
warrants, conversion or other rights to acquire any shares of its
capital stock or any such securities or obligations; (ii) merge with or
into any other corporation or bank, permit any other corporation or
bank to merge into it or consolidate with, any other corporation or
bank, or effect any reorganization or recapitalization; (iii) purchase
or otherwise acquire any substantial portion of the assets, or more
than 5% of any class of stock, of any corporation, bank, or other
business; (iv) liquidate, sell dispose of, or encumber any assets or
acquire any assets, except in the ordinary course of its business
consistent with past practice; or (v) except as provided herein, split,
combine or reclassify any of its capital stock or issue or authorize or
propose the
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issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock;
(e) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale of, any shares of
its capital stock of any class (including shares held in treasury), any
Voting Debt or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, Voting Debt or convertible
securities;
(f) propose or adopt any amendments to its charter or by-laws
in any way adverse to Sac River or Liberty;
(g) authorize, recommend, propose or announce an intention
to authorize, recommend or propose, or enter into an agreement in
principle with respect to any acquisition of a material amount of
assets or securities or any release or relinquishment of any material
contract rights not in the ordinary course of business;
(h) with respect to properties leased by Liberty or
Bancshares, renew, exercise an option to extend, cancel or surrender
any lease of real property or allow any such lease to lapse, without
prior consultation with Sac River;
(i) change any of its methods of accounting in effect at
December 31, 1997, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year
ending December, 1997, except as may be required by law or generally
accepted accounting principles;
(j) take action which would or is reasonably likely to (i)
adversely affect the ability of Sac River, Bancshares or Liberty to
obtain any necessary approvals of governmental authorities required for
the transactions contemplated hereby; (ii) adversely affect Bancshares'
or Liberty's respective ability to perform its covenants and agreements
under this Agreement; or (iii) result in any of the conditions to the
Merger set forth in Article VIII hereof not being satisfied;
(k) change the lending, investment, liability management and
other material policies concerning the banking business of Liberty,
unless required by Law or order or unless such change does not cause a
Bancshares Material Adverse Effect;
(l) (A) make, or agree to make, any loan or increase any
existing loan to any one borrower, (1) in the amount of $250,000.00; or
(2) would result in the aggregate indebtedness of said borrower to be
in excess of $500,000.00, unless said
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loan is made pursuant to a properly documented and legally enforceable
commitment of Liberty to the borrower made prior to the date of this
Agreement; (B) make or agree to make, any new loan or advance on any
existing loan, except of in conformity with Liberty's current loan
policies; (C) make any change with respect to the terms of any existing
loan, except in the ordinary course of business; or (D) make or commit
to make any further advances on any loan which is either in default or
classified, whether such classification is a result of a federal or
state bank regulatory examination or internal classification of
substandard or lower by Liberty's officers or directors, unless Liberty
is under a legal obligation to do so. With respect to any Sac River
consent required by this Section 7.2(l), Sac River shall provide advice
of its consent within three business days after Sac River has received
the request for consent and accompanying information necessary for Sac
River to consider the request (the provisions of part A of this section
shall not apply to renewals of existing loans, advances under existing
loans or increases to existing loans for an amount below the applicable
limits set forth in part A);
(m) purchase any equity securities not in the ordinary course
of business; or
(n) agree in writing or otherwise to do any of the foregoing.
7.3 Access and Information. Except where prohibited by law, upon
reasonable prior notice Bancshares shall ( and shall cause Liberty to) afford to
Sac River's officers, employees, accountants, counsel and other representatives,
access, from time to time during normal business hours during the period prior
to the Effective Time, to all books, papers and records relating to the assets,
stock, properties, operations, obligations and liabilities of Bancshares and
Liberty, including without limitation all books of account tax records, minute
books of directors' and stockholders' meetings, contracts and agreements,
filings with any regulatory authority, accountants' work papers, litigation
files (other than attorney work product or materials protected by any
attorney-client privilege), documents relating to assets and title thereto,
plans affecting employees, securities transfer records and stockholder lists,
and any books, papers and records relating to other assets, business activities
or prospects in which Sac River may have a reasonable interest. During such
period, Bancshares will cause one or more of its representatives to confer on a
regular and frequent basis with representatives of Sac River, to report on the
general status of its ongoing operations and to consult as to the making of any
decision or the taking of any actions in matters other than in the ordinary
course of business. During such period, Bancshares shall (and shall cause
Liberty to), except where prohibited by law, furnish promptly to Sac River (i) a
copy of each Bancshares
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Report filed or received by it during such period pursuant to the requirements
of the BHC Act and any other federal or state banking laws promptly after such
documents are available; (ii) the monthly financial statements of Bancshares and
Liberty (as prepared by Bancshares in accordance with its normal accounting
procedures) promptly after such financial statements are available; (iii) a
summary of any action taken by the Board of Directors, or any committee thereof,
of Bancshares; (iv) minutes of the Bancshares Board of Directors meetings and
the reports of management of Bancshares and Liberty customarily provided to
their respective Boards of Directors; and (v) all other information concerning
its business, properties and personnel as Sac River may reasonably request.
During such period, Bancshares shall, and shall cause Liberty to, instruct its
officers, employees, counsel and accountants to be available for, and respond to
any questions of, Sac River's officers, employees, accountants, counsel and
other representatives at reasonable hours and with reasonable notice by Sac
River to such individuals, and to cooperate fully with Sac River in planning for
the integration of the business of Sac River with the business of Bancshares and
Liberty.
7.4 Update Disclosure; Breaches.
(a) From and after the date hereof until the Effective Time,
Bancshares shall promptly, but not less frequently than monthly, update
the Bancshares Disclosure Letter by notice to Sac River to reflect any
matters which have occurred from and after the date hereof which, if
existing on the date hereof, would have been required to be described
therein; provided, however, that no such update shall affect the
conditions to the obligation of Sac River to consummate the
transactions contemplated hereby, except as provided herein, and any
and all changes reflected in any such update shall be considered in
determining whether such conditions have been satisfied.
(b) Bancshares shall, in the event it becomes aware of the
impending or threatened occurrence of any event or condition which
would cause or constitute a material breach (or would have caused or
constituted a breach had such event occurred or been known prior to the
date hereof) of any of its representations or agreements contained or
referred to herein or which would cause any of the conditions to the
obligations of any party set forth in Article IX to be satisfied, give
prompt written notice thereof to Sac River and use its best efforts to
prevent or promptly remedy the same.
7.5 Liberty Benefit Plans. Liberty shall provide to retained
employees of Sac River all corporate-wide employee retirement, health, dental,
life and long-term disability benefits that Liberty provides to its similarly
situated employees, subject to the age and eligibility requirements for such
benefits. Each such employee's last continuous period of service prior to the
Effective
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Time with Sac River shall count for purposes of determining eligibility and
vesting for all such benefits. If such coverage under the Liberty benefits is
not provided immediately after the Effective Time, Liberty shall continue the
Sac River plans until coverage is effective under Liberty's plans so that no
lapse in benefits occurs. Without limiting the generality of the foregoing, no
preexisting condition limits shall be applied to participants in Benefit Plans
upon their eligibility for such Liberty benefits (except for continuation of any
such limits that were in effect under the applicable Benefit Plans). For the
purpose of determining each employees's benefit for the year in which the Merger
occurs under the Liberty vacation program, vacation taken by an employee in the
year in which the Merger occurs will be deducted from the total Liberty benefit.
7.6 Tax Treatment. Bancshares will use its best efforts to cause
the Merger to qualify as one or more reorganizations under Code ss.368(a)(1).
Following the Merger, Bancshares and Liberty will not take any action the effect
of which will prevent the Merger from qualifying as one or more reorganizations
under Code Section 368(a)(1).
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Filings and Approvals.
(a) Each party will use all reasonable efforts and will
cooperate with the other in the preparation and filing, as soon as
practicable, of all applications or other documents required to obtain
the requisite approvals of and consents to the Merger and other
transactions contemplated by this Agreement, from the Federal Reserve
Board, the Division of Finance and the FDIC as applicable, and from any
other applicable bank regulatory authorities and provide copies of
nonconfidential portions of such applications, filings and related
correspondence to the other parties. Prior to filing each application,
notice or other documents with the applicable regulatory authority,
each party will provide the other party with an opportunity to review
and comment on the nonconfidential portions of each such application,
notice or other document. Each party shall ensure that none of the
information supplied or to be supplied by it for inclusion or
incorporation by reference in any documents to be filed with the
Federal Reserve Board, the Division of Finance, the FDIC or any other
regulatory agency in connection with the transactions contemplated
hereby will, at the time of filing, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein. Subject to the terms and conditions herein provided, each
party will use all reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary,
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proper or advisable to cause the conditions herein provided, each party
will use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to cause the conditions set forth in Article IX to be
satisfied, including participating in any required hearings or
proceedings, and to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement. Each party
shall keep the other advised of all material regulatory developments in
a timely manner.
(b) In the event of a restraining order or injunction which
prevents the Closing by reason of the operation of Section 9.1(a), Sac
River and Bancshares shall use their respective best efforts to cause
such order or injunction to be lifted and the Closing to be consummated
as soon as reasonably practicable.
8.2 Registration Statement.
(a) For the purposes of (i) holding a meeting of the
stockholders of Sac River to approve this Agreement and the Merger (the
"Meeting") and (ii) registering the Bancshares common stock to be
issued to holders of Sac River common stock in connection with the
Merger with the Securities and Exchange Commission (the "SEC") and with
applicable state securities authorities, the parties hereto shall
cooperate in the preparation of an appropriate registration statement
(such registration statement, together with all and any amendments and
supplements thereto, being herein referred to as the "S-4"), which
shall include a joint prospectus of Bancshares and proxy statement of
Sac River (the "Proxy Statement") that shall satisfy all applicable
requirements of the Securities Act, the Exchange Act, applicable state
securities laws and the rules and regulations thereunder.
(b) Bancshares shall furnish such information concerning
Bancshares as is necessary in order to cause the Proxy Statement,
insofar as it relates to Bancshares to be prepared in accordance with
Section 8.2(a) hereof. Bancshares agrees promptly to advise Sac River
if any time prior to the Meeting any information provided by Bancshares
in the Proxy Statement becomes incorrect or incomplete in any material
respect, and to provide the information needed to correct such
inaccuracy or omission. At the time the S-4 becomes effective and at
the time the Proxy Statement is mailed to the shareholders of Sac River
and at all times subsequent to such mailing up to and including the
time of the Meeting, the S-4 and such Proxy Statement (including any
amendments or supplements thereto), with respect to all information set
forth therein relating to Bancshares (including Liberty) and the
Bancshares common stock, this Agreement, the Merger and all other
transactions
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contemplated hereby, will (a) comply in all material respects with
applicable provisions of the Securities Act and the Exchange Act, and
(b) not contain any untrue statement of material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which
they are made, not misleading.
(c) Sac River shall furnish Bancshares with such information
concerning Sac River as is necessary in order to cause the Proxy
Statement, insofar as it relates to Sac River, to be prepared in
accordance with Section 8.2(a) hereof. Sac River agrees promptly to
advise Bancshares if at any time prior to the Meeting any information
provided by Sac River in the Proxy Statement become incorrect or
incomplete in any material respect, and to provide Bancshares with the
information needed to correct such inaccuracy or omission. At the time
the S-4 become effective and at the time the Proxy Statement is mailed
to the shareholders of Sac River and at all times subsequent to such
mailings up to and including the time of the Meeting, the S-4 and the
Proxy Statement (including any supplements thereto), with respect to
all information set forth therein relating to Sac River and its
shareholders, Sac River common stock, this Agreement, the Merger and
all other transactions contemplated hereby will (a) comply in all
material respects with applicable provisions of the Securities Act and
the Exchange Act, and (b) not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they are made, not misleading.
(d) Bancshares shall file the S-4 with the SEC and applicable
state securities agencies. Bancshares shall use best efforts to cause
the S-4 to become effective under the Securities Act and applicable
state securities laws at the earliest practicable date. Sac River
authorizes Bancshares to utilize in the S-4 the information concerning
Sac River provided to Bancshares for the purpose of inclusion in the
Proxy Statement. Sac River shall have the right to comment on and
approve the form of the proxy statement included in the S-4. Bancshares
shall advise Sac River promptly when the S-4 has become effective and
of any supplements or amendments thereto, and Bancshares shall furnish
Sac River with copies of all such documents. Prior to the Effective
Time or the termination of this Agreement, each party shall consult
with the other with respect to any material (other than the Proxy
Statement) that might constitute a "prospectus" relating to the Merger
within the meaning of the Securities Act.
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8.3 Reports.
(a) Prior to the Effective Time, (i) Sac River shall prepare
and file as and when required all Sac River Reports and (ii) Bancshares
and Liberty shall prepare and file as and when required all Bancshares
and Liberty Reports.
(b) Bancshares, Liberty and Sac River shall prepare such
Reports such that (i) they comply in all material respects with all of
the statutes, rules and regulations enforced or promulgated by the
regulatory authority with which they are filed and 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 were
made,not misleading, and (ii) with respect to any Report containing
financial information of the type included in the Sac River Financial
Statements or the Bancshares Financial Statements, respectively, the
financial information (A) is prepared in accordance with generally
accepted accounting principles as utilized in the Sac River Financial
Statements or the Bancshares Financial Statements, as of the case may
be, applied on a consistent basis (except as stated therein or in the
notes thereto), (B) presents fairly the consolidated financial
condition of Sac River and Bancshares, as the case may be, at the
dates, and the consolidated results of operations and cash flows for
the periods, stated therein and (C) in the case of interim fiscal
periods, reflects all adjustments, consisting only of normal recurring
items, subject to year-end audit adjustments.
8.4 Brokers or Finders. Each of Sac River and Bancshares
represents, as to itself, its subsidiaries and its affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee in connection with nay of the transactions contemplated by this Agreement,
and each of Sac River and Bancshares respectively agree to indemnify and hold
the other harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses asserted by
any person on the basis of any act or statement alleged to have been made by
such party or its affiliate.
8.5 Additional Agreements; Reasonable Efforts. Subject to the terms
and conditions of this agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, subject to the appropriate vote of the shareholders of Sac River
described in Section 9.1 hereof, including cooperating fully with the other
party. In case at any
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time after the Effective Time any further action is reasonably necessary or
desirable to carry out the purposes of this Agreement or to vest Liberty with
full title to all properties, assets, rights approvals, immunities and
franchises of Sac River, the proper officers and directors of each party to this
Agreement shall take all such necessary action.
ARTICLE IX
CONDITIONS PRECEDENT
9.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) Corporate Approval.
(i) The Merger shall have been approved and
adopted by the requisite vote of the holders of the outstanding
shares of Sac River common stock and Liberty common stock.
(ii) The Board of Directors of Bancshares shall
have approved an increase in the number of directors of its
Board to seventeen (17) directors, and the Board of Directors
of Liberty shall have approved an increase in the number of
directors of its Board to sixteen (16) directors, and both
Boards shall have taken such action necessary to effectuate
such increases.
(iii) The Board of Directors and shareholders of
Bancshares shall have approved the following:
(1) Amending the articles of
incorporation of Bancshares to provide for the
elimination of preemptive rights of shareholders
effective as of the Effective Time of the Merger;
and
(2) Terminating the Bancshares
Shareholders Agreement dated May 1, 1995, effective
as of Effective Time of the Merger.
(b) Regulatory Approvals. This Agreement and the Merger shall
have been approved by the Federal Reserve Board, the Division of
Finance and the FDIC, as applicable and any other applicable bank
regulatory authorities without any condition not reasonably
satisfactory to Bancshares and Sac River, all conditions required to be
satisfied prior to the Effective Time imposed by the terms of such
approvals shall have been satisfied and all waiting period relating to
such approvals shall have expired.
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(c) S-4: Securities Laws. The S-4 shall have become
effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order. Bancshares shall
have received all state securities or "blue sky" permits or exemptions
necessary to issue the Bancshares common stock in exchange for the Sac
River common stock and to consummate the Merger.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect.
(e) Tax Opinion. An opinion of Husch and Eppenberger, LLC, in
a form satisfactory to Sac River, to the Boards of Directors of Sac
River and Bancshares, to the effect that (i) the Merger will be
treated for federal income tax purposes as one or more reorganizations
within the meaning of Code Section 368(a), (ii) each Constituent
Corporation will be a party to that reorganization within the meaning
of Code Section 368(b) and (iii) no gain or loss will be recognized by
the shareholders of Sac River upon the receipt solely of Bancshares
common stock in the Merger in exchange for their shares of Sac River
common stock, dated on or about the dates that are each two business
days prior to the date the Proxy Statement is first mailed to
stockholders of Sac River, shall have been delivered to Sac River and
to Bancshares and shall not have been withdrawn or modified in any
material respect. The opinion shall specifically state that it may be
relied upon by the shareholders of Sac River. Husch and Eppenberger,
LLC, may request that it be provided with certain representations,
warranties and assumptions from Bancshares, Liberty and Sac River upon
which it will be expressly authorized to rely in issuing said opinion.
9.2 Conditions to Obligations of Bancshares. The obligation of
Bancshares to effect the Merger are subject to the satisfaction of the following
conditions, unless waived in writing by Bancshares:
(a) Representations and Warranties. (i) Each of the
representations and warranties of Sac River set forth in this
Agreement, without giving effect to any update to the Sac River
Disclosure Letter or notice to Bancshares under Section 6.5 hereof,
shall be true and correct in all material respects as of the date of
this Agreement, and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date, and (ii) Bancshares shall
have received a certificate to such effect signed on behalf of Sac
River by its chief executive officer.
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(b) Performance of Obligations of Sac River. Sac River shall
have performed in all material respects each of the obligations
required to be performed by it under this Agreement at or prior to the
Closing Date, and Bancshares shall have received a certificate to such
effect signed on behalf of Sac River by its chief executive officer.
(c) Consents Under Agreements. Sac River shall have obtained
the consent or approval of each person whose consent or approval shall
be required in order to permit the succession by Liberty pursuant to
the Merger to any obligation, right or interest of Sac River under any
loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument, except those for which failure to obtain such
consents and approvals would not, individually or in the aggregate,
have a Sac River Material Adverse Effect, whether prior to or following
the consummation of the transactions contemplated hereby.
(d) No Material Adverse Change. There shall have been no
material adverse change since the date of this Agreement in the
business, operations, prospects or financial condition of Sac River
other than any such change attributable to or resulting from any change
in law, regulation or generally accepted accounting principles which
impairs both Sac River and Liberty in a substantially similar manner,
and Bancshares shall have received a certificate to such effect signed
on behalf of Sac River by its chief executive officer.
(e) No Proceeding or Litigation. No material action, suit or
proceeding before any court or any governmental or regulatory authority
shall be pending against Bancshares, Liberty, Sac River or any
affiliate, associate, officer or director of any of them seeking to
restrain, enjoin, prevent, change or rescind the transactions
contemplated hereby or questioning the validity or legality of any such
transactions.
(f) Allowance for Losses on Loans. If Bancshares believes
that Sac River's allowance for loan losses is inadequate, it will
within ten (10) days prior to the Closing recommend to the Board of
Directors of Sac River an adjustment in the amount of such allowance
which, if reasonable and consistent with prudent banking practices,
shall be approved by such Board.
(g) Outstanding Common Stock. As of the Closing Date, the
number of outstanding shares of Sac River common stock shall not be
greater than ten thousand (10,000), and the Optional Per Share Cash
Amounts elected by the Sac River shareholders shall not have exceeded
the Optional Cash Payment
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Limitation at the time of the Election Deadline (or, if applicable, the
Extended Election Deadline).
9.3 Conditions to Obligations of Sac River. The obligation of Sac
River to effect the Merger is subject to the satisfaction of the following
conditions, unless waived by Sac River:
(a) Representations and Warranties. (i) Each of the
representations and warranties of Bancshares set forth in this
Agreement, without giving effect to any update to the Bancshares
Disclosure Letter or notice to Sac River pursuant to Section 7.4, shall
be true and correct in all material respects as of the date of this
Agreement and (except to the extent such representations speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date, and (ii) Sac River shall have received a certificate to
such effect signed on behalf of Bancshares by its chief executive
officer.
(b) Performance of Obligations of Bancshares. Bancshares
shall have performed in all material respects each of the obligations
required to be performed by it under this Agreement at or prior to the
Closing Date, and Sac River shall have received a certificate to such
effect signed on behalf of Bancshares by its chief executive officer.
(c) Consents Under Agreements. Bancshares shall have obtained
the consent or approval of each person whose consent or approval shall
be required in connection with the transactions contemplated hereby
under any loan or credit agreement, note, mortgage, indenture, lease or
other agreement or instrument, except those for which failure to obtain
such consents and approvals would not, individually or in the
aggregate, have a Bancshares Material Adverse Effect whether prior to
or following the consummation of the transactions contemplated hereby.
(d) No Material Adverse Change. There shall have been no
material adverse change since the date of this Agreement in the
business, operations, prospects or financial condition of Bancshares or
Liberty other than any such change attributable to or resulting from
any change in law, regulation or generally accepted accounting
principles which impairs both Sac River and Liberty in a substantially
similar manner, and Sac River shall have received a certificate to such
effect signed on behalf of Bancshares by its chief executive officer.
(e) No Proceeding or Litigation. No material action, suit or
proceeding before any court or any governmental or regulatory authority
shall be pending against the Bancshares, Liberty, Sac River or any
affiliate, associate, officer or director or any of them seeking to
restrain, enjoin, prevent,
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change or resend the transactions contemplated hereby or questioning
the validity or legality of any such transactions.
(f) Allowance for Losses on Loans. If Sac River believes that
Bancshares' allowance for loan losses is inadequate, it will within ten
(10) days prior to the Closing recommend to the Board of Directors of
Liberty an adjustment in the amount of such allowance which, if
reasonable or consistent with prudent banking practices, shall be
approved by such Board.
(g) Optional Cash Payment Limitation. The Optional Per Share
Cash Amounts elected by the Sac River shareholders shall not have
exceeded the Optional Cash Payment Limitation at the time of the
Election Deadline (or, if applicable, the Extended Election Deadline).
(h) Tax Treatment. Sac River reasonably believes, as of the
Closing Date, that the Merger will qualify as one or more
reorganizations under Code Section 368(a)(1).
ARTICLE X
TERMINATION AND AMENDMENT
10.1 Termination. This Agreement and the Merger may be terminated at
any time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the shareholders of Sac
River:
(a) by mutual consent of the Board of Directors of Bancshares
and the Board of Directors of Sac River;
(b) by Bancshares or Sac River (i) if there has been a breach
in any material respect of any representation, warranty, covenant or
agreement on the part of Sac River, on the one hand, or Bancshares, on
the other hand, set forth in this Agreement, or (ii) if the
representations and warranties of Sac River, on the one hand, or
Bancshares, on the other hand, shall be discovered to have become
materially untrue in the aggregate, in either case which breach or
other condition has not been cured within thirty (30) business days
following receipt of the non-terminating party of notice of such breach
or other condition;
(c) by Bancshares, on the one hand, or Sac River, on the
other hand, if any permanent injunction preventing the consummation of
the Merger shall be become final and nonappealable;
(d) subject to Section 1.2 hereof, by the Board of Directors
of Bancshares or the Board of Directors of Sac River if the Merger
shall not have been consummated before March 31,
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1999, for a reason other than the failure of the terminating party to
comply with its obligations under this Agreement;
(e) by the Board of Directors of Bancshares or the Board of
Directors of Sac River if (i) the Federal Reserve Board, the Division
of Finance, the FDIC or other applicable bank regulatory authority has
denied approval of the Merger and neither Bancshares nor Sac River has,
within thirty (30) days after the entry of the order denying such
approval, filed a petition seeking review of such order as provided by
applicable law or (ii) any such petition for review has been denied;
(f) by Sac River or Bancshares, if (i) this Agreement and the
Merger are not duly approved by the shareholders of Sac River or
Liberty after a vote thereon at a meeting of Sac River's or Liberty's
shareholders (or any adjournment thereof) duly called and held for such
purpose;
10.2 Investigation and Review.
(a) Subject to the next following sentence, at any time on or
prior to the 20th day following the receipt of the Sac River Disclosure
Letter, Bancshares may, by action of its Board of Directors, elect to
terminate this Agreement on behalf of Bancshares. Nothing in this
Section 10.2(a) shall be construed (i) to limit the period of time
during which Bancshares may conduct its investigation and review of Sac
River, (ii) to limit any duty to Sac River otherwise to cooperate with
the investigation and review by Bancshares subsequent to the period
established pursuant to the first sentence of this subsection (a), or
(iii) to limit or qualify in any respect the representations and
warranties of Sac River to Bancshares set forth in this Agreement as a
result of any such investigation and review.
(b) Subject to the next following sentence, at any time on or
prior to the 20th day following receipt of the Bancshares Disclosure
Letter, Sac River may, by action of its Board of Directors, elect to
terminate this Agreement on behalf of Sac River. Nothing in this
Section 10.2(b) shall be construed (i) to limit the period of time
during which Sac River may conduct its investigation and review of
Bancshares and Liberty; (ii) to limit any duty of Bancshares otherwise
to cooperate with the investigation and review by Sac River subsequent
to the period established pursuant to the first sentence of this
subsection (b); or (iii) to limit or qualify in any respect the
representations and warranties of Bancshares to Sac River set forth in
this Agreement as a result of such investigation and review.
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10.3 Effect of Termination. In the event of termination of this
Agreement by Sac River or Bancshares as provided in Sections 10.1 or 10.2
hereof, this Agreement and the Merger shall forthwith become void and there
shall be no liability or obligation on the part of Bancshares or Sac River or
their respective officers or directors except (a) with respect to Sections 6.7
and 8.4 hereof, and (b) to the extent that such termination results from the
willful breach by a party hereto of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
10.4 Amendment. Subject to the last sentence of this Section 10.4,
this Agreement may be amended by the parties hereto by action taken or
authorized by their respective Boards of Directors at any time before or after
approval of the matters presented in connection with the Merger by the
shareholders of Sac River and Liberty, but after any such approval by the
shareholders of Sac River and Liberty, no amendment shall be made which changes
in any manner adverse to such shareholders the consideration to be provided to
such shareholders pursuant to this Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
10.5 Extension; Waiver. At any time prior to the Effective Time,
Bancshares and Sac River, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other party
hereto, (ii) waive any inaccuracies in the representations and warranties of the
other contained herein or in any document delivered by the other pursuant
hereto, and (iii) waive compliance by the other with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE XI
GENERAL PROVISIONS
11.1 Non-Survival of Representations, Warranties and Agreements.
None the representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements and instruments contained or specified in
Sections 2.3 and 2.4, Article III, Sections 6.4, 6.7, 7.4, 7.5, 7.6, 8.5, and
9.1(e), the last sentence of Section 10.4, and this Article XI.
11.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by nationally
recognized overnight courier service, telecopied (with receipt confirmed) or
mailed by registered or certified mail (return receipt requested) to the parties
at the
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following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Bancshares and/or Liberty: Mr. Gary E. Metzger
President
Liberty Bank
1414 E. Primrose
Springfield, MO 65804
Fax: (417) 888-2080
(b) if to Sac River: Mr. Garry L. Robinson
President
Sac River Valley Bank
P.O. Box B
Stockton, MO 65785
Fax: (417) 276-4624
11.3 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
11.4 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof (b) except as expressly provided herein, is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
11.5 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Missouri.
11.6 Publicity. The parties hereto agree that they will consult with
each other concerning any proposed press release or public announcement
pertaining to the Merger and use their best efforts to agree upon the text of
such press release or public announcement prior to the publication of such press
release or the making of such public announcement.
11.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
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11.8 Knowledge of the Parties. Wherever in this Agreement any
representation or warranty is made upon the knowledge of a party hereto that is
not an individual, such knowledge shall include the knowledge, after due
inquiry, of any executive officer of such party or an executive officer of any
subsidiary thereof.
11.9 Confidentiality. Except for information that is available to
the public, all information concerning Sac River and its customers made
available to or in the possession of Bancshares shall be kept as confidential.
Except for information that is available to the public, all information
concerning Bancshares, Liberty and their customers made available to or in the
possession of Sac River shall be kept as confidential.
IN WITNESS WHEREOF, Bancshares, Liberty and Sac River have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
(Corporate Seal) LIBERTY BANCSHARES, INC.
ATTEST:
By /s/ Gary E. Metzger
-------------------------------------
/s/ Pat L. Sechler Gary E. Metzger, President
- -----------------------------
Secretary/Assistant Secretary "Bancshares"
(Corporate Seal) LIBERTY BANK
ATTEST:
By /s/ Gary E. Metzger
/s/ Pat L. Sechler -------------------------------------
- ----------------------------- Gary E. Metzger, President
Secretary/Assistant Secretary
"Liberty"
(Corporate Seal) SAC RIVER VALLEY BANK
ATTEST:
By /s/ Garry L. Robinson
/s/ Stephen T. Drew -------------------------------------
- ----------------------------- Garry L. Robinson, President
Secretary/Assistant Secretary
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<PAGE> 63
STATE OF MISSOURI )
) ss.
COUNTY OF Greene )
On this 18th day of June, 1998, before me personally appeared Gary E.
Metzger, to me personally known, who being duly sworn, did say that he is the
President of Liberty Bancshares, Inc. (the "Corporation"), that the seal affixed
to this instrument is the corporate seal of the Corporation, and that the said
instrument was signed and sealed on behalf of the Corporation by authority of
its Board of Directors and the said Gary L. Metzger acknowledged said instrument
to be the free act and deed of the Corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal, at my office in Springfield, the day and year first above
written.
/s/ Pat L. Sechler
----------------------------------
Notary Public
My commission expires: 11-14-2000
STATE OF MISSOURI )
) ss.
COUNTY OF Greene )
On this 18th day of June, 1998, before me personally appeared Gary E.
Metzger, to me personally known, who being duly sworn, did say that he is the
President of Liberty Bank (the "Corporation"), that the seal affixed to this
instrument is the corporate seal of the Corporation, and that the said
instrument was signed and sealed on behalf of the Corporation by authority of
its Board of Directors and the said Gary L. Metzger acknowledged said instrument
to be the free act and deed of the Corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal, at my office in Springfield, the day and year first above
written.
/s/ Pat L. Sechler
------------------------------------
Notary Public
My commission expires: 11-14-2000
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<PAGE> 64
STATE OF MISSOURI )
) ss.
COUNTY OF Cedar )
On this 18th day of June, 1998, before me personally appeared Garry L.
Robinson, to me personally known, who being duly sworn, did say that he is the
President of Sac River Valley Bank (the "Corporation"), that the seal affixed to
this instrument is the corporate seal of the Corporation, and that the said
instrument was signed and sealed on behalf of the Corporation by authority of
its Board of Directors and the said Gary L. Metzger acknowledged said instrument
to be the free act and deed of the Corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal, at my office in Stockton, MO, the day and year first above
written.
/s/ Carla S. Barnes
------------------------------------
Notary Public
My commission expires: 8/14/01
CARLA S. BARNES
NOTARY PUBLIC - NOTARY SEAL
STATE OF MISSOURI
CEDAR COUNTY
MY COMMISSION EXPIRES AUG. 14, 2001
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EXHIBIT "A"
AGREEMENT TO MERGE
SAC RIVER VALLEY BANK
WITH AND INTO
LIBERTY BANK
UNDER THE CHARTER OF
LIBERTY BANK
WITH THE TITLE OF
"LIBERTY BANK"
THIS AGREEMENT TO MERGE (hereinafter called this "Agreement"), dated
the ______ day of _______________, 1998, by and among Liberty Bancshares, Inc.,
a Missouri corporation with its principal place of business located at 1414 East
Primrose, Springfield, Missouri, 65804 ("Bancshares"); Liberty Bank, a Missouri
chartered bank and wholly owned subsidiary of Bancshares with its main office
located at 1414 East Primrose, Springfield, Greene County, Missouri ("Liberty");
and Sac River Valley Bank, a Missouri chartered bank with its main office
located in Stockton, Cedar County, Missouri ("Sac River"). (Liberty and Sac
River are sometimes hereinafter collectively referred to as the "Constituent
Banks").
W I T N E S S E T H:
WHEREAS, Liberty has an authorized capitalization consisting of
thirty-four thousand (34,000) shares of common stock, par value Fifty Dollars
($50.00) per share, all of which are issued and outstanding and are owned of
record and beneficially by Bancshares as of the date hereof; and
WHEREAS, Sac River has an authorized capitalization consisting of ten
thousand (10,000) shares of common stock, par value Thirty Dollars ($30.00) per
share, all of which are issued and outstanding as of the date hereof; and
WHEREAS, as of December 31, 1997, the equity capital of Liberty was
Seven Million Six Hundred Three Thousand Dollars ($7,603,000.00) divided into
thirty-four thousand (34,000) shares of common stock, of a par value of Fifty
Dollars ($50.00) each, surplus of Five Million Five Hundred Ninety-Two Thousand
Dollars ($5,592,000.00) and undivided profits, including capital reserves, of
Three Hundred Eleven Thousand Dollars ($311,000.00); and
<PAGE> 66
WHEREAS, as of December 31, 1997, the equity capital of Sac River was
Eleven Million One Hundred Forty Thousand Dollars ($11,140,000.00), divided into
ten thousand (10,000) shares of common stock, each of a par value of Thirty
Dollars ($30.00) each, surplus of Five Hundred Thousand Dollars ($500,000.00),
undivided profits, including capital reserves, of Ten Million Three Hundred
Fifteen Thousand Dollars ($10,315,000.00), and net unrealized holding gains
unavailable for sale securities of Twenty Five Thousand Dollars ($25,000.00);
and
WHEREAS, Bancshares has, on the date hereof, authorized capital
consisting of 5,000,000 shares of common stock, par value of $1.00 per share (as
approved by the shareholders of Bancshares on May 19, 1998), of which on the
date hereof 511,090 shares are issued and outstanding; and
WHEREAS, the Boards of Directors of Sac River, Liberty and Bancshares
deem it advisable to merge Sac River in and into Liberty (the "Merger") in
accordance with the provisions of RSMo. Sections 362.610 to 362.810, inclusive;
and
WHEREAS, Sac River, Liberty and Bancshares have entered into an
Agreement and Plan of Merger dated as of June 18, 1998 (the "Reorganization
Agreement"), providing for the Merger; and
WHEREAS, the Board of Directors and the shareholders of Sac River have
approved this Agreement and the Merger in accordance with the provisions of
RSMo. Sections 362.610 to 362.810, inclusive; and
WHEREAS, the Board of Directors and the sole shareholder of Liberty
have approved this Agreement and the Merger in accordance with RSMo.
Sections 362.610 to 362.810, inclusive, the Board of Directors of Bancshares has
approved this Agreement and the Merger in accordance with The General and
Business Corporation Law of Missouri and no action by the shareholders of
Bancshares is required under The General and Business Corporation Law of
Missouri in order to approve this Agreement and the Merger;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, mutual covenants and agreements herein contained,
the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 Subject to and in accordance with the provisions of this Agreement,
Sac River shall be merged with and into Liberty (being sometimes referred to
herein as the "Surviving Association") under the charter of Liberty. The time
the Merger becomes effective is hereinafter referred to as the "Effective Date."
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1.2 The name of the Surviving Association shall be "Liberty Bank".
1.3 From and after the Effective Date, the Surviving Association shall
be considered the same business and corporate entity as the Constituent Banks,
with all of the rights, powers, duties and liabilities of the Constituent Banks.
Pursuant to the Merger, all assets of Sac River as of the Effective Date shall
pass to and vest in the Surviving Association, and all liabilities of Sac River
as of the Effective Date shall attach to and become liabilities of the Surviving
Association, without any conveyance or other action.
1.4 Prior to and after the Effective Date, Bancshares, Liberty and Sac
River shall take all such actions as may be necessary or appropriate in order to
effect the Merger. If at any time after the Effective Date any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Association with full title to all properties, assets and rights
of Sac River as of the Effective Date, the officers of Bancshares, Liberty and
Sac River shall take all such further action.
ARTICLE II
TERMS OF CONVERSION AND EXCHANGE OF SHARES
2.1 On the Effective Date, by virtue of the Merger and without any
action on the part of any holder of any share of Liberty common stock or any
share of Sac River common stock, but subject to RSMo. Section 362.730 with
respect to the rights of dissenting shareholders, the following shall occur:
(a) Each issued and outstanding share of Liberty common stock
on the Effective Date shall remain issued and outstanding and shall be
unchanged by the Merger.
(b) Each issued and outstanding share of Sac River common
stock issued and outstanding after the Effective Date shall cease to be
outstanding, and shall be automatically cancelled and retired and shall
cease to exist, and shall be converted into and exchanged for the right
to receive common stock of Bancshares, fully paid and non-assessable,
and cash from Bancshares, as follows:
(i) Cash in the amount of Four Hundred Eighty-Five
Dollars & 70/100 ($485.70) per share (the "Mandatory Per Share
Cash Amount"). In no event, however, shall the Mandatory Per
Share Cash Amounts exceed, in the aggregate, Four Million
Eight Hundred Fifty-Seven Thousand Dollars ($4,857,000.00);
and
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(ii) At the election of each shareholder of Sac
River, with respect to each share of Sac River common stock:
(A) Cash in the amount of One Thousand Fifty
Dollars ($1,050.00) per share (the "Optional Per
Share Cash Amount"); provided, however, that the
total cash payable by Bancshares with respect to the
Optional Per Share Cash Amount to all shareholders of
Sac River shall not exceed Two Million Eight Hundred
Thousand Dollars ($2,800,000.00), less cash
distributed in lieu of fractional shares (the
"Optional Cash Payment Limitation"); or
(B) The right to receive 35.516 shares of
common stock of Bancshares (the "Exchange Ratio").
2.2 In the event Bancshares changes the number of shares of Bancshares
common stock issued and outstanding prior to the Effective Date as a result of a
stock split, stock dividend, or similar recapitalization with respect to such
stock and the record date therefore (in the case of a stock dividend) or the
effective date thereof (in the case of a stock split or similar recapitalization
for which a record date is not established) shall be prior to the Effective
Date, the Exchange Ratio shall be proportionately adjusted.
2.3 Notwithstanding any other provision of this Agreement, each holder
of shares of Sac River common stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Bancshares
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 such fractional part of a shares of Bancshares common stock multiplied
by the value of one share of Bancshares common stock at the Effective Date. For
purposes of this Agreement, the value of one share of Bancshares common stock at
the Effective Date shall be $29.56 (subject to adjustment as provided in Section
2.2 hereof). No such holder shall be entitled to dividends, voting rights, or
any other rights as a shareholder in respect of any fractional shares.
2.4 Elections by shareholders of Sac River to receive Optional Per
Share Cash Amounts shall be made by mailing or delivering to the Exchange Agent
(as defined below) the Form of Election delivered to the shareholders of Sac
River with the Proxy Statement (as defined in the Reorganization Agreement). To
be effective, a Form of Election must be properly completed, signed and
submitted by the shareholder no later than the date of the special meeting of
the shareholders of Sac River held to approve the Merger (the "Election
Deadline"). In the event the special
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shareholders meeting is adjourned to a specified date no longer than ninety (90)
days after such adjournment, the Election Deadline shall be such specified date
(the "Extended Election Deadline"). Sac River and Bancshares shall mail the Form
of Election with the Proxy Statement to all holders of Sac River common stock on
the record date of the Sac River special shareholders' meeting and shall make
the Form of Election available to all persons who become holders of Sac River
common stock subsequent to such day and no later than the close of business on
the business day prior to the Extended Election Deadline. All elections by
shareholders to receive Optional Per Share Cash Amounts may be revoked or
amended until the Extended Election Deadline. If no such election is filed by a
Sac River shareholder, no Optional Per Share Cash Amount shall be made to the
shareholder, and all of the Sac River shares held by the shareholder shall be
exchanged for Bancshares common stock in accordance with the Exchange Ratio
(except for the Mandatory Per Share Cash Amount). Each Sac River shareholder who
does not vote in favor of the Merger as of the Extended Election Deadline shall
be deemed, subject to the right hereinabove provided for amendment or revocation
of the election and subject to the provisions of Section 2.9 hereof, to have
made an election to receive Optional Per Share Cash Amounts with respect to his
or her shares, regardless of the actual Form of Election submitted by said
shareholder
2.5 At the closing of the Merger (the "Closing" or "Closing Date"),
Bancshares shall deposit with Husch & Eppenberger, LLC (the "Exchange Agent"),
for the benefit of the then holders of shares of Sac River common stock,
certificates dated as of the Closing Date representing the shares of Bancshares
common stock, the cash to be paid in lieu of fractional shares, the Optional Per
Share Cash Amounts (if any), and the Mandatory Per Share Cash Amounts (such cash
and certificates of Bancshares common stock, together with any dividend or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued and paid pursuant to Section 2.1 hereof in
exchange for the outstanding shares of Sac River common stock. Within five (5)
business days after the Closing Date, Bancshares shall cause the Exchange Agent
to mail to each holder of record as of the Closing Date of a Sac River
certificate or certificates (i) a letter of transmittal which will specify that
delivery shall be effective, and risk of loss and title to the Sac River
certificate(s) shall pass, only upon delivery of the Sac River certificate(s) to
the Exchange Agent and which shall be in such form and have such other
provisions as Bancshares and Sac River may reasonably specify, and (ii)
instructions for use in effecting the surrender of the Sac River certificate(s)
in exchange for a certificate representing shares of Bancshares common stock,
cash to be paid in lieu of any fractional share, the Optional Per Share Cash
Amount (if any) and the Mandatory Per Share Cash Amount. Upon surrender of a
shareholder's Sac River certificate or certificates for cancellation to the
Exchange Agent together with such letter of transmittal, duly
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executed, the holder of such Sac River certificate(s) shall be entitled to
receive in exchange therefore, within ten (10) business days following said
surrender, (1) a certificate representing the applicable number of whole shares
of Bancshares common stock, and (2) a check representing the amount of the cash
to be paid in lieu of a fractional share, if any, the Optional Per Share Cash
Amount (if any) and the Mandatory Per Share Cash Amount, and the Sac River
certificate(s) so surrendered shall forthwith be cancelled; provided, however,
that any Sac River shareholder who does not vote in favor of the Merger shall
not be entitled to receive said cash earlier than sixty (60) days after the
Effective Date. Except for said shareholders (who, except as provided in Section
2.9 hereof, shall receive interest at the rate of 9% per annum during the period
of sixty (60) days following the Effective Date), no interest will be paid on
the cash in lieu of fractional shares, if any, the Optional Per Share Cash
Amount (if any), and the Mandatory Per Share Cash Amount. Any applicable stock
transfer taxes shall be paid by Bancshares. Adoption of this Agreement by the
shareholders of Sac River and Liberty shall constitute ratification of the
appointment of the Exchange Agent.
2.6 At the Effective Date, the stock transfer books of Sac River shall
be closed as to holders of Sac River common stock immediately prior to the
Effective Time and no transfer of Sac River common stock by any such holder
shall thereafter be made or recognized. Until surrendered for exchange in
accordance with the provisions of Section 2.5 hereof, each certificate
theretofore representing shares of Sac River common stock shall from and after
the Effective Time represent for all purposes only the right to receive the
consideration provided in Section 2.1 hereof in exchange therefore, subject,
however, to Bancshares' obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Date which have been
declared or made by Sac River in respect of such shares of Sac River common
stock in accordance with the terms of this Agreement and which remain unpaid at
the Effective Date. Whenever a dividend or other distribution is declared by
Bancshares on the Bancshares common stock, the record date for which is at or
after the Effective Date, the declaration shall include dividends or other
distributions on all shares of Bancshares common stock issuable pursuant to this
Agreement, but beginning thirty (30) days after the Effective Date no dividend
or other distribution payable to the holders of record of Bancshares common
stock as of any time subsequent to the Effective Date shall be delivered to the
holder of any certificate representing shares of Sac River common stock issued
and outstanding at the Effective Date until such holder surrenders such
certificate (or an affidavit in lieu thereof pursuant to Section 2.8 hereof) for
exchange as provided in Section 2.5 of this Agreement. However, upon surrender
of Sac River common stock certificate, both the Bancshares common stock
certificate (together with all such undelivered dividends or other distributions
without interest) and any undelivered dividends and cash payments payable
6
<PAGE> 71
thereunder (without interest) shall be delivered and paid with respect to each
share represented by such certificate.
2.7 Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Sac River for twelve (12) months after the Closing Date shall be
paid to Bancshares. Any shareholders of Sac River who have not theretofore
complied with this Article II shall thereafter look only to Bancshares for
payment of their shares of Bancshares common stock, cash in lieu of any
fractional share of Bancshares common stock, Optional Per Share Cash Amount (if
any) and Mandatory Per Share Cash Amount, without any interest thereon.
Notwithstanding the foregoing, neither the Exchange Agent nor Bancshares shall
be liable to any former holder of shares of Sac River common stock for any
amount properly delivered to a public official pursuant to any applicable
abandoned property, escheat or similar laws.
2.8 In the event any Sac River certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Sac River certificate to be lost, stolen or destroyed and, if
required by the Exchange Agent, the execution and delivery of an indemnity
agreement whereby said person shall agree to indemnify the Exchange Agent and
Bancshares against any claim which may be made against it with respect to such
Sac River certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Sac River certificate the shares of Bancshares common stock
and cash in an amount as determined in accordance with Section 2.1 hereof,
deliverable in respect thereof pursuant to this Agreement.
2.9 Each issued and outstanding share of Sac River common stock, the
holder of which has validly asserted dissenters' rights pursuant to RSMo.
Section 362.730 and has not effectively withdrawn or lost such rights, shall
not be converted into or represent a right to receive the consideration
specified in Section 2.1 hereof, but the holder thereof shall be entitled only
to such rights as are granted by RSMo. Section 362.730. In the event the holder
of Sac River common stock validly asserts dissenters' pursuant to RSMo.
Section 362.730, any cash held by the Exchange Agent with respect to said
shareholder's shares shall be paid by the Exchange Agent to the Surviving
Association. Each shareholder entitled, pursuant to the provisions of RSMo.
Section 362.730, to payment for his or her shares of Sac River common stock,
shall receive payment therefore from the Surviving Association (but only after
the amount thereof shall have been agreed upon or determined pursuant to such
provisions) and such shares of Sac River common stock shall be cancelled. If
any holder of shares of Sac River common stock who asserts dissenters' rights
under RSMo. Section 362.730 effectively withdraws or loses (through failure to
perfect or otherwise) such rights, each such share of Sac River common stock
shall be converted into the right to receive the consideration specified in
Section 2.1 hereof.
7
<PAGE> 72
ARTICLE III
CONDUCT OF BUSINESS
3.1 The business of the Surviving Association shall be that of a
Missouri banking association.
3.2 The business of the Surviving Association shall be conducted at the
Surviving Association's main office, located at 1414 East Primrose, Springfield,
Missouri 65804, and at its legally established branches, as approved by the
Missouri Commissioner of Finance (the "Commissioner of Finance").
ARTICLE IV
ARTICLES OF ASSOCIATION AND BY-LAWS
4.1 From and after the Effective Date until they are duly amended, the
Articles of Association of the Surviving Association shall read in their
entirety as set forth in Schedule "1", attached hereto and made a part hereof by
this reference.
4.2 The By-Laws of Liberty immediately prior to the Merger shall be the
By-Laws of the Surviving Association from and after the Effective Date until
they are duly amended.
ARTICLE V
DIRECTORS AND OFFICERS
5.1 The directors of the Constituent Banks in office immediately prior
to the Effective Date, as listed on Schedule "2", attached hereto and made a
part hereof by this reference, shall serve as the directors of the Surviving
Association from and after the Effective Time in accordance with By-Laws of the
Surviving Association.
5.2 The officers of Liberty in office immediately prior to the
Effective Date shall serve in the same capacities with the Surviving Association
from and after the Effective Date in accordance with the By-Laws of the
Surviving Association. In addition, Garry L. Robinson shall serve as the
Executive Vice-President of the Surviving Association, and all current vice
presidents of Sac River shall serve as vice presidents of the Surviving
Association.
ARTICLE VI
EFFECTIVE DATE
6.1 The Effective Date of the Merger shall be at such time as this
Agreement, a copy of the minutes of the respective
8
<PAGE> 73
shareholders' meetings at which the Merger was approved, with a copy of the
approval of the Boards of Directors of the Constituent Banks, all certified and
verified by the respective secretaries of the meetings, shall be filed with the
Commissioner of Finance and in and with such additional offices as required by
the provisions of RSMo. Sections 362.610 to 362.810, inclusive.
ARTICLE VII
TERMINATION
7.1 This Agreement shall automatically terminate and the Merger shall
be abandoned upon termination of the Reorganization Agreement by Liberty or Sac
River in accordance with the provisions of Article X of the Reorganization
Agreement.
ARTICLE VIII
AMENDMENT
8.1 Subject to the last sentence of this Section 8.1, this Agreement
may be amended by the parties hereto by action taken or authorized by the
respective Boards of Directors at any time before or after approval of the
matters presented in connection with the Merger by the shareholders of Sac River
and Liberty, but after any such approval by the shareholders of Sac River and
Liberty, no amendment shall be made which changes in any manner adverse to such
shareholders the consideration to be provided to such shareholders pursuant to
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
ARTICLE IX
MISCELLANEOUS
9.1 This Agreement may be executed in counterparts, each of which when
so executed shall be deemed to be an original and such counterparts shall
constitute but one and the same instrument.
9.2 This Agreement shall be governed and construed in accordance with
the laws of the State of Missouri.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first above written.
9
<PAGE> 74
(Corporate Seal) LIBERTY BANCSHARES, INC.
ATTEST:
By__________________________________
_____________________________ Gary E. Metzger, President
Secretary/Assistant Secretary
"Bancshares"
(Corporate Seal) LIBERTY BANK
ATTEST:
By__________________________________
_____________________________ Gary E. Metzger, President
Secretary/Assistant Secretary
"Liberty"
(Corporate Seal) SAC RIVER VALLEY BANK
ATTEST:
By__________________________________
_____________________________ Garry L. Robinson, President
Secretary/Assistant Secretary
STATE OF MISSOURI )
) ss.
COUNTY OF ____________ )
On this _______ day of __________________, 1998, before me personally
appeared Gary E. Metzger, to me personally known, who being duly sworn, did say
that he is the President of Liberty Bancshares, Inc. (the "Corporation"), that
the seal affixed to this instrument is the corporate seal of the Corporation,
and that the said instrument was signed and sealed on behalf of the Corporation
by authority of its Board of Directors and the said Gary L. Metzger acknowledged
said instrument to be the free act and deed of the Corporation.
10
<PAGE> 75
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal, at my office in _____________________________, the day and year
first above written.
__________________________
Notary Public
My commission expires:___________________________
STATE OF MISSOURI )
) ss.
COUNTY OF ____________ )
On this _______ day of __________________, 1998, before me personally
appeared Gary E. Metzger, to me personally known, who being duly sworn, did say
that he is the President of Liberty Bank (the "Corporation"), that the seal
affixed to this instrument is the corporate seal of the Corporation, and that
the said instrument was signed and sealed on behalf of the Corporation by
authority of its Board of Directors and the said Gary L. Metzger acknowledged
said instrument to be the free act and deed of the Corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal, at my office in _____________________________, the day and year
first above written.
__________________________
Notary Public
My commission expires:___________________________
STATE OF MISSOURI )
) ss.
COUNTY OF ____________ )
On this _______ day of __________________, 1998, before me personally
appeared Garry L. Robinson, to me personally known, who being duly sworn, did
say that he is the President of Sac River Valley Bank (the "Corporation"), that
the seal affixed to this instrument is the corporate seal of the Corporation,
and that the said instrument was signed and sealed on behalf of the Corporation
by authority of its Board of Directors and the said Gary L. Metzger acknowledged
said instrument to be the free act and deed of the Corporation.
11
<PAGE> 76
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal, at my office in _____________________________, the day and year
first above written.
___________________________
Notary Public
My commission expires:___________________________
12
<PAGE> 77
EXHIBIT "B"
LIST OF DIRECTORS OF SURVIVING BANK
William P. Gaut
Lyle D. Graesser
Kenneth E. Hamilton
Jack Hoke
Gary E. Metzger
Richard A. Pendleton
Wayne E. Scheer
C. Tal Wooten, Jr.
Dixie Letsch
C. W. "Bill" Neale
Howard K. Johnson
Franklin Smith
Neale W. Johnson
Garry L. Robinson
Stephen T. Wrenn
Charles Skaggs
13
<PAGE> 1
EXHIBIT 3.1 & 4.1
ARTICLES OF INCORPORATION
OF
LIBERTY BANCSHARES, INC.
The undersigned, natural person, of the age of eighteen (18) years or more, for
the purpose of forming a corporation under the "General and Business Corporation
Law of Missouri," adopt the following Articles of Incorporation:
ARTICLE I
The name of the corporation is LIBERTY BANCSHARES, INC.
ARTICLE II
The address of the corporation's initial registered office in the State
of Missouri is 3333 East Battlefield, Suite 1000, Springfield, MO 65804, and the
name of its initial registered agent at such address is Carl E. Yates.
ARTICLE III
The authorized amount cash capital of this banking corporation shall be
Three Million Six Hundred Thousand Dollars ($3,600,000) of which the capital
stock of the banking corporation shall be One Million Eight Hundred Thousand
Dollars ($1,800,000) which shall be divided into thirty-six thousand (36,000)
shares of the par value of fifty dollars ($50.00) each; that the same has been
bona fide subscribed and is actually paid up in lawful money of the United
States of America and is in the custody of the persons hereinafter named as the
first board of directors; that the Surplus will be One Million Dollars ($1
,000,000) and the Undivided Profits will be Eight Hundred Thousand Dollars
($800,000).
The preferences, qualifications, limitations, restrictions and special
or relative rights, if any, in respect of the shares of each class are as
follows: NONE.
ARTICLE IV
The holders of shares shall have preemptive rights to purchase any
shares of the corporation hereafter issued or any securities exchangeable for or
convertible into such shares, or any warrants or other instruments evidencing
rights or options to subscribe for, purchase or otherwise acquire such shares.
ARTICLE V
The name and place of residence of the sole incorporator is as follows:
Gary E. Metzger
1947 East Norshire
Springfield, MO 65804
<PAGE> 2
ARTICLE VI
The initial Board of Directors of the corporation shall consist of
eleven (11). The number of directors to constitute subsequent boards of
directors shall be fixed by, or in the manner provided in the By-Laws of the
corporation and any change in the number of directors shall be reported to the
Secretary of State within thirty (30) days of such change.
ARTICLE VII
The duration of the corporation is perpetual.
ARTICLE VIII
This corporation is formed under Chapter 351, RSMo., for the following
purposes:
A. To organize, own and operate a state chartered bank, as a bank
holding company;
B. Invest in or to assist a subsidiary to invest in a bank service
corporation as defined by the act of Congress known as the "Bank Service
Corporation Act," Public Law 87-856, as approved October 23, 1962, to the same
extent as provided by that act or any amendment thereto;
C. To own or control a company;
D. Purchase and hold the stock of one safe deposit company organized
and existing under the laws of the State of Missouri and doing a safety deposit
business on premises owned or leased by any subsidiary bank or trust company at
not more than one location outside the main banking house; provided, that the
purchasing and holding of the stock is first duly authorized by resolution of
the board of directors of the bank or trust company and by the written approval
of the Commissioner of Finance, and that all of the shares of the safe deposit
company shall be purchased and held, and shall not be sold or transferred except
as a whole and not be pledged at all, all sales or transfers or pledges in
violation hereof to be void;
E. To own stock in any corporation organized to act as the fiscal or
transfer agent of the United States, of any state, municipality, body politic or
corporation and in such capacity to receive and disburse money, to transfer,
register and countersign certificates of stock bonds and other evidences of
indebtedness;
F. Purchase, lease, hold or convey real property for the following
purposes:
1. With the approval of the Commissioner of Finance, plots
whereon there is or may be erected a building or buildings suitable for the
convenient conduct of its functions or business or for customer or employee
parking even though a revenue may be derived from portions not required for its
own use; or
2. Real property conveyed to it in satisfaction or part
satisfaction of debts previously contracted in the course of its business;
- 2 -
<PAGE> 3
G. Purchase, hold and become the owner and lessor of personal
property acquired upon the specific request of and for use of a subsidiary and
may incur such additional obligations as may be incident to becoming an owner
and lessor of the property.
H. Contract with another bank or trust company, bank service
corporation or other partnership, corporation or association, within or without
the state, to render or receive services such as check and deposit sorting and
posting, computation and posting of interest and other credits and charges,
preparation and mailing of checks, statements, notices and similar items, or any
other clerical, bookkeeping, accounting, statistical or similar services; except
that the contract shall provide, to the satisfaction of the commissioner of
finance, that the party providing the services will be subject to regulation and
examination to the same extent as if the services were being performed by the
bank or trust company on its own premises.
I. To make contracts and incur liabilities which may be appropriate
to enable it to accomplish any or all of its purposes, to borrow money for its
corporate purposes at such rates of interest as the corporation may determine,
to issue its notes, bonds and other obligations, to issue notes or bonds,
secured or unsecured, which by their terms are convertible into share. of stock
of any class, upon such terms and conditions and at such rates or prices as may
be provided in such notes or bonds and the indenture or mortgage under which
they are issued, and to secure any of its obligations by mortgage, pledge or
deed of trust, of all or any of its property, franchises and income;
J. To invest its surplus funds from time to time and to lend money
for its corporate purposes and to take and hold real and personal property as
security for the payment of funds so invested or loaned;
K. To conduct its business, carry on its operations and have offices
within and without this State and to exercise in any other state, territory,
district or possession of the United States, or in any foreign country, the
powers granted by the General and Business Corporation Law of Missouri;
L. To elect and appoint officers and agents of the corporation and
to define their duties and fix their compensation;
M. To make and alter By-laws not inconsistent with its Articles of
Incorporation or with the laws of this State for the administration and
regulations of the affairs of the corporation;
N. To cease its corporate activities and surrender its corporate
franchise;
0. To have and exercise all powers necessary or convenient to effect
any or all of the purposes for which the corporation is formed;
P To make contributions to any corporation organized for civic,
charitable or benevolent purposes or to any incorporated or unincorporated
association, community chest or community funds;
Q. To purchase, take, receive or otherwise acquire, hold, own,
pledge, transfer or otherwise dispose of its own shares; and
R. To engage in any other lawful act Of activity which corporations
are now or may in the future be authorized under the General and Business
Corporation Law of Missouri.
- 3 -
<PAGE> 4
ARTICLE IX
The private property of the shareholders of the corporation shall not
be subject to the payment of the corporate debts, except to the extent of any
unpaid balances of the subscription for shares.
IN WITNESS WHEREOF, these Articles of Incorporation have been signed
this 2nd day of May, 1995.
/s/ Gary E. Metzger
-----------------------------
Gary E. Metzger, Incorporator
VERIFICATION OF INCORPORATOR
STATE OF MISSOURI )
) ss.
COUNTY OF GREENE )
I, Denise C. Ritter, a notary public, do hereby certify that on the 2nd
day of May, 1995, personally appeared before me Gary E. Metzger, who, being by
me first duly sworn, declared that he is the person who signed the foregoing
document as incorporator and that the statements therein contained are true.
/s/ Denise C. Ritter
-----------------------------
Notary Public
My commission expires:
DENSE C. RITTER Notary Public
Lawrence County State of Missouri
My Commission Expires Nov 23 1596
- 4 -
<PAGE> 5
HONORABLE REBECCA MCDOWELL COOK
SECRETARY OF STATE
STATE OF MISSOURI
JEFFERSON CITY, MISSOURI 65101
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF LIBERTY BANCSHARES, INC.
Pursuant to the provisions of The General and Business Corporation Law
of the State of Missouri, the undersigned Corporation certifies the following:
1. The name of the Corporation is LIBERTY BANCSHARES, INC.
2. An amendment to the Corporation's Articles of Incorporation was
adopted by the Shareholders on the 13th day of May, 1997.
3. Article III is amended to read as follows:
ARTICLE III
"The aggregate number of shares of all classes of stock which
the corporation shall have the authority to issue is Thirty Eight
Thousand (38,000) shares, all of which shall be capital stock having a
par value of Fifty Dollars ($50.00) per share.
The preferences, qualifications, limitations, restrictions, and
the relative or special rights, including convertible rights, if any,
in respect of the shares of each class are as follows: NONE."
4. Article IV is amended to read as follows:
ARTICLE IV
"The holders of shares shall have preemptive rights to purchase
any shares of the corporation hereafter issued or any securities
exchangeable for or convertible into such shares, or any warrants or
other instruments evidencing rights or options to subscribe for,
purchase or otherwise acquire such shares; provided, however, that the
shareholders of the corporation shall have no preemptive rights to
subscribe to or purchase any shares of the corporation heretofore
authorized but unissued, and subsequently issued by the corporation
upon the exercise by an optionee of any option granted under the
Liberty Bancshares, Inc. Incentive Stock Option Plan."
5. Of the 33,500 shares outstanding and entitled to vote on the
amendment, 33,500 shares were voted for and 0 shares were voted against the
amendment.
6. The amendment does not provide for the exchange, reclassification,
or cancellation of issued shares, or a reduction of the number of authorized
shares of any class below the number of issued shares of that class.
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, this Certificate of Amendment has been executed by the
Corporation by its President and by its Secretary on this 21st day of May, 1997.
LIBERTY BANCSHARES, INC.
By /s/ Gary E. Metzger
--------------------------
Gary E. Metzger, President
(Corporate Seal)
ATTEST:
/s/ Pat L. Sechler
- -------------------------
Pat L. Sechler, Secretary
STATE OF MISSOURI )
) ss.
COUNTY OF GREENE )
I, Pat L. Sechler, a Notary Public, do hereby certify that on this 21st day
of May, 1997, personally appeared before me GARY E. METZGER, who being by me
first duly sworn, declared that he is one of the persons who signed the
foregoing documents as an officer of the corporation named therein, and that the
statements therein contained are true.
/s/ Pat L. Sechler
-------------------
Notary Public
Pat L. Sechler
Greene county, MO.
My Commission expires:
11-14-2000
- ----------------------
- 6 -
<PAGE> 7
HONORABLE REBECCA MC DOWELL COOK
SECRETARY OF STATE
STATE OF MISSOURI
JEFFERSON CITY, MISSOURI 65101
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF LIBERTY BANCSHARES, INC.
Pursuant to the provisions of The General and Business Corporation Law
of the State of Missouri, the undersigned Corporation certifies the following:
1. The name of the Corporation is LIBERTY BANCSHARES, INC.
2. An amendment to the Corporation's Articles of Incorporation was
adopted by the Shareholders on the 19th day of May, 1998.
3. Article III is amended to read as follows:
"ARTICLE III
Each of the fifty-five thousand six hundred nine (55,609) shares of
common stock of the Corporation authorized immediately prior to the
effectiveness of this amendment (both issued and unissued), with a par value of
Fifty Dollars ($50.00) per share, shall be, and each hereby is, reclassified as
and converted into one (1) share of the Corporation's common stock, par value
Ten Dollars ($10.00) per share.
Immediately upon the effectiveness of this amendment to the Articles of
Incorporation of the Corporation, the aggregate number of sharers of all
classes of stock which the Corporation shall have authority to issue is fifty-
five thousand six hundred nine (55,609) shares, all of which shall be common
stock having a par value of Ten Dollars ($10.00) per share.
The preferences, qualifications, limitations, restrictions, and the
relative or special rights, including convertible rights, if any, in respect of
the shares of each class are as follows: NONE."
<PAGE> 8
4. Of the 51,109 shares outstanding and entitled to vote on the
amendment, 41,420 shares were voted for and 0 shares were voted against the
amendment.
5. The amendment does not provide for the exchange, reclassification, or
cancellation of issued shares, or a reduction of the number of authorized
shares of any class below the number of issued shares of that class.
IN WITNESS WHEREOF, this Certificate of Amendment has been executed by the
Corporation by its President and by its Secretary on this 15th day of June,
1998.
LIBERTY BANCSHARES, INC.
By /s/ Gary E. Metzger
----------------------------
Gary E. Metzger, President
(Corporate Seal)
ATTEST: FILED AND CERTIFICATE
ISSUED
/s/ Pat L. Sechler JUN 17 1998
- -----------------------------
Pat L. Sechler, Secretary
STATE OF MISSOURI ) Rebecca McDonnell Cook
) ss. SECRETARY OF STATE
COUNTY OF GREENE )
I, PAT L. SECHLER, a Notary Public, do hereby certify that on this 15th
day of June, 1998, personally appeared before me GARY E. METZGER, who being
by me first duly sworn, declared that he is one of the persons who signed the
foregoing documents as an officer of the corporation named therein, and that
the statements therein contained are true.
/s/ Pat L. Sechler
------------------------------
Notary Public
Pat L. Sechler
Greene County, Mo.
My Commission expires:
11-14-2000
- ----------------------
2
<PAGE> 9
HONORABLE REBECCA MCDONNELL COOK
SECRETARY OF STATE
STATE OF MISSOURI
JEFFERSON CITY, MISSOURI 65101
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF LIBERTY BANCSHARES, INC.
Pursuant to the provisions of The General and Business Corporation Law
of the State of Missouri, the undersigned Corporation certifies the following:
1. The name of the Corporation is LIBERTY BANCSHARES, INC.
2. An amendment to the Corporation's Articles of Incorporation was
adopted by the Shareholders on the 19th day of May, 1998.
3. Article III is amended to read as follows:
"ARTICLE III
Each of the fifty-five thousand six hundred nine (55,609) shares of
common stock of the Corporation authorized immediately prior to the
effectiveness of this amendment (both issued and unissued), with a par value of
Ten Dollars ($10.00) per share, each, immediately upon the effectiveness of
this amendment, hereby changed into ten (10) shares with a par value of One
Dollar ($1.00) per share. The stated capital of the Corporation upon this
change shall be the same as the stated capital of the Corporation immediately
prior to this change.
Immediately following the stock split specified in the preceding
paragraph, upon the effectiveness of this amendment, the authorized shares of
common stock of the Corporation shall be increased from five hundred fifty-six
thousand ninety (556,090) shares, having a par value of One Dollar ($1.00)
each, to five million (5,000,000) shares of common stock, having a par value of
One Dollar ($1.00) each.
The preferences, qualifications, limitations, restrictions, and the
relative or special rights, including convertible rights, if any, in respect of
the shares of each class are as follows: NONE."
<PAGE> 10
4. Of the 51,109 shares outstanding and entitled to vote on the
amendment, 41,420 shares were voted for and 0 shares were voted against the
amendment.
5. The amendment does not provide for the exchange, reclassification,
or cancellation of issued shares, or a reduction of the number of authorized
shares of any class below the number of issued shares of that class.
IN WITNESS WHEREOF, this Certificate of Amendment has been executed by
the Corporation by its President and by its Secretary on this 15th day of June,
1998.
LIBERTY BANCSHARES, INC.
By /s/ Gary E. Metzger
-----------------------------
Gary E. Metzger, President
(Corporate Seal)
ATTEST:
FILED AND CERTIFICATE
/s/ Pat L. Sechler ISSUED
- ----------------------------- Jun 17 1998
Pat L. Sechler, Secretary
STATE OF MISSOURI ) Rebecca McDonnell Cook
) ss. SECRETARY OF STATE
COUNTY OF GREENE )
I, PAT L. SECHLER, a Notary Public, do hereby certify that on this 15th
day of June, 1998, personally appeared before me GARY E. METZGER, who being by
me first duly sworn, declared that he is one of the persons who signed the
foregoing documents as an officer of the corporation named therein, and that
the statements therein contained are true.
/s/ Pat L. Sechler
------------------------------
Notary Public
My Commission expires: Pat L. Sechler
Greene County, Mo.
11-14-2000
- ----------------------
2
<PAGE> 1
EXHIBIT 3.2 & 3.4
BY-LAWS
OF
LIBERTY BANCSHARES, INC.
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
SHAREHOLDERS
<TABLE>
<S> <C>
Section 1.01. Annual Meeting........................................... - 4 -
Section 1.02. Special Meetings......................................... - 4 -
Section 1.03. Record Date for Meetings and Other Purposes.............. - 4 -
Section 1.04. Notice of Meetings....................................... - 4 -
Section 1.05. Quorum at Meetings....................................... - 5 -
Section 1.06. Presiding Officer and Secretary.......................... - 5 -
Section 1.07. Inspectors............................................... - 5 -
Section 1.08. Voting................................................... - 5 -
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers........................................... - 6 -
Section 2.02. Number of Directors...................................... - 6 -
Section 2.03. Election and Term of Directors........................... - 6 -
Section 2.04. Vacancies and Newly Created Directorships................ - 6 -
Section 2.05. Resignations............................................. - 6 -
Section 2.06. Removal of Directors..................................... - 6 -
Section 2.07. Meetings................................................. - 6 -
Section 2.08. Quorum and Voting........................................ - 7 -
Section 2.09. Committees of the Board.................................. - 7 -
Section 2.10. Notices and Meetings of Committees....................... - 7 -
Section 2.11. Quorum and Actions of Committee.......................... - 7 -
Section 2.12. Resignations from Committees............................. - 8 -
Section 2.13. Compensation of Directors................................ - 8 -
Section 2.14. Action of Board or Committees without a Meeting.......... - 8 -
ARTICLE III
OFFICERS, AGENTS AND EMPLOYEES
Section 3.01. General Provisions....................................... - 8 -
Section 3.02. Powers and Duties of the Chairman of the Board........... - 8 -
Section 3.03. Powers and Duties of the President....................... - 8 -
Section 3.06. Powers and Duties of the Secretary....................... - 9 -
Section 3.07. Powers and Duties of the Treasurer....................... - 9 -
Section 3.08. Powers and Duties of Assistant Secretaries............... - 9 -
Section 3.09. Powers and Duties of Assistant Treasurers................ - 9 -
ARTICLE IV
SHARES OF THE CORPORATION
Section 4.01. Certificates for Shares.................................. - 9 -
Section 4.02. Transfer Agents and Registrars........................... - 10 -
Section 4.03. Record of Shareholders................................... - 10 -
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V
SEAL
Section 5.01. Corporation Seal......................................... - 10 -
ARTICLE VI
CHECKS, NOTES & DRAFTS
Section 6.01. Checks, Notes & Drafts................................... - 10 -
ARTICLE VII
FISCAL YEAR
Section 7.01. Fiscal Year.............................................. - 10 -
ARTICLE VIII
AMENDMENTS
Section 8.01. Amendments............................................... - 10 -
ARTICLE IX
OFFICIAL ORDER OF BUSINESS AT
SHAREHOLDERS' AND DIRECTORS' MEETINGS
Section 9.01. Annual Shareholders' Meeting............................. - 11 -
Section 9.02. Special Meeting of Shareholders.......................... - 11 -
Section 9.03. Annual Meeting of Board.................................. - 11 -
ARTICLE X
KEEPING OF MINUTE BOOKS
Section 10.01. Keeping of Minute Books................................. - 12 -
ARTICLE XI
AMENDMENTS TO OR CHANGES IN BY-LAWS
Section 12.01. Amendments to or Changes in By-Laws..................... - 12 -
</TABLE>
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<PAGE> 4
BY-LAWS
OF
LIBERTY BANCSHARES, INC.
ARTICLE I
SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The annual meeting of the shareholders of
Liberty Bancshares, Inc. (the "CORPORATION") for the election of directors and
the transaction of such other business as may properly come before the meeting
shall be held between the hours of 10:00 a.m. and 4:00 p.m., at such time as may
be fixed by the Board and specified in the notice of the meeting, on the first
Tuesday in May in each year or, if that day shall be a legal holiday at the
place where the meeting is to be held, on the next day thereafter not a legal
holiday. The annual meeting in each year shall be held at such place within or
without the State of Missouri as may be fixed by the Board, or, if not so fixed,
at the registered office of the Corporation.
SECTION 1.02. SPECIAL MEETINGS. Special meetings of the shareholders
may be called by the Board, the Chairman of the Board or the President, and
shall be called by the President or the Secretary at the written demand of at
least twenty-five percent (25%) of all outstanding shares entitled to vote on
the action proposed to be taken at such meeting, which demand shall state the
purpose or purposes of the proposed meeting. Special meetings shall be held at
such place within or without the State of Missouri as may be specified in the
notice thereof. At any special meeting only such business may be transacted
which is related to the purpose or purposes set forth in the notice thereof, but
any special meeting may be called and held in conjunction with an annual meeting
of the shareholders.
SECTION 1.03. RECORD DATE FOR MEETINGS AND OTHER PURPOSES. For the
purpose of determining the shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or to express consent to or
dissent from any proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividend or allotment of any
right, or for the purpose of any other action, the Board may fix in advance, a
date as the record date for any such determination of shareholders. Such date
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action.
When a determination of shareholders of record entitled to notice of or
to vote at any meeting of shareholders has been made as provided in this
Section, such determination shall apply to any adjournment thereof, unless the
Board fixes a new record date under this Section for the adjourned meeting.
SECTION 1.04. NOTICE OF MEETINGS. Except as otherwise provided by law,
written notice of the time, place and purpose or purposes of every meeting of
shareholders shall be given not less than ten nor more than sixty days before
the date of the meeting, either personally or by mail, to each shareholder
entitled to vote at the meeting.
When a meeting is adjourned to another time or place, it shall not he
necessary to give notice of the adjourned meeting if the time and place to which
the meeting is adjourned are announced at the meeting at which the adjournment
is taken and at the adjourned meeting only such business is transacted as might
have been transacted at the original meeting. However, if after the adjournment,
the Board fixes a new record date for the adjourned meeting a notice of the
adjourned meeting shall be given to each shareholder of record on the new record
date entitled to notice under this Section.
<PAGE> 5
SECTION 1.05. QUORUM AT MEETINGS. Except as otherwise provided by law,
or in the Articles of Incorporation, the shareholders entitled to cast a
majority of the votes at a meeting of the shareholders shall constitute a quorum
at such meeting for the transaction of business, but the shareholders present
may adjourn any meeting to another time or place despite the absence of a
quorum. The shareholders present in person or by proxy at a duly organized
meeting may continue to do business until adjournment, notwithstanding
withdrawal of shareholders in excess of the number which otherwise is required
to constitute a quorum to open a meeting.
Whenever the holders of any class or series of shares are entitled to
vote separately on a specified item of business, the provisions of this Section
shall apply in determining the presence of a quorum of such class or series for
the transaction of such specified item of business.
SECTION 1.06. PRESIDING OFFICER AND SECRETARY. At any meeting of the
shareholders, if neither the Chairman of the Board, if there be one, nor the
President nor a Vice President nor a person designated by the Board to preside
at the meeting shall be present, the shareholders shall appoint a presiding
officer for the meeting. If neither the Secretary nor an Assistant Secretary be
present, the shareholders shall appoint a person to act as secretary of the
meeting.
SECTION 1.07. INSPECTORS. The Board may, in advance of any
shareholders' meeting, appoint one or more inspectors to act as inspectors at
the meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the request of any
shareholder entitled to vote thereat, shall make such appointment. In case any
person appointed as inspector fails to appear or act, the vacancy may be filled
by appointment made by the Board in advance of the meeting or at the meeting by
the person presiding at the meeting. Each inspector, before entering upon the
discharge of the duties of an inspector, shall take and sign an oath to
faithfully execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. No person shall be
elected a director at a meeting at which he has served as an inspector.
The inspectors shall determine the number of shares outstanding and the
voting power of each of the shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, determine the result, and do such acts as
are proper to conduct the election or vote with fairness to all shareholders. If
there are three or more inspectors, the act of a majority shall govern. On
request of the person presiding at the meeting or any shareholder entitled to
vote thereat, the inspectors shall make a report in writing of any challenge,
question or matter determined by them. Any report made by them shall be prima
facie evidence of the facts therein stated, and such report shall be filed with
the minutes of the meeting.
SECTION 1.08. VOTING. Whenever directors are to be elected by the
shareholders, they shall be elected by a majority of the votes cast at a meeting
of shareholders by the holders of shares entitled to vote for such directors.
Whenever any action, other than the election of directors, is to be taken by
vote of the shareholders, it shall, except as otherwise required by law or in
the Articles of Incorporation, be authorized by a majority of the votes cast at
a meeting of shareholders by the holders of shares entitled to vote thereon.
Except as otherwise provided by the Articles of Incorporation, every
holder of record of shares of the Corporation entitled to vote on any matter at
any meeting of shareholders shall be entitled to one vote for every such share
standing in his name on the record of shareholders of the Corporation on the
record date for the determination of the shareholders entitled to notice of or
to vote at the meeting. Elections of directors need not be by ballot unless a
shareholder demands election by ballot at the election and before the voting
begins; and otherwise the method of voting at any election of directors or upon
any question before a meeting shall be discretionary with the person presiding
at the meeting.
- 2 -
<PAGE> 6
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.01. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by its Board of Directors (herein referred to as
the "BOARD").
SECTION 2.02. NUMBER OF DIRECTORS. The entire Board shall consist of
that number of directors, not less than three nor more than 25, as may from time
to time be prescribed by the Board by amendment to these By-Laws. Directors
shall be at least 21 years of age and need not be United States citizens or
residents of Missouri or shareholders of the Corporation.
SECTION 2.03. ELECTION AND TERM OF DIRECTORS. At each annual meeting of
shareholders, except the first annual meeting, directors shall be elected to
hold office until the next succeeding annual meeting. The term of office of each
director shall be from the time of his election and qualification until the
annual meeting of shareholders next succeeding his election and until his
successor shall have been elected and shall have qualified.
SECTION 2.04. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Any
directorship not filled at the annual meeting and any vacancy, however caused
(including any directorship to be filled by reason of any increase in the number
of directors), occurring in the Board may be filled by the affirmative vote of a
majority of the remaining directors even though less than a quorum of the Board,
or by a sole remaining director. If one or more directors shall resign from the
Board effective at a future date, a majority of the directors then in office
including those who have so resigned, shall have the power to fill such vacancy
or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective.
SECTION 2.05. RESIGNATIONS. Any director may resign by written notice
to the Corporation. A resignation shall be effective upon receipt thereof by the
Corporation or at such subsequent time as shall be specified in the notice of
resignation.
SECTION 2.06. REMOVAL OF DIRECTORS. Any directors may be removed at any
time, either for or without cause; by the affirmative vote of the majority of
the votes cast by the shareholders entitled to vote for the election of
directors; provided, however, that any director elected by a class vote may be
removed only by a class vote of the holders of shares entitled to vote for his
election.
SECTION 2.07. MEETINGS. Meetings of the Board, regular or special, may
be held at any place within or without the State of Missouri as the Board from
time to time may fix or as shall be specified in the respective notice or
waivers of notice thereof. An annual meeting of the Board for the appointment of
officers shall be held on the day on which the annual meeting of the
shareholders shall have been held, or as soon after the holding of such meeting
of shareholders as is practicable. The Board may fix times and places for
regular meetings of the Board and no notice of such meetings need be given.
Special meetings of the Board shall be held whenever called by the Chairman of
the Board, if there be one, the President, a Vice President or any two or more
directors. Notice of each such meeting shall be given by the Secretary or by the
person calling the meeting to each director by mailing the same not later than
the third day before the meeting or personally or by telegraphing, cabling,
faxing or telephoning the same not later than the day before the meeting. Notice
of a meeting need not be given to any director who signs a waiver of notice
whether before or after the meeting, or who attends the meeting without
protesting, prior to the conclusion of the meeting, the lack of notice to the
member. Neither the business to be transacted at, nor the purpose of, any
meeting of the Board need be specified in the notice or waiver of notice of such
meeting. Notice of an adjourned meeting need not be given if the time and place
are fixed at the meeting adjourning and if the period of adjournment does not
exceed ten days.
- 3 -
<PAGE> 7
SECTION 2.08. QUORUM AND VOTING. A majority of the entire Board shall
constitute a quorum for the transaction of business. Except as otherwise
provided by law, the Articles of Incorporation or these By-Laws, the act of the
majority of the directors present at a meeting at which a quorum is present,
shall be the act of the Board.
SECTION 2.09. COMMITTEES OF THE BOARD. The Board, by resolution adopted
by a majority of the entire Board, may appoint from among its members an
Executive Committee and one or more other committees, each of which shall have
at least three members.
The Board, by resolution adopted by a majority of the entire Board,
may:
(a) fill any vacancy in any such committee;
(b) appoint one or more directors to serve as alternate members of any such
committee, to act in the absence or disability of members of any such
committee with all the powers of such absent or disabled members;
(c) abolish any such committee at its pleasure; and
(d) remove any director from membership on such committee at any time, with
or without cause.
Actions taken at a meeting of any such committee shall be kept in a
record of its proceedings which reported to the Board at its next meeting
following such committee meeting; except that, when the of the Board is held
within two days after the committee meeting, such report shall, if not made at
meeting, be made to the Board at its second meeting following such committee
meeting.
SECTION 2.10. NOTICES AND MEETINGS OF COMMITTEES. Meetings of any
committee of the Board, regular or special, may be held at any place within or
without the State of Missouri as such committee from time to time may fix or is
shall be specified in the respective notice or waivers of notice thereof, but no
notice of regular meetings need be given. Notice of each special meeting shall
be given to each member of such committee by mailing the same not later than the
second day before the meeting, or personally, or by telegraphing, cabling or
telephoning the same, not later then the day before the meeting. Notice of a
meeting need not be given to any member who signs a waiver of notice whether
before or after the meeting, or who attends the meeting without protesting prior
to conclusion of the meeting, the lack of notice to such member.
SECTION 2.11. QUORUM AND ACTIONS OF COMMITTEE. A majority of each
committee shall constitute a quorum for the transaction of business. The act of
the majority of the members present at a meeting at which a quorum is present
shall be the act of any such committee, except the Executive Committee. Each
committee shall have and may exercise such authority and the extent provided in
the resolution creating such committee~ The Executive Committee shall have and
may exercise all the authority of the Board. but only upon the unanimous consent
of those present, provided there is a quorum. No committee shall:
(a) make, alter or repeal any by-law of the Corporation;
(b) elect or appoint any director, or remove any officers or director;
(c) submit to shareholders any action that requires shareholders'
approval;
(d) amend or repeal any resolution theretofore adopted by the Board;
or
(e) declare dividends or dispose of any corporate assets not in the
ordinary course of business.
- 4 -
<PAGE> 8
SECTION 2.12. RESIGNATIONS FROM COMMITTEES. Any member of a committee
may resign by written notice to the Board. A resignation shall be effective upon
receipt thereof by the Board or such subsequent time as shall be specified in
the notice of resignation.
SECTION 2.13. COMPENSATION OF DIRECTORS. No Director shall be entitled
to any salary as such; but the Board may fix, from time to time, a reasonable
fee to be paid each Director for his services in attending meetings of the
Board. The Board of Directors may provide that such fee as it deems reasonable
shall be paid to any of its members, or to the members of any other duly
authorized committee for attendance upon meetings of the Board or of such
committee, respectively. The Board, by affirmative vote of a majority of
directors in office and irrespective of any personal interest of any of them,
may establish reasonable compensation of directors for services to the
Corporation as directors, members of any committee of the Board, officers or
otherwise.
SECTION 2.14. ACTION OF BOARD OR COMMITTEES WITHOUT A MEETING. Any
action required or permitted to be taken pursuant to authorization voted at a
meeting of the Board or any committee thereof, may be taken without a meeting
if, prior or subsequent to such action, all members of the Board or such
committee, as the case may be, consents thereto in writing and such written
consents are filed with the minutes of the proceedings of the Board or such
committee; and any such action shall be reported to the Board at its next
meeting following such action.
ARTICLE III
OFFICERS, AGENTS AND EMPLOYEES
SECTION 3.01. GENERAL PROVISIONS. The officers of the Corporation shall
consist of a President, a Secretary, a Treasurer and, if desired, a Chairman of
the Board, one or more Vice Presidents, one or more Assistant Secretaries and
one or more Assistant Treasurers. Any one or more Vice Presidents may be
designated as Executive Vice President. The officers shall be elected by the
Board at the first meeting of the Board after the annual meeting of the
shareholders in each year. The Board may elect or appoint other officers, agents
and employees, who shall have such authority and perform such duties as may be
prescribed by the Board. Each officer shall hold office for the term for which
he is elected or appointed and until his successor is elected or appointed and
has qualified. Any two or more offices may be held by the same person but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity if such instrument is required by law or by these By-Laws to be
executed, acknowledged or verified by two or more officers. Any officer, agent
or employee of the Corporation may be removed by the Board with or without
cause. Such removal without cause shall be without prejudice to such person's
contract rights, if any, but the election or appointment of an officer, agent or
employee of the Corporation shall not of itself create contract rights. The
compensation of officers, agents and employees who are not also directors shall
be fixed by the Board, but this power may be delegated to any officer, agent or
employee a~ to persons under his direction or control. The Board may require any
officer, agent or employee to give security for the faithful performance of his
duties.
SECTION 3.02. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The
Chairman of the Board shall be the chief executive officer of the Corporation,
unless the President is so designated by the Board, and shall preside at all
meetings of the shareholders and of the Board at which he is present. He shall,
in addition, perform such other duties as the Board may designate.
SECTION 3.03. POWERS AND DUTIES OF THE PRESIDENT. The President shall,
in the absence of the Chairman of the Board, preside at all meetings of the
shareholders and the Board at which he is present and shall, in addition,
perform such other duties as the Board may designate.
- 5 -
<PAGE> 9
SECTION 3.04. POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER. Subject
to the directions of the Board, the chief executive officer shall have general
charge of the business and affairs of the Corporation and shall, in addition,
perform such other duties as the Board may designate. He may employ and
discharge employees and agents of the Corporation, except such of them as shall
be elected or appointed by the Board, and he may delegate these powers. He may
vote the shares or other securities of any other domestic or foreign corporation
of any type or kind which may at any time be owned by the Corporation, may
execute any shareholders' or other consents in respect thereof and mall in his
discretion delegate such powers by executing proxies, or otherwise, on behalf of
the Corporation. The Board, by resolution from time to time, may confer like
powers upon any other person or persons.
SECTION 3.05. POWERS AND DUTIES OF VICE PRESIDENTS. Each Vice President
shall have such powers AND perform such duties as the Board or the chief
executive officer may prescribe IN THE ABSENCE OR inability to act of the
President, unless the Board shall otherwise provide, any Vice President may
perform all the duties and may exercise any of the powers of the President. The
performance of any such duty by a Vice President shall be conclusive evidence of
his power to act.
SECTION 3.06. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall
have charge of the minutes of all proceeding of the shareholders and of the
Board. The Secretary shall attend to the giving of notice to shareholders and
directors. The Secretary shall have charge of the seal of the Corporation and
shall attest the same by signature whenever required. The Secretary shall have
charge of the record of shareholders of the Corporation and of such books and
papers as the Board may direct. The Secretary shall have all such powers and
duties as generally are incident to the position of Secretary or as may be
assigned to the Secretary by the chief executive officer of the Board.
SECTION 3.07. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall
have charge of all funds and securities of the Corporation, shall endorse the
same for deposit or collection when necessary and deposit the same to the credit
of the Corporation in such banks or depositaries as the Board may authorize. The
Treasurer may endorse all commercial documents requiring endorsement for or on
behalf of the Corporation and may sign all receipts and vouchers for payments
made to the Corporation. The Treasurer shall have such powers and duties as
generally are incident to the position of Treasurer or as may be assigned to the
Treasurer by the chief executive officer of the Corporation or by the Board.
SECTION 3.08. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the
absence or inability of the SECRETARY TO ACT, any Assistant Secretary may
perform all of THE DUTIES AND EXERCISE ALL OF THE powers of the Secretary. The
performance of any such duty shall be conclusive evidence of the power of the
Assistant Secretary to act. An Assistant Secretary shall also perform such other
duties as the Secretary, the chief executive officer or the Board may assign.
SECTION 3.09. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the absence
or inability of the Treasurer to act, an Assistant Treasurer may perform all the
duties and exercise all of the powers of the Treasurer. The performance of any
such duty shall be conclusive evidence of the power of the Assistant Treasurer
to act. An Assistant Treasurer shall also perform such other duties as the
Treasurer, the chief executive officer and the Board may assign.
ARTICLE IV
SHARES OF THE CORPORATION
SECTION 4.01. CERTIFICATES FOR SHARES. The shares of the Corporation
shall be represented by certificates which shall either be manually, or by
facsimile, signed by, or in the name of the Corporation by, the President or a
Vice President and the Treasurer or an Assistant Treasurer or the Secretary or
an Assistant Secretary of the Corporation, may be sealed with the seal of the
Corporation or a facsimile thereof, and shall contain such information as is
required by agreement of the shareholders or by law to be stated thereon. If the
- 6 -
<PAGE> 10
certificate is countersigned by a transfer agent or a registrar who is not an
officer of the Corporation, any and all of the signatures may be by facsimile.
In case any officer, transfer agent or registrar who has signed a certificate
shall cease to be such officer, transfer agent or registrar before the
certificate is issued, it may be issued by the Corporation with the same effect
as if such officer, transfer agent or registrar were the officer, transfer agent
or registrar at the date of such issue.
SECTION 4.02. TRANSFER AGENTS AND REGISTRARS. The Board may appoint one
or more transfer agents and one or more registrars with respect to the
certificates representing shares of stock of the Corporation, and may require
all such certificates to bear the signature of either or both.
SECTION 4.03. RECORD OF SHAREHOLDERS. The Corporation shall keep at its
registered office in the State of Missouri, or at the office of its transfer
agent within or without the State of Missouri a record containing the names and
addresses of all shareholders, the number, class and series of shares held by
each and the dates when they respectively became the owners of record thereof.
The Corporation shall be entitled to treat the persons in whose names shares
stand on the record of shareholders as the owners thereof for all purposes.
ARTICLE V
SEAL
SECTION 5.01. CORPORATION SEAL. The seal of the Corporation shall be in
such form as shall be approved from time to time by the Board. The Corporation
may use the seal by causing it or a facsimile to be affixed or impressed or
reproduced in any manner.
ARTICLE VI
CHECKS, NOTES & DRAFTS
SECTION 6.01. CHECKS, NOTES & DRAFTS. Checks, notes, drafts, acceptances,
bills of exchange and other orders or obligations for the payment of money shall
be signed by such officer or officers or person or persons as the Board shall
from time to time determine.
ARTICLE VII
FISCAL YEAR
SECTION 7.01. FISCAL YEAR. The fiscal year of the Corporation shall be
the calendar year.
ARTICLE VIII
AMENDMENTS
SECTION 8.01. AMENDMENTS. These By-laws may be altered or repealed and
new By-laws may be adopted by the Board, but By-laws adopted by the Board may be
altered or repealed, and new By-laws made, by the shareholders entitled to vote
thereon.
- 7 -
<PAGE> 11
ARTICLE IX
OFFICIAL ORDER OF BUSINESS AT SHAREHOLDERS' AND DIRECTORS' MEETINGS
SECTION 9.01. ANNUAL SHAREHOLDERS' MEETING. The order of business at
the annual shareholders meeting shall be as follows:
(a) Calling of roll;
(b) Report by the Secretary as to the presence of a quorum;
(c) Reading of the minutes of preceding meeting and the taking of
action thereon;
(d) Reading of the reports and statements of officers and committees;
(e) Unfinished business;
(f) Election of directors;
(g) New and miscellaneous business.
SECTION 9.02. SPECIAL MEETING OF SHAREHOLDERS. The order of business at
special meetings of the shareholders shall be as follows:
(a) of the roll;
(b) Report by the secretary as to the Presence of a quorum,
(c) Reading of the call for the meeting;
(d) Action upon matters mentioned in the call.
SECTION 9.03. ANNUAL MEETING OF BOARD. The order of business at the
annual meeting of the board of directors shall be as follows:
(a) Calling of the roll;
(b) Report by the secretary as to the presence of a duly qualified
quorum;
(c) Reading of the minutes of the last annual meeting of the
directors and the last special meeting and the taking of action
thereon;
(d) Reading of reports and statements of officers and committees;
(f) Consideration of reports and statements of officials and
committees;
(g) Unfinished business;
(h) New and miscellaneous business.
- 8 -
<PAGE> 12
ARTICLE X
KEEPING OF MINUTE BOOKS
SECTION 10.01. KEEPING OF MINUTE BOOKS. The Board shall keep complete
records of its proceedings in a minute book kept for that purpose alone. The
organization papers of this Corporation, as executed and filed with the
Secretary of State and supplied to the Commissioner of Finance of the State of
Missouri, the By-Laws and any amendments thereto, the proceedings and minutes of
all regular and special meetings of the Board and shareholders, and all reports
of committees of the Board shall be recorded in the minute book; and the minutes
of each meeting shall be signed by the presiding officer and attested by the
recording officer. When a member of the Board shall request it, the vote of each
director upon a particular question shall be recorded in the minute book. Such
minutes shall show the action of the Board or Executive Committee on all
investments made or authorized. The minutes of the Executive Committee shall be
submitted to the Board for approval at each regular meeting of the Board and the
reports of examining committees and all other proceedings shall be recorded in
detail in the minute book. Every official communication from the Commissioner of
Finance of the State of Missouri shall be noted in the minutes as required by
law.
ARTICLE XI
AMENDMENTS TO OR CHANGES IN BY-LAWS
SECTION 12.01. AMENDMENTS TO OR CHANGES IN BY-LAWS. These By-Laws may
be changed or amended by the vote of a majority of the Board at any regular or
special meeting of the Board, provided, however, that the Board shall have been
given 10 days' notice of the intention to change or offer an amendment thereto.
At a meeting of Board of Directors and Shareholders of Liberty Bancshares,
Inc., duly called and regularly held on the 16th day of May , 1995, the
foregoing By-Laws were adopted.
- 9 -
<PAGE> 1
EXHIBIT 8.1
[HUSCH & EPPENBERGER, LLC LETTERHEAD]
September ____, 1998
Liberty Bancshares, Inc.
1414 East Primrose
Springfield, MO 65804
Liberty Bank
1414 East Primrose
Springfield, MO 65804
Sac River Valley Bank
P.O. Box B
Stockton, MO 65785
RE: Agreement and Plan of Merger, Dated as of June
18, 1998, among Sac River Valley Bank, Liberty
Bancshares, Inc. and Liberty Bank
Ladies and Gentlemen:
We have acted as counsel for Liberty Bank ("Liberty") and Liberty
Bancshares, Inc. ("Bancshares") in connection with the proposed merger (the
"Merger") of Sac River Valley Bank ("Sac River") with and into Liberty, pursuant
to the terms of the above-referenced agreement (the"Agreement"). Liberty is the
wholly owned subsidiary of Bancshares. Unless otherwise defined herein, all
capitalized terms shall have the respective meetings set forth in the Agreement.
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion, including, but not limited to,
the current provisions of the Internal Revenue
<PAGE> 2
[HUSCH & EPPENBERGER, LLC LETTERHEAD]
Liberty Bancshares, Inc.
Liberty Bank
Sac River Valley Bank
September ___, 1998
Page 2
Code of 1986, as amended (the "Code"), the Treasury Regulations promulgated
thereunder, and applicable judicial and administrative interpretations thereof,
existing as of the date hereof, any of which is subject to change at any time.
We have also made the following factual assumptions:
1. The Merger will be consummated in accordance with the terms
of the Agreement.
2. The representations and warranties of the parties under the
Agreement will be true and correct in all material respects as of the
effective date of the Merger, except to the extent waived by the
parties.
3. As of the effective date of the Merger, there will be no
plan or intention on the part of Bancshares or any entity related to
Bancshares to reacquire any of the shares of Bancshares common stock to
be issued in the Merger.
4. Bancshares will not terminate the Sac River Valley Bank
Employee Stock Ownership Plan at any time sooner than one year
following the effective date of the Merger.
5. Bancshares will not have any call rights with respect to
the Bancshares stock to be received by the Sac River stockholders in
the Merger.
6. Except as may be provided in Article XI of the Sac River
Valley Bank Employee Stock Ownership Plan and Trust Agreement, no Sac
River shareholder will have put rights with respect to any Bancshares
stock to be received in the Merger.
7. Total cash consideration to Sac River shareholders in
exchange for their Sac River common stock, including the reasonable
cash value of shares of Sac River shareholders who exercise dissenters'
rights granted under RSMo. Section 362.730 with respect to their Sac
River common stock (by applying in the appropriate court either before
or after the Merger by petition for the appointment of appraisers to
value said shares), as finally determined by a court of competent
jurisdiction, shall not exceed, in the aggregate, $8,657,000.00.
<PAGE> 3
[HUSCH & EPPENBERGER, LLC LETTERHEAD]
Liberty Bancshares, Inc.
Liberty Bank
Sac River Valley Bank
September ___, 1998
Page 3
8. Liberty will acquire at least 90% of the fair market value
of the net assets and at least 70% of the fair market value of the
gross assets held by Sac River immediately prior the Merger.
9. Prior to the Merger, Bancshares will own all of the issued
and outstanding shares of stock of Liberty.
10. Following the Merger, Liberty will not issue additional
shares of its stock that would result in Bancshares losing control of
Liberty within the meaning of Code Section 368(c).
11. As of the effective date of the Merger, Bancshares will
have no plan or intention to liquidate Liberty; to merge Liberty with
and into another corporation; to sell or otherwise dispose of the stock
of Liberty; or to cause Liberty to sell or otherwise dispose of any of
the operating assets of Sac River acquired in the Merger, except for
dispositions made in the ordinary course of business or transfers
described in Code Section 368(a)(2)(C).
12. The liabilities of Sac River assumed by Liberty and the
liabilities to which the transferred assets of Sac River are subject
were incurred by Sac River in the ordinary course of its business.
13. Following the Merger, Liberty will continue the historic
business of Sac River or use a significant portion of Sac River's
business assets in a business.
14. Bancshares, Liberty, Sac River, and the shareholders of
Sac River will pay their respective expenses, if any, incurred in
connection with the Merger.
15. There is no inter-corporate indebtedness existing between
Bancshares and Liberty or between Liberty and Sac River that was
issued, acquired or will be settled at a discount.
<PAGE> 4
[HUSCH & EPPENBERGER, LLC LETTERHEAD]
Liberty Bancshares, Inc.
Liberty Bank
Sac River Valley Bank
September ___, 1998
Page 4
16. No two parties to the Merger are investment companies as
defined in Code Section 368(a)(2)(F)(iii) and (iv).
17. Sac River is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Code Section 368(a)(3)(A).
18. The fair market value of the assets of Sac River transferred
to Liberty will equal or exceed the sum of the liabilities assumed by
Liberty, plus the amount of liabilities, if any, to which the
transferred assets are subject.
19. No stock of Liberty will be used in the Merger.
Based upon the foregoing assumptions, and in reliance upon the matters
set forth above, and subject to the exceptions and qualifications contained
herein, we are of the opinion that, for federal income tax purposes:
1. No gain or loss will be recognized by Bancshares, Liberty, or
Sac River as a result of the Merger.
2. Sac River stockholders will not recognize any gain or loss
upon the receipt of Bancshares common stock (as opposed to cash) in
exchange for their Sac River common stock.
3. The tax basis of the Bancshares common stock received by a
Sac River stockholder will be the same as the basis of the Sac River
common stock surrendered in exchange therefor reduced by the portion of
the basis allocable to the fractional shares of Bancshares stock
received in the Merger.
4. The holding period for Bancshares stock received by Sac River
stockholder in the Merger will include the period during which the Sac
River common stock surrendered in exchange therefor was held.
5. Each Sac River stockholder will recognize gain equal to the
lesser of (i) the amount of cash received in the Merger or (ii) the
amount, if any, by which the sum of the cash plus
<PAGE> 5
[HUSCH & EPPENBERGER, LLC LETTERHEAD]
Liberty Bancshares, Inc.
Liberty Bank
Sac River Valley Bank
September ___, 1998
Page 5
the fair market value of the Bancshares stock received in the Merger
exceeds the stockholder's basis in the Sac River shares surrendered.
For purposes of determining the character of such gain, the cash
received in the Merger will be treated as if shares of Bancshares
common stock equal in value to the cash had been distributed to the Sac
River shareholders as part of the Merger and then immediately after the
Merger such shares were redeemed by Bancshares. Depending upon the
particular circumstances of each shareholder, such cash payments will
be characterized as either having been received as a distribution in
full payment in exchange for the Bancshares stock deemed to have been
redeemed or as having been received as a dividend, as provided in Code
Section 302. If the cash payment is treated as having been received by
a Sac River stockholder as a distribution in full payment in exchange
for redeemed shares, such stockholder's gain recognized in the Merger
will be short-term, mid-term or long-term capital gain, depending upon
the Sac River stockholder's holding period for the Sac River stock. If
the cash payment is treated as having been received by a Sac River
stockholder as a dividend, the stockholder's gain on the Merger will
be recognized as ordinary income.
This opinion is subject to the following additional assumptions and
qualifications:
(a) This opinion is specifically limited to applicable federal
income tax laws in effect as of the date hereof.
(b) We undertake no responsibility to advise you of any changes
in the federal income tax law or as to any events that may occur or as
to any amendment of any of the documents referred to herein, after the
Closing of the Merger, that may alter the scope or substance of this
opinion.
(c) This opinion is based upon the assumption by management of
Liberty and Bancshares (without independent verification by us) that,
to the best of management's knowledge and belief:
(i) As of the effective date of the Merger, the fair market
value of the Bancshares stock and other
<PAGE> 6
[HUSCH & EPPENBERGER, LLC LETTERHEAD]
Liberty Bancshares, Inc.
Liberty Bank
Sac River Valley Bank
September ___, 1998
Page 6
consideration to be received by each Sac River shareholder
will be approximately equal to the fair market value of the
Sac River stock surrendered in the Merger; and
(ii) As of the effective date of the Merger, the fair
market value of Bancshares common stock shall not be less
than $29.50 per share.
This opinion may be specifically relied upon by the shareholders of Sac
River.
This opinion is being furnished to you solely in connection with the
Merger and is solely for your benefit and the benefit of shareholders of Sac
River. Accordingly, without our prior written consent, this letter may not be
quoted in whole or in part or otherwise referred to in any reported document or
otherwise referred to or circulated in connection with any transaction other
than the Merger. Notwithstanding the foregoing, we hereby consent to the
inclusion of this opinion in the Registration Statement on Form S-4 to be filed
by Bancshares with the Securities and Exchange Commission to register _______
shares of Bancshares common stock which may be issued in the Merger and to the
reference to this firm under the caption "Legal Opinions" in the prospectus
comprising part of such Registration Statement.
Sincerely yours,
HUSCH & EPPENBERGER, LLC
By_________________________
Gary A. Powell
GAP/wm
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT CONTRACT
This agreement will serve as an employment agreement between Sac River Valley
Bank and Garry Robinson. Terms and compensation under this contract will begin
July 1, 1998 and will remain in effect for a period of nine (9) years from this
date. The present employment contract between Garry Robinson and Sac River
Valley Bank will be cancelled as of the above stated date.
DUTIES
GLR will work in Springfield 3 days per week and in Stockton 2 days per week.
In Springfield GLR will:
Run the Springfield office of SRVB
Hire and train all personnel there
Initiate Springfield loans
Collect and supervise Springfield
In Stockton GLR will:
Continue to handle his Stockton loan portfolio.
Support the Stockton management, to include, but not be limited
to:
Advice on investments
Participate in the training of management personnel
Generally help in the supervision of the operation of the
bank
COMPENSATION
The compensation under this contract will be $144,000 for the first year, paid
in monthly installments with an annual raise of 5%. There will be no bonuses
paid to GLR under this contract. If the after-tax net profit of SRVB drops
below $1,000,000 in any year the following year's salary of GLR will be reduced
by 10% of the total salary for each $100,000 the profit is below $1,000,000 for
the year. The minimum salary to be paid to GLR under this formula is $50,000
annually. At the point that the contract payments fall to $50,000 or below, SRVB
may terminate this contract at is sole discretion.
BENEFITS
Fringe benefits such as health insurance, dental insurance, disability
insurance, vacation, life insurance and retirement plans will be the same as
other officers of the bank. Bank will provide a bank vehicle for GLR (similar to
an 88 Oldsmobile Royale). This vehicle will be updated to a current year model
every three years as is the current procedure.
OTHER TERMS
Should SRVB sell, the contract will be binding in the purchaser. GLR will honor
the terms of the contract with any purchaser. During the term of the contract
GLR will not compete in the banking field with SRVB without the written consent
of SRVB.
SAC RIVER VALLEY BANK /s/ Garry L. Robinson
--------------------------------
Date: 11/13/97
---------------------------
/s/ Darrell D. Church
- ------------------------
/s/ Neale W. Johnson
- ------------------------
/s/ Howard K. Johnson
- ------------------------
/s/ Stephen T. Wrenn
- ------------------------
/s/ Charles W. Neale
- ------------------------
/s/ Garry L. Robinson
- ------------------------
/s/ Franklin H. Smith
- ------------------------
<PAGE> 2
ADDENDUM TO CONTRACT
If during the term of this contract, Garry L. Robinson should become
incapacitated for a period exceeding six months, this contract shall be void.
Incapacitation shall include any act, intentional or unintentional, which shall
render Garry L. Robinson unable to physically or emotionally complete the terms
of this contract. Should a dispute arise in the definition of incapacitation,
the opinion of the local court with legal jurisdiction shall prevail.
<PAGE> 1
EXHIBIT 10.2
RESTATEMENT OF INCENTIVE STOCK OPTION PLAN
RESTATEMENT ("Restatement"), of Incentive Stock Option Plan, executed
this 13th day of May, 1997, by Liberty Bancshares, Inc., a one bank holding
corporation organized and existing under the laws of the State of Missouri
(hereinafter referred to as "Bancshares").
W I T N E S S E T H :
WHEREAS, the Board of Directors of Bancshares, in order to promote its
success and the success of its subsidiary banking association, Liberty Bank
(hereinafter referred to as the "Bank"), adopted, on October 27, 1995, the
Liberty Bancshares, Inc. Incentive Stock Option Plan (the "Plan"), which was
approved by the shareholders of Bancshares on May 7, 1996; and
WHEREAS, the Board of Directors desires to amend the Plan in many
particulars and believes that the amendments will be better understood if the
entire plan is restated (except for the introductory paragraphs appearing
immediately before Section 1 of the Plan);
NOW, THEREFORE, in consideration of the premises, the Plan is hereby
amended by substituting for it this Restatement, which sets forth all of the
terms and conditions of the Plan, which Restatement shall be effective as of the
original effective date of the Plan; provided, however, that this Restatement
shall not, without the optionee's consent, alter or impair any rights or
obligations under any option heretofore granted under the Plan.
1. Qualification of Option: This Plan is intended to promote
the interests of both the Bank and Bancshares and employees who are
selected from time to time by encouraging such employees to invest on
reasonable terms in Bancshare's common stock by means of "Incentive
Stock Options" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"). However, nothing herein shall be
deemed to be or interpreted as a representation, guarantee, or other
undertaking on the part of either Bancshares or the Bank that such
option is or will be determined to be a qualified stock option within
that or any other section of the Internal Revenue Code.
2. Administration: This Plan shall be administered by an
Incentive Stock Option Committee (hereinafter referred to as the
"Committee") of not less than five (5) members selected by the Board of
Directors from Bancshares' board of directors. No member of the
Committee may participate in the Plan. The Committee may, from time to
time, select employees to participate in the Plan and issue orders and
adopt resolutions
<PAGE> 2
not inconsistent with the provisions of this Plan. All determinations
shall be made by the affirmative vote of a majority of the members of
the Committee at a meeting called for such purpose, or reducing to
writing and signed by a majority of the members of the Committee. In
the absence of fraud or gross negligence, all decisions made by the
Committee in construing the provisions of this Plan shall be final,
conclusive and binding upon all persons. Committee members shall serve
until further vote of the Board of Directors of Bancshares.
3. Option Agreements. Each option granted by the Committee
shall be evidenced by a written Employee Incentive Stock Option
Agreement which shall contain such terms and conditions as may be
approved by the Committee and shall be signed by an officer of
Bancshares and the selected employee.
4. Eligibility. Options may be granted under this Plan only to
employees of either Bancshares or the Bank selected by the Committee
from time to time whose ownership of Bancshares common stock (as
determined at the date of the grant of any option) does not exceed ten
percent (10%) of the total combined voting power of all classes of
stock of Bancshares or of any subsidiary thereof. This provision shall
not apply if at the time such option is granted the option price is at
least one hundred ten percent (110%) of the fair market value of the
stock subject to the option and such option by its terms is not
exercisable after the expiration of five (5) years from the date of
such option is granted. Options may be granted only to employees for a
reason connected with his or her employment who at all times during the
period beginning on the date of the granting of the option and ending
in the day three months before the date of such exercise was an
employee of either Bancshares or the bank. In the case of an employee
who is disabled (within the meaning of Code Section 22(e)(3)), the
three month period will be one year.
5. Shares Subject to Plan: The Committee may, from time to
time, provide for the option and sale in the aggregate amount of One
Thousand Five Hundred (1,500) shares of Bancshares' common stock.
6. Option Price: The purchase price of the stock under each
option shall be the fair market value of the stock at the time of
granting of the option unless the employee to whom the option is
granted owns greater than ten (10%) of the total combined voting power
of all classes of stock of Bancshares or of any subsidiary thereof, in
which case the purchase price of the stock shall be one hundred ten
percent (110%) of the fair market value of the stock at the time of the
granting of the option.
2
<PAGE> 3
7. Effective Date and Duration of Plan: This Plan shall become
effective upon its approval by the favorable vote of the holders of a
majority of the common stock of Bancshares. All options under this Plan
shall be granted within ten (10) years from the date hereof; provided,
however, that the Board of Directors may at any time suspend or
terminate the Plan. No option shall be granted during such suspension
or after such termination. The suspension or termination of the Plan
shall not, however, without the optionee's consent, alter or repair any
rights or obligations under any option previously granted under the
Plan.
8. Annual Limitation of Exercise of Options: In a calendar
year, an employee may not exercise options to purchase stock for more
than One Hundred Thousand Dollars ($100,000.00) of stock, valued as of
the date of the grant of the options.
9. Exercise of Options: All options granted under the Plan
must be exercised within ten (10) years after the option was granted.
All options granted under the Plan, to the extent not theretofore
exercised, shall terminate and become null and void on the option
termination date or sooner if the employee ceases to be in the
continuous employee of the Bancshares or the Bank (whether by
resignation, retirement, dismissal or otherwise). However, in the event
of the termination of such employment for any reason other than death,
the employee may exercise the option at any time within the three (3)
month period following such termination, to the extent that such option
was exercisable by him on the date of termination of such employment.
An option granted under the Plan may not be transferred except by will,
the laws of descent and distribution, or non-probate transfer as
provided in the Non-probate Transfers Law of Missouri and, during the
lifetime of the employee to whom granted, may be exercised only by him.
If the employee dies either (i) while in the employ of Bancshares or
the Bank, or (ii) within three (3) months following termination of such
employment, to the extent the employee was entitled to exercise an
option on the date of his death, such option may, within one (1) year
after his death, be exercised by the person or persons to whom the
employee's rights shall pass by will, the laws of descent and
distribution, or non-probate transfer. All stock acquired by an
employee or by the person or persons to whom the employee's rights
shall pass by will, the laws of descent and distribution, or
non-probate transfer, shall be subject to (i) the restrictions on sale,
encumbrance or other disposition as set forth in the Stock Purchase
Agreement among Bancshares and its shareholders effective May 1, 1995
(the "Stock Purchase Agreement"), and (ii) such put and call options
applicable
3
<PAGE> 4
upon the employee's termination of employment as deemed necessary or
advisable by the Board of Directors of Bancshares.
10. Amendment of Plan: The Committee or Board of Directors may
at any time amend the Plan in such respects as the Board of Directors
or the Committee may deem advisable in order that options granted under
the Plan shall be "Incentive Stock Options" as defined in Code ss.422,
or in order to conform to any change in the law, or in any other
respect which the Board of Directors may deem to be in the best
interest of Bancshares; provided, however, that no such amendment
shall, without further approval of the shareholders of Bancshares, (a)
increase the aggregate number of shares of common stock of Bancshares
which may be issued under options granted pursuant to the Plan or the
maximum number of shares for which an option or options may be granted
under the Plan to any one employee; (b) change the minimum option
purchase price; (c) increase the maximum period during which options
may be exercised; or (d) extend the termination date of the Plan. Any
amendment to the Plan shall not, without the optionee's consent, alter
or impair any rights or obligations under any option theretofore
granted under the Plan.
IN WITNESS WHEREOF, this Restatement to the Liberty Bancshares, Inc.
Incentive Stock Option Plan is hereby executed under the authority of the Board
of Directors of Bancshares, as of the day and year first above written.
(Corporate Seal)
Attest:
LIBERTY BANCSHARES, INC.
/s/ Pat Sechler /s/ Gary E. Metzger
_________________________ By: __________________________
Secretary/Asst. Secretary GARY E. METZGER,
President
4
<PAGE> 1
EXHIBIT 10.3
AMENDMENT TO RESTATEMENT OF INCENTIVE STOCK OPTION PLAN
AMENDMENT ("Amendment") of Incentive Stock Option Plan, executed this
13th day May, 1997, by Liberty Bancshares, Inc., a one bank holding corporation
corporation organized and existing under the laws of the State of Missouri
(hereinafter referred to as "Bancshares").
W I T N E S S E T H :
WHEREAS, the Board of Directors of Bancshares, in order to promote its
success and the success of its subsidiary banking association, Liberty Bank
(hereinafter referred to as the "Bank"), adopted, on October 27, 1995, the
Liberty Bancshares, Inc. Incentive Stock Option Plan (the "Plan"), which was
approved by the shareholders of Bancshares on May 7, 1996; and
WHEREAS, One Thousand Five Hundred (1,500) shares of common stock of
Bancshares are currently subject to the Plan;
WHEREAS, on May 13, 1997, the shareholders of Bancshares approved an
increase of the maximum number of shares which can be subject to options under
the Plan to Four Thousand Five Hundred (4,500) shares of the common stock of
Bancshares;
NOW, THEREFORE, the Plan as currently set forth in the Restatement
thereof dated the 5th day of May, 1997 (the "Restatement"), is hereby amended
as follows:
1. Section 5 of the Restatement, which sets forth the shares
subject to the Plan, is hereby deleted in its entirety, and the
following new Section 5 is inserted in lieu thereof:
<PAGE> 2
"5. Shares Subject to Plan: The Committee may,
from time to time, provide for the option and sale in the
aggregate amount of Four Thousand Five Hundred (4,500)
shares of Bancshares common stock."
2. Effective Date. The amendments to the Plan, as set
forth herein, shall be effective May 13, 1997.
3. Reaffirmation. In all other respects, the Plan, as
set forth in the Restatement, is hereby reaffirmed.
IN WITNESS WHEREOF, this Amendment to the Restatement of the
Liberty Bancshares, Inc. Incentive Stock Option Plan is hereby executed under
the authority of the Board of Directors of Bancshares, as of the day and year
first above written.
LIBERTY BANCSHARES, INC.
(CORPORATE SEAL)
By: /s/Gary E. Metzger
-----------------------------
GARY E. METZGER, PRESIDENT
ATTEST:
/s/ Pat Sechler
- -----------------------------
Secretary/Assistant Secretary
2
<PAGE> 1
EXHIBIT 10.4
SECOND AMENDMENT TO RESTATEMENT OF
INCENTIVE STOCK OPTION PLAN
AMENDMENT ("Amendment") of Incentive Stock Option Plan, executed this
21st day of July, 1998, by Liberty Bancshares, Inc., a one bank
holding corporation organized and existing under the laws of the State of
Missouri (hereinafter referred to as "Bancshares").
W I T N E S S E T H:
WHEREAS, the Board of Directors of Bancshares, in order to promote its
success and the success of its subsidiary banking association, Liberty Bank
(hereinafter referred to as the "Bank"), adopted, on October 27, 1995, the
Liberty Bancshares, Inc. Incentive Stock Option Plan (the "Plan"), which was
approved by the shareholders of Bancshares on May 7, 1996; and
WHEREAS, the Plan was restated in its entirety on May 13, 1997
(the "Restatement"); and
WHEREAS, the Plan was subsequently amended by an amendment to
the Restatement, also dated May 13, 1997; and
WHEREAS, effective May 19, 1998, the shareholders of Bancshares
approved the following changes to the authorized capital of Bancshares, in order
to accommodate the proposed merger of Sac River Valley Bank into Bank, in
exchange for common stock Bancshares, pursuant to an Agreement and Plan of
Merger by and among Sac River Valley Bank, Bank, and Bancshares (the "Merger
Agreement"), as well as to provide additional authorized stock which may be used
with respect to subsequent acquisitions by Bancshares:
(a) That with respect to the existing authorized capital stock
of Bancshares, the par value be decreased from $50.00 per share to
$10.00 per share;
(b) That a ten for one stock split be effectuated with respect
to the existing authorized capital stock of Bancshares, with the result
that the existing authorized capital stock of Bancshares (after said
reduction in par value and stock split) would have a par value of $1.00
per share; and
(c) That the authorized common stock of Bancshares be
increased to 5,000,000 shares; and
WHEREAS, the shareholders of Bancshares, on May 19, 1998, also approved
the termination of the Stock Purchase Agreement dated May
<PAGE> 2
1, 1995, between Bancshares and the shareholders of Bancshares, effective upon
the effective date of the merger of Sac River Valley Bank in to Liberty bank,
pursuant to the Merger Agreement; and
WHEREAS, as a result of said matters as approved by the shareholders of
Bancshares, the Board of Directors of Bancshares has determined that the Plan be
amended in certain particulars:
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Adjustment of and Changes in Stock of Bancshares. As the
result of the ten for one stock split with respect to the existing
authorized capital stock of Bancshares as approved by the shareholders
of Bancshares on May 19, 1998, Section 5 of the Plan, as heretofore
restated and amended, which sets forth the shares subject to the Plan,
is hereby deleted in its entirety, and the following new Section 5 is
inserted in lieu thereof:
"5. Shares Subject to Plan: The
Committee may, from time to time, provide for
the option and sale in the aggregate amount of
forty-five thousand (45,000) of Bancshares
common stock, par value $1.00 per share."
2. Termination of Stock Purchase Agreement. Due to the
termination of the Stock Purchase Agreement among Bancshares and its
shareholders effective May 1, 1995, as approved by the shareholders of
Bancshares on May 19, 1998, the last sentence of Section 9 of the Plan,
as heretofore amended and restated, is hereby deleted, and the
following new sentence is inserted in lieu thereof:
"All stock acquired by an employee or by a person or
persons to whom the employee's rights shall pass by will, the
laws of descent and distribution, or non-probate transfer,
shall be subject to such put and call options applicable upon
the employee's termination of employment as deemed necessary
or advisable by the Board of Directors of Bancshares."
3. Amendments to Employee Incentive Stock Option Agreements.
The officers of Bancshares are hereby authorized and directed to
execute and deliver amendments to existing Employee Incentive Stock
Option Agreements to reflect the amendments to the Plan as set forth
herein. As a result of the ten for one stock split approved by the
shareholders of Bancshares, the option price under existing Employee
Incentive Stock Option Agreements shall be adjusted accordingly.
2
<PAGE> 3
4. Effective Date. The amendments to the Plan, as set forth
herein, shall be effective May 19, 1998.
5. Reaffirmation. In all other respects, the Plan, as
heretofore and herein amended and restated, is hereby
reaffirmed.
IN WITNESS WHEREOF, this Amendment to the Restatement of the Liberty
Bancshares, Inc. Incentive Stock Option Plan is hereby executed under the
authority of the Board of Directors of Bancshares, as of the day and year first
above written.
LIBERTY BANCSHARES, INC.
(CORPORATE SEAL)
By:
-----------------------------
Gary E. Metzger, President
ATTEST:
- -----------------------------
Pat L. Sechler, Secretary
3
<PAGE> 1
EXHIBIT 10.5
SAC RIVER VALLEY BANK
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST AGREEMENT
SAC RIVER VALLEY BANK, a bank organized under the laws of the State of
Missouri, makes this Agreement with GARRY L. ROBINSON, as Trustee.
WITNESSETH;
SAC RIVER VALLEY BANK establishes within this Trust Agreement, a Plan
for the administration and distribution of contributions made by the Employer
for the purpose of providing retirement benefits for eligible Employees. The
provisions of this Plan apply solely to an Employee whose employment with the
Employer terminates on or after the Effective Date of the Employer's Plan. If an
Employee's employment with the Employer terminates prior to the Effective Date,
that Employee is not entitled to any benefit under the Plan.
Now, therefore, in consideration of their mutual covenants, the
Employer and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
1.01 "Plan" means the retirement plan established by the Employer in
the form of this Agreement, designated as the Sac River Valley Bank Employee
Stock Ownership Plan. The Employer has designed this Plan to invest primarily in
Employer Securities.
1.02 "Employer" means SAC RIVER VALLEY BANK.
1.03 "Trustee" means GARRY L. ROBINSON, or any successor in office who
in writing accepts the position of Trustee.
1.04 "Plan Administrator" is the Employer unless the Employer
designates another person to hold the position of Plan Administrator. In
addition to his other duties, the Plan Administrator has full responsibility for
compliance with the reporting and disclosure rules under ERISA as respects this
Agreement.
1.05 "Advisory Committee" means the Employer's Advisory Committee as
from time to time constituted.
1.06 "Employee" means any employee of the Employer.
<PAGE> 2
1.07 "Highly Compensated Employee" means an Employee who, during the
Plan Year or during the preceding 12-month period:
(a) is a more than 5% owner of the Employer (applying the
constructive ownership rules of Code ss.318);
(b) has Compensation in excess of $75,000.00 (as adjusted by
the Commissioner of Internal Revenue for the relevant year);
(c) has Compensation in excess of $50,000.00 (as adjusted by
the Commissioner of Internal Revenue for the relevant year) and is part
of the top-paid 20% group of employees (based on Compensation for the
relevant year);
(d) has Compensation in excess of 50% of the dollar amount
prescribed in Code Section 415(b)(1)(A) (relating to defined benefit
plans) and is an officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in
the Plan Year but not during the preceding 12-month period and does not satisfy
clause (a) in either period, the Employee is a Highly Compensated Employee only
if he is one of the 100 most highly compensated Employees for the Plan Year. The
number of officers taken into account under clause (d) will not exceed the
greater of 3 or 10% of the total number (after application of the Code Section
414(q) exclusions) of Employees, but no more than 50 officers. If no Employee
satisfies the Compensation requirement in clause (d) for the relevant year,
the Advisory Committee will treat the highest paid officer as satisfying
clause (d) for that year.
For purposes of this Section 1.07, "Compensation" means Compensation as
defined in Section 1.10, except any exclusions from Compensation other than the
exclusions described in paragraphs (a), (b), (c) and (d) of Section 1.10, and
Compensation must include: (i) elective deferrals under a Code ss.401(k)
arrangement or under a Simplified Employee Pension maintained by the Employer;
and (ii) amounts paid by the Employer which are not currently includible in the
Employee's gross income because of Code Sections 125 (cafeteria plans) or 403(b)
(tax-sheltered annuities). The Advisory Committee must make the determination of
who is a Highly Compensated Employee, including the determinations of the number
and identity of the top paid 20% group, the top 100 paid Employees, the number
of officers includible in clause (d) and the relevant Compensation, consistent
with Code Section 414(q) and regulations issued under that Code section. The
Employer may make a calendar year election to determine the Highly Compensated
Employees for the Plan Year, as prescribed by Treasury regulations. A calendar
year election must apply to all plans and arrangements of the Employer. For
purposes of applying any nondiscrimination test required under the Plan or
under the Code, in a manner consistent with applicable Treasury regulations,
the Advisory Committee will not treat as a separate Employee a family member
(a spouse, a lineal ascendant or descendant, or a spouse of a lineal ascendant
or descendant) of a Highly Compensated Employee described in clause (a) of this
Section, or a family member of one of
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<PAGE> 3
the ten Highly Compensated Employees with the greatest Compensation for
the Plan Year, but will treat the Highly Compensated Employee and all family
members as a single Highly Compensated Employee. This aggregation rule applies
to a family member even if that family member is a Highly Compensated Employee
without family aggregation.
The term "Highly Compensated Employee" also includes any former
Employee who separated from Service (or has a deemed Separation from Service, as
determined under Treasury regulations) prior to the Plan Year, performs no
Service for the Employer during the Plan Year, and was a Highly Compensated
Employee either for the separation year or any Plan Year ending on or after his
55th birthday. If the former Employee's Separation from Service occurred prior
to January 1, 1987, he is a Highly Compensated Employee only if he satisfied
clause (a) of this Section 1.07 or received Compensation in excess of $50,000.00
during: (1) the year of his Separation from Service (or the prior year); or (2)
any year ending after his 54th birthday.
1.08 "Participant" is an Employee who is eligible to be and becomes a
Participant in accordance with the provisions of Section 2.01.
1.09 "Beneficiary" is a person designated by a Participant who is or
may become entitled to a benefit under the Plan. A Beneficiary who becomes
entitled to a benefit under the Plan remains a Beneficiary under the Plan until
the Trustee has finally distributed his benefit to him. A Beneficiary's right to
(and the Plan Administrator's, the Advisory Committee's or a Trustee's duty to
provide to the Beneficiary) information or data concerning the Plan does not
arise until he first becomes entitled to receive a benefit under the Plan.
1.10 "Compensation" means the Participant's wages, salaries, fees for
professional service and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the plan
(including, but not limited to, compensation for services on the basis of a
percentage of profits, overtime pay, and bonuses). Compensation also includes
elective contributions made by the Employer on the Employee's behalf. "Elective
contributions" are amounts excludible from the Employee's gross income under
Code Section 402(a)(8) (relating to a Code Section 401(k) arrangement), Code
Section 402(h) (relating to a Simplified Employee Pension), Code Section 125
(relating to a cafeteria plan) or Code Section 403(b) (relating to a
tax-sheltered annuity). The term "Compensation" does not include:
(a) Employer contributions (other than "elective
contributions") to a plan of deferred compensation to the extent the
contributions are not included in the gross income of the Employee for
the taxable year in which contributed, on behalf of an Employee to a
Simplified Employee Pension Plan to the extent such contributions are
excludible from the Employee's gross income, and any distributions from
a plan of deferred compensation, regardless of whether such amounts are
includible in the gross income of the Employee when distributed.
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<PAGE> 4
(b) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by an
Employee either becomes freely transferable or is no longer subject to
a substantial risk of forfeiture.
(c) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option.
(d) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent that the
premiums are not includible in the gross income of the Employee), or
contributions made by an Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Code Section 403(b) (whether or not the contributions are
excludible from the gross income of the Employee), other than "elective
contributions".
Any reference in this Plan to Compensation is a reference to the
definition in this Section 1.10, unless the Plan reference specifies a
modification to this definition. The Advisory Committee will take into account
only Compensation actually paid for the relevant period.
The Advisory Committee must take into account only the first
$200,000.00 (or beginning January 1, 1990, such larger amount as the
Commissioner of Internal Revenue may prescribe) of any Participant's
Compensation. The $200,000.00 Compensation limitation applies to the combined
Compensation of the Employee and of any family member aggregated with the
Employee under Section 1.09 and who is either (i) the Employee's spouse; or (ii)
the Employee's lineal descendant under the age of 19. If the $200,000.00 (or
adjusted) Compensation limitation applies to the combined Compensation of the
Employee and one or more family members, the Advisory Committee will apply the
contribution and allocation provisions of Article III by prorating the
$200,000.00 (or adjusted) limitation among the affected Participants in
proportion to each such Participant's Compensation determined prior to
application of this limitation.
NONDISCRIMINATION. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees, Compensation means
Compensation as defined in this Section 1.10 except any exclusions from
Compensation other than the exclusions described in paragraphs (a), (b), (c) and
(d), unless the Employer elects to use an alternate nondiscriminatory
definition, in accordance with the requirements of Code Section 414(s) and the
regulations issued under that Code section. The Employer may elect
to include all elective contributions made by the Employer on behalf of the
Employees. The Employer's election to include elective contributions must be
consistent and uniform with respect to Employees and all plans of the Employer
for any particular Plan Year. The Employer may make this election to include
elective contributions for nondiscrimination testing purposes, irrespective of
whether this Section 1.10 includes elective contributions in the general
Compensation definition applicable to the Plan.
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<PAGE> 5
1.11 "Account" means the separate account(s) which the Advisory
Committee or the Trustee maintains for a Participant under the Plan.
1.12 "Accrued Benefit" means the amount standing in a Participant's
Account(s) as of any date derived from both Employer contributions and Employee
contributions, if any.
1.13 "Nonforfeitable" means a Participant's or Beneficiary's
unconditional claim, legally enforceable against the Plan, to the Participant's
Accrued Benefit.
1.14 "Plan Year" means the fiscal year of the Plan, a 12 consecutive
month period ending every December 31.
1.15 "Effective Date" of this Plan is January 1, 1989.
1.16 "Plan Entry Date" means the Effective Date and every January 1 and
July 1 after the restated Effective Date.
1.17 "Accounting Date" is the last day of the Plan Year. Unless
otherwise specified in the Plan, the Advisory Committee will make all Plan
allocations for a particular Plan Year as of the Accounting Date of that Plan
Year.
1.18 "Trust" means the separate Trust created under the Plan.
1.19 "Trust Fund" means all property of every kind held or acquired by
the Trustee under the Plan.
1.20 "Nontransferable Annuity" means an annuity which by its terms
provides that it may not be sold, assigned, discounted, pledged as collateral
for a loan or security for the performance of an obligation or for any purpose
to any person other than the insurance company. If the Trustee distributes an
annuity contract, the contract must be a Nontransferable Annuity.
1.21 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.22 "Code" means the Internal Revenue Code of 1986, as amended.
1.23 "Service" means any period of time the Employee is in the employ
of the Employer, including any period the Employee is on an unpaid leave of
absence authorized by the Employer under a uniform, nondiscriminatory policy
applicable to all Employees. "Separation from Service" means a separation from
Service with the Employer maintaining this Plan.
1.24 "Hour of Service" means:
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<PAGE> 6
(a) Each Hour of Service for which the Employer, either
directly or indirectly, pays an Employee, or for which the Employee is
entitled to payment, for the performance of duties. The Advisory
Committee credits Hours of Service under this paragraph (a) to the
Employee for the computation period in which the Employee performs the
duties, irrespective of when paid;
(b) Each Hour of Service for back pay, irrespective of
mitigation of damages, to which the Employer has agreed or for which
the Employee has received an award. The Advisory Committee credits
Hours of Service under this paragraph (b) to the Employee for the
computation period(s) to which the award or the agreement pertains
rather than for the computation period in which the award, agreement or
payment is made; and
(c) Each Hour of Service for which the Employer, either
directly or indirectly, pays an Employee, or for which the Employee is
entitled to payment (irrespective of whether the employment
relationship is terminated), for reasons other than for the performance
of duties during a computation period, such as leave of absence,
vacation, holiday, sick leave, illness, incapacity (including
disability), layoff, jury duty or military duty. The Advisory Committee
will credit no more than 501 Hours of Service under this paragraph (c)
to an Employee on account of any single continuous period during which
the Employee does not perform any duties (whether or not such period
occurs during a single computation period). The Advisory Committee
credits Hours of Service under this paragraph (c) in accordance with
the rules of paragraphs (b) and (c) of Labor Reg. Section
2530.200b-2, which the Plan, by this reference, specifically
incorporates in full within this paragraph (c).
The Advisory Committee will not credit an Hour of Service under more
than one of the above paragraphs. A computation period for purposes of this
Section 1.24 is the Plan Year, Year of Service period, Break in Service period
or other period, as determined under the Plan provision for which the Advisory
Committee is measuring an Employee's Hours of Service. The Advisory Committee
will resolve any ambiguity with respect to the crediting of an Hour of Service
in favor of the Employee.
The Employer will credit every Employee with Hours of Service on the
basis of the "actual" method. For purposes of the Plan, "actual" method means
the determination of Hours of Service from records of hours worked and hours for
which the Employer makes payment or for which payment is due from the Employer.
Solely for purposes of determining whether the Employee incurs a Break
in Service under any provision of this Plan, the Advisory Committee must credit
Hours of Service during an Employee's unpaid absence period due to maternity or
paternity leave. The Advisory Committee considers an Employee on maternity or
paternity leave if the Employee's absence is due to the Employee's pregnancy,
the birth of the Employee's child, the placement with the Employee of an adopted
child, or the care of the Employee's child
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<PAGE> 7
immediately following the child's birth or placement. The Advisory
Committee credits Hours of Service under this paragraph on the basis of the
number of Hours of Service the Employee would receive if he were paid during the
absence period or, if the Advisory Committee cannot determine the number of
Hours of Service the Employee would receive, on the basis of eight (8) hours per
day during the absence period. The Advisory Committee will credit only the
number (not exceeding 501) of Hours of Service necessary to prevent an
Employee's Break in Service. The Advisory Committee credits all Hours of Service
described in this paragraph to the computation period in which the absence
period begins or, if the Employee does not need these Hours of Service to
prevent a Break in Service in the computation period in which his absence period
begins, the Advisory Committee credits these Hours of Service to the immediately
following computation period.
1.25 "Disability" means the Participant, because of a physical or
mental disability, will be unable to perform the duties of his customary
position of employment (or is unable to engage in any substantial gainful
activity) for an indefinite period which the Advisory Committee considers will
be of long continued duration. A Participant also is disabled if he incurs the
permanent loss or loss of use of a member or function of the body, or is
permanently disfigured, and incurs a separation from Service. The Plan considers
a Participant disabled on the date the Advisory Committee determines the
Participant satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to confirm
disability. The Advisory Committee will apply the provisions of this Section
1.25 in a nondiscriminatory, consistent and uniform manner.
1.26 SERVICE FOR PREDECESSOR EMPLOYER. If the Employer maintains the
plan of a predecessor employer, the Plan treats service of the Employee with the
predecessor employer as service with the Employer.
1.27 RELATED EMPLOYERS. A related group is a controlled group of
corporations (as defined in Code Section 414(b)), trades or businesses (whether
or not incorporated) which are under common control (as defined in Code
Section 414(c)) or an affiliated service group (as defined in Code Section
414(m) or in Code Section 414(o)). If the Employer is a member of a related
group, the term "Employer" includes the related group members for purposes of
crediting Hours of Service, determining Years of Service and Breaks in Service
under Articles II and V, applying the limitations on allocations in Part 2 of
Article III, applying the top heavy rules and the minimum allocation
requirements of Article III, the definitions of Employee, Highly Compensated
Employee, Compensation and Leased Employee, and for any other purpose required
by the applicable Code section or by a Plan provision. However, only Sac River
Valley Bank may contribute to the Plan and only an Employee employed by Sac
River Valley Bank is eligible to participate in this Plan.
1.28 LEASED EMPLOYEES. The Plan treats a Leased Employee as an Employee
of the Employer. A Leased Employee is an individual (who otherwise is not an
Employee of the Employer) who, pursuant to a leasing agreement between the
Employer and any other person, has performed services for the Employer (or for
the Employer and any persons
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<PAGE> 8
related to the Employer within the meaning of Code Section 144(a)(3)) on a
substantially full-time basis for at least one (1) year and who performs
services historically performed by employees in the Employer's business field.
If a Leased Employee is treated as an Employee by reason of this Section 1.28 of
the Plan, "Compensation" includes Compensation from the leasing organization
which is attributable to services performed for the Employer.
SAFE HARBOR PLAN EXCEPTION. The Plan does not treat a Leased Employee
as an Employee if the leasing organization covers the employee in a safe harbor
plan and, prior to application of this safe harbor plan exception, 20% or less
of the Employer's Employees (other than Highly Compensated Employees) are Leased
Employees. A safe harbor plan is a money purchase pension plan providing
immediate participation, full and immediate vesting, and a non- integrated
contribution formula equal to at least 10% of the employee's compensation
without regard to employment by the leasing organization on a specified date.
The safe harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code Section 415(c)(3) plus elective contributions
(as defined in Section 1.10).
OTHER REQUIREMENTS. The Advisory Committee must apply this Section 1.28
in a manner consistent with Code Sections 414(n) and 414(o) and the regulations
issued under those Code sections.
1.29 DETERMINATION OF TOP HEAVY STATUS. If this Plan is the only
qualified plan maintained by the Employer, the Plan is top heavy for a Plan Year
if the top heavy ratio as of the Determination Date exceeds 60%. The top heavy
ratio is a fraction, the numerator of which is the sum of the present value of
Accrued Benefits of all Key Employees as of the Determination Date and the
denominator of which is a similar sum determined for all Employees. The Advisory
Committee must include in the top heavy ratio, as part of the present value of
Accrued Benefits, any contribution not made as of the Determination Date but
includible under Code Section 416 and the applicable Treasury regulations, and
distributions made within the Determination Period. The Advisory Committee must
calculate the top heavy ratio by disregarding the Accrued Benefit (and
distributions, if any, of the Accrued Benefit) of any Non-Key Employee who was
formerly a Key Employee, and by disregarding the Accrued Benefit (including
distributions, if any, of the Accrued Benefit) of an individual who has not
received credit for at least one Hour of Service with the Employer during the
Determination Period. The Advisory Committee must calculate the top heavy ratio,
including the extent to which it must take into account distributions, rollovers
and transfers, in accordance with Code Section 416 and the regulations under
that Code section.
If the Employer maintains other qualified plans (including a simplified
employee pension plan), or maintained another such plan which now is terminated,
this Plan is top heavy only if it is part of the Required Aggregation Group, and
the top heavy ratio for the Required Aggregation Group and for the Permissive
Aggregation Group, if any, each exceeds 60%. The Advisory Committee will
calculate the top heavy ratio in the same manner as required by the first
paragraph of this Section 1.29, taking into account all plans within the
Aggregation Group. To the extent the Advisory Committee must take into account
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<PAGE> 9
distributions to a Participant, the Advisory Committee must include
distributions from a terminated plan which would have been part of the Required
Aggregation Group if it were in existence on the Determination Date. The
Advisory Committee will calculate the present value of Accrued Benefits under
defined benefit plans or simplified employee pension plans included within the
group in accordance with the terms of those plans, Code Section 416 and the
regulations under that Code section. If a Participant in a defined benefit plan
is a Non-Key Employee, the Advisory Committee will determine his Accrued
Benefit under the accrual method, if any, which is applicable uniformly to all
defined benefit plans maintained by the Employer or, if there is no uniform
method, in accordance with the slowest accrual rate permitted under the
fractional rule accrual method described in Code Section 411(b)(1)(C). To
calculate the present value of benefits from a defined benefit plan, the
Advisory Committee will use the actuarial assumptions (interest and mortality
only) prescribed by the defined benefit plan(s) to value benefits for top heavy
purposes. If an aggregated plan does not have a valuation date coinciding with
the Determination Date, the Advisory Committee must value the Accrued Benefits
in the aggregated plan as of the most recent valuation date falling within the
12-month period ending on the Determination Date, except as Code Section 416
and applicable Treasury regulations require for the first and second plan year
of a defined benefit plan. The Advisory Committee will calculate the top heavy
ratio with reference to the Determination Dates that fall within the same
calendar year.
DEFINITIONS. For purposes of applying the provisions of this
Section 1.29:
(a) "Key Employee" means, as of any Determination Date, any
Employee or former Employee (or Beneficiary of such Employee) who, for
any Plan Year in the Determination Period: (i) has Compensation in
excess of 50% of the dollar amount prescribed in Code Section
415(b)(1)(A) (relating to defined benefit plans) and is an officer of
the Employer; (ii) has Compensation in excess of the dollar amount
prescribed in Code Section 415(c)(1)(A) (relating to defined
contribution plans) and is one of the Employees owing the ten largest
interests in the Employer; (iii) is a more than 5% owner of the
Employer; or (iv) is a more than 1% owner of the Employer and has
Compensation of more than $150,000.00. The constructive ownership
rules of Code Section 318 will apply to determine ownership in the
Employer. The number of officers taken into account under clause (i)
will not exceed the greater of 3 or 10% of the total number (after
application of the Code Section 414(q)(8) exclusions) of Employees,
but not more than 50 officers. The Advisory Committee will make the
determination of who is a Key Employee in accordance with Code Section
416(i)(1) and the regulations under that Code section.
(b) "Non-Key Employee" is an employee who does not meet the
definition of Key Employee.
(c) "Compensation" means Compensation as determined under
Section 1.07 (relating to the Highly Compensated Employee definition).
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<PAGE> 10
(d) "Required Aggregation Group" means: (1) each qualified
plan of the Employer in which at least one Key Employee participates at
any time during the Determination Period; and (2) any other qualified
plan of the Employer which enables a plan described in clause (1) to
meet the requirements of Code Section 401(a)(4) or Code Section 410.
(e) "Permissive Aggregation Group" is the Required Aggregation
Group plus any other qualified plans maintained by the Employer, but
only if such group would satisfy in the aggregate the requirements of
Code Section 401(a)(4) and Code Section 410. The Advisory Committee
will determine the Permissive Aggregation Group.
(f) "Employer" means the Employer that adopts this Plan and
any related employers described in Section 1.27.
(g) "Determination Date" for any Plan Year is the Accounting
Date of the preceding Plan Year or, in the case of the first Plan Year
of the Plan, the Accounting Date of that Plan Year. The "Determination
Period" is the five-year period ending on the Determination Date.
1.30 "Disqualified Person" has the meaning ascribed to that term under
Code Section 4975(e)(2).
1.31 "Employer Securities" means voting common stock issued by the
Employer, or by a corporation which is a member of the same controlled group of
corporations.
1.32 "Exempt Loan" means a loan made to this Plan by a Disqualified
Person, or a loan to this Plan which a Disqualified Person guarantees, provided
the loan satisfies the requirements of Treas. Reg. Section 54.4975-7(b).
1.33 "Leveraged Employer Securities" means Employer Securities acquired
by the Trust with the proceeds of an Exempt Loan and which satisfy the
definition of "qualifying employer securities" in Code Section 4975(e)(8).
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY. Each Employee becomes a Participant in the Plan on
the Plan Entry Date (if employed on that date) coincident with or immediately
following the later of the date on which he completes one Year of Service or
attains age 21. Further, all Employees employed as of the date of adoption of
this Plan shall become a Participant in the Plan as of their Employment
Commencement Date (as defined in Section 2.02 hereof).
2.02 YEAR OF SERVICE - PARTICIPATION. For purposes of an Employee's
participation in the Plan under Section 2.01, the Plan takes into account all of
his Years of
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Service with the Employer, except as provided in Section 2.03.
"Year of Service" means a 12 consecutive month period during which the Employee
completes not less than 1,000 Hours of Service, measuring the beginning of the
first 12 month period from the Employment Commencement Date. If the Employee
does not complete 1,000 Hours of Service during the 12-month period commencing
with the Employment Commencement Date, the Plan measures the second 12-month
period by reference to the Plan Year which includes the first anniversary of the
Employee's Employment Commencement Date. The Plan measures any subsequent 12-
month period necessary for a determination of Year of Service for participation
by reference to succeeding Plan Years. "Employment Commencement Date" means the
date on which the Employee first performs an Hour of Service for the Employer.
2.03 BREAK IN SERVICE - PARTICIPATION. For purposes of participation in
the Plan, the Plan does not apply any Break in Service rule.
2.04 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment
terminates re-enters the Plan as a Participant on the date of his re-employment.
An Employee who satisfies the Plan's eligibility conditions but who terminates
employment prior to becoming a Participant becomes a Participant in the Plan on
the later of the Plan Entry Date on which he would have entered the Plan had he
not terminated employment or the date of his re-employment. Any Employee who
terminates employment prior to satisfying the Plan's eligibility conditions
becomes a Participant in accordance with the provisions of Section 2.01.
2.05 ELECTION NOT TO PARTICIPATE. An Employee eligible to participate,
or any present Participant, may elect not to participate in the Plan. For an
election to be effective for a particular Plan Year, the Employee or Participant
must file the election in writing with the Plan Administrator not later than 60
days prior to the Accounting Date of that Plan Year. The Employer may not make a
contribution under the Plan for the Employee or for the Participant for the Plan
Year for which the election is effective, nor for any succeeding Plan Year
unless the Employee or Participant re-elects to participate in the Plan. After
an Employee's or Participant's election not to participate has been effective
for at least two Plan Years, the Employee or Participant may re-elect to
participate in the Plan for any Plan Year and subsequent Plan Years. An Employee
or Participant may re-elect to participate in the Plan by filing his election in
writing with the Plan Administrator not later than 60 days prior to the
Accounting Date of the Plan Year for which his election is to be effective. An
Employee or Participant who re-elects to participate may not again elect not to
participate. The Plan Administrator must furnish an Employee or a Participant
any form required for purposes of an election under this Section 2.05. An
election timely filed is effective for the entire Plan Year.
A Participant who elects not to participate may not receive a
distribution of his Accrued Benefit attributable either to Employer or to
Participant contributions except as
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<PAGE> 12
provided under Article IV or Under Article VI. However, for each Plan
Year for which a Participant's election not to participate is effective, the
Participant's Account, if any, continues to share in Trust Fund allocations
under Article IX. Furthermore, the Employee or the Participant receives vesting
credit under Article V for each included Year of Service during the period the
election not to participate is effective.
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<PAGE> 13
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
PART 1. AMOUNT OF EMPLOYER CONTRIBUTIONS AND PLAN ALLOCATIONS:
SECTIONS 3.01 THROUGH 3.06
3.01 AMOUNT. For each Plan year, the Employer will contribute to the
Trust an amount which the Employer may from time to time deem advisable. The
Employer may not make a contribution to the Trust for any Plan Year to the
extent the contribution would exceed the Participants' "Maximum Permissible
Amounts" under Section 3.08.
The Trustee, upon written request from the Employer, must return to the
Employer the amount of the Employer's contribution made by the Employer by
mistake of fact or the amount of the Employer's contribution disallowed as a
deduction under Code ss.404. The Trustee will not return any portion of the
Employer's contribution under the provisions of this paragraph more than one
year after:
(a) The Employer made the contribution by mistake of
fact; or
(b) The disallowance of the contribution as a deduction, and
then, only to the extent of the disallowance.
The Trustee will not increase the amount of the Employer contribution
returnable under this Section 3.01 for any earnings attributable to the
contribution, but the Trustee will decrease the Employer contribution returnable
for any losses attributable to it. The Trustee may require the Employer to
furnish him whatever evidence the Trustee deems necessary to enable the Trustee
to confirm the amount the Employer has requested be returned is properly
returnable under ERISA.
The Employer may make its contribution in cash or in Employer
Securities as the Employer from time to time may determine. The Employer may
make its contribution of Employer Securities at fair market value determined at
the time of contribution.
3.02 DETERMINATION OF CONTRIBUTION. The Employer, from its records,
determines the amount of any contributions to be made by it to the Trust under
the terms of the Plan.
3.03 TIME OF PAYMENT OF CONTRIBUTION. The Employer may pay its
contribution for each Plan Year in one or more installments without interest.
The Employer must make its contribution to the Trustee within the time
prescribed by the Code or applicable Treasury regulations.
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<PAGE> 14
3.04 CONTRIBUTION ALLOCATION.
(A) METHOD OF ALLOCATION. Subject to Section 3.04(B) and any
restoration allocation required under Section 5.04, the Advisory Committee will
allocate and credit each annual Employer contribution (and Participant
forfeitures, if any), to the Account of each Participant who satisfies the
conditions of Section 3.06, in the same ratio that each Participant's
Compensation for the Plan Year bears to the total Compensation of all
Participants for the Plan Year.
(B) TOP HEAVY MINIMUM ALLOCATION.
(1) MINIMUM ALLOCATION. If the Plan is top heavy in any
Plan Year:
(a) Each Non-Key Employee (as defined in Section
1.29) who is a Participant and is employed by the Employer on
the last day of the Plan Year will receive a top heavy minimum
allocation for that Plan Year, irrespective of whether he
satisfies the Hours of Service condition under Section 3.06;
and
(b) The top heavy minimum allocation is the lesser of
3% of the Non-Key Employee's Compensation for the Plan Year or
the highest contribution rate for the Plan Year made on behalf
of any Key Employee (as defined in Section 1.29).
For purposes of clause (b), "Compensation" means Compensation
as defined in Section 1.10, disregarding elective contributions and any
exclusions from Compensation, other than the exclusions described in
paragraphs (a), (b), (c) and (d) of Section 1.10 and disregarding the
requirements of Section 3.06. For purposes of this Section 3.04(B), a
Participant's contribution rate is the sum of Employer contributions
(not including Employer contributions to Social Security) and
forfeitures allocated to the Participant's Account for the Plan Year
divided by his Compensation for the entire Plan Year. A Non-Key
Employee's contribution rate does not include any elective
contributions Under a Code Section 401(k) arrangement nor any Employer
matching contributions subject to the nondiscrimination requirements
of Code Section 401(k) or of Code Section 401(m). To determine a
Participant's contribution rate, the Advisory Committee must treat all
qualified top heavy defined contribution plans maintained by the
Employer (or by any related Employers described in Section 1.27) as a
single plan.
(2) METHOD OF COMPLIANCE. The Plan will satisfy the top heavy
minimum allocation in accordance with this Section 3.04(B)(2). The
Advisory Committee first will allocate the Employer contributions (and
Participant forfeitures, if any) for the Plan Year in accordance with
the allocation formula under Section 3.04(A). The Employer then will
contribute an additional amount for the Account of any Participant who
is entitled under this Section 304(B) to a top heavy minimum allocation
and
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<PAGE> 15
whose contribution rate for the Plan Year is less than the top
heavy minimum allocation. The additional amount is the amount necessary
to increase the Participant's contribution rate to the top heavy
minimum allocation. The Advisory Committee will allocate the additional
contribution to the Account of the Participant on whose behalf the
Employer makes the contribution.
3.05 FORFEITURE ALLOCATION. The amount of a Participant's Accrued
Benefit forfeited under the Plan is a Participant forfeiture. Subject to any
restoration allocation required under Sections 5.04 or 9.14, the Advisory
Committee will allocate the forfeiture in accordance with Section 3.04, as an
Employer contribution for the Plan Year in which the forfeiture occurs, as if
the Participant forfeiture were an additional Employer contribution for that
Plan Year. The Advisory Committee will continue to hold the undistributed,
non-vested portion of a terminated Participant's Accrued Benefit in his Account
solely for his benefit until a forfeiture occurs at the time specified in
Section 5.09. Except as provided under Section 5.04, a Participant will not
share in the allocation of a forfeiture of any portion of his Accrued Benefit.
In making a forfeiture allocation under this Section 3.05, the Advisory
Committee will base forfeitures of Employer Securities upon the fair market
value of the Employer Securities as of the Accounting Date of the forfeitures.
3.06 ACCRUAL OF BENEFIT. The Advisory Committee will determine the
accrual of benefit (Employer contributions and Participant forfeitures) on the
basis of the Plan Year.
COMPENSATION TAKEN INTO ACCOUNT. In allocating an Employer contribution
to a Participant's Account, the Advisory Committee, will take into account all
Compensation paid the Employee during the Plan Year.
HOURS OF SERVICE REQUIREMENT. Subject to the top heavy minimum
allocation requirement of Section 3.04(B), the Advisory Committee will not
allocate any portion of an Employer contribution for a Plan Year to any
Participant's Account if the Participant does not complete a minimum of 1,000
Hours of Service during the Plan Year, unless the Participant terminates
employment during the Plan Year because of death or disability or because of the
attainment of Normal Retirement Age in the current Plan Year or in a prior Plan
Year.
EMPLOYMENT REQUIREMENT. A Participant who, during a particular Plan
Year, completes the Hours of Service requirement under this Section 3.06 will
share in the allocation of Employer contributions and Participant forfeitures,
if any, for that Plan Year without regard to whether he is employed by the
Employer on the Accounting Date of that Plan Year.
PART 2. LIMITATIONS ON ALLOCATIONS: SECTIONS 3.07 AND 3.08
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<PAGE> 16
3.07 LIMITATIONS ON ALLOCATIONS TO PARTICIPANTS' ACCOUNTS. The amount
of Annual Additions which the Advisory Committee may allocate under this Plan on
a Participant's behalf for a Limitation Year may not exceed the Maximum
Permissible Amount. If the amount the Employer otherwise would contribute to the
Participant's Account would cause the Annual Additions for the Limitation Year
to exceed the Maximum Permissible Amount, the Employer will reduce the amount of
its contribution so the Annual Additions for the Limitation Year will equal the
Maximum Permissible Amount. If an allocation of Employer contributions, pursuant
to Section 3.04, would result in an Excess Amount (other than an Excess Amount
resulting from the circumstances described in Section 3.07(B)) to the
Participant's Account, the Advisory Committee will reallocate the Excess Amount
to the remaining Participants who are eligible for an allocation of Employer
contributions for the Plan Year in which the Limitation Year ends. The Advisory
Committee will make this reallocation on the basis of the allocation method
under the Plan as if the Participant whose Account otherwise would receive the
Excess Amount is not eligible for an allocation of Employer contributions.
(A) ESTIMATION OF COMPENSATION. Prior to the determination of the Participant's
actual Compensation for a Limitation Year, the Advisory Committee may determine
the Maximum Permissible Amount on the basis of the participant's estimated
annual Compensation for such Limitation Year. The Advisory Committee must make
this determination on a reasonable and uniform basis for all Participants
similarly situated. The Advisory Committee must reduce any Employer
contributions (including any allocation of forfeitures) based on estimated
annual Compensation by any Excess Amount carried over from prior years. As soon
as is administratively feasible after the end of the Limitation Year, the
ADvisory Committee will determine the Maximum Permissible Amount for such
Limitation Year on the basis of the Participant's actual Compensation for such
Limitation Year.
MORE THAN ONE PLAN. If the Advisory Committee allocated an Excess
Amount to a Participant's Account on an allocation date of this Plan which
coincides with an allocation date of another defined contribution plan
maintained by the Employer, the Excess Amount attributed to this Plan will be
the product of:
(a) The total Excess Amount allocated as of such date
(including any amount which the Advisory Committee would have allocated
but for the limitations of Code Section 415); times
(b) The ratio of (i) the amount allocated to the Participant
as of such date under this Plan divided by (ii) the total amount
allocated as of such date under all qualified defined contribution
plans (determined without regard to the limitations of Code Section
415).
(B) (A) DISPOSITION OF EXCESS AMOUNT. If, pursuant to Section 3.07(A), or
because of the allocation of forfeitures, there is an Excess Amount with respect
to a Participant for a Limitation Year, the Advisory Committee will dispose of
such Excess Amount as follows:
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<PAGE> 17
(a) The Advisory Committee will return any nondeductible
voluntary Employee contributions to the Participant to the extent that
the return would reduce the Excess Amount.
(b) If, after the application of paragraph (a), an Excess
Amount still exists, and the Plan covers the Participant at the end of
the Limitation Year, then the Advisory Committee will use the Excess
Amount(s) to reduce future Employer contributions (including any
allocation of forfeitures) under the Plan for the next Limitation Year
and for each succeeding Limitation Year, as is necessary, for the
Participant.
(c) If, after the application of paragraph (a), an Excess
Amount still exists, and the Plan does not cover the Participant at the
end of the Limitation Year, then the Advisory Committee will hold the
Excess Amount unallocated in a suspense account. The Advisory Committee
will apply the suspense account to reduce Employer Contributions
(including allocation of forfeitures) for all remaining Participants in
the next Limitation Year, and in each succeeding Limitation Year, if
necessary.
(d) The Advisory Committee will not distribute any Excess
Amount(s) to Participants or to former Participants.
(C) DEFINED BENEFIT PLAN LIMITATION. If the Participant presently participates,
or has ever participated under a defined benefit plan maintained by the
Employer, then the sum of the defined benefit plan fraction and the defined
contribution plan fraction for the Participant for that Limitation Year must not
exceed 1.0. To the extent necessary to satisfy the limitation under Section
3.08, the Employer will reduce its contribution or allocation on behalf of the
Participant to the Plan.
3.08 DEFINITIONS - ARTICLE III. For purposes of Article III, the following terms
mean:
(a) "Annual Addition" - The sum of the following amounts
allocated on behalf of a Participant for a Limitation year, of (i) all
Employer contributions; (ii) all forfeitures; and (iii) all Employee
contributions. Except to the extent provided in Treasury regulations,
Annual Additions include excess contributions described in Code
Section 401(k), excess aggregate contributions described in Code
Section 401(m) and excess deferrals described in Code Section 402(g),
irrespective of whether the plan distributes or forfeits such excess
amounts. Annual Additions also include Excess Amounts reapplied to
reduce Employer contributions under Section 3.07. Amounts allocated to
an individual medical account (as defined in Code Section 415(1)(2))
included as part of a defined benefit plan maintained by the Employer
are Annual Additions. Furthermore, Annual Additions include
contributions attributable to post-retirement medical benefits
allocated to the separate account of a key employee (as defined in
Code Section 419A(d)(3)) under a welfare benefit fund (as defined in
Code Section 419(e)) maintained by the
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<PAGE> 18
Employer, but only for purposes of the dollar limitation
applicable to the Maximum Permissible Amount.
"Annual Additions" do not include any Employer contributions applied by
the Advisory Committee (not later than the due date, including
extensions, for filing the Employer's Federal income tax return for
that Plan Year) to pay interest on an Exempt Loan, and any Leveraged
Employer Securities the Advisory Committee allocates as forfeitures;
provided, however, the provisions of this sentence do not apply in a
Plan Year for which the Advisory Committee allocates more than
one-third (1/3) of the Employer contributions applied to pay principal
and interest on an Exempt Loan to Restricted Participants. The Advisory
Committee may reallocate the Employer contributions in accordance with
Section 3.04 to the Accounts of non-Restricted Participants to the
extent necessary in order to satisfy this special limitation. For
purposes of this Section 3.08, "Restricted Participants" mean
Participants who are Highly Compensated Employees within the meaning of
Code Section 414(q).
(b) "Compensation" - For purposes of applying the limitations
of Part 2 of this Article III, "Compensation" means Compensation as
defined in Section 1.10, disregarding elective contributions and any
exclusions from Compensation, other than the exclusions described in
paragraphs (a), (b), (c) and (d) of Section 1.10.
(c) "Maximum Permissible Amount" - The lesser of (i)
$30,000.00 (or, if greater, one-fourth of the defined benefit dollar
limitation under Code ss.415(b)(1)(A)), or (ii) 25% of the
Participant's Compensation for the Limitation Year. The dollar amount
of clause (i) will increase by the lesser of (1) 100% of the dollar
amount in effect for the Plan Year; or (2) the amount of the Employer
Securities allocated to the Participant's Employer Securities Account
as an Employer contribution for the Plan Year. The immediately
preceding sentence does not apply for any Plan Year for which the
Advisory Committee allocates more than one-third of the Employer
contribution to Restricted Participants. If there is a short Limitation
Year because of a change in Limitation Year, the Advisory Committee
will multiply the $30,000.00 limitation (or larger limitation) by the
following fraction:
Number of Months in the short Limitation Year
12
(d) "Employer" - The Employer that adopts this Plan and any
related employers described in Section 1.27. Solely for purposes of
applying the limitations of Part 2 of this Article III, the Advisory
Committee will determine related employers described in Section 1.27 by
modifying Code Sections 414(b) and (c) in accordance with Code Section
415(h).
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<PAGE> 19
(e) "Excess Amount" - The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
(f) "Limitation Year" - The Plan Year. If the Employer amends
the Limitation Year to a different 12 consecutive month period, the new
Limitation Year must begin on a date within the Limitation year for
which the Employer makes the amendment, creating a short Limitation
Year.
(g) "Defined contribution plan" - A retirement plan which
provides for an individual account for each participant and for
benefits based solely on the amount contributed to the participant's
account, and any income, expenses, gains and losses, and any
forfeitures of accounts of other participants which the plan may
allocate to such participant's account. The Advisory Committee must
treat all defined contribution plans (whether or not terminated)
maintained by the Employer as a single plan. For purposes of the
limitations of Part 2 of this Article III, the Advisory Committee will
treat employee contributions made to a defined benefit plan maintained
by the Employer as a separate defined contribution plan. The Advisory
Committee also will treat as a defined contribution plan an individual
medical account (as defined in Code Section 415(1)(2)) included as
part of a defined benefit plan maintained by the Employer and a
welfare benefit fund under Code Section 419(e) maintained by the
Employer to the extent there are post-retirement medical benefits
allocated to the separate account of a key employee (as defined in
Code Section 419A(d)(3)).
(h) "Defined benefit plan" - A retirement plan which does not
provide for individual accounts for Employer contributions. The
Advisory Committee must treat all defined benefit plans (whether or not
terminated) maintained by the Employer as a single plan.
(i) "Defined benefit plan fraction" -
Projected annual benefit of the Participant under
the defined benefit plan(s)
------------------------------------------------------------------------
The lesser of (i) 125% (subject to the "100%
limitation" in paragraph (k)) of the dollar
limitation in effect under Code
Section 415(b)(1)(A) for the Limitation Year, or (ii) 140% of
the Participant's average Compensation for his high
three consecutive years of service
To determine the denominator of this fraction, the Advisory
Committee will make any adjustment required under Code Section 415(b)
and will determine a Year of Service, unless otherwise provided in
this Section 3.08, as a Plan Year in which the Employee completed at
least 1,000 Hours of Service. The "projected annual benefit" is the
annual retirement benefit (adjusted to an actuarially equivalent
straight life
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<PAGE> 20
annuity if the plan expresses such benefit in a form other than a
straight life annuity or qualified joint and survivor annuity) of the
Participant under the terms of the defined benefit plan on the
assumptions he continues employment until his normal retirement age (or
current age, if later) as stated in the defined benefit plan, his
compensation continues at the same rate as in effect in the Limitation
Year under consideration until the date of his normal retirement age
and all other relevant factors used to determine benefits under the
defined benefit plan remain constant as of the current Limitation Year
for all future Limitation Years.
CURRENT ACCRUED BENEFIT. If the Participant accrued benefits
in one or more defined benefit plans maintained by the Employer which
were in existence on May 5, 1986, the dollar limitation used in the
denominator of this fraction will not be less than the Participant's
Current Accrued Benefit. A Participant's Current Accrued Benefit is the
sum of the annual benefits under such defined benefit plans which the
Participant had accrued as of the end of the 1986 Limitation Year (the
last Limitation Year beginning before January 1, 1987), determined
without regard to any change in the terms or conditions of the Plan
made after May 5, 1986, and without regard to any cost of living
adjustment occurring after May 5, 1986. This Current Accrued Benefit
rule applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of Code Section 415 as in effect
at the end of the 1986 Limitation Year.
(j) "Defined contribution plan fraction" -
The sum, as of the close of the Limitation Year, of the
Annual Additions to the Participant's Account Under the
defined contribution plan(s)
----------------------------
The sum of the lesser of the following amounts determined for
the Limitation Year and for each prior Year of Service with
the Employer: (i) 125% (subject to the "100% limitation" in
paragraph (k)) of the dollar limitation in effect under
Code Section 415(c)(1)(A) for the Limitation Year (determined without
regard to the special dollar limitations for employee
stock ownership plans), or (ii) 35% of the Participant's
Compensation for the Limitation Year
For purposes of determining the defined contribution plan
fraction, the Advisory Committee will not recompute Annual Additions in
Limitation Years beginning prior to January 1, 1987, to treat all
Employee contributions as Annual Additions. If the Plan satisfied Code
ss.415 for Limitation Years beginning prior to January 1, 1987, the
Advisory Committee will redetermine the defined contribution plan
fraction and the defined benefit plan fraction as of the end of the
1986 Limitation Year, in accordance with this Section 3.08. If the sum
of the redetermined fractions exceeds 1.0, the Advisory Committee will
subtract permanently from the numerator
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<PAGE> 21
of the defined contribution plan fraction an amount equal to
the product of (1) the excess of the sum of the fractions over 1.0,
times (2) the denominator of the defined contribution plan fraction. In
making the adjustment, the Advisory Committee must disregard any
accrued benefit under the defined benefit plan which is in excess of
the Current Accrued Benefit. This Plan continues any transitional rules
applicable to the determination of the defined contribution plan
fraction under the Employer's Plan as of the end of the 1986 Limitation
Year.
(k) "100% limitation." If the 100% limitation applies, the
Advisory Committee must determine the denominator of the defined
benefit plan fraction and the denominator of the defined contribution
plan fraction by substituting 100% for 125%. The 100% limitation
applies only if: (i) the Plan's top heavy ratio exceeds 90%, or (ii)
the Plan's top heavy ratio is greater than 60%, and the Employer does
not provide extra minimum benefits which satisfy Code Section
416(h)(2).
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT VOLUNTARY CONTRIBUTIONS. The Plan does not permit nor
require Participant voluntary contributions.
4.02 PARTICIPANT ROLLOVER CONTRIBUTIONS. Any Participant, with the
Employer's written consent and after filing with the Trustee the form prescribed
by the Advisory Committee, may contribute cash to the Trust distributed to the
Participant from the Sac River Valley Bank Employees Pension Trust if the
contribution is a "rollover contribution" which the Code permits an employee to
transfer either directly or indirectly from one qualified plan to another
qualified plan. Before accepting such rollover contributions, the Trustee may
require an Employee to furnish satisfactory evidence that the proposed transfer
is, in fact, a "rollover contribution" which the Code permits an employee to
make to a qualified plan. A rollover contribution is not an Annual Addition
under Part 2 of Article III. The Trustee will hold, administer and distribute a
rollover contribution in the same manner as any Employer contribution made to
the Trust.
An eligible Employee, prior to satisfying the Plan's eligibility
conditions, may make a rollover contribution to the Trust to the same extent and
in the same manner as a Participant. If an Employee makes a rollover
contribution to the Trust prior to satisfying the Plan's eligibility conditions,
the Advisory Committee and Trust must treat the Employee as a Participant for
all purposes of the Plan except the Employee is not a Participant for purposes
of sharing in Employer contributions or Participant forfeitures under the Plan
until he actually becomes a Participant in the Plan. If the Employee has a
Separation from Service prior to becoming a Participant, the Trustee will
distribute his rollover contribution Account to him as if it were an Employer
contribution Account.
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<PAGE> 22
A Participant's Accrued Benefit is, at all times, one hundred percent
(100%) Nonforfeitable to the extent the value of his Accrued Benefit is derived
from rollover contributions made by him to the Trust.
The Advisory Committee must maintain, or must direct the Trustee to
maintain, a separate Account(s) in the name of each Participant to reflect the
Participant's Accrued Benefit under the Plan derived from his rollover
contributions. A Participant's Accrued Benefit derived from his rollover
contributions as of any applicable date is the balance of his separate rollover
contribution Account(s).
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT AGE. A Participant's Normal Retirement Age is 65
years of age. A Participant who remains in the employ of the Employer after
attaining Normal Retirement Age will continue to participate in Employer
contributions. A Participant's Accrued Benefit derived from Employer
contributions is 100% Nonforfeitable upon and after his attaining Normal
Retirement Age (if employed by the Employer on or after that date).
5.02 PARTICIPANT DISABILITY OR DEATH. If a Participant's employment
with the Employer terminates as a result of death or disability, the
Participant's Accrued Benefit derived from Employer contributions will be 100%
Nonforfeitable.
5.03 VESTING SCHEDULE. Except as provided in Sections 5.01 and 5.02,
for each Year of Service, a Participant's Nonforfeitable percentage of his
Accrued Benefit derived from Employer contributions equals the percentage in the
following vesting schedule:
Years of Service Percent of
With the Employer Nonforfeitable
----------------- Accrued Benefit
----------------
Less than 3 . . . . . . . . . . . None
3 . . . . . . . . . . . . . . . . 20%
4 . . . . . . . . . . . . . . . . 40%
5 . . . . . . . . . . . . . . . . 60%
6 . . . . . . . . . . . . . . . . 80%
7 or more . . . . . . . . . . . . 100%
Effective the first Plan Year for which the Plan is a top heavy Plan (as defined
in Section 1.29), and in all subsequent Plan Years, the Advisory Committee will
calculate a Participant's Nonforfeitable Percentage of his Accrued Benefit under
the following schedule:
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<PAGE> 23
Years of Service Percent of
With the Employer Nonforfeitable
----------------- Accrued Benefit
---------------
Less than 2 . . . . . . . . . . . None
2 . . . . . . . . . . . . . . . . 20%
3 . . . . . . . . . . . . . . . . 40%
4 . . . . . . . . . . . . . . . . 60%
5 . . . . . . . . . . . . . . . . 80%
6 or more . . . . . . . . . . . . 100%
The Advisory Committee will apply the top heavy schedule to
Participants who earn at least one Hour of Service after the top heavy schedule
becomes effective. A shift between vesting schedules under this Section 5.03 is
an amendment to the vesting schedule and the Advisory Committee must apply the
rules of Section 7.05 accordingly. A shift to a new vesting schedule under this
Section 5.03 is effective on the first day of the Plan Year for which the top
heavy status of the Plan changes.
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED
PARTICIPANTS/RESTORATION OF FORFEITED ACCRUED BENEFIT. If, pursuant to Article
VI, a partially-vested Participant receives a cash-out distribution before he
incurs a Forfeiture Break in Service (as defined in Section 5.08), the cash-out
distribution will result in an immediate forfeiture of the non-vested portion of
the Participant's Accrued Benefit derived from Employer contributions. See
Section 5.09. A partially-vested Participant is a Participant whose
Nonforfeitable Percentage determined under SEction 5.03 is less than 100%. A
cash-out distribution is a distribution of the entire present value of the
Participant's Nonforfeitable Accrued Benefit.
(A) RESTORATION AND CONDITIONS UPON RESTORATION. A partially- vested Participant
who is re-employed by the Employer after receiving a cash-out distribution of
the Nonforfeitable percentage of his Accrued Benefit may repay the Trustee the
amount of the cash-out distribution attributable to Employer contributions,
unless the Participant no longer has a right to restoration under the
requirements of this Section 5.04. If a partially-vested Participant makes the
cash-out distribution repayment, the Advisory Committee, subject to the
conditions of this paragraph (A), must restore his Accrued Benefit attributable
to Employer contributions to the same dollar amount as the dollar amount of his
Accrued Benefit on the Accounting Date, or other valuation date, immediately
preceding the date of the cash-out distribution, unadjusted for any gains or
losses occurring subsequent to that Accounting Date, or other valuation date.
Restoration of the Participant's Accrued Benefit includes restoration of all
Code Section.411(d)(6) protected benefits with respect to that restored Accrued
Benefit, in accordance with applicable Treasury regulations. The Advisory
Committee will not restore a re-employed Participant's Accrued Benefit under
this paragraph if:
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<PAGE> 24
(1) 5 years have elapsed since the Participant's first
re-employment date following the cash-out distribution; or
(2) The Participant incurred a Forfeiture Break in Service (as
defined in Section 5.08). This condition also applies if the
Participant makes repayment within the Plan Year in which he incurs the
Forfeiture Break in Service and that Forfeiture Break in Service would
result in a complete forfeiture of the amount the Advisory Committee
otherwise would restore.
(B) TIME AND METHOD OF RESTORATION. If neither the two conditions preventing
restoration of the Participant's Accrued Benefit applies, the Advisory Committee
will restore the Participant's Accrued Benefit as of the Plan Year Accounting
Date coincident with or immediately following the repayment. To restore the
Participant's Accrued Benefit, the Advisory Committee, to the extent necessary,
will allocate to the Participant's Account:
(1) First, the amount, if any, of Participant forfeitures the
Advisory Committee would otherwise allocate under Section 3.05;
(2) Second, the amount, if any, of the Trust Fund net income
or gain for the Plan Year; and
(3) Third, the Employer contribution for the Plan Year to the
extent made under a discretionary formula.
To the extent the amounts described in clauses (1), (2) and (3) are
insufficient to enable the Advisory Committee to make the required restoration,
the Employer must contribute, without regard to any requirement or condition of
Section 3.01, the additional amount necessary to enable the Advisory Committee
to make the required restoration. If, for a particular Plan Year, the Advisory
Committee must restore the Accrued Benefit of more than one reemployed
Participant, then the Advisory Committee will make the restoration allocation(s)
to each such Participant's Account in the same proportion that a Participant's
restored amount for the Plan Year bears to the restored amount for the Plan Year
of all reemployed Participants. The Advisory Committee will not take into
account the allocation under this Section 5.04 in applying the limitation on
allocations under Part 2 of Article III.
(C) 0% VESTED PARTICIPANT. The deemed cash-out rule applies to a 0% vested
Participant. A 0% vested Participant is a Participant whose Accrued Benefit
derived from Employer contributions is entirely forfeitable at the time of his
Separation from Service. Under the deemed cash-out rule, the Advisory Committee
will treat the 0% vested Participant as having received a cash-out distribution
on the date of the Participant's Separation from Service or, if the
Participant's Account is entitled to an allocation of Employer contributions for
the Plan Year in which he separates from Service, on the last day of that Plan
Year. For purposes of applying the restoration provisions of this Section 5.04,
the Advisory Committee will treat
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<PAGE> 25
the 0% vested Participant as repaying his cash-out "distribution" on the first
date of his re-employment with the Employer.
5.05 SEGREGATED ACCOUNT FOR REPAID AMOUNT. Until the Advisory Committee
restores the Participant's Accrued Benefit, as described in Section 5.04, the
Trustee will invest the cash-out amount the Participant has repaid in a
segregated Account maintained solely for that Participant. The Trustee must
invest the amount in the Participant's segregated Account in Federally insured
interest bearing savings account(s) or time deposit(s) (or a combination of
both), or in other fixed income investments. Until commingled with the balance
of the Trust Fund on the date the Advisory Committee restores the Participant's
Accrued Benefit, the Participant's segregated Account remains a part of the
Trust, but it alone shares in any income it earns and it alone bears any
expense or loss it incurs. Unless the repayment qualifies as a rollover
contribution, the Advisory Committee will direct the Trustee to repay to the
Participant as soon as is administratively practicable the full amount of the
Participant's segregated Account if the Advisory Committee determines either of
the conditions of Section 5.04(A) prevents restoration as of the applicable
Accounting Date, notwithstanding the Participant's repayment.
The Advisory Committee will direct the Trustee to commingle the Participant's
segregated account with the balance of the Trust Fund as of the second
Accounting Date immediately following the date of the Participant's repayment.
5.06 YEAR OF SERVICE - VESTING. For purposes of vesting under Section
5.03, Year of Service means any Plan Year during which an Employee completes not
less than 1,000 Hours of Service with the Employer, including Plan Years prior
to the Effective Date of the Plan.
5.07 BREAK IN SERVICE - VESTING. For purposes of this Article V, a
Participant incurs a "Break in Service" if during any Plan Year he does not
complete more than 500 Hours of Service with the Employer.
5.08 INCLUDED YEARS OF SERVICE - VESTING. For purposes of determining
"Years of Service" under Section 5.06, the Plan takes into account all Years of
Service an Employee completes with the Employer. For the sole purpose of
determining a Participant's Nonforfeitable percentage of his Accrued Benefit
derived from Employer contributions which accrued for his benefit prior to a
Forfeiture Break in Service, the Plan disregards any Year of Service after the
Participant first incurs a Forfeiture Break in Service. The Participant incurs a
Forfeiture Break in Service when he incurs 5 consecutive Breaks in Service.
5.09 FORFEITURE OCCURS. A Participant's forfeiture, if any, of his
Accrued Benefit derived from Employer contributions occurs under the Plan on the
earlier of:
(a) The last day of the Plan Year in which the Participant
first incurs a Forfeiture Break in Service; or
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<PAGE> 26
(b) The date the Participant receives a cash-out distribution.
The Advisory Committee determines the percentage of a
Participant's Accrued Benefit forfeiture, if any, under this Section 5.09 solely
by reference to the vesting schedule of Section 5.03. A Participant will not
forfeit any portion of his Accrued Benefit for any other reason or cause except
as expressly provided by this Section 5.09 or as provided under Section 9.14.
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<PAGE> 27
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT. Unless, pursuant to Section
6.03, the Participant or the Beneficiary elects in writing to a different time
or method of payment, the Advisory Committee will direct the Trustee to commence
distribution of a Participant's Nonforfeitable Accrued Benefit in accordance
with this Section 6.01. A Participant must consent, in writing, to any
distribution required under this Section 6.01 if the present value of the
Participant's Nonforfeitable Accrued Benefit, at the time of the distribution to
the Participant, exceeds $3,500 and the Participant has not attained the later
of Normal Retirement Age or age 62. For all purposes of this Article VI, the
term "annuity starting date" means the first day of the first period for which
the Plan pays an amount as an annuity or in any other form. A distribution date
under this Article VI, unless otherwise specified within the Plan, is April 1st
of the Plan Year or as soon as administratively practicable following a
distribution date. For purposes of the consent requirements under this Article
VI, if the present value of the Participant's Nonforfeitable Accrued Benefit, at
the time of any distribution, exceeds $3,500, the Advisory Committee must treat
that present value as exceeding $3,500 for purposes of all subsequent Plan
distributions to the Participant.
(A) TERMINATION OF EMPLOYMENT FOR A REASON OTHER THAN DEATH. For a Participant
who terminates employment with the Employer for a reason other than death, the
Advisory Committee will direct the Trustee to commence distribution of the
Participant's Accrued Benefit, as follows:
(1) PARTICIPANT'S NON-FORFEITABLE ACCRUED BENEFIT NOT EXCEEDING $3,500.
In a lump sum, on the first distribution date in the first Plan Year beginning
after the Participant's Separation from Service, but in no event later than the
60th day following the close of the Plan Year in which the Participant attains
Normal Retirement Age. If the Participant has attained Normal Retirement Age
when he separates from Service, the distribution under this paragraph will occur
no later than the 60th day following the close of the Plan Year in which the
Participant's Separation from Service occurs.
(2) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500. In a
form and at the time elected by the Participant, pursuant to Section 6.03. In
the absence of an election by the Participant, the Advisory Committee will
direct the Trustee to distribute the Participant's Nonforfeitable Accrued
Benefit in lump sum on the 60th day following the close of the Plan Year in
which the latest of the following events occurs: (a) the Participant attains
Normal Retirement Age; (b) the Participant attains age 62; or (c) the
Participant separates from Service.
(3) DISABILITY. If the Participant terminates employment because of
disability, in lump sum, on the first distribution date after the close of the
Plan Year in which the Participant terminates employment because of disability,
subject to the notice and consent
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requirements of this Article VI and to the applicable mandatory commencement
dates described in Paragraph (1) or in Paragraph (2).
(B) REQUIRED BEGINNING DATE. If any distribution commencement date described
under Paragraph (A) of this Section 6.01, either by Plan provision or by
Participant election (or nonelection), is later than the Participant's Required
Beginning Date, the Advisory Committee instead must direct the Trustee to make
distribution under this Section 6.01 on the Participant's Required Beginning
Date. A Participant's Required Beginning Date is the April 1 following the close
of the calendar year in which the Participant attains age 70 1/2. However, if
the Participant, prior to incurring a Separation from Service, attained age 70
1/2 by January 1, 1988, and, for the five Plan Year period ending in the
calendar year in which he attained age 70 1/2 and for all subsequent years, the
Participant was not a more than 5% owner (as defined in Section 1.07(a)), the
Required Beginning Date is the April 1 following the close of the calendar year
in which the Participant separates from Service or, if earlier, the April 1
following the close of the calendar year in which the Participant becomes a more
than 5% owner. Furthermore, if a Participant who was not a more than 5% owner
attained age 70 1/2 during 1988 and did not incur a Separation from Service
prior to January 1, 1989, his Required Beginning Date is April 1, 1990. A
mandatory distribution at the Participant's Required Beginning Date will be in
lump sum unless the Participant, pursuant to the provisions of this Article VI,
makes a valid election to receive an alternative form of payment.
(C) DEATH OF THE PARTICIPANT. The Advisory Committee will direct the Trustee, in
accordance with this Section 6.01(C), to distribute to the Participant's
Beneficiary the Participant's Nonforfeitable Accrued Benefit remaining in the
Trust at the time of the
Participant's death.
(1) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT DOES NOT
EXCEED $3,500. The Advisory Committee must direct the Trustee to pay the
deceased Participant's Nonforfeitable Accrued Benefit in a single cash sum, as
soon as administratively practicable following the Participant's death or, if
later, the date on which the Advisory Committee receives notification of or
otherwise confirms the Participant's death.
(2) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS
$3,500. The Advisory Committee will direct the Trustee to pay the deceased
Participant's Nonforfeitable Accrued Benefit at the time and in the form elected
by the Participant or, if applicable by the Beneficiary, as permitted under this
Article VI. In the absence of an election, the Advisory Committee will direct
the Trustee to distribute the Participant's undistributed Nonforfeitable Accrued
Benefit in a lump sum on the first distribution date following the close of the
Plan Year in which the Participant's death occurs or, if later, the first
distribution date following the date the Advisory Committee receives
notification of or otherwise confirms the Participant's death.
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If the death benefit is payable to the Participant's surviving spouse
in full, the surviving spouse, in addition to the distribution options provided
in this Section 6.01(C), may elect distribution at any time or in any form this
Article VI would permit for a Participant.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. Subject to any restrictions
prescribed by Section 6.03, a Participant or Beneficiary may elect distribution
under one, or any combination, of the following methods: (a) by payment in a
lump sum; or (b) by payment in annual installments over a fixed reasonable
period of time, not exceeding the life expectancy of the Participant, or the
joint life and last survivor expectancy of the Participant and his Beneficiary.
The distribution options permitted under this Section 6.02 are
available only if the present value of the Participant Nonforfeitable Accrued
Benefit, at the time of the distribution to the Participant, exceeds $3,500. To
facilitate installment payments under this Article VI, the Advisory Committee
may direct the Trustee to segregate all or any part of the Participant's Accrued
Benefit in a separate Account. The Trustee will invest the Participant's
segregated Account in Federally insured interest bearing savings account(w) or
time deposit(s) (or a combination of both), or in other fixed income
investments. A segregated Account remains a part of the Trust, but it alone
shares in any income it earns, and it alone bears any expense or loss it incurs.
A Participant or Beneficiary may elect to receive an installment distribution in
the form of a Nontransferable Annuity Contract. Under an installment
distribution, the Participant or Beneficiary, at any time, may elect to
accelerate the payment of all, or any portion, of the Participant's unpaid
Nonforfeitable Accrued Benefit.
(A) MINIMUM DISTRIBUTION REQUIREMENTS FOR PARTICIPANTS. The Advisory
Committee may not direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit, nor may the Participant elect to have the
Trustee distribute his Nonforfeitable Accrued Benefit, under a method of payment
which, as of the Required Beginning Date, does not satisfy the minimum
distribution requirements under Code Section 401(a)(9) and the applicable
Treasury regulations. The minimum distribution for a calendar year equals
the Participant's Nonforfeitable Accrued Benefit as of the latest valuation
date preceding the beginning of the calendar year divided by the Participant's
life expectancy or, if applicable, the joint and last survivor expectancy of
the Participant and his designated Beneficiary (as determined under Article
VIII, subject to the requirements of the Code Section 401(a)(9) regulations).
The Advisory Committee will increase the Participant's Nonforfeitable Accrued
Benefit, as determined on the relevant valuation date, for contributions or
forfeitures allocated after the valuation date and by December 31 of the
valuation calendar year, and will decrease the valuation by distributions made
after the valuation date and by December 31 of the valuation calendar year. For
purposes of this valuation, the Advisory committee will treat any portion of
the minimum distribution for the first distribution calendar year made after
the close of that year as a distribution occurring in that first distribution
calendar year. In computing a minimum distribution, the Advisory Committee must
use the unisex life expectancy multiples under Treas. Reg. Section 1.72-9. The
Advisory Committee, only upon the Participant's written request,
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may compute the minimum distribution for a calendar year subsequent to
the first calendar year for which the Plan requires a minimum distribution by
redetermining the applicable life expectancy. However, the Advisory Committee
may not redetermine the joint life and last survivor expectancy of the
Participant and a nonspouse designated Beneficiary in a manner which takes into
account any adjustment to a life expectancy other than the Participant's life
expectancy.
If the Participant's spouse is not his designated Beneficiary, a method
of payment to the Participant (whether by Participant election or by Advisory
Committee direction) may not provide more than incidental benefits to the
Beneficiary. The Plan must satisfy the minimum distribution incidental benefit
("MDIB") requirement in the Treasury regulations issued under Code Section 401
(a)(9) for distributions made on or after the Participant's Required Beginning
Date and before the Participant's death. To satisfy the MDIB requirement, the
Advisory Committee will compute the minimum distribution required by this
Section 6.02(A) by substituting the applicable MDIB divisor for the applicable
life expectancy factor, if the MDIB divisor is a lesser number. Following the
Participant's death, the Advisory Committee will compute the minimum
distribution required by this Section 6.02(A) solely on the basis of the
applicable life expectancy factor and will disregard the MDIB factor. The
Advisory Committee must determine whether benefits to the Beneficiary are
incidental as of the date the Trustee is to commence payment of the retirement
benefits to the Participant, or as of any date the Trustee redetermines the
payment period to the Participant.
The minimum distribution for the first distribution calendar year is
due by the Participant's Required Beginning Date. The minimum distribution for
each subsequent distribution calendar year, including the calendar year in which
the Participant's Required Beginning Date falls, is due by December 31 of that
year. If the Participant receives distribution in the form of a Nontransferable
Annuity Contract, the distribution satisfies this Section 6.02(A) if the
contract complies with the requirements of Code Section 401(a)(9) and the
applicable Treasury regulations.
(B) MINIMUM DISTRIBUTION REQUIREMENTS FOR BENEFICIARIES. The method of
distribution to the Participant's Beneficiary must satisfy Code Section 401(a)
(9) and the applicable Treasury regulations. If the Participant's death occurs
after his Required Beginning Date, the method of payment to the Beneficiary
must provide for completion of payment over a period which does not exceed the
payment period which had commenced for the Participant. If the Participant's
death occurs prior to his Required Beginning Date, the method of payment to the
Beneficiary must provide for completion of payment to the Beneficiary over a
period not exceeding: (i) 5 years after the date of the Participant's death; or
(ii) if the Beneficiary is a designated Beneficiary, the designated
Beneficiary's life expectancy. The Advisory Committee may not direct payment of
the Participant's Nonforfeitable Accrued Benefit over a period described in
clause (ii) unless the Trustee will commence payment to the designated
Beneficiary, no later than the December 31 following the close of the calendar
year in which the Participant's death occurred or, if later, and the designated
Beneficiary is the Participant's surviving spouse, December 31 of the calendar
year in which the Participant
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would have attained age 70 1/2. If the Trustee will make distribution in
accordance with clause (ii), the minimum distribution for a calendar year equals
the Participant's Nonforfeitable Accrued Benefit as of the latest valuation date
preceding the beginning of the calendar year divided by the designated
Beneficiary's life expectancy. The Advisory Committee must use the unisex life
expectancy multiples under Treas. Reg. ss.1.72-9 for purposes of applying this
paragraph. The Advisory Committee, only upon the written request of the
Participant or of the Participant's surviving spouse, may recalculate the life
expectancy of the Participant's surviving spouse not more frequently than
annually, but may not recalculate the life expectancy of a nonspouse designated
Beneficiary after the trustee commences payment to the designated Beneficiary.
The Advisory Committee will apply this paragraph by treating any amount paid to
the Participant's child, which becomes payable to the Participant's surviving
spouse upon the child's attaining the age of majority, as paid to the
Participant's surviving spouse. Upon the Beneficiary's written request, the
Advisory Committee must direct the Trustee to accelerate payment of all, or any
portion, of the Participant's unpaid Accrued Benefit, as soon as
administratively practicable following the effective date of that request.
6.03 BENEFIT PAYMENT ELECTIONS. Not earlier than 90 days nor later than
30 days before the Participant's annuity starting date, the Plan Administrator
must provide a benefit notice to a Participant who is eligible to make an
election under this Section 6.03. The benefit notice must explain the optional
forms of benefit in the Plan, including the material features and relative
values of those options, and the Participant's right to defer distribution until
he attains the later of Normal Retirement Age or age 62.
If a Participant makes an election prescribed by this Section 6.03, the
Advisory Committee will direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in accordance with that election. Any election
under this Section 6.03 is subject to the requirements of Section 6.02. The
Participant or Beneficiary must make an election under this Section 6.03 by
filing his election form with the Advisory Committee at any time before the
Trustee otherwise would commence to pay a Participant's Accrued Benefit in
accordance with the requirements of Article VI.
(A) PARTICIPANT ELECTIONS AFTER TERMINATION OF EMPLOYMENT. If the present value
of a Participant's Nonforfeitable Accrued Benefit exceeds $3,500, he may elect
to have the Trustee commence distribution as of any distribution date, but not
earlier than the first distribution date in the first Plan Year beginning after
the Participant's Separation from Service. The Participant may reconsider an
election at any time prior to the annuity starting date and elect to commence
distribution as of any other distribution date, but not earlier than the date
described in the first sentence of this Paragraph (A). A Participant who has
separated from Service may elect distribution as of any distribution date
following his attainment of Normal Retirement Age, irrespective of the
restrictions otherwise applicable under this Section 6.03(A). If the Participant
is partially-vested in his Accrued Benefit, an election under this Paragraph (A)
to distribute prior to the Participant's incurring a Forefeiture Break in
Service (as defined in Section 5.08), must be in the form of a cash-out
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distribution (as defined in Article V). A Participant may not receive a cash-out
distribution if, prior to the time the Trustee actually makes the cash-out
distribution, the Participant returns to employment with the Employer.
(B) PARTICIPANT ELECTIONS PRIOR TO TERMINATION OF EMPLOYMENT. After a
Participant attains Normal Retirement Age, the Participant, until he retires,
has a continuing election to receive all or any portion of his Accrued Benefit.
A Participant must make an election under this Section 6.03(B) on a form
prescribed by the Advisory Committee at any time during the Plan Year for which
his election is to be effective. In his written election, the Participant must
specify the percentage of dollar amount he wishes the Trustee to distribute to
him. The Participant's election relates solely to the percentage or dollar
amount specified in his election form and his right to elect to receive an
amount, if any, for a particular Plan Year greater than the dollar amount or
percentage specified in his election form terminates on the Accounting Date. The
Trustee must make a distribution to a Participant in accordance with his
election under this Section 6.03(B) within the 90 day period (or as soon as
administratively practicable) after the Participant files his written election
with the Trustee. The Trustee will distribute the balance of the Participant's
Accrued Benefit not distributed pursuant to his election(s) in accordance with
the other distribution provisions of this Plan.
(C) DEATH BENEFIT ELECTIONS. If the present value of the deceased Participant's
Nonforfeitable Accrued Benefit exceeds $3,500, the Participant's Beneficiary may
elect to have the Trustee distribute the Participant's Nonforfeitable Accrued
Benefit in a form and within a period permitted under Section 6.02. The
Beneficiary's election is subject to any restrictions designated in writing by
the Participant and not revoked as of his date of death.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS. The joint and survivor
annuity requirements of the Code do not apply to this Plan. The Plan does not
provide any annuity distributions to Participants. A transfer agreement
described in Section 14.05 may not permit a plan which is subject to the
provisions of Code Section 417 to transfer assets to this Plan.
6.05 SPECIAL DISTRIBUTION AND PAYMENT REQUIREMENTS. Unless the
Participant elects in writing to have the Trustee apply other distribution
provisions of the Plan, or unless other distribution provisions of the Plan
require earlier distribution of the Participant's Accrued Benefit, the Trustee
must distribute the portion of the Participant's Accrued Benefit attributable to
Employer Securities (the "Eligible Portion") no later than the time prescribed
by this Section 6.05, irrespective of any other provision of the Plan. The
distribution provisions of this Section 6.05 are subject to the consent and form
of distribution requirements of Articles V and VI of the Plan.
(a) If the Participant separates from Service by reason of the
attainment of Normal Retirement Age, death, or disability, the Advisory
Committee will direct the Trustee to commence distribution of the
Eligible Portion not later than one (1) year after the close of the
Plan Year in which that event occurs.
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(b) If the Participant separates from Service for any reason
other than by reason of the attainment of Normal Retirement Age, death
or disability, the Advisory Committee will direct the Trustee to
commence distribution of the Eligible Portion not later than one year
after the Separation of Service. If the Participant resumes employment
with the Employer on or before the last day of the fifth Plan Year
following the Plan Year of his separation from Service, the
distribution provisions of this paragraph (b) do not apply.
For purposes of this Section 6.05, Employer Securities do not include
any Employer Securities acquired with the proceeds of an Exempt Loan until the
close of the Plan Year in which the borrower repays the Exempt Loan in full.
6.06 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS. Nothing contained
in this Plan prevents the Trustee, in accordance with the direction of the
Advisory Committee, from complying with the provisions of a qualified domestic
relations order (as defined in Code Section 414(p)). This Plan specifically
permits distribution to an alternate payee under a qualified domestic relations
order at any time, irrespective of whether the Participant has attained his
earliest retirement age (as defined under Code Section 414(p)) under the Plan.
A distribution to an alternate payee prior to the Participant's attainment of
earliest retirement age is available only if: (1) the order specifies
distribution at that time or permits an agreement between the Plan and the
alternate payee to authorize an earlier distribution; and (2) if the present
value of the alternate payee's benefits under the Plan exceeds $3,500.00, and
the order requires, the alternate payee consents to any distribution occurring
prior to the Participant's attainment of earliest retirement age. Nothing in
this Section 6.06 permits a Participant a right to receive distribution at a
time otherwise not permitted under the Plan nor does it permit the alternate
payee to receive a form of payment not permitted under the Plan.
The Plan Administrator must establish reasonable procedures to
determine the qualified status of a domestic relations order. Upon receiving a
domestic relations order, the Plan Administrator promptly will notify the
Participant and any alternate payee named in the order, in writing, of the
receipt of the order and the Plan's procedures for determining the qualified
status of the order. Within a reasonable period of time, after receiving the
domestic relations order, the Plan Administrator must determine the qualified
status of the order and must notify the Participant and each alternate payee, in
writing, of its determination. The Plan Administrator must provide notice under
this paragraph by mailing to the individual's address specified in the domestic
relations order, or in a manner consistent with Department of Labor regulations.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the Plan Administrator is making its determination of
the qualified status of the domestic relations order, the Advisory Committee
must make a separate accounting of the amounts payable. If the Plan
Administrator determines the order is a qualified domestic relations order
within 18 months of the date amounts first are payable following receipt of the
order, the Advisory Committee will direct the Trustee to distribute the payable
amounts
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in accordance with the order. If the Plan Administrator does not make
its determination of the qualified status of the order within the 18 month
determination period, the Advisory Committee will direct the Trustee to
distribute the payable amounts in the manner the Plan would distribute if the
order did not exist and will apply the order prospectively if the Plan
Administrator later determines the order is a qualified domestic relations
order.
To the extent it is not inconsistent with the provisions of the
qualified domestic relations order, the Advisory Committee may direct the
Trustee to invest any partitioned amount in a segregated subaccount or separate
account and to invest the account in Federally insured, interest-bearing savings
account(s) or time deposit(s) (or a combination of both), or in other fixed
income investments. A segregated subaccount remains a part of the Trust, but it
alone shares in any income it earns, and it alone bears any expense or loss it
incurs. The Trustee will make any payments or distributions required under this
Section 6.06 by separate benefit checks or other separate distribution to the
alternate payee(s).
ARTICLE VII
EMPLOYER ADMINISTRATIVE PROVISIONS
7.01 INFORMATION TO COMMITTEE. The Employer must supply current
information to the Advisory Committee as to the name, date of birth, date of
employment, annual compensation, leaves of absence, Years of Service and date of
termination of employment of each Employee who is, or who will be eligible to
become, a Participant under the Plan, together with any other information which
the Advisory Committee considers necessary. The Employer's records as to the
current information the Employer furnishes to the Advisory Committee are
conclusive as to all persons.
7.02 NO LIABILITY. The Employer assumes no obligation or responsibility
to any of its Employees, Participants or Beneficiaries for any act of, or
failure to act, on the part of its Advisory Committee (unless the Employer is
the Advisory Committee), the Trustee or the Plan Administrator (unless the
Employer is the Plan Administrator).
7.03 INDEMNITY OF COMMITTEE. The Employer indemnifies and saves
harmless the Plan Administrator and the members of the Advisory Committee, and
each of them, from and against any and all loss resulting from liability to
which the Plan Administrator and the Advisory Committee, or the members of the
Advisory Committee, may be subjected by reason of any act or conduct (except
willful misconduct or gross negligence) in their official capacities in the
administration of this Trust or Plan or both, including all expenses reasonably
incurred in their defense, in case the Employer fails to provide such defense.
The indemnification provisions of this Section 7.03 do not relieve the Plan
Administrator or any Advisory Committee member from any liability he may have
under ERISA for breach of a fiduciary duty. Furthermore, the Plan Administrator
and the Advisory Committee members and the Employer may execute a letter
agreement further delineating the indemnification agreement of this Section
7.03, provided the letter agreement must be consistent with and must not violate
ERISA. The indemnification provisions of this
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Section 7.03 extend to the Trustee solely to the extent provided by a
letter agreement executed by the Trustee and the Employer.
7.04 EMPLOYER DIRECTION OF INVESTMENT. The Employer has the right to
direct the Trustee with respect to the investment and re- investment of assets
comprising the Trust Fund only if the Trustee consents in writing to permit such
direction. If the Trustee consents to Employer direction of investment, the
Trustee and the Employer must execute a letter agreement as a part of this Plan
containing such conditions, limitations and other provisions they deem
appropriate before the Trustee will follow any Employer direction as respects
the investment or re-investment of any part of the Trust Fund.
7.05 AMENDMENT TO VESTING SCHEDULE. Though the Employer reserves the
right to amend the vesting schedule at any time, the Advisory Committee will not
apply the amended vesting schedule to reduce the Nonforfeitable percentage of
any Participant's Accrued Benefit derived from Employer contributions
(determined as of the later of the date the Employer adopts the amendment, or
the date the amendment becomes effective) to a percentage less than the
Nonforfeitable percentage computed under the Plan without regard to the
amendment.
If the Employer makes a permissible amendment to the vesting schedule,
each Participant having at least three Years of Service with the Employer may
elect to have the percentage of his Nonforfeitable Accrued Benefit computed
under the Plan without regard to the amendment. The Participant must file his
election with the Plan Administrator within 60 days of the latest of (a) the
Employer's adoption of the amendment; (b) the effective date of the amendment;
or (c) his receipt of a copy of the amendment. The Plan Administrator, as soon
as practicable, must forward a true copy of any amendment to the vesting
schedule to each affected Participant, together with an explanation of the
effect of the amendment, the appropriate form upon which the Participant may
make an election to remain under the vesting schedule provided under the Plan
prior to the amendment and notice of the time within which the Participant must
make an election to remain under the prior vesting schedule. For purposes of
this Section 7.05, an amendment to the vesting schedule includes any Plan
amendment which directly or indirectly affects the computation of the
Nonforfeitable percentage of an Employee's rights to his Employer derived
Accrued Benefit.
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ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 BENEFICIARY DESIGNATION. Any Participant may from time to time
designate, in writing, any person or persons, contingently or successively, to
whom the Trustee will pay his Accrued Benefit on event of his death and the
Participant may designate the form and method of payment. The Advisory Committee
will prescribe the form for the written designation of Beneficiary and, upon the
Participant's filing the form with the Advisory Committee, the form effectively
revokes all designations filed prior to that date by the same Participant.
A married Participant's Beneficiary designation is not valid unless the
Participant's spouse consents, in writing, to the Beneficiary designation. The
spouse's consent must acknowledge the effect of that consent and a notary public
or the Plan Administrator (or his representative) must witness that consent. The
spousal consent requirements of this paragraph do not apply if: (1) the
Participant and his spouse are not married throughout the one year period ending
on the date of the Participant's death; (2) the Participant's spouse is the
Participant's sole primary beneficiary; (3) the Plan Administrator is not able
to locate the Participant's spouse; (4) the Participant is legally separated or
has been abandoned (within the meaning of state law) and the Participant has a
court order to that effect; or (5) other circumstances exist under which the
Secretary of the Treasury will excuse the consent requirement. If the
Participant's spouse is legally incompetent to give consent, the spouse's legal
guardian (even if the guardian is the Participant) may give consent.
8.02 NO BENEFICIARY DESIGNATION. If a Participant fails to name a
Beneficiary in accordance with Section 8.01, or if the Beneficiary named by a
Participant predeceases him or dies before complete distribution of the
Participant's Accrued Benefit as prescribed by the Participant's Beneficiary
form, then the Trustee will pay the Participant's Accrued Benefit in accordance
with Section 6.02 in the following order of priority to:
(a) The Participant's surviving spouse;
(b) The Participant's surviving children, including adopted
children, in equal shares;
(c) The Participant's surviving parents, in equal shares; or
(d) The legal representative of the estate of the last to die
of the Participant and his Beneficiary.
The Advisory Committee will direct the Trustee as to the method and to
whom the Trustee will make payment under this Section 8.02.
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8.03 PERSONAL DATA TO COMMITTEE. Each Participant and each Beneficiary
of a deceased Participant must furnish to the Advisory Committee such evidence,
data or information as the Advisory Committee considers necessary or desirable
for the purpose of administering the Plan. The provisions of this Plan are
effective for the benefit of each Participant upon the condition precedent that
each Participant will furnish promptly full, true and complete evidence, data
and information when requested by the Advisory Committee, provided the Advisory
Committee advises each Participant of the effect of his failure to comply with
its request.
8.04 ADDRESS FOR NOTIFICATION. Each Participant and each Beneficiary of
a deceased Participant must file with the Advisory Committee from time to time,
in writing, his post office address and any change of post office address. Any
communication, statement or notice addressed to a Participant, or Beneficiary,
at his last post office address filed with the Advisory Committee, or as shown
on the records of the Employer, binds the Participant, or Beneficiary, for all
purposes of this Plan.
8.05 ASSIGNMENT OR ALIENATION. Subject to Code Section 414(p)
relating to qualified domestic relations orders, neither a Participant nor a
Beneficiary may anticipate, assign or alienate (either at law or in equity) any
benefit provided under the Plan, and the Trustee will not recognize any such
anticipation, assignment or alienation. Furthermore, a benefit under the Plan
is not subject to attachment, garnishment, levy, execution or other legal or
equitable process.
8.06 NOTICE OF CHANGE IN TERMS. The Plan Administrator, within the time
prescribed by ERISA and the applicable regulations, must furnish all
Participants and Beneficiaries a summary description of any material amendment
to the Plan or notice of discontinuance of the Plan and all other information
required by ERISA to be furnished without charge.
8.07 LITIGATION AGAINST THE TRUST. A court of competent jurisdiction
may authorize any appropriate equitable relief to redress violations of ERISA or
to enforce any provisions of ERISA or the terms of the Plan. A fiduciary may
receive reimbursement of expenses properly and actually incurred in the
performance of his duties with the Plan.
8.08 INFORMATION AVAILABLE. Any Participant in the Plan or any
Beneficiary may examine copies of the Plan description, latest annual report,
this Plan and Trust, contract or any other instrument under which the Plan was
established or is operated. The Plan Administrator will maintain all of the
items listed in this Section 8.08 in his office, or in such other place or
places as he may designate from time to time in order to comply with the
regulations issued under ERISA, for examination during reasonable business
hours. Upon the written request of a Participant or Beneficiary the Plan
Administrator will furnish him with a copy of any item listed in this Section
8.08. The Plan Administrator may make a reasonable charge to the requesting
person for the copy so furnished.
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8.09 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. The Plan Administrator
will provide adequate notice in writing to any Participant or to any Beneficiary
("Claimant") whose claim for benefits under the Plan the Advisory Committee has
denied. The Plan Administrator's notice to the Claimant must set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which
the Advisory Committee based its denial;
(c) A description of any additional material and information
needed for the Claimant to perfect his claim and an explanation of why
the material or information is needed; and
(d) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Advisory Committee within 75
days after receipt of the Plan Administrator's notice of denial of
benefits. The Plan Administrator's notice must further advise the
Claimant that his failure to appeal the action to the Advisory
Committee in writing within the 75-day period will render the Advisory
Committee's determination final, binding and conclusive.
If the Claimant should appeal to the Advisory Committee, he, or his
duly authorized representative, may submit, in writing, whatever issues and
comments he, or his duly authorized representative, feels are pertinent. The
Claimant, or his duly authorized representative, may review pertinent Plan
documents. The Advisory Committee will re-examine all facts related to the
appeal and make a final determination as to whether the denial of benefits is
justified under the circumstances. The Advisory Committee must advise the
Claimant of its decision within 60 days of the Claimant's written request for
review, unless special circumstances (such as a hearing) would make the
rendering of a decision within the 60-day limit unfeasible, but in no event may
the Advisory Committee render a decision respecting a denial for a claim for
benefits later than 120 days after its receipt of a request for review.
The Plan Administrator's notice of denial of benefits must identify the
name of each member of the Advisory Committee and the name and address of the
Advisory Committee member to whom the Claimant may forward his appeal.
8.10 PARTICIPANT DIRECTION OF INVESTMENT. Except as provided in this
Section 8.10, a Participant does not have the right to direct the Trustee with
respect to the investment or reinvestment of the assets comprising the
Participant's individual Account. Each Qualified Participant may direct the
Trustee as to the investment of 25% of the value of the Participant's Accrued
Benefit attributable to Employer Securities (the "Eligible Accrued Benefit")
within 90 days after the Accounting Date of each Plan Year (to the extent a
direction amount exceeds the amount to which a prior direction under this
Section 8.10
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applies) during the Participant's Qualified Election Period. For
the last Plan Year in the Participant's Qualified Election Period, the Trustee
will substitute "50%" for "25%" in the immediately preceding sentence. The
Qualified Participant must make his direction to the Trustee in writing, the
direction may be effective no later than 180 days after the close of the Plan
year to which the direction applies, and the direction must specify which, if
any, of the investment options the Participant selects.
A Qualified Participant may choose one of the following investment
options:
(a) The distribution of the portion of his Eligible Accrued
Benefit covered by the election. The Trustee will make the distribution
within 90 days after the last day of the period during which the
Qualified Participant may make the election. The provisions of this
Plan applicable to a distribution of Employer Securities, including the
put option requirements of Article XI, apply to this investment option.
(b) The direct transfer of the portion of his Eligible Accrued
Benefit covered by the election to another qualified plan of the
Employer which accepts such transfers, but only if the transferee plan
permits employee-directed investment and does not invest in Employer
Securities to a substantial degree. The Trustee will make the direct
transfer no later than 90 days after the last day of the period during
which the Qualified Participant may make the election.
For purposes of this Section 8.10, the following definitions apply:
(i) "Qualified Participant" means a Participant who has
attained age 55 and who has completed at least ten years of
participation in the Plan. A "year of participation" means a Plan Year
in which the Participant was eligible for an allocation of Employer
contributions, irrespective of whether the Employer actually
contributed to the Plan for that Plan Year.
(ii) "Qualified Election Period" means the six Plan Year
period beginning with the Plan Year in which the Participant first
becomes a Qualified Participant.
8.11 PROHIBITED ALLOCATIONS. In the event the Trustee acquires Employer
Securities in a sale to which Code Section 1042 or Code Section 2057 applies,
the following provisions shall be applicable. No portion of the assets of the
Trust Fund attributable to (or allocable in lieu of) Employer Securities so
acquired may accrue (or be allocated directly or indirectly under any Plan of
the Employer meeting the requirements of Code Section 401(a)) -
(a) During the non-allocation period, for the benefit of -
(i) Any taxpayer who makes an election under Code
Section 1042(a) with respect to the Employer Securities or any
decedent if the executor of the estate of such decedent makes
a qualified sale to which Code Section 2057 applies,
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(ii) Any individual who is related to the taxpayer or
the decedent (within the meaning of Code Section 267(b)), or
(b) For the benefit of any other person who owns (after
application of Code Section 318(a), applied without regard to the
exception of Code Section 318(a)(2)(B)(i)) more than twenty-five
percent (25%) of -
(i) Any class of outstanding stock of the Employer or
of any corporation which is a member of the same controlled
group of corporations (within the meaning of Code
Section 409(l)(4)) of the Employer, or
(ii) The total value of any class of outstanding
stock of any such corporation.
For purposes of this Section 8.11, the term "non-allocation period" shall have
such meaning as set forth in Code Section 409(n)(3)(C). Code Section 409(n)(3)
(B) shall be applied to determine those persons who are twenty-five percent
(25%) shareholders.
ARTICLE IX
ADVISORY COMMITTEE-DUTIES WITH RESPECT TO PARTICIPANTS'
ACCOUNTS
9.01 MEMBERS' COMPENSATION EXPENSES. The Employer must appoint an
Advisory Committee to administer the Plan, the members of which may or may not
be Participants in the Plan, or which may be the Plan Administrator acting
alone. The members of the Advisory Committee will serve without compensation for
services as such, but the Employer will pay all expenses of the Advisory
Committee, including the expense for any bond required under ERISA.
9.02 TERM. Each member of the Advisory Committee serves until the
appointment of his successor.
9.03 POWERS. In case of a vacancy in the membership of the Advisory
Committee, the remaining members of the Advisory Committee may exercise any and
all of the powers, authority, duties and discretion conferred upon the Advisory
Committee pending the filling of the vacancy.
9.04 GENERAL. The Advisory Committee has the following powers and
duties:
(a) To select a Secretary, who need not be a member of
the Advisory Committee;
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<PAGE> 41
(b) To determine the rights of eligibility of an Employee to
participate in the Plan, the value of a Participant's Accrued Benefit
and the Nonforfeitable percentage of each Participant's Accrued
Benefit;
(c) To adopt rules of procedure and regulations necessary for
the proper and efficient administration of the Plan provided the rules
are not inconsistent with the terms of this Agreement;
(d) To enforce the terms of the Plan and the rules and
regulations it adopts;
(e) To direct the Trustee as respects the crediting and
distribution of the Trust;
(f) To review and render decisions respecting a claim for (or
denial of a claim for) a benefit under the Plan;
(g) To furnish the Employer with information which the
Employer may require for tax or other purposes;
(h) To engage the service of agents whom it may deem advisable
to assist it with the performance of its duties;
(i) To engage the services of an Investment Manager or
Managers (as defined in ERISA Section 3(38)), each of whom will have
full power and authority to manage, acquire or dispose (or direct
the Trustee with respect to acquisition or disposition) of any Plan
asset under its control;
(j) To establish a nondiscriminatory policy which the Trustee
must observe in making loans, if any, to Participants; and
(k) To establish and maintain a funding standard account and
to make credits and charges to the account to the extent required by
and in accordance with the provisions of the Code.
The Advisory Committee must exercise all of its powers, duties and
discretion under the Plan in a uniform and nondiscriminatory manner.
LOAN POLICY. A loan policy described in paragraph (j) must be a written
document and must include: (1) the identity of the person or positions
authorized to administer the participant loan program; (2) a procedure for
applying for the loan; (3) the criteria for approving or denying a loan; (4) the
limitations, if any, on the types and amounts of loans available; (5) the
procedure for determining a reasonable rate of interest; (6) the types of
collateral which may secure the loan; and (7) the events constituting default
and the steps the Plan will take to preserve plan assets in the event of
default.
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<PAGE> 42
9.05 FUNDING POLICY. The Advisory Committee will review, not less often
than annually, all pertinent Employee information and Plan data in order to
establish the funding policy of the Plan and to determine the appropriate
methods of carrying out the Plan's objectives. The Advisory Committee must
communicate periodically, as it deems appropriate, to the Trustee and to any
Plan Investment Manager the Plan's short-term and long-term financial needs so
investment policy can be coordinated with Plan financial requirements.
9.06 MANNER OF ACTION. The decision of a majority of the
members appointed and qualified controls.
9.07 AUTHORIZED REPRESENTATIVE. The Advisory Committee may authorize
any one of its members, or its Secretary, to sign on its behalf any notices,
directions, applications, certificates, consents, approvals, waivers, letters or
other documents. The Advisory Committee must evidence this authority by an
instrument signed by all members and filed with the Trustee.
9.08 INTERESTED MEMBER. No member of the Advisory Committee may decide
or determine any matter concerning the distribution, nature or method of
settlement of his own benefits under the Plan, except in exercising an election
available to that member in his capacity as a Participant, unless the Plan
Administrator is acting alone in the capacity of the Advisory Committee.
9.09 INDIVIDUAL ACCOUNTS. The Advisory Committee will maintain, or
direct the Trustee to maintain, a separate Account, or multiple separate
Accounts, in the name of each Participant to reflect the Participant's Accrued
Benefit under the Plan. The Advisory Committee must maintain one Account
designated as the Employer Securities Account to reflect a Participant's
interest in Employer Securities held by the Trust and another Account designated
as the General Investments Account to reflect the Participant's interest in the
Trust Fund attributable to assets other than Employer Securities. If a
Participant re-enters the Plan subsequent to his having a Forfeiture Break in
Service (as defined in Section 5.08), the Advisory Committee, or the Trustee,
must maintain a separate Account for the Participant's pre- Forfeiture Break in
Service Accrued Benefit and a separate Account for his post-Forfeiture Break in
Service Accrued Benefit unless the Participant's entire Accrued Benefit under
the Plan is 100% Nonforfeitable.
The Advisory Committee will make its allocations, or request the
Trustee to make its allocations, to the Accounts of the Participants in
accordance with the provisions of Section 9.11. The Advisory Committee may
direct the Trustee to maintain a temporary segregated investment Account in the
name of a Participant to prevent a distortion of income, gain or loss
allocations under Section 9.11. The Advisory Committee shall maintain records of
its activities.
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9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. The value of each
Participant's Accrued Benefit consists of that proportion of the net worth (at
fair market value) of the Employer's Trust Fund which the net credit balance in
his Account bears to the total net credit balance in the Accounts of all
Participants. For purposes of a distribution under the Plan, the value of a
Participant's Accrued Benefit is its value as of the valuation date immediately
preceding the date of the distribution.
9.11 ALLOCATIONS TO PARTICIPANTS' ACCOUNTS. A "valuation date" under
this Plan is each Accounting Date and each interim valuation date determined
under Section 10.14. As of each valuation date the Advisory Committee must
adjust General Investment Accounts to reflect net income, gain or loss since the
last valuation date. The valuation period is the period beginning the day after
the last valuation date and ending on the current valuation date.
(A) Employer Securities Account. As of the Accounting DAte of each Plan
Year, the Advisory Committee first will reduce Employer Securities Accounts for
any forfeitures arising under Section 5.09 and then will credit the Employer
Securities Account maintained for each Participant with the Participant's
allocable share of Employer Securities (including fractional shares) purchased
and paid for by the Trust or contributed in kind to the Trust, with any
forfeitures of Employer Securities and with any stock dividends on Employer
Securities allocated to his Employer Securities Account. The Advisory Committee
will allocate Employer Securities acquired with an Exempt Loan under Section
10.03(C) in accordance with that Section. Except as otherwise specifically
provided in Section 10.03(C), the Advisory Committee will base allocations to
the Participants' Accounts on dollar values expressed as shares of Employer
Securities or on the basis of actual shares where there is a single class of
Employer Securities. In making a forfeiture reduction under this Section 9.11,
the Advisory Committee, to the extent possible, first must forfeit from a
Participant's General Investments Account before making a forfeiture from his
Employer Securities Account.
(B) GENERAL INVESTMENTS ACCOUNT.
TRUST FUND ACCOUNTS. The allocation provisions of this paragraph apply
to all Participant General Investment Accounts other than segregated investment
Accounts. The Advisory Committee first will adjust the Participant General
Investment Accounts, as those Accounts stood at the beginning of the current
valuation period, by reducing the Accounts for any forfeitures arising under
Section 5.09 or under Section 9.14, for amounts charged during the valuation
period to the Accounts in accordance with Section 9.13 (relating to
distributions) and for the amount of any General Investment Account which the
Trustee has fully distributed since the immediately preceding valuation date.
The Advisory Committee then, subject to the restoration allocation requirements
of Section 5.04 or of Section 9.14, will allocate the net income, gain or loss
pro rata to the adjusted Participant General Investment Accounts. The allocable
net income, gain or loss is the net income (or net loss), including the increase
or decrease in the fair market value of assets, since the last valuation
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<PAGE> 44
date. In making its allocations under this Section 9.11(B), the
Advisory Committee will exclude Employer Securities allocated to Employer
Securities Accounts, stock dividends on allocated Employer Securities and
interest paid by the Trust on an Exempt Loan. The Advisory Committee will
include as income (available for payment on a Exempt Loan) any cash dividends on
Employer Securities except cash dividends which the Advisory Committee has
directed the Trustee to distribute in accordance with Section 10.08.
SEGREGATED INVESTMENT ACCOUNTS. A segregated investment Account
receives all income it earns and bears all expense or loss it incurs. As of the
valuation date, the Advisory Committee must reduce a segregated Account for any
forfeiture arising under Section 5.09 after the Advisory Committee has made all
other allocations, changes or adjustments to the Account for the Plan Year.
ADDITIONAL RULES. An Excess Amount or suspense account described in
Part 2 of Article III does not share in the allocation of net income, gain or
loss described in this Section 9.11(B). This Section 9.11(B) applies solely to
the allocation of net income, gain or loss of the Trust. The Advisory Committee
will allocate the Employer contributions and Participant forfeitures, if any, in
accordance with Article III.
9.12 INDIVIDUAL STATEMENT. As soon as practicable after the Accounting
Date of each Plan Year, but within the time prescribed by ERISA and the
regulations under ERISA, the Plan Administrator will deliver to each Participant
(and to each Beneficiary) a statement reflecting the condition of his Accrued
Benefit in the Trust as of that date and such other information ERISA requires
be furnished the Participant or Beneficiary. No Participant, except a member of
the Advisory Committee, has the right to inspect the records reflecting the
Account of any other Participant.
9.13 ACCOUNT CHARGED. The Advisory Committee will charge all
distributions made to a Participant or to his Beneficiary from his Account
against the Account of the Participant when made.
9.14 UNCLAIMED ACCOUNT PROCEDURE. The Plan does not require either the
Trustee or the Advisory Committee to search for, or ascertain the whereabouts
of, any Participant or Beneficiary. At the time the Participant's or
Beneficiary's benefit becomes distributable under Article VI, the Advisory
Committee, by certified or registered mail addressed to his last known address
of record with the Advisory Committee or the Employer, must notify any
Participant, or Beneficiary, that he is entitled to a distribution under this
Plan. The notice must quote the provisions of this Section 9.14 and otherwise
must comply with the notice requirements of Article VI. If the Participant, or
Beneficiary, fails to claim his distributive share or make his whereabouts known
in writing to the Advisory Committee within six (6) months from the date of
mailing of the notice, the Advisory Committee will treat the Participant's or
Beneficiary's unclaimed payable Accrued Benefit as forfeited and will reallocate
the unclaimed payable Accrued Benefit in accordance with Section 3.05. Where the
benefit is distributable to the Participant, the forfeiture under this paragraph
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<PAGE> 45
occurs as of the last day of the notice period, if the Participant's
Nonforfeitable Accrued Benefit does not exceed $3,500.00, or as of the first day
the benefit is distributable without the Participant's consent, if the present
value of the Participant's Nonforfeitable Accrued Benefit exceeds $3,500.00.
Where the benefit is distributable to a Beneficiary, the forfeiture occurs on
the date the notice period ends except, if the Beneficiary is the Participant's
spouse and the Nonforfeitable Accrued Benefit payable to the spouse exceeds
$3,500.00, the forfeiture occurs as of the first day the benefit is
distributable without the spouse's consent. Pending forfeiture, the Advisory
Committee, following the expiration of the notice period, may direct the Trustee
to segregate the Nonforfeitable Accrued Benefit in a segregated Account and to
invest that segregated Account in Federally insured interest bearing savings
accounts or time deposits (or in a combination of both), or in other fixed
income investments.
If a Participant or Beneficiary who has incurred a forfeiture
of his Accrued Benefit under the provisions of the first paragraph
of this Section 9.14 makes a claim, at any time, for his forfeited Accrued
Benefit, the Advisory Committee must restore the Participant's or Beneficiary's
forfeited Accrued Benefit to the same dollar amount as the dollar amount of the
Accrued Benefit forfeited, unadjusted for any gains or losses occurring
subsequent to the date of the forfeiture. The Advisory Committee will make the
restoration during the Plan Year in which the Participant or Beneficiary makes
the claim, first from the amount, if any, of Participant forfeitures the
Advisory Committee otherwise would allocate for the Plan Year, then from the
amount, if any, of the Trust Fund net income or gain for the Plan Year and then
from the amount, or additional amount, the Employer contributes to enable the
Advisory Committee to make the required restoration. The Advisory Committee will
direct the Trustee to distribute the Participant's or Beneficiary's restored
Accrued Benefit to him not later than 60 days after the close of the Plan Year
in which the Advisory Committee restores the forfeited Accrued Benefit. The
forfeiture provisions of this Section 9.14 apply solely to the Participant's or
to the Beneficiary's Accrued Benefit derived from Employer contributions.
ARTICLE X
TRUSTEE, POWERS AND DUTIES
10.01 ACCEPTANCE. The Trustee accepts the Trust created under the Plan
and agrees to perform the obligations imposed. The Trustee must provide bond for
the faithful performance of his duties under the Trust to the extent required by
ERISA.
10.02 RECEIPT OF CONTRIBUTIONS. The Trustee is accountable to the
Employer for the funds contributed to him by the Employer, but does not have any
duty to see that the contributions received comply with the provisions of the
Plan. The Trustee is not obliged to collect any contributions from the Employer,
nor is obliged to see that funds deposited with him are deposited according to
the provisions of the Plan.
10.03 FULL INVESTMENT POWERS.
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(A) TRUSTEE POWERS. The Trustee has full discretion and authority with regard to
the investment of the Trust Fund, except with respect to a Plan asset under the
control or direction of a properly appointed Investment Manager or with respect
to a Plan asset subject to Employer, Participant or Advisory Committee direction
of investment. The Trustee must coordinate its investment policy with Plan
financial needs as communicated to it by the Advisory Committee. The Trustee is
authorized and empowered, but not by way of limitation, with the following
powers, rights and duties:
(a) To invest the Trust Fund primarily in Employer Securities
("primarily" meaning the authority to hold and to acquire not more than
100% of the Trust Fund in Employer Securities) and to invest any part
or all of the Trust Fund in any common or preferred stocks, open-end or
closed-end mutual funds, put and call options traded on a national
exchange, United States retirement plan bonds, corporate bonds,
debentures, convertible debentures, commercial paper, U.S. Treasury
bills, U.S. Treasury notes and other direct or indirect obligations of
the United States Government or its agencies, improved or unimproved
real estate situated in the United States, limited partnerships,
insurance contracts of any type, mortgages, notes or other property of
any kind, real or personal, and to buy or sell options on common stock
on a nationally recognized exchange with or without holding the
underlying common stock, and to make any other investments the Trustee
deems appropriate, as a prudent man would do under like circumstances
with due regard for the purposes of this Plan. Any investment made or
retained by the Trustee in good faith is proper but must be of a kind
(with the exception of Employer Securities) constituting a
diversification considered by law suitable for trust investments;
(b) To retain in cash so much of the Trust Fund as he may deem
advisable to satisfy liquidity needs of the Plan and to deposit any
cash held in the Trust Fund in a bank account at reasonable interest.
If the Trustee is a bank or similar financial institution supervised by
the United States or by a State, this paragraph (b) includes specific
authority to invest in any type of deposit of the Trustee (or of a bank
related to the Trustee within the meaning of Code Section 414(b) at a
reasonable rate of interest or in a common trust fund (the provisions
of which govern the investment of such assets and which the Plan
incorporates by this reference) as described in Code Section 584 which
the Trustee (or its affiliate, as defined in Code Section 1504)
maintains exclusively for the collective investment of money
contributed by the bank (or the affiliate) in its capacity as trustee
and which conforms to the rules of the Comptroller of the Currency;
(c) To manage, sell, contract to sell, grant options to
purchase, convey, exchange, transfer, abandon, improve, repair, insure,
lease for any term even though commencing in the future or extending
beyond the term of the Trust, and otherwise deal with all property,
real or personal, in such manner, for such considerations and on such
terms and conditions as the Trustee decides;
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(d) To credit and distribute the Trust as directed by the
Advisory Committee. The Trustee is not obliged to inquire as to whether
any payee or distributee is entitled to any payment or whether the
distribution is proper or within the terms of the Plan, or as to the
manner of making any payment or distribution. The Trustee is
accountable only to the Advisory Committee for any payment or
distribution made by him in good faith on the order or direction of the
Advisory Committee;
(e) To borrow money, to assume indebtedness, extend mortgages
and encumber by mortgage or pledge;
(f) To compromise, contest, arbitrate or abandon claims and
demands, in his discretion;
(g) To vote, subject to Section 10.16, all voting stock held
by the Trust Fund;
(h) To lease for oil, gas and other mineral purposes and to
create mineral severances by grant or reservation; to pool or unitize
interests in oil, gas and other minerals; and to enter into operating
agreements and to execute division and transfer orders;
(i) To hold any securities or other property in the name of
the Trustee or his nominee, with depositories or agent depositories or
in another form as he may deem best, with or without disclosing the
trust relationship;
(j) To perform any and all other acts in his judgment
necessary or appropriate for the proper and advantageous management,
investment and distribution of the Trust;
(k) To retain any funds or property subject to any dispute
without liability for the payment of interest, and to decline to make
payment or delivery of the funds or property until final adjudication
is made by a court of competent jurisdiction;
(l) To file all tax returns required of the Trustee;
(m) To furnish to the Employer, the Plan Administrator and the
Advisory Committee an annual statement of account showing the condition
of the Trust Fund and all investments, receipts, disbursements and
other transactions effected by the Trustee during the Plan Year covered
by the statement and also stating the assets of the Trust held at the
end of the Plan Year, which accounts are conclusive on all persons,
including the Employer, the Plan Administrator and the Advisory
Committee, except as to any act or transaction concerning which the
Employer, the Plan Administrator or the Advisory Committee files with
the Trustee written
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exceptions or objections within 90 days after the receipt of
the accounts or for which ERISA authorizes a longer period within which
to object; and
(n) To begin, maintain or defend any litigation necessary in
connection with the administration of the Plan, except that the Trustee
is not obligated or required to do so unless indemnified to his
satisfaction.
The Trustee will allocate any insurance proceeds received from the
purchase of insurance contracts under paragraph (a) to Participants' Accounts in
the same manner as the allocation under Section 3.04 of the Employer
contribution for the Plan Year in which the death of the insured Participant
occurs.
(B) PARTICIPANT LOANS. This Section 10.03(B) specifically authorizes the Trustee
to make loans on a nondiscriminatory basis to a Participant in accordance with
the loan policy established by the Advisory Committee, provided: (1) the loan
policy satisfies the requirements of Section 9.04; (2) any loan is adequately
secured and bears a reasonable rate of interest; (3) the loan provides for
repayment within a specified time; (4) the default provisions of the note
prohibit offset of the Participant's Nonforfeitable Accrued Benefit prior to the
time the Trustee otherwise would distribute the Participant's Nonforfeitable
Accrued Benefit; (5) the amount of the loan does not exceed (at the time the
Plan extends the loan) the present value of the Participant's Nonforfeitable
Accrued Benefit; and (6) the loan otherwise conforms to the exemption provided
by Code Section 4975(d)(1).
(C) EXEMPT LOAN. This Section 10.03(C) specifically authorizes the Trustee to
enter into an Exempt Loan transaction. The following terms and conditions will
apply to any Exempt Loan:
(1) The Trustee will use the proceeds of the loan within a
reasonable time after receipt only for any or all of the following
purposes: (i) to acquire Employer Securities, (ii) to repay such loan,
or (iii) to repay a prior Exempt Loan. Except as provided under Article
XI, no Employer Security acquired with the proceeds of an Exempt Loan
may be subject to a put, call or other option, or buy-sell or similar
arrangement while held by and when distributed from this Plan, whether
or not this Plan is then an employee stock ownership plan.
(2) The interest rate of the loan may not be more than a
reasonable rate of interest.
(3) Any collateral the Trustee pledges to the creditor must
consist only of the assets purchased by the borrowed funds and those
assets the Trust used as collateral on the prior Exempt Loan repaid
with the proceeds of the current Exempt Loan.
(4) The creditor may have no recourse against the Trust under
the loan except with respect to such collateral given for the loan,
contributions (other than
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contributions of Employer Securities) that the Employer makes
to the Trust to meet its obligations under the loan, and earnings
attributable to such collateral and the investment of such
contributions. The payment made with respect to an Exempt Loan by the
Plan during a Plan Year must not exceed an amount equal to the sum of
such contributions and earnings received during or prior to the year
less such payments in prior years. The Advisory Committee and the
Trustee must account separately for such contributions and earnings in
the books of account of the Plan until the Trust repays the loan.
(5) In the event of default upon the loan, the value of Plan
assets transferred in satisfaction of the loan must not exceed the
amount of the default, and if the lender is a Disqualified Person, the
loan must provide for transfer of Plan assets upon default only upon
and to the extent of the failure of the Plan to meet the payment
schedule of the loan.
(6) The Trustee must add and maintain all assets acquired with
the proceeds of an Exempt Loan in a suspense Account. In withdrawing
assets from the suspense Account, the Trustee will apply the provisions
of Treas. Reg. Sections 54.4975- 7(b)(8) and (15) as if all securities
in the suspense Account were encumbered. Upon the payment of any
portion of the loan, the Trustee will effect the release of assets in
the suspense Account from encumbrances. For each Plan Year during
the duration of the loan, the number of Employer Securities released
must equal the number of encumbered Employer Securities held
immediately before release for the current Plan Year multiplied by a
fraction. The numerator of the fraction is the amount of principal and
interest paid for the Plan Year. The denominator of the fraction is
the sum of the numerator plus the principal and interest to be paid
for all future Plan Years. Notwithstanding the three (3) preceding
sentences, the number of Employer Securities released for each Plan
Year may be determined with reference to principal payments only,
provided that (i) the loan must provide for annual payments of
principal and interest at a cumulative rate that is not less rapid at
any time than level annual payments of such amounts for ten (10)
years, (ii) the interest included in any payment shall be disregarded
only to the extent that it would be determined to be interest under
standard loan amortization tables, and (iii) this method of
determining the number of Employer Securities released shall not be
applicable from the time that, by reason of a renewal, extension, or
refinancing, the sum of the expired duration of the Exempt Loan, the
renewal period, the extension period, and the duration of the new
Exempt Loan exceeds ten (10) years. The number of future Plan Years
under the Loan must be definitely ascertainable and must be determined
without taking into account any possible extension or renewal periods.
If the interest rate under the loan is variable, the interest to be
paid in future Plan Years must be computed by using the interest rate
applicable as of the end of the Plan Year. If collateral includes more
than one class of Employer Securities, the number of Employer
Securities of each class to be released for a Plan Year must be
determined by applying the same fraction to each such class. The
Advisory Committee will allocate assets withdrawn from the
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suspense Account to the Accounts of Participants who otherwise
share in the allocation of the Employer's contribution for the Plan
Year for which the Trustee has paid the portion of the loan resulting
in the release of the assets. The Advisory Committee consistently will
make this allocation as of each Accounting Date on the basis of
non-monetary units, taking into account the relative Compensation of
all such Participants for such Plan Year.
(7) The loan must be for a specific term and may not be
payable at the demand of any person except in the case of default.
(8) Notwithstanding the fact this Plan ceases to be an
employee stock ownership plan, Employer Securities acquired with the
proceeds of an Exempt Loan will continue after the Trustee repays the
loan to be subject to the provisions of Treas. Reg.
Sections 54.4975-7(b)(4), (10), (11) and (12) relating to put, call or
other options and to buy-sell or similar arrangements, except to the
extent these regulations are inconsistent with Code ss.409(h).
10.04 RECORDS AND STATEMENTS. The records of the Trustee pertaining to
the Plan must be open to the inspection of the Plan Administrator, Advisory
Committee and the Employer at all reasonable times and may be audited from time
to time by any person or persons as the Employer, Plan Administrator or Advisory
Committee may specify in writing. The Trustee must furnish the Plan
Administrator or Advisory Committee with whatever information relating to the
Trust Fund the Plan Administrator or Advisory Committee considers necessary.
10.05 FEES AND EXPENSES FROM FUND. The Trustee will receive reasonable
annual compensation as may be agreed upon from time to time between the Employer
and the Trustee. The Trustee will pay all fees and expenses reasonably incurred
by him in his administration of the Plan from the Trust Fund, unless the
Employer pays the fees and expenses. The Advisory Committee will not treat any
fee or expense paid, directly or indirectly, by the Employer as an Employer
contribution, provided the fee or expense relates to the ordinary and necessary
administration of the Fund. No person who is receiving full pay from the
Employer may receive compensation for services as Trustee.
10.06 PARTIES TO LITIGATION. Except as otherwise provided by ERISA,
only the Employer, the Plan Administrator, the Advisory Committee, and the
Trustee are necessary parties to any court proceeding involving the Trustee or
the Trust Fund. No Participant, or Beneficiary, is entitled to any notice of
process unless required by ERISA. Any final judgment entered in any proceeding
will be conclusive upon the Employer, the Plan Administrator, the Advisory
Committee, the Trustee, Participants and Beneficiaries.
10.07 PROFESSIONAL AGENTS. The Trustee may employ and pay from the
Trust Fund reasonable compensation to agents, attorneys, accountants and other
persons to advise the Trustee as in his opinion may be necessary. The Trustee
may delegate to any
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agent, attorney, accountant or other person selected by him any non-Trustee
power or duty vested in him by the Plan, and the Trustee may
act or refrain from acting on the advice or opinion of any agent, attorney,
accountant or other person so selected.
10.08 DISTRIBUTION OF TRUST FUND. The Trustee will make all
distributions of benefits under the Plan in Employer Securities valued at fair
market value at the time of distribution. The Trustee will pay in cash any
fractional security share to which a Participant or his Beneficiary is entitled.
In the event the Trustee is to make a distribution in shares of Employer
Securities, the Trustee may apply any balance in a Participant's General
Investments Account to provide whole shares of Employer Securities for
distribution at the then fair market value.
Notwithstanding the preceding paragraph, (i) if the Employer's charter
or bylaws restrict ownership of substantially all shares of Employer Securities
to Employees and the Trust, as described in Code Section 409(h)(2), or (ii) the
Employer is prohibited by law from redeeming or purchasing its own securities,
as described in Code Section 409(h)(3), the Trustee will make the distribution
of a Participant's Accrued Benefit entirely in cash.
Notwithstanding the preceding provisions of this Section 10.08, the
Trustee, if directed in writing by the Advisory Committee, will pay, in cash,
any cash dividends on Employer Securities allocated, or allocable to
Participants' Employer Securities Accounts, irrespective of whether a
Participant is fully vested in his Employer Securities Account. The Advisory
Committee's direction must state whether the Trustee is to pay the cash dividend
distributions currently, or within the 90-day period following the close of the
Plan Year in which the Employer pays the dividends to the Trust. The Advisory
Committee may request the Employer to pay dividends on Employer Securities
directly to Participants.
In addition to the foregoing, the Trustee, if directed in writing by
the Advisory Committee, shall use any cash dividends paid to the Trustee by the
Employer with respect to the Employer Securities held by the Trust Fund to make
payments on a loan described in Code Section 404(a)(9).
10.09 DISTRIBUTION DIRECTIONS. If no one claims a payment or
distribution made from the Trust, the Trustee must promptly notify the Advisory
Committee and then dispose of the payment in accordance with the subsequent
direction of the Advisory Committee.
10.10 THIRD PARTY. No person dealing with the Trustee is obligated to
see to the proper application of any money paid or property delivered to the
Trustee, or to inquire whether the Trustee has acted pursuant to any of the
terms of the Plan. Each person dealing with the Trustee may act upon any notice,
request or representation in writing by the Trustee, or by the Trustee's duly
authorized agent, and is not liable to any person in so acting. The certificate
of the Trustee that it is acting in accordance with the Plan will be conclusive
in favor of any person relying on the certificate. If more than two persons act
as
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Trustee, the decision of a majority of such persons controls with respect to
any decision regarding the administration or investment of the Trust Fund.
10.11 RESIGNATION. The Trustee may resign at any time as Trustee of the
Plan by giving 30 days' written notice in advance to the Employer and to the
Advisory Committee. If the Employer fails to appoint a successor Trustee within
60 days of its receipt of the Trustee's written notice of resignation, the
Trustee will treat the Employer as having appointed itself as Trustee and as
having filed its acceptance of appointment with the former Trustee.
10.12 REMOVAL. The Employer, by giving 30 days' written notice in
advance to the Trustee, may remove any Trustee. In the event of the resignation
or removal of a Trustee, the Employer must appoint a successor Trustee if it
intends to continue the Plan. If two or more persons hold the position of
Trustee, in the event of the removal of one such person, during any period the
selection of a replacement is pending, or during any period such person is
unable to serve for any reason, the remaining person or persons will act as the
Trustee.
10.13 INTERIM DUTIES AND SUCCESSOR TRUSTEE. Each successor Trustee
succeeds to the title to the Trust vested in his predecessor by accepting in
writing his appointment as successor Trustee and filing the acceptance with the
former Trustee and the Advisory Committee without the signing or filing of any
further statement. The resigning or removed Trustee, upon receipt of acceptance
in writing of the Trust by the successor Trustee, must execute all documents and
do all acts necessary to vest the title of record in any successor Trustee. Each
successor Trustee has and enjoys all of the powers, both discretionary and
ministerial, conferred under this Agreement upon his predecessor. A successor
Trustee is not personally liable for any act or failure to act of any
predecessor Trustee, except as required under ERISA. With the approval of the
Employer and the Advisory Committee, a successor Trustee, with respect to the
Plan, may accept the account rendered and the property delivered to him by a
predecessor Trustee without incurring any liability or responsibility for so
doing.
10.14 VALUATION OF TRUST. The Trustee must value the Trust Fund as of
each Accounting Date to determine the fair market value of each Participant's
Accrued Benefit in the Trust, and the Trustee also must value the Trust Fund on
such other dates, as directed by the Advisory Committee. With respect to
activities carried on by the Plan, an independent appraiser meeting requirements
similar to those prescribed by Treasury regulations under Code Section
170(a)(1) must perform all valuations of Employer Securities which are not
readily tradeable on an established securities market.
10.15 LIMITATION ON LIABILITY - IF INVESTMENT MANAGER APPOINTED. The
Trustee is not liable for the acts or omissions of any Investment Manager or
Managers the Advisory Committee may appoint, nor is the Trustee under any
obligation to invest or otherwise manage any asset of the Plan which is subject
to the
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<PAGE> 53
management of a properly appointed Investment Manager. The Advisory
Committee, the Trustee and any properly appointed Investment Manager may execute
a letter agreement as a part of this Plan delineating the duties,
responsibilities and liabilities of the Investment Manager with respect to any
part of the Trust Fund under the control of the Investment Manager.
10.16 PARTICIPANT VOTING RIGHTS - EMPLOYEE SECURITIES. With respect to
the voting of Employer Securities which are not part of a registration-type
class of securities (as defined in Code Section 409(e)(4)), a Participant has
the right to direct the Trustee regarding the voting of such Employer
Securities allocated to his Employer Securities Account with respect to any
corporate matter which involves the approval or disapproval of any
corporate merger or consolidation, recapitalization, reclassification,
liquidation, dissolution, sale of substantially all assets of a trade or
business, or such similar transaction as the Treasury may prescribe in
regulations. As to any Employer Securities allocated to the Participant's
Employer Securities Account which are part of a registration-type class of
securities, the voting rights provided in this Section 10.16 extend to all
corporate matters requiring a vote of stockholders. The Trustee does not have
the right to vote any Employer Securities which a Participant (or Beneficiary)
fails to vote as authorized by this Section 10.16.
ARTICLE XI
REPURCHASE OF EMPLOYER SECURITIES
11.01 PUT OPTION. The Employer will issue a "put option" to each
Participant receiving a distribution of Employer Securities from the Trust. The
put option will permit the Participant to sell the Employer Securities to the
Employer, at any time during two option periods, at the current fair market
value. The first put option period runs for a period of at least 60 days
commencing on the date of distribution of Employer Securities to the
Participant. The second put option period runs for a period of at least 60 days
commencing after the new determination of the fair market value of Employer
Securities by the Advisory Committee and notice to the Participant of the new
fair market value. If a Participant (Beneficiary) exercises his put option, the
Employer must purchase the Employer Securities at fair market value upon the
terms provided under Section 11.04. The Employer may grant the Trust an option
to assume the Employer's rights and obligations at the time a Participant
exercises an option under this Section 11.01. Further, if Federal or state law
will be violated by the Employer's honoring of the put option, the Employer
Securities may be put, in a manner consistent with such law, to a third party
(e.g., an affiliate of the Employer or a shareholder other than the Trustee)
that has substantial net worth at the time the Exempt Loan is made and whose net
worth is reasonably expected to remain substantial.
11.02 RESTRICTION ON EMPLOYER SECURITIES. Except upon the prior written
consent of the Employer, no Participant (or Beneficiary) may sell, assign, give,
pledge, encumber, transfer or otherwise dispose of any Employer Securities now
owned or subsequently acquired by him without complying with the terms of this
Article XI. If a
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<PAGE> 54
Participant (or Beneficiary) pledges or encumbers any Employer
Securities with the required prior written consent, any security holder's rights
with respect to such Employer Securities are subordinate and subject to the
rights of the Employer.
11.03 LIFETIME TRANSFER/RIGHT OF FIRST REFUSAL. If any Participant (or
Beneficiary) who receives Employer Securities under this Plan desires to dispose
of any of his Employer Securities for any reason during his lifetime (whether by
sale, assignment, gift or any other method of transfer), he first must offer the
Employer Securities for sale to the Employer. The Advisory Committee may require
a Participant (or Beneficiary) entitled to a distribution of Employer Securities
to execute an appropriate stock transfer agreement (evidencing the right of
first refusal) prior to receiving a certificate for Employer Securities.
In the case of an offer by a third party, the offer to the Employer is
subject to all the terms and conditions set forth in SEction 11.04 based on the
price equal to the fair market value per share and payable in accordance with
the terms of Section 11.04 unless the selling price and terms offered to the
Participant by the third party are more favorable to the Participant than the
selling price and terms of Section 11.04, in the event the selling price and
terms of the offer of the third party apply. The Employer must give written
notice to the offering Participant of its acceptance of the Participant's offer
within 14 days after the Participant has given written notice to the Employer or
the Employer's rights under this Section 11.03 will lapse. The Employer may
grant the Trust the option to assume the Employer's rights and obligations with
respect to all or any part of the Employer Securities offered to the Employer
under this Section 11.03.
11.04 PAYMENT OF PURCHASE PRICE. If the Employer (or the Trustee, at
the direction of the Advisory Committee) exercises an option to purchase a
Participant's Employer Securities pursuant to an offer given under Section
11.03, the purchaser(s) must make payment in lump sum or, if the distribution to
the Participant (or to his Beneficiary) constitutes a Total Distribution, in
substantially equal installments over a period not exceeding five years. A
"Total Distribution" to a Participant (or to a Beneficiary) is the distribution,
within one taxable year of the recipient, of the entire balance to the
Participant's credit under the Plan. In the case of a distribution which is not
a Total Distribution or which is a Total Distribution with respect to which the
purchaser(s) will make payment in lump sum, the purchaser(s) must pay the
Participant (or Beneficiary) the fair market value of the Employer Securities
repurchased no later than 30 days after the date the Participant (or
Beneficiary) exercises the option. In the case of a Total Distribution with
respect to which the purchaser(s) will make installment payments, the
purchaser(s) must make the first installment payment no later than 30 days after
the Participant (or Beneficiary) exercises the put option. For installment
amounts not paid within 30 days of the exercise of the put option, the
purchaser(s) must evidence the balance of the purchase price by executing a
promissory note, delivered to the selling Participant at the Closing. The note
delivered at Closing must bear a reasonable rate of interest, determined as of
the Closing Date, and the purchaser(s) must provide adequate security. The note
must provide for equal annual installments with interest payable with each
installment, the first installment being due and
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<PAGE> 55
payable one year after the Closing Date. The note further must provide
for acceleration in the event of 30 days' default of the payment on interest or
principal and must grant to the maker of the note the right to prepay the note
in whole or in part at any time or times without penalty; provided, however, the
purchaser(s) may not have the right to make any prepayment during the calendar
year or fiscal year of the Participant (Beneficiary) in which the Closing Date
occurs.
11.05 NOTICE. A person has given Notice permitted or required under
this Article XI when the person deposits the Notice in the United States mail,
first class, postage prepaid, addressed to the person entitled to the Notice at
the address currently listed for him in the records of the Advisory Committee.
Any person affected by this Article XI has the obligation of notifying the
Advisory Committee of any change of address.
11.06 TERMS AND DEFINITIONS. For purposes of this Article XI:
(a) "Fair market value" means the value of the Employer
Securities (i) determined as of the date of the exercise of an option
if the exercise is by a Disqualified Person, or (ii) in all other
cases, determined as of the most recent Accounting Date. The Advisory
Committee must determine fair market value of Employer Securities for
all purposes of the Plan by engaging the services of an independent
appraiser. See Section 10.14.
(b) "Notice" means any offer, acceptance of an offer, payment
or any other communication.
(c) "Beneficiary" includes the legal representative of a
deceased Participant.
(d) "Closing" means the place, date and time ("Closing Date")
to which the selling Participant (or his Beneficiary) and purchaser may
agree for purposes of a sale and purchase under this Article XI,
provided Closing must take place not later than 30 days after the
exercise of an offer under Section 11.01.
ARTICLE XII
MISCELLANEOUS
12.01 EVIDENCE. Anyone required to give evidence under the terms of the
Plan may do so by certificate, affidavit, document or other information which
the person to act in reliance may consider pertinent, reliable and genuine, and
to have been signed, made or presented by the proper party or parties. Both the
Advisory Committee and the Trustee are fully protected in acting and relying
upon any evidence described under the immediately preceding sentence.
12.02 NO RESPONSIBILITY FOR EMPLOYER ACTION. Neither the Trustee nor
the Advisory Committee has any obligation or responsibility with respect to any
action
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required by the Plan to be taken by the Employer, any Participant or
eligible Employee, or for the failure of any of the above persons to act or make
any payment or contribution, or to otherwise provide any benefit contemplated
under this Plan. Furthermore, the Plan does not require the Trustee or the
Advisory Committee to collect any contribution required under the Plan, or to
determine the correctness of the amount of any Employer contribution. Neither
the Trustee nor the Advisory Committee need inquire into or be responsible for
any action or failure to act on the part of the others. Any action required of a
corporate Employer must be by its Board of Directors or its designate.
12.03 FIDUCIARIES NOT INSURERS. The Trustee, the Advisory Committee,
the Plan Administrator and the Employer in no way guarantee the Trust Fund from
loss or depreciation. The Employer does not guarantee the payment of any money
which may be or becomes due to any person from the Trust Fund. The liability of
the Advisory Committee and the Trustee to make any payment from the Trust Fund
at any time and all times is limited to the then available assets of the Trust.
12.04 WAIVER OF NOTICE. Any person entitled to notice under
the Plan may waive the notice.
12.05 SUCCESSORS. The Plan is binding upon all persons entitled to
benefits under the Plan, their respective heirs and legal representatives, upon
the Employer, its successors and assigns, and upon the Trustee and the Advisory
Committee and their successors.
12.06 WORD USAGE. Words used in the masculine also apply to the
feminine where applicable, and wherever the context of the Plan dictates, the
plural includes the singular and the singular includes the plural.
12.07 STATE LAW. Missouri law will determine all questions arising with
respect to the provisions of this Agreement except to the extent Federal statute
supersedes Missouri law.
12.08 EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan, or
with respect to the establishment of the Trust, or any modification or amendment
to the Plan or Trust, or in the creation of any Account, or the payment of any
benefit, gives any Employee, Employee-Participant or any Beneficiary any right
to continue employment, any legal or equitable right against the Employer, or
Employee of the Employer, or against the Trustee, or its agents or employees, or
against the Plan Administrator, except as expressly provided by the Plan, the
Trust, ERISA or by a separate agreement.
ARTICLE XIII
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
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<PAGE> 57
13.01 EXCLUSIVE BENEFIT. Except as provided under Article III, the
Employer has no beneficial interest in any asset of the Trust and no part of any
asset in the Trust may ever revert to or be repaid to an Employer, either
directly or indirectly; nor, prior to the satisfaction of all liabilities with
respect to the Participants and their Beneficiaries under the Plan, may any part
of the corpus or income of the Trust Fund, or any asset of the Trust, be (at any
time) used for, or diverted to, purposes other than the exclusive benefit of the
Participants or their Beneficiaries. However, if the Commissioner of Internal
Revenue, upon the Employer's request for initial approval of this Plan,
determines that the Trust created under the Plan is not a qualified
trust exempt from Federal income tax, then (and only then) the Trustee, upon
written notice from the Employer, will return the Employer's contributions (and
increment attributable to the contributions) to the Employer. The Trustee must
make the return of the Employer contribution under this Section 13.01 within one
(1) year of a final disposition of the Employer's request for initial approval
of the Plan. The Plan and Trust will terminate upon the Trustee's return of the
Employer's contributions.
13.02 AMENDMENT BY EMPLOYER. The Employer has the right at
any time and from time to time:
(a) To amend this Agreement in any manner it deems necessary
or advisable in order to qualify (or maintain qualification of) this
Plan and the Trust created under it under the appropriate provisions of
Code Section 401(a); and
(b) To amend this Agreement in any other manner.
No amendment may authorize or permit any of the Trust Fund (other than
the part which is required to pay taxes and administration expenses) to be used
for or diverted to purposes other than for the exclusive benefit of the
Participants or their Beneficiaries or estates. No amendment may cause or permit
any portion of the Trust Fund to revert to or become a property of the Employer.
The Employer also may not make any amendment which affects the rights, duties or
responsibilities of the Trustee, the Plan Administrator or the Advisory
Committee without the written consent of the affected Trustee, the Plan
Administrator or the affected member of the Advisory Committee.
CODE SECTION 411(d)(6) PROTECTED BENEFITS. An amendment may not
decrease a Participant's Accrued Benefit, except to the extent permitted under
Code Section 412(c)(8), and may not reduce or eliminate Code Section 411(d)(6)
protected benefits determined immediately prior to the adoption date (or,
if later, the effective date) of the amendment. An amendment reduces or
eliminates Code Section 411(d)(6) protected benefits if the amendment has the
effect of either (1) eliminating or reducing an early retirement benefit or a
retirement-type subsidy (as defined in Treasury regulations), or (2) except as
provided by Treasury regulations, eliminating an optional form of benefit. The
Advisory Committee must disregard an amendment to the extent application of the
amendment would fail to satisfy this paragraph. If the Advisory Committee must
disregard an amendment because the amendment would violate clause (1) or clause
(2), the Advisory Committee must maintain a schedule of the
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early retirement option or other optional forms of benefit the Plan
must continue for the affected Participants.
The Employer must make all amendments in writing. Each amendment must
state the date to which it is either retroactively or prospectively effective.
13.03 DISCONTINUANCE. The Employer has the right, at any time, to
suspend or discontinue its contributions under the Plan, and to terminate, at
any time, this Plan and the Trust created under this Agreement. The Plan will
terminate upon the first to occur of the following:
(a) The date terminated by action of the Employer;
(b) The date the Employer is judicially declared bankrupt or
insolvent, unless the proceeding authorized continued maintenance of
the Plan;
(c) The dissolution, merger, consolidation, or reorganization
of the Employer or the sale by the Employer of all or substantially all
of its assets, unless the successor or purchaser makes provision to
continue the Plan, in which event the successor or purchaser must
substitute itself as the Employer under this Plan.
13.04 FULL VESTING ON TERMINATION. Upon either full or partial
termination of the Plan, or, if applicable, upon complete discontinuance of
profit sharing plan contributions to the Plan, an affected Participant's right
to his Accrued Benefit is 100% Nonforfeitable, irrespective of the
Nonforfeitable percentage which otherwise would apply under Article V.
13.05 MERGER/DIRECT TRANSFER. The Trustee may not consent to, or be a
party to, any merger or consolidation with another plan, or to a transfer of
assets or liabilities to another plan unless immediately after the merger,
consolidation or transfer, the surviving Plan provides each Participant a
benefit equal to or greater than the benefit each Participant would have
received had the Plan terminated immediately before the merger or consolidation
or transfer. The Trustee possesses the specific authority to enter into merger
agreements or direct transfer of assets agreements with the trustees of other
retirement plans described in code Section 401(a), including an elective
transfer, and to accept the direct transfer of plan assets, or to
transfer plan assets, as a party to any such agreement.
The Trustee may accept a direct transfer of plan assets on behalf of an
Employee prior to the date the Employee satisfies the Plan's eligibility
conditions. If the Trustee accepts a direct transfer of plan assets, the
Advisory Committee and Trustee must treat the Employee as a Participant for all
purposes of the Plan except the Employee is not a Participant for purposes of
sharing in Employer contributions or Participant forfeitures under the Plan
until he actually becomes a Participant in the Plan.
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<PAGE> 59
The Trustee may not consent to, or be a party to a merger,
consolidation or transfer of assets with a defined benefit plan, except with
respect to an elective transfer. The Trustee will hold, administer and
distribute the transferred assets as a part of the Trust Fund and the Trustee
must maintain a separate Employer contribution Account for the benefit of the
Employee on whose behalf the Trustee accepted the transfer in order to reflect
the value of the transferred assets. Unless a transfer of assets to this Plan is
an elective transfer, the Plan will preserve all Code Section 411(d)(6)
protected benefits with respect to those transferred assets, in the manner
described in Section 13.02. A transfer is an elective transfer if: (1) the
transfer satisfies the first paragraph of this Section 13.05; (2) the transfer
is voluntary, under a fully informed election by the Participant; (3) the
Participant has an alternative that retains his Code Section 411(d)(6)
protected benefits (including an option to leave his benefit in the transferor
plan, if that plan is not terminating); (4) the transfer satisfies the
applicable spousal consent requirements of the Code; (5) the transferor plan
satisfies the joint and survivor notice requirements of the Code, if the
Participant's transferred benefit is subject to those requirements; (6) the
Participant has a right to immediate distribution from the transferor plan, in
lieu of the elective transfer; (7) the transferred benefit is at least the
greater of the single sum distribution provided by the transferor plan for
which the Participant is eligible or the present value of the Participant's
accrued benefit under the transferor plan payable at that plan's normal
retirement age; (8) the Participant has a 100% Nonforfeitable interest in the
transferred benefit; and (9) the transfer otherwise satisfies applicable
Treasury regulations. An elective transfer may occur between qualified plans of
any type.
DISTRIBUTION RESTRICTIONS UNDER CODE SECTION 401(K). If the Plan
receives a direct transfer (by merger or otherwise) of elective contributions
(or amounts treated as elective contributions) under a Plan with a Code
Section 401(k) arrangement, the distribution restrictions of Code Sections
401(k)(2) and (10) continue to apply to those transferred elective
contributions.
13.06 TERMINATION. Upon termination of the Plan, the distribution
provisions of Article VI2 remain operative, with the following exceptions:
(1) if the present value of the Participant's Nonforfeitable
Accrued Benefit does not exceed $3,500.00, the Advisory Committee will
direct the Trustee to distribute the Participant's Nonforfeitable
Accrued Benefit to him in a lump sum as soon as administratively
practicable after the Plan terminates; and
(2) if the present value of the Participant's Nonforfeitable
Accrued Benefit exceeds $3,500.00, the Participant or the Beneficiary,
in addition to the distribution events permitted under Article VI, may
elect to have the Trustee commence distribution of his Nonforfeitable
Accrued Benefit as soon as administratively practicable after the Plan
terminates.
To liquidate the Trust, the Advisory Committee will purchase a deferred
annuity contract for each Participant which protects the Participant's
distribution rights under the Plan, if the Participant's Nonforfeitable Accrued
Benefit exceeds $3,500.00 and the
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Participant does not elect an immediate distribution pursuant to
Paragraph (2). The Trust will continue until the Trustee in accordance with the
direction of the Advisory Committee has distributed all of the benefits under
the Plan.
On each valuation date, the Advisory Committee will credit any part of
a Participant's Accrued Benefit retained in the Trust with its proportionate
share of the Trust's income, expenses, gains and losses, both realized and
unrealized. Upon termination of the Plan, the amount, if any, in a suspense
account under Article III will revert to the Employer, subject to the conditions
of the Treasury regulations permitting such a reversion. A resolution or
amendment to freeze all future benefit accrual, but otherwise to continue
maintenance of this Plan, is not a termination for purposes of this Section
13.06.
IN WITNESS WHEREOF, the Employer and Trustee have executed this Plan
and Trust in Stockton, Missouri, in duplicate counterparts, each of which shall
be deemed an original, this 13th day of December, 1989.
SAC RIVER VALLEY BANK
By: /s/ Garry L. Robinson
------------------------------
Garry L. Robinson, President
(CORPORATE SEAL)
"EMPLOYER"
Attest:
- -----------------------------
Secretary/Assistant Secretary
/s/ Garry L. Robinson
------------------------------
Garry L. Robinson
"TRUSTEE"
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STATE OF MISSOURI )
) ss.
COUNTY OF )
---------
On this _____ day of November, 1989, before me personally appeared
Garry L. Robinson, to me personally known, who being duly sworn, did say that he
is the President of Sac River Valley Bank (the "Corporation"), that the seal
affixed to this instrument is the corporate seal of the Corporation, and that
the said instrument was signed and sealed on behalf of the Corporation by
authority of its Board of Directors, and the said Garry L. Robinson acknowledged
said instrument to be the free act and deed of the Corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal, at my office in __________________________, the day and year
first above written.
------------------------------------
Notary Public
My commission expires:
--------------------
STATE OF MISSOURI )
) ss.
COUNTY OF )
--------
On this _____ day of November, 1989, before me personally appeared
Garry L. Robinson, to me known to be the person described in and who executed
the foregoing instrument, and acknowledged that he executed the same as his free
act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal, at my office in ___________________________, the day and year
first above written.
-------------------------------------
Notary Public
My commission expires:
------------------------
- 61 -
<PAGE> 1
EXHIBIT 10.6
FIRST AMENDMENT TO SAC RIVER VALLEY BANK
EMPLOYEE STOCK OWNERSHIP PLAN AND
TRUST AGREEMENT
AMENDMENT, executed in several counterparts, each of which shall be
deemed an original, made and entered into this 12th day of February, 1994, by
and between Sac River Valley Bank, a bank organized under the laws of the State
of Missouri (hereinafter referred to as the "Employer"), and Garry L. Robinson
(hereinafter referred to as "Trustee").
W I T N E S S E T H:
WHEREAS, on December 13, 1989, the Employer and Trustee executed and
delivered the Sac River Valley Bank Employee Stock Ownership Plan and Trust
Agreement (hereinafter referred to as the "Trust Agreement"), effective as of
January 1, 1989; and
WHEREAS, Section 13.02 of the Trust Agreement provides that the
Employer shall have the right at any time and from time to time to amend the
Trust Agreement, and, pursuant thereto, the parties now desire to amend the
Trust Agreement in certain particulars; and
WHEREAS, the Board of Directors of the Employer has approved the
following amendments to the Trust Agreement, effective as of January 1, 1989,
except as otherwise specifically provided herein;
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
1. Section 1.07 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof, the following new Section 1.07 is inserted, which
reads as follows:
"1.07 "Highly Compensated Employee" means an Employee who,
during the Plan Year or during the preceding 12-month period:
(a) Is a more than five percent (5%) owner of the Employer
(applying the constructive ownership rules of Code Section
318);
(b) Has Compensation in excess of Seventy-Five Thousand
Dollars ($75,000.00) (as adjusted by the Commissioner of
Internal Revenue for the relevant year);
(c) Has Compensation in excess of Fifty Thousand Dollars
($50,000.00) (as adjusted by the Commissioner of Internal
Revenue for the relevant year), and
<PAGE> 2
is part of the top-paid twenty- percent (20%) group of
employees (based on Compensation for the relevant year); or
(d) Has Compensation in excess of fifty percent (50%) of the
dollar amount prescribed in Code Section 415(b)(1)(A)
(relating to defined benefit plans), and is an officer of
the Employer.
If the Employee satisfies the definition in clause (b), (c),
or (d) in the Plan Year, but does not satisfy clause (b), (c)
or (d) during the preceding 12-month period, and does not
satisfy clause (a) in either period, the Employee is a Highly
Compensated Employee only if he is one of the one hundred
(100) most Highly Compensated Employees for the Plan Year. The
number of officers taken into account under clause (d) will
not exceed the greater of three (3) or ten percent (10%) of
the total number (after application of the Code Section 414(q)
exclusions) of Employees, but no more than fifty (50)
officers. If no Employee satisfies the Compensation
requirement in clause (d) for the relevant year, the Advisory
Committee will treat the highest paid officer as satisfying
clause (d) for that year.
For purposes of this Section 1.07, "Compensation" means
Compensation as defined in Section 1.10, except no exclusions
from Compensation apply other than the exclusions described in
paragraphs (a), (b), (c) and (d) of Section 1.10, and
Compensation must include 'elective contributions' (as defined
in Section 1.10). The Advisory Committee must make the
determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of the
top-paid twenty percent (20%) group, the top one hundred (100)
paid Employees, the number of officers includable in clause
(d) and the relevant Compensation, consistent with Code
Section 414(q) and Regulations issued under that Code
Section. The Employer may make a calendar year election to
determine the Highly Compensated Employees for the Plan
Year, as prescribed by Treasury Regulations. A calendar year
election must apply to all plans and arrangements of the
Employer. For purposes of applying any non-discrimination
test required under the Plan or under the Code, in a manner
consistent with applicable Treasury Regulations, the Advisory
Committee will treat a Highly Compensated Employee and all
family members (a spouse, a lineal ascendant or descendant,
or a spouse of a lineal ascendant or descendant) as a single
Highly Compensated Employee, but only if the Highly
Compensated Employee is a more than five percent (5%) owner
or is one of the ten (10) Highly Compensated Employees with
the greatest Compensation for the Plan Year. This aggregation
rule applies to a family member even if that family member is
a Highly Compensated Employee without family aggregation.
- 2 -
<PAGE> 3
The term "Highly Compensated Employee" also includes any
former Employee who separated from Service (or has a deemed
Separation from Service, as determined under Treasury
Regulations) prior to the Plan Year, performs no Service for
the Employer during the Plan Year, and was a Highly
Compensated Employee either for the separation year or for any
Plan Year ending on or after his fifty-fifth (55th) birthday.
If the former Employee's Separation from Service occurred
prior to January 1, 1987, he is a Highly Compensated Employee
only if he satisfied clause (a) of this Section 1.07 or
received Compensation in excess of Fifty Thousand Dollars
($50,000.00) during: (1) the year of his Separation from
Service (or prior year); or (2) any year ending after his
fifty-fourth (54th) birthday."
2. Section 1.10 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof the following new Section 1.10 is inserted, which
reads as follows:
"1.10 "Compensation" means W-2 wages as defined under Code
Section 3121(a) for purposes of calculating Social Security taxes,
determined without regard to the taxable wage base limitation, except
Compensation does not include reimbursements or other expense
allowances, fringe benefits (cash and noncash), moving expenses,
deferred compensation, and welfare benefits. Compensation excludes
elective contributions made by the Employer on the Employee's behalf.
"Elective contributions" are amounts excludable from the Employee's
gross income under Code Sections 125, 402(a)(8), 402(h) or 403(b), and
contributed by the Employer, at the Employee's election, to a Code
Section 401(k) arrangement, a Simplified Employee Pension, cafeteria
plan or tax-sheltered annuity. A Compensation payment includes
Compensation paid by the Employer to an Employee through another
person under the common paymaster provisions of Code Sections 312(s)
and 3306(p). The term "Compensation" does not include:
(a) Employer contributions (other than "elective
contributions") to a plan of deferred compensation to the
extent the contributions are not included in the gross income
of the Employee for the taxable year in which contributed, on
behalf of an Employee to a Simplified Employee Pension Plan to
the extent such contributions are excludable from the
Employee's gross income, and any distributions from a plan of
deferred compensation, regardless of whether such amounts are
includable in the gross income of the Employee when
distributed.
(b) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by
an Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture.
(c) Amounts realized from the sale, exchange or other
disposition of stock acquired under a stock option described
in Part II, Subchapter D, Chapter 1 of the Code.
- 3 -
<PAGE> 4
(d) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent
that the premiums are not includable in the gross income of
the Employee), or contributions made by an Employer (whether
or not under a salary reduction agreement) towards the
purchase of an annuity contract described in Code Section
403(b) (whether or not the contributions are excludable from
the gross income of the Employee), other than
"elective contributions."
Any reference in this Plan to Compensation is a
reference to the definition in this Section 1.10, unless the Plan
reference specifies a modification to this definition. The Advisory
Committee will take into account only Compensation actually paid for
the relevant period.
(A) LIMITATIONS ON COMPENSATION.
(1) COMPENSATION DOLLAR LIMITATION. For any Plan Year
beginning after December 31, 1988, the Advisory Committee must take
into account only the first $200,000.00 (or beginning January 1, 1990,
such larger or smaller amount as the Commissioner of Internal Revenue
may prescribe) of any Participant's Compensation. For any Plan Year
beginning prior to January 1, 1989, this $200,000.00 limitation (but
not the family aggregation requirement) applies only if the Plan is
top heavy for such Plan Year. For Plan Years beginning after December
31, 1993, the Advisory Committee will substitute $150,000.00 for
$200,000.00 wherever the $200,000.00 amount appears in this Section
1.10.
(2) APPLICATION OF COMPENSATION LIMITATION TO CERTAIN FAMILY
MEMBERS. The $200,000.00 Compensation limitation applies to the
combined Compensation of the Employee and of any family member
aggregated with the Employee under Section 1.07 who is either (i) the
Employee's spouse; or (ii) the Employee's lineal descendant under the
age of 19. If, for a Plan Year, the combined Compensation of the
Employee and such family members who are Participants entitled to an
allocation for that Plan Year exceeds the $200,000.00 (or adjusted)
limitation, "Compensation" for each such Participant, for purposes of
the contribution and allocation provisions of Article III, means his
Adjusted Compensation. Adjusted Compensation is the amount which bears
the same ratio to the $200,000.00 (or adjusted) limitation as the
affected Participant's Compensation (without regard to the $200,000.00
Compensation limitation) bears to the combined Compensation of all the
affected Participants in the family unit.
(B) NONDISCRIMINATION. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees, Compensation
means Compensation as defined in this Section 1.10 except any
exclusions from Compensation, other than the exclusions described in
paragraphs (a), (b), (c) and (d), do not apply. The Employer also may
elect to use an alternate nondiscriminatory definition, in accordance
with the
- 4 -
<PAGE> 5
requirements of Code Section 414(s) and the regulations issued
under that Code section. In determining Compensation under this Section
1.10(B), the Employer may elect to include all elective contributions
made by the Employer on behalf of the Employees. The Employer's
election to include elective contributions must be consistent and
uniform with respect to Employees. The Employer may make this election
to include elective contributions for nondiscrimination testing
purposes, irrespective of whether this Section 1.10 includes elective
contributions in the general Compensation definition applicable to the
Plan."
3. There is hereby added to Section 1.27 of the Trust Agreement the
following sentence:
"For Plan allocation purposes, "Compensation" does not include
Compensation received from a related employer not
participating in this Plan."
4. There is hereby added to Section 1.28(B) of the Trust Agreement the
following sentence:
"The Advisory Committee will reduce a Leased Employee's
allocation of Employer contributions under this Plan by the
Leased Employee's allocation under the leasing organization's
plan, but only to the extent that allocation is attributable
to the Leased Employee's service provided to the Employer."
5. Section 1.31 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof, the following new Section 1.31 is inserted, which
reads as follows:
"1.31 "Employer Securities" means common stock issued by the
Employer, or by a corporation which is a member of the same controlled
group of corporations, having a combination of voting power and
dividend rights equal to or in excess of --
(a) that class of common stock of the Employer (or of any
other such corporation) having the greatest voting power; and
(b) that class of common stock of the Employer (or of any
other such corporation) having the greatest dividend rights."
6. Section 2.01 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof the following new Section 2.01 is inserted, which
reads as follows:
"2.01 ELIGIBILITY. Each Employee (other than an Excluded
Employee) becomes a Participant in the Plan on the Plan Entry Date (if
employed on that date) immediately following the later of the date on
which he completes one Year of Service or attains age 21. "Plan Entry
Date" means the Effective Date and January 1 and July 1.
- 5 -
<PAGE> 6
An Employee is an Excluded Employee if he is a Leased
Employee.
If a Participant has not incurred a Separation from Service
but becomes an Excluded Employee, then during the period such a
Participant is an Excluded Employee, the Advisory Committee will limit
that Participant's sharing in the allocation of Employer contributions
and Participant forfeitures, if any, under the Plan by disregarding his
Compensation paid by the Employer for services rendered in his capacity
as an Excluded Employee. However, during such period of exclusion, the
Participant, without regarding to employment classification, continues
to receive credit for vesting under Article V for each included Year of
Service and the Participant's Account continues to share fully in Trust
Fund allocations under Section 9.11."
7. Section 3.01 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof the following new Section 3.01 is inserted, which
reads as follows:
"3.01 AMOUNT. For each Plan Year, the Employer will contribute
to the Trust the amount which the Employer may from time to time deem
advisable. The Employer may contribute to this Plan irrespective of
whether it has net profits. The Employer intends the Plan to be an
employee stock ownership plan for the purposes of the Code. The
Employer may not make a contribution to the Trust for any Plan Year to
the extent the contribution would exceed the Participants' Maximum
Permissible Amounts. See Part 2 of this Article III.
The Employer contributes to this Plan on the
condition its contribution is not due to a mistake of fact and the
Revenue Service will not disallow the deduction for its contribution.
The Trustee, upon written request from the Employer, must return to the
Employer the amount of the Employer's contribution made by the Employer
by mistake of fact or the amount of the Employer's contribution
disallowed as a deduction under Code Section 404. The Trustee will not
return any portion of the Employer's contribution under the provisions
of this paragraph more than one year after:
(a) The Employer made the contribution by mistake of fact; or
(b) The disallowance of the contribution as a deduction, and
then, only to the extent of the disallowance.
The Trustee will not increase the amount of the
Employer contribution returnable under this Section 3.01 for any
earnings attributable to the contribution, but the Trustee will
decrease the Employer contribution returnable for any losses
attributable to it. The Trustee may require the Employer to furnish it
whatever evidence the Trustee deems necessary to enable the Trustee to
confirm the amount the Employer has requested be returned is properly
returnable under ERISA."
- 6 -
<PAGE> 7
8. Section 3.03 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof the following new Section 3.03 is inserted, which
reads as follows:
"3.03 TIME OF PAYMENT OF CONTRIBUTION. The Employer may pay
its contribution for each Plan Year in one or more installments without
interest. The Employer must make its contribution to the Plan within
the time prescribed by the Code or applicable Treasury regulations.
Subject to the consent of the Trustee, the Employer may make its
contribution in property (including Employer Securities) rather than
cash, provided the contribution of property is not a prohibited
transaction under the Code or under ERISA."
9. Section 3.04 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof the following new Section 3.04 is inserted, which
reads as follows:
"3.04 CONTRIBUTION ALLOCATION.
(A) METHOD OF ALLOCATION. The Advisory Committee will allocate and
credit each annual Employer contribution (and Participant forfeitures,
if any) to the Account of each Participant who satisfies the conditions
of Section 3.06. The Advisory Committee will allocate the annual
Employer contributions (and Participant forfeitures) in the same ratio
that each Participant's Compensation for the Plan Year bears to the
total Compensation of all Participants for the Plan Year.
(B) TOP HEAVY MINIMUM ALLOCATION.
(1) MINIMUM ALLOCATION. If the Plan is top heavy in any
Plan Year:
(a) Each Non-Key Employee who is a Participant and
employed by the Employer on the last day of the Plan
Year will receive a top heavy minimum allocation for
that Plan Year, irrespective of whether he satisfies
the Hours of Service condition under Section 3.06;
and
(b) The top heavy minimum allocation is the lesser
of 3% of the Non-Key Employee's Compensation for the
Plan Year or the highest contribution rate for the
Plan Year made on behalf of any Key Employee.
However, if a defined benefit plan maintained by the
Employer which benefits a Key Employee depends on
this Plan to satisfy the anti- discrimination rules
of Code Section 401(a)(4) or the coverage rules of
Code Section 410 (or another plan benefiting the Key
Employee so depends on such defined benefit plan),
the top heavy minimum allocation is 3% of the
Non-Key Employee's Compensation regardless of the
contribution rate for the Key Employees.
- 7 -
<PAGE> 8
(2) SPECIAL DEFINITIONS. For purposes of clause (1)(b),
"Compensation" means Compensation as defined in Section 1.10,
except: (i) Compensation does not include elective
contributions; (ii) any exclusions from Compensation (other
than the exclusion of elective contributions and the
exclusions described in paragraphs (a), (b), (c) and (d) of
Section 1.10) do not apply; and (iii) the Advisory Committee
must take into account Compensation for the entire Plan Year.
(3) DETERMINING CONTRIBUTION RATES. For purposes of this
Section 3.04(B), a Participant's contribution rate is the sum
of Employer contributions (not including Employer
contributions to Social Security) and forfeitures allocated
to the Participant's Account for the Plan Year divided by his
Compensation for the entire Plan Year. However, for purposes
of satisfying a Participant's top heavy minimum allocation in
Plan Years beginning after December 31, 1988, a Participant's
contribution rate does not include any elective contributions
under a Code Section 401(k) arrangement nor any Employer
matching contributions necessary to satisfy the
nondiscrimination requirements of Code Section 401(k) or of
Code Section 401(m). To determine a Participant's
contribution rate, the Advisory Committee must treat all
qualified top heavy defined contribution plans maintained by
the Employer (or by any related Employers described in
Section 1.27) as a single plan.
(4) NO ALLOCATIONS. If, for a Plan Year, there are no
allocations of Employer contributions or forfeitures for any
Key Employee, the Plan does not require any top heavy minimum
allocation for the Plan Year, unless a top heavy minimum
allocation applies because of the maintenance by the Employer
of more than one plan.
(5) METHOD OF COMPLIANCE. The Plan will satisfy the top heavy
minimum allocation in accordance with this Section 3.04(B)(5).
The Advisory Committee first will allocate the Employer
contributions (and Participant forfeitures, if any) for the
Plan Year in accordance with the allocation formula under
Section 3.04(A). The Employer then will contribute an
additional amount for the Account of any Participant entitled
under this Section 3.04(B) to a top heavy minimum allocation
and whose contribution rate for the Plan Year, under this Plan
and any other plan aggregated under paragraph (3), is less
than the top heavy minimum allocation. The additional amount
is the amount necessary to increase the Participant's
contribution rate to the top heavy minimum allocation. The
Advisory Committee will allocate the additional contribution
to the Account of the Participant on whose behalf the Employer
makes the contribution."
10. Section 3.05 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof, the following new Section 3.05 is inserted, which
reads as follows:
- 8 -
<PAGE> 9
"3.05 FORFEITURE ALLOCATION. The amount of a Participant's
Accrued Benefit forfeited under the Plan is a Participant forfeiture.
Subject to any restoration allocation required under Section 9.14, the
Advisory Committee will allocate a Participant forfeiture in accordance
with Section 3.04, as an Employer contribution for the Plan Year in
which the forfeiture occurs, as if the Participant forfeiture were an
additional Employer contribution for that Plan Year. The Advisory
Committee will continue to hold the undistributed, non-vested portion
of a terminated Participant's Accrued Benefit in his Account solely for
his benefit until a forfeiture occurs at the time specified in Section
5.09, or, if applicable, until the time specified in Section 9.14.
Except as provided under Section 5.04, a Participant will not share in
the allocation of a forfeiture of any portion of his Accrued Benefit.
In making a forfeiture allocation under this Section 3.05, the Advisory
Committee must base forfeitures of Employer Securities upon the fair
market value of the Employer Securities as of the Accounting Date of
the forfeitures."
11. There is hereby added to Section 3.06 of the Trust Agreement, the
following new paragraph (D), which shall read as follows:
"(D) SUSPENSION OF ACCRUAL REQUIREMENTS. The Plan suspends the
accrual requirements under Sections 3.06(B) and (C) if, for any Plan
Year beginning after December 31, 1989, the Plan fails to satisfy the
Participation Test or the Coverage Test. A Plan satisfies the
Participation Test if, on each day of the Plan Year, the number of
Employees who benefit under the Plan is at least qual to the lesser of
50 or 40% of the total number of Includable Employees as of such day. A
Plan satisfies the Coverage Test if, on the last day of each quarter of
the Plan Year, the number of Non-highly Compensated Employees who
benefit under the Plan is at least qual to 70% of the total number of
Includable Non-highly Compensated Employees as of such day.
"Includable" Employees are all employees other than: (1) those
Employees excluded from participating in the Plan for the entire Plan
Year by reason of the collective bargaining unit exclusion or the
nonresident alien exclusion described in the Code or by reason of the
age and service requirements of Article II; and (2) any Employee who
incurs a Separation from Service during the Plan Year and fails to
complete at least 501 Hours of Service for the Plan Year. A "Non-highly
Compensated Employee" is an Employee who is not a Highly Compensated
Employee and who is not a family member aggregated with a Highly
Compensated Employee pursuant to Section 1.07 of the Plan. For purposes
of the Participation Test and the Coverage Test, an Employee is
benefiting under the Plan on a particular date if under Section 3.04,
he is entitled to an Employer contribution allocation for the Plan
Year.
If this Section 3.06(D) applies for a Plan Year, the Advisory
Committee will suspend the accrual requirements for the Includable
Employees who are Participants, beginning first with the Includable
Employee(s) employed with the Employer on the last day of the Plan
Year, then the Includable Employee(s) who have the latest Separation
from Service during the Plan Year, and continuing to suspend in
- 9 -
<PAGE> 10
descending order the accrual requirements for each Includable Employee
who incurred an earlier Separation from Service, from the latest to the
earliest Separation from Service date, until the Plan satisfies both
the Participation Test and the Coverage Test for the Plan Year. If two
or more Includable Employees have a Separation from Service on the same
day, the Advisory Committee will suspend the accrual requirements for
all such Includable Employees, irrespective of whether the Plan can
satisfy the Participation Test and the Coverage Test by accruing
benefits for fewer than all such Includable Employees. If the Plan
suspends the accrual requirements for an Includable Employee, that
Employee will share in the allocation of Employer contributions and
Participant forfeitures, if any, without regard to the number of Hours
of Service he has earned for the Plan Year and without regard to
whether he is employed by the Employer on the last day of the Plan
Year."
12. Section 3.07 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof the following new Section 3.07 is inserted, which
reads as follows:
"3.07 LIMITATIONS ON ALLOCATIONS TO PARTICIPANTS' ACCOUNTS.
The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation
Year may not exceed the Maximum Permissible Amount. If the amount the
Employer otherwise would contribute to the Participant's Account would
cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, the Employer will reduce the amount of its
contribution so the Annual Additions for the Limitation Year will equal
the Maximum Permissible Amount. If an allocation of Employer
contributions, pursuant to Section 3.04, would result in an Excess
Amount (other than an Excess Amount resulting from the circumstances
described in Section 3.07(B)) to the Participant's Account, the
Advisory Committee will reallocate the Excess Amount to the remaining
Participants who are eligible for an allocation of Employer
contributions for the Plan Year in which the Limitation Year ends. The
Advisory Committee will make this reallocation on the basis of the
allocation method under the Plan as if the Participant whose Account
otherwise would receive the Excess Amount is not eligible for an
allocation of Employer contributions.
(A) ESTIMATION OF COMPENSATION. Prior to the determination of the
Participant's actual Compensation for a Limitation Year, the Advisory
Committee may determine the Maximum Permissible Amount on the basis of
the Participant's estimated annual Compensation for such Limitation
Year. The Advisory Committee must make this determination on a
reasonable and uniform basis for all Participants similarly situated.
The Advisory Committee must reduce any Employer contributions
(including any allocation of forfeitures) based on estimated annual
Compensation by any Excess Amount carried over from prior years. As
soon as is administratively feasible after the end of the Limitation
Year, the Advisory Committee will determine the Maximum Permissible
Amount for such Limitation Year on the basis of the Participant's
actual Compensation for such Limitation Year.
- 10 -
<PAGE> 11
(B) MORE THAN ONE PLAN. If the Advisory Committee allocated an Excess
Amount to a Participant's Account on an allocation date of this Plan
which coincides with an allocation date of another defined contribution
plan maintained by the Employer, the Excess Amount attributed to this
Plan will be the product of:
(a) The total Excess Amount allocated as of such date
(including any amount which the Advisory Committee would have
allocated but for the limitations of Code Section 415); times
(b) The ratio of (i) the amount allocated to the Participant
as of such date under this Plan divided by (ii) the total
amount allocated as of such date under all qualified defined
contribution plans (determined without regard to the
limitations of Code Section 415).
(C) DISPOSITION OF EXCESS AMOUNT. If, pursuant to Section 3.07(A), or
because of the allocation of forfeitures, there is an Excess Amount
with respect to a participant for a Limitation Year, the Advisory
Committee will dispose of such Excess Amount as follows:
(a) The Advisory Committee will return any nondeductible
voluntary Employee contributions to the Participant to the
extent the return would reduce the Excess Amount.
(b) If, after the application of paragraph (a), an Excess
Amount still exists, and the Plan covers the Participant at
the end of the Limitation Year, then the Advisory Committee
will use the Excess Amount(s) to reduce future Employer
contributions (including any allocation of forfeitures) under
the Plan for the next Limitation Year and for each succeeding
Limitation Year, as is necessary, for the Participant. The
Participant may elect to limit his Compensation for allocation
purposes to the extent necessary to reduce his allocation for
the Limitation Year to the Maximum Permissible Amount and
eliminate the Excess Amount.
(c) If, after the application of paragraph (a), an Excess
Amount still exists, and the Plan does not cover the
Participant at the end of the Limitation Year, then the
Advisory Committee will hold the Excess Amount unallocated in
a suspense account. The Advisory Committee will apply the
suspense account to reduce Employer Contributions (including
allocation of forfeitures) for all remaining Participants in
the next Limitation Year, and in each succeeding Limitation
Year, if necessary. Neither the Employer nor any Employee may
contribute to the Plan for any Limitation Year in which the
Plan is unable to allocate fully a suspense account maintained
pursuant to this paragraph (c).
- 11 -
<PAGE> 12
(d) The Advisory Committee will not distribute any Excess
Amount(s) to Participants or to former Participants.
(D) DEFINED BENEFIT PLAN LIMITATION. If the Participant presently
participates, or has ever participated under a defined benefit plan
maintained by the Employer, then the sum of the defined benefit plan
fraction and the defined contribution plan fraction for the Participant
for that Limitation Year must not exceed 1.0. To the extent necessary
to satisfy this limitation, the Employer will reduce its contribution
or allocation on behalf of the Participant to the defined contribution
plan under which the Participant participates, and then, if necessary,
the Participant's projected annual benefit under the defined benefit
plan under which the Participant participates."
13. Paragraph (a) of Section 3.08 of the Trust Agreement is hereby
deleted in its entirety, and in lieu thereof the following new paragraph (a) of
Section 3.08 is inserted, which reads as follows:
"(a) "Annual Addition" - The sum of the following amounts allocated on
behalf of a Participant for a Limitation Year: (i) all Employer
contributions; (ii) all forfeitures; and (iii) all Employee
contributions. Except to the extent provided in Treasury Regulations,
Annual Additions include excess contributions described in Code
Section 401(k), excess aggregate contributions described in Code
Section 401(m) and excess deferrals described in Code Section 402(g),
irrespective of whether the plan distributes or forfeits such excess
amounts. Annual Additions also include Excess Amounts reapplied to
reduce Employer contributions under Section 3.07. Amounts allocated
after March 31, 1984, to an individual medical account (as defined in
Code Section 415(1)(2)) included as part of a defined benefit plan
maintained by the Employer are Annual Additions. Furthermore, Annual
Additions include contributions paid or accrued after December 31,
1985, for taxable years ending after December 31, 1985, attributable
to post-retirement medical benefits allocated to the separate account
of a key employee (as defined in Code Section 419A(d)(3)) under a
welfare benefit fund (as defined in Code Section 419(e)) maintained by
the Employer, but only for purposes of the dollar limitation
applicable to the Maximum Permissible Amount. "Annual Additions" do
not include any Employer contributions applied by the Advisory
Committee (not later than the due date, including extensions, for
filing the Employer's Federal income tax return for the Plan Year) to
pay interest (charged to a Participant's Account) on an Exempt Loan,
and any Leveraged Employer Securities the Advisory Committee allocates
as forfeitures; provided, however, the provisions of this sentence do
not apply in a Limitation Year for which the Advisory Committee
allocates more than one-third of the Employer contributions applied to
pay principal and interest on an Exempt Loan to Highly Compensated
Employee-Participants. The Advisory Committee may reallocate the
Employer contributions in accordance with Section 3.04 to the Accounts
of non-Highly Compensated Employee-Participants to the extent
necessary in order to satisfy this special limitation."
- 12 -
<PAGE> 13
14. Paragraph (b) of Section 3.08 of the Trust Agreement is hereby
deleted in its entirety, and in lieu thereof, the following new paragraph (b) of
Section 3.08 is inserted, which reads as follows:
"(b) "Compensation" - For purposes of applying the limitations of Part
2 of this Article III, "Compensation" means Compensation as defined in
Section 1.10, except Compensation does not include elective
contributions and any exclusion from Compensation (other than the
exclusion of elective contributions and the exclusions described in
paragraphs (a), (b), (c) and (d) of Section 1.10) does not apply."
15. Paragraph (c) of Section 3.08 of the Trust Agreement is hereby
deleted in its entirety, and in lieu thereof the following new paragraph (c) of
Section 3.08 is inserted, which reads as follows:
"(c) "Maximum Permissible Amount" - The lesser of (i) $30,000.00 (or,
if greater, one-fourth of the defined benefit dollar limitation under
Code Section 415(b)(1)(A)), or (ii) 25% of the Participant's
Compensation for the Limitation Year. The dollar amount of clause
(i) will increase by the lesser of (1) 100% of the dollar amount in
effect for the Limitation Year; or (2) the amount of the Employer
Securities allocated to the Participant's Employer Securities Account
as an Employer contribution for the Limitation Year. The immediately
preceding sentence does not apply for any Limitation Year for which
the Advisory Committee allocates more than one-third of the Employer
contribution to Highly Compensated Employee- Participants, nor to any
Limitation Year commencing after July 12, 1989. If there is a short
Limitation Year because of a change in Limitation Year, the Advisory
Committee will multiply the $30,000.00 limitation (or larger
limitation) by the following fraction:
Number of months in the short Limitation Year
---------------------------------------------
12"
16. There is hereby added to Section 5.03 of the Trust Agreement the
following new paragraphs:
"SPECIAL VESTING SCHEDULE. If the Trustee makes a distribution
(other than a cash-out distribution described in Section 5.04) to a
partially-vested Participant, and the Participant has not incurred a
Forfeiture Break in Service at the relevant time, the Advisory
Committee will establish a separate Account for the Participant's
Accrued Benefit. At any relevant time following the distribution, the
Advisory Committee will determine the Participant's Nonforfeitable
Accrued Benefit derived from Employer contributions in accordance with
the following formula: P(AB + (R x D)) - (R x D).
To apply this formula, "P" is the Participant's current
vesting percentage at the relevant time, "AB" is the Participant's
Employer-derived Accrued Benefit at the relevant time, "R" is the
ratio of "AB" to the Participant's Employer-derived Accrued
- 13 -
<PAGE> 14
Benefit immediately following the earlier distribution, and "D" is the
amount of the earlier distribution. If, under a restated Plan, the
Plan has made distribution to a partially-vested Participant prior
to its restated Effective Date and is unable to apply the cash-out
provisions of Section 5.04 to that prior distribution, this special
vesting formula also applies to that Participant's remaining Account."
17. Paragraph (C) of Section 5.04 of the Trust Agreement is hereby
deleted in its entirety, and in lieu thereof the following new paragraph (C) of
Section 5.04 is inserted, which reads as follows:
"(C) 0% VESTED PARTICIPANT. The deemed cash-out rule applies to a 0%
vested Participant. A 0% vested Participant is a Participant whose
Accrued Benefit derived from Employer contributions is entirely
forfeitable at the time of his Separation from Service. If the
Participant's Account is not entitled to an allocation of Employer
contributions or Participant forfeitures for the Plan Year in which he
has a Separation from Service, the Advisory Committee will apply the
deemed cash-out rule as if the 0% vested Participant received a
cash-out distribution on the date of the Participant's Separation from
Service. If the Participant's Account is entitled to an allocation of
Employer contributions or Participant forfeitures for the Plan Year in
which he has a Separation from Service, the Advisory Committee will
apply the deemed cash-out rule as if the 0% vested Participant received
a cash-out distribution on the first day of the first Plan Year
beginning after his Separation from Service. For purposes of applying
the restoration provisions of this Section 5.04, the Advisory Committee
will treat the 0% vested Participant as repaying his cash-out
"distribution" on the first date of his re-employment with the
Employer."
18. Section 6.01 of the Trust Agreement, through Paragraph (A) of
Section 6.01, is hereby deleted in its entirety, and in lieu thereof the
following is inserted, which reads as follows:
"6.01 TIME OF PAYMENT OF ACCRUED BENEFIT. Unless, pursuant to
Section 6.03, the Participant or the Beneficiary elects in writing to a
different time or method of payment, the Advisory Committee will direct
the Trustee to commence distribution of a Participant's Nonforfeitable
Accrued Benefit in accordance with this Section 6.01. A Participant
must consent, in writing, to any distribution required under this
Section 6.01, if the present value of the Participant's Nonforfeitable
Accrued Benefit, at the time of the distribution to the Participant,
exceeds $3,500.00 and the Participant has not attained the later of age
62 or Normal Retirement Age. For all purposes of this Article VI, the
term "annuity starting date" means the first day of the first period
for which the Plan pays an amount as an annuity or in any other form. A
distribution date under this Article VI, unless otherwise specified
within the Plan, is every day of the Plan Year or as soon as
administratively practicable following a distribution date. For
purposes of the consent requirements under this Article VI, if the
present value of the Participant's Nonforfeitable Accrued
- 14 -
<PAGE> 15
Benefit, at the time of any distribution, exceeds $3,500.00, the
Advisory Committee must treat that present value as exceeding $3,500.00
for purposes of all subsequent Plan distributions to the Participant.
(A) SEPARATION FROM SERVICE FOR A REASON OTHER THAN DEATH.
(1) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING
$3,500.00. If the Participant's Separation from Service is for any
reason other than death, the Advisory Committee will direct the Trustee
to distribute the Participant's Nonforfeitable Accrued Benefit in lump
sum, as soon as administratively practicable following the close of the
first Plan Year beginning after the Participant's Separation from
Service, but in no event later than the 60th day following the close of
the Plan Year in which the Participant attains Normal Retirement Age.
If the Participant has attained Normal Retirement Age when he separates
from Service, the distribution under this paragraph will occur no later
than the 60th day following the close of the Plan Year in which the
Participant's Separation from Service occurs.
(2) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS
$3,500.00. If the Participant's Separation from Service is for any
reason other than death, the Advisory Committee will direct the Trustee
to distribute the Participant's Nonforfeitable Accrued Benefit at the
time elected by the Participant, pursuant to Section 6.03. In the
absence of an election by the Participant, the Advisory Committee will
direct the Trustee to distribute the Participant's Nonforfeitable
Accrued Benefit in lump sum on the 60th day following the close of the
Plan Year in which the later of the following events occurs: (a) the
Participant attains Normal Retirement Age; or (b) the Participant
separates from Service.
(3) DISABILITY. If the Participant's Separation from Service
is because of disability, the Advisory Committee will direct the
Trustee to pay the Participant's Nonforfeitable Accrued Benefit in lump
sum, on the first administratively practicable distribution date of the
first Plan Year beginning after the Participant's Separation from
Service, subject to the notice and consent requirements of this Article
VI and to the applicable mandatory commencement dates described in
Paragraph (1) or in Paragraph (2)."
19. Section 6.05 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof the following new Section 6.05 is inserted, which
reads as follows:
"6.05 SPECIAL DISTRIBUTION AND PAYMENT REQUIREMENTS. Unless
the Participant elects in writing to have the Trustee apply other
distribution provisions of the Plan, or unless other distribution
provisions of the Plan require earlier distribution of the
Participant's Accrued Benefit, the Trustee must distribute the portion
of the Participant's Accrued Benefit attributable to Employer
Securities (the "Eligible Portion") no later than the time prescribed
by this Section 6.05,
- 15 -
<PAGE> 16
irrespective of any other provisions of the Plan. The distribution
provisions of this Section 6.05 are subject to the consent and form of
distribution requirements of Articles V and VI of the Plan.
(a) If the Participant separates from Service by reason of the
attainment of Normal Retirement Age, death, or disability, the
Advisory Committee will direct the Trustee to commence
distribution of the Eligible Portion not later than one year
after the close of the Plan Year in which the applicable event
occurs.
(b) If the Participant separates from Service for any reason
other than by reason of the attainment of Normal Retirement
Age, death or disability, the Advisory Committee will direct
the Trustee to commence distribution of the Eligible Portion
not later than one year after the close of the fifth Plan Year
following the Plan Year in which the Participant separated
from Service. If the Participant resumes employment with the
Employer on or before the last day of the fifth Plan Year
following the Plan Year of his separation from Service, the
mandatory distribution provisions of this paragraph (b) do not
apply.
For purposes of this Section 6.05, Employer Securities do not
include any Employer Securities acquired with the proceeds of an Exempt
Loan until the close of the Plan Year in which the borrower repays the
Exempt Loan in full.
PERIOD OF PAYMENT. The Advisory Committee will direct the
Trustee to make distributions required under this Section 6.05 over a
period not exceeding five years unless the Participant otherwise elects
under the other distributions provisions of the Plan. If a
Participant's Eligible Portion exceeds $500,000.00, the maximum payment
period, subject to a contrary election by the Participant, is five
years plus one additional year (but no more than five additional years)
for each $100.00 (or fraction of $100,000.00) by which the Eligible
Portion exceeds $500,000.00. The Advisory Committee will apply this
Section 6.05 by adjusting the $500,000.00 and $100,000.00 limitations
by the adjustment factor prescribed by the Secretary of the Treasury
under Code ss.415(d). In no event will the distribution period exceed
the period permitted under Section 6.02 of the Plan."
20. There is hereby added to Article VI of the Trust Agreement, the
following new Section 6.07, which reads as follows:
"6.07. DIRECT ROLLOVER OF ELIGIBLE ROLLOVER DISTRIBUTIONS. For
distributions made after December 31, 1992, a Participant may elect, at
the time and in the manner prescribed by the Committee, to have any
portion of his eligible rollover distribution paid directly to an
eligible retirement plan specified by the Participant in a direct
rollover designation. For purposes of this
- 16 -
<PAGE> 17
Section 6.07, a Participant includes a Participant's surviving spouse
and the Participant's spouse or former spouse who is an alternate payee
under a qualified domestic relations order.
The following definitions apply to this Section 6.07:
(a) ELIGIBLE ROLLOVER DISTRIBUTION. An eligible rollover
distribution is any distribution of all or any portion of the balance
to the credit of the Participant, except an eligible rollover
distribution does not include: any distribution which is one of a
series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
Participant or the joint lives (or joint life expectancies) of the
Participant the Participant's designated beneficiary, or for a
specified period of ten years of more; any distribution to the extent
required under Code Section 401(a)(9); and the portion of any
distribution which is not includable in gross income (determined
without regard to the exclusion of net unrealized appreciation with
respect to employer securities).
(b) ELIGIBLE RETIREMENT PLAN. An eligible retirement plan is
an individual retirement account described in Code Section 408(a), an
individual retirement annuity described in Code Section 408(b), an
annuity plan described in Code Section 403(a), or a qualified trust
described in Code Section 401(a), which accepts the Participant's
eligible rollover distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an eligible retirement
plan is an individual retirement account or individual retirement
annuity.
(c) DIRECT ROLLOVER. A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the distributee."
21. There is hereby added to the first paragraph of Section 7.05 of
the Trust Agreement, the following sentence:
"An amended vesting schedule will apply to a Participant only if the
Participant receives credit for at least one (1) Hour of Service after
the new schedule becomes effective."
22. There is hereby added to the second paragraph of Section 7.05 of
the Trust Agreement, the following sentence:
"The election described in this Section 7.05 does not apply to a
Participant if the amended vesting schedule provides for vesting at
least as rapid at all times as the vesting schedule in effect prior to
the amendment."
23. Section 8.11 of the Trust Agreement is hereby deleted.
- 17 -
<PAGE> 18
24. Section 9.10 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof the following new Section 9.10 is inserted, which
reads as follows:
"9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. The value of
each Participant's Accrued Benefit consists of that proportion of the
net worth (at fair market value) of the Employer's Trust Fund which the
net credit balance in his Account bears to the total net credit balance
in the Accounts of all Participants. For purposes of a distribution
under the Plan, the value of a Participant's Accrued Benefit
attributable to his General Investments Account is its value as of the
valuation date immediately preceding the date of the distribution."
24. Section 9.11 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof the following new Section 9.11 is inserted, which
reads as follows:
"9.11 ALLOCATION TO PARTICIPANT'S ACCRUED BENEFIT. A
"valuation date" under this Plan is each Accounting Date and each
interim valuation date determined under Section 10.14. As of each
valuation date, the Advisory Committee must adjust General Investments
Accounts to reflect net income, gain or loss since the last valuation
date. The valuation period is the period beginning the day after the
last valuation date and ending on the current valuation date.
[A] EMPLOYER SECURITIES ACCOUNT. As of the Accounting Date of each Plan
Year, the Advisory Committee first will reduce Employer Securities
Accounts for any forfeitures arising under Section 5.09 and then will
credit the Employer Securities Account maintained for each Participant
with the Participant's allocable share of Employer Securities
(including fractional shares) purchased and paid for by the Trust or
contributed in kind to the Trust, with any forfeitures of Employer
Securities and with any stock dividends on Employer Securities
allocated to his Employer Securities Account. The Advisory Committee
will allocate Employer Securities acquired with an Exempt Loan under
Section 10.03[C] in accordance with that Section, subject, however, to
the provisions of paragraph [C] of this Section 9.11. Except as
otherwise specifically provided in Section 10.04[C], the Advisory
Committee will base allocations to the Participants' Accounts on dollar
values expressed as shares of Employer Securities or on the basis of
actual shares where there is a single class of Employer Securities. In
making a forfeiture reduction under this Section 9.11, the Advisory
Committee, to the extent possible, first must forfeit from a
Participant's General Investments Account before making a forfeiture
from his Employer Securities Account.
[B] GENERAL INVESTMENTS ACCOUNT. The allocation provisions of this
paragraph apply to all Participant General Investments Accounts other
than segregated investment Accounts. The Advisory Committee first will
adjust the Participant General Investments Accounts, as those Accounts
stood at the beginning of the current valuation period, by reducing the
Accounts for any forfeitures arising under
- 18 -
<PAGE> 19
Section 5.09 or under Section 9.14, for amounts charged during the
valuation period to the Accounts in accordance with Section 9.13
(relating to distributions) and for the amount of any General
Investments Account which the Trustee has fully distributed since the
immediately preceding valuation date. The Advisory Committee then,
subject to the restoration allocation requirements of Section 9.14,
will allocate the net income, gain or loss pro rata to the adjusted
Participant General Investment Accounts. The allocable net income, gain
or loss is the net income (or net loss), including the increase or
decrease in the fair market value of assets, since the last valuation
date. In making its allocations under this Section 9.11[B], the
Advisory Committee will exclude Employer Securities and interest paid
by the Trust on an Exempt Loan.
[C] DIVIDENDS ON EMPLOYER SECURITIES. The Advisory Committee will
allocate any cash dividends the Employer pays with respect to Employer
Securities to the General Investments Accounts of participants in the
same ratio, determined on the dividend declaration date, that Employer
Securities allocated to a Participant's Employer Securities Account
bear to the Employer Securities allocated to all Employer Securities
Accounts. The Advisory Committee will not allocate to the General
Investments Accounts any cash dividends the Employer directs the
Trustee to apply to the payment of an Exempt Loan nor any cash
dividends the Advisory Committee directs the Trustee to distribute in
accordance with Section 10.08. If the Employer directs the Trustee to
apply cash dividends on Employer Securities to the payment of an Exempt
Loan, the Advisory Committee first will allocate the released Employer
Securities to the Participants' Employer Securities Accounts in the
same ratio, determined on the dividend declaration date, that Employer
Securities allocated to a Participant's Employer Securities Account
bear to the Employer Securities allocated to all Employer Securities
Accounts. This first allocation of released Employer Securities must
equal the greater of: (1) the shares of released Employer Securities
equal to the fair market value of the cash dividends attributable to
the allocated Employer Securities; or (2) the number of shares of all
released Employer Securities attributable to the cash dividends on
allocated Employer Securities. If any released Employer Securities
remain unallocated after the first allocation, the Advisory Committee
will allocate these remaining released Employer Securities under
Section 3.04(A) as if the Employer has made an Employer contribution
equal to the amount of the cash dividend attributable to the
unallocated Employer Securities.
[D] SEGREGATED INVESTMENT ACCOUNTS. A segregated investment Account
receives all income it earns and bears all expense or loss it incurs.
As of the valuation date, the Advisory Committee must reduce a
segregated Account for any forfeiture arising under Section 5.09 after
the Advisory Committee has made all other allocations, changes or
adjustments to the Account for the Plan Year.
[E] ADDITIONAL RULES. An excess Amount or suspense account described in
Part 2 of Article III does not share in the allocation of net income,
gain or loss described in this Section 9.11. This Section 9.11 applies
solely to the allocation of net income,
- 19 -
<PAGE> 20
gain or loss of the Trust. The Advisory Committee will allocate the
Employer contributions and Participant forfeitures, if any, in
accordance with Article III.
[F] ALLOCATION RESTRICTION. To the extent a shareholder sells Employer
Securities to the Trust and elects (with the consent of the Employer)
nonrecognition of gain under Code Section 1042, the Committee will not,
directly or indirectly, allocate under the Plan, at any time, any
portion of the purchased Employer Securities to:
(1) the selling shareholder,
(2) the selling shareholder's spouse, brothers or sisters
(whether by the whole or half blood), ancestors or
lineal descendants; or
(3) any shareholder owning (as determined under
Code Section 318(a)) more than 25% in value of any
class of Employer Securities.
For purposes of this Section 9.11[F], the term "shareholder"
includes the shareholder's executor and the term "purchased Employer
Securities" includes any dividends or other income attributable to the
purchased Employer Securities."
25. Section 9.13 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof the following new Section 9.13 is inserted, which
reads as follows:
"9.13 ACCOUNT CHARGED. The Advisory Committee will charge a
Participant's Account for all distributions made from that Account to
the Participant, to his Beneficiary or to an alternate payee. The
Advisory Committee also will charge a Participant's Account for any
administrative expenses incurred by the Plan directly related to that
Account."
26. There is hereby added to Section 10.14 of the Trust Agreement, the
following sentence:
"The valuation requirement of the immediately preceding sentence
applies to all Employer Securities acquired by the Plan."
27. Section 13.06 of the Trust Agreement is hereby deleted in its
entirety, and in lieu thereof, the following new Section 13.06 is inserted,
which reads as follows:
"13.06 TERMINATION. Upon termination of the Plan, the
distribution provisions of Article VI remain operative, with the
following exceptions:
(1) if the present value of the Participant's Nonforfeitable
Accrued Benefit does not exceed $3,500.00, the Advisory
Committee will direct the Trustee to
- 20 -
<PAGE> 21
distribute the Participant's Nonforfeitable Accrued Benefit to
him in lump sum as soon as administratively practicable after
the Plan terminates; and
(2) if the present value of the Participant's Nonforfeitable
Accrued Benefit exceeds $3,500.00, the Participant or the
Beneficiary, in addition to the distribution events permitted
under Article VI, may elect to have the Trustee commence
distribution of his Nonforfeitable Accrued Benefit as soon as
administratively practicable after the Plan terminates.
To liquidate the Trust, the Advisory Committee will purchase a
deferred annuity contract for each Participant which protects the
Participant's distribution rights under the Plan, if the Participant's
Nonforfeitable Accrued Benefit exceeds $3,500.00, and the Participant
does not elect an immediate distribution pursuant to paragraph (2).
If this paragraph applies, in lieu of the preceding provisions
of this Section 13.06 and the distribution provisions of Article VI,
the Advisory Committee will direct the Trustee to distribute each
Participant's Nonforfeitable Accrued Benefit, in lump sum, as soon as
administratively practicable after the termination of the Plan,
irrespective of the present value of the Participant's Nonforfeitable
Accrued Benefit and whether the Participant consents to that
distribution. This paragraph applies only if: (1) the Plan does not
provide an annuity option; (2) the Plan is a defined contribution plan
at the time of its termination date; and (3) as of the period between
the Plan termination date and the final distribution of assets, the
Employer does not maintain any other defined contribution plan (other
than an ESOP).
The Trust will continue until the Trustee, in accordance with
the direction of the Advisory Committee, has distributed all of the
benefits under the Plan. On each valuation date, the Advisory Committee
will credit any part of a Participant's Accrued Benefit retained in the
Trust with its proportionate share of the Trust's income, expenses,
gains and losses, both realized and unrealized. Upon termination of the
Plan, the amount, if any, in a suspense account under Article III will
revert to the Employer, subject to the conditions of the Treasury
regulations permitting such a reversion. A resolution or amendment to
freeze all future benefit accrual but otherwise to continue maintenance
of this Plan, is not a termination for purposes of this Section 13.06."
28. Except as hereinabove provided, the Trust Agreement of December
_____, 1989, is hereby reaffirmed in all respects.
IN WITNESS WHEREOF, the Employer and Trustee have executed this
Amendment to the Trust Agreement as of the day and year first above written.
SAC RIVER VALLEY BANK
- 21 -
<PAGE> 22
By: /s/ Garry L. Robinson
-----------------------------
Garry L. Robinson, President
(CORPORATE SEAL) "EMPLOYER"
ATTEST:
____________________________________
Secretary/Asst. Secretary
/s/ Garry L. Robinson
-----------------------------
Garry L. Robinson
"TRUSTEE"
- 22 -
<PAGE> 1
EXHIBIT 11.1
LIBERTY BANCSHARES, INC.
- - Statement Re Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
1998 1997 1997 1996
---------- ---------- ---------- ----------
Basic: (Dollars in Thousands)
<S> <C> <C> <C> <C>
Average shares outstanding 477,060 337,330 393,900 345,000
Net income 153 51 166 94
Per share amount $0.32 $0.15 $0.42 $0.27
Diluted:
Average shares outstanding 477,060 337,330 393,900 345,000
Net effect of dilutive stock options - 3,270 1,165 2,831 1,123
---------- ---------- ---------- ----------
Diluted shares 480,330 338,495 396,731 346,123
Net income 153 51 166 94
Per share amount $0.32 $0.15 $0.42 $0.27
</TABLE>
<PAGE> 1
EXHIBIT 11.2
SAC RIVER VALLEY BANK
Exhibit 11.1 - Statement Re Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
1998 1997 1997 1996
------------ ------------ ------------ ------------
Basic: (Dollars in Thousands)
<S> <C> <C> <C> <C>
Average shares outstanding 10,000 10,000 10,000 10,000
Net income 449 387 1,584 1,626
Per share amount $44.85 $38.72 $158.37 $162.61
Diluted:
Average shares outstanding 10,000 10,000 10,000 10,000
Net effect of dilutive stock options - - - - -
------------ ------------ ------------ ------------
Diluted shares 10,000 10,000 10,000 10,000
Net income 449 387 1,584 1,626
Per share amount $44.85 $38.72 $158.37 $162.61
</TABLE>
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of Registrant
--------------------------
Liberty Bancshares, Inc.
Liberty Bank 100%
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in the LIBERTY BANCSHARES, INC.
registration statement on Form S-4 of our report dated February 27, 1998, with
respect to LIBERTY BANCSHARES, INC.'S financial statements for the years ended
December 31, 1997 and 1996, and for the 65 day period ended December 31, 1995.
We also consent to the reference to our firm under the heading "EXPERTS" in such
registration statement.
Springfield, Missouri
July 8, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in the Liberty Bancshares, Inc.
registration statement on Form S-4 of our report dated May 13, 1998, with
respect to SAC RIVER VALLEY BANK'S financial statements for the years ended
December 31, 1997 and 1996. We also consent to the reference to our firm under
the heading "EXPERTS" in such registration statement.
Springfield, Missouri
July 8, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AND THE UNAUDITED CONSOLIDATED STATEMENT OF
INCOME FILED AS PART OF THE REGISTRATION STATEMENT ON FORM S-4 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REGISTRATION STATEMENT ON FORM S-4.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 5,166
<INT-BEARING-DEPOSITS> 4,900
<FED-FUNDS-SOLD> 435
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,438
<INVESTMENTS-CARRYING> 14,438
<INVESTMENTS-MARKET> 14,438
<LOANS> 65,530
<ALLOWANCE> 574
<TOTAL-ASSETS> 93,487
<DEPOSITS> 78,408
<SHORT-TERM> 8,456
<LIABILITIES-OTHER> 447
<LONG-TERM> 0
0
0
<COMMON> 2,605
<OTHER-SE> 3,571
<TOTAL-LIABILITIES-AND-EQUITY> 93,487
<INTEREST-LOAN> 1,308
<INTEREST-INVEST> 205
<INTEREST-OTHER> 111
<INTEREST-TOTAL> 1,624
<INTEREST-DEPOSIT> 789
<INTEREST-EXPENSE> 884
<INTEREST-INCOME-NET> 740
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 528
<INCOME-PRETAX> 230
<INCOME-PRE-EXTRAORDINARY> 238
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 153
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
<YIELD-ACTUAL> 0.32
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 524
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 574
<ALLOWANCE-DOMESTIC> 574
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AND THE UNAUDITED STATEMENT OF INCOME FILED AS PART OF
THE REGISTRATION STATEMENT ON FORM S-4 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH REGISTRATION STATEMENT ON FORM S-4.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 966
<INT-BEARING-DEPOSITS> 750
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,522
<INVESTMENTS-CARRYING> 24,579
<INVESTMENTS-MARKET> 24,725
<LOANS> 64,305
<ALLOWANCE> 854
<TOTAL-ASSETS> 99,859
<DEPOSITS> 75,941
<SHORT-TERM> 11,547
<LIABILITIES-OTHER> 783
<LONG-TERM> 0
0
0
<COMMON> 300
<OTHER-SE> 11,288
<TOTAL-LIABILITIES-AND-EQUITY> 99,859
<INTEREST-LOAN> 1,400
<INTEREST-INVEST> 420
<INTEREST-OTHER> 86
<INTEREST-TOTAL> 1,906
<INTEREST-DEPOSIT> 772
<INTEREST-EXPENSE> 993
<INTEREST-INCOME-NET> 913
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 340
<INCOME-PRETAX> 684
<INCOME-PRE-EXTRAORDINARY> 684
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 449
<EPS-PRIMARY> 44.85
<EPS-DILUTED> 44.85
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 852
<CHARGE-OFFS> 0
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 854
<ALLOWANCE-DOMESTIC> 854
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
ARTICLES OF AGREEMENT
OF
LIBERTY BANK
Know all men by these presents:
The undersigned, desirous of forming a corporation under the laws of
the State of Missouri, and more particularly under the provisions of Chapter
362, Revised Statutes of the State of Missouri, 1994, as amended, for the
purpose of establishing and organizing a banking corporation, have entered into
the following articles of agreement:
ARTICLE I
Name of Bank
The name of this banking corporation shall be LIBERTY BANK.
ARTICLE II
Location of Bank
The main banking office of Liberty Bank shall be located at the
Southeast corner of Primrose Street and Fremont Avenue in the City of
Springfield, Greene County, Missouri. The banking business of Liberty Bank shall
be conducted from its main banking office.
ARTICLE III
Capital Stock
The authorized amount cash capital of this banking corporation shall be
Three Million Four Hundred Thousand Dollars ($3,400,000) of which the capital
stock of the banking corporation shall be One Million Seven Hundred Thousand
Dollars which shall be divided into thirty-four thousand (34,000) shares of the
par value of fifty dollars ($50.00) each; that the same has been bona fide
subscribed and is actually paid in lawful money of the United States of America
and is in the custody of the persons hereinafter named as the first board of
directors; that the Surplus will be One Million Dollars ($1,700,000), and the
undivided profits will be zero ($0).
If the capital stock is increased by the sale of additional shares
thereof, each shareholder shall be entitled to subscribe for such additional
shares in proportion to the number of shares of said capital stock owned by him
at the time the increase is authorized by the shareholder. The Board of
Directors shall have the power to prescribe a reasonable period of time within
which the preemptive rights to subscribe to the new shares of capital stock must
be exercised.
ARTICLE IV
Name and Addresses of Shareholders
The names and places of residence of the shareholder and the number of
shares subscribed by each is as follows:
<PAGE> 2
Name Residence Number of Shares
Gary E. Metzger, as agent for Primrose & Fremont 34,000
Liberty Bancshares, Inc. Springfield, Missouri
ARTICLE V
Directors
The Board of Directors of Liberty Bank shall consist of ten members,
and the following are the names of those agreed upon as the first Board of
Directors to hold their office as director until their successors, as such, are
elected and qualified:
Name Address
---- -------
William P. Gaut 3538 Blueridge
Springfield, Missouri 65809
Lyle A. Graesser Route 2 Box 38
Republic, Missouri 65738
Kenneth E. Hamilton 4745 Bittersweet
Springfield, Missouri 65804
Jack Hoke 6264 South White Hills
Springfield, Missouri 65804
Gary E. Metzger 1947 East Norshire
Springfield, Missouri 65804
Ben A. Parnell, Jr. 2545 Cinnamon Place
Springfield, Missouri 65809
Richard A. Pendleton 1655 South Enterprise
Springfield, Missouri 65804
Wayne A. Scheer 3648 Sugar Hill
Springfield, Missouri 65809
Matthew C. Vattes Route 1 Box 175-4
Nixa, Missouri 65714
C. Tal Wooten, Jr. 3106 East White Oak Terrace
Springfield, Missouri 65809
The Board of Directors shall appoint one of its members President of
this banking corporation and the President shall serve as Chairman of the Board
unless the Board of Directors selects another member to serve as Chairman of the
Board. The Board shall have the power to appoint one or more Vice Presidents and
to appoint a Cashier and such other officers and employees as may be required to
transact the banking business of the banking corporation.
- 2 -
<PAGE> 3
The Board of Directors shall have the power to define the duties of the
officers and employees of this banking corporation; to fix the salaries to be
paid to the officers and employees; to dismiss officers and employees; to
require bonds of the officers and employees and to fix the penal amount of such
bonds; to manage and administer the business and affairs of the banking
corporation; to make all bylaws that it may be lawful for the Board of Directors
to make; and to do and perform all acts that it may be lawful for a Board of
Directors to do and perform.
ARTICLE VI
Duration
The duration of this banking corporation shall be perpetual and its
existence shall continue until terminated in accordance with the laws of the
State of Missouri.
ARTICLE VII
Purposes
The purposes for which this banking corporation is formed is to have
and exercise all rights and powers of a bank, except fiduciary powers requiring
a separate Certificate of Authority from the Commissioner of Finance pursuant to
Section 362.115, under Chapter 362, RSMo.
IN TESTIMONY WHEREOF, I have hereunto, this 26th day of May, 1995, set
my hand and affixed my seal.
/s/ Gary E. Metzger
----------------------------
Gary E. Metzger
/s/ William P. Gaut
----------------------------
William P. Gaut
/s/ C. Tal Wooten
----------------------------
C. Tal Wooten
/s/ Jack Hoke
----------------------------
Jack Hoke
/s/ Kenneth E. Hamilton
----------------------------
Kenneth E. Hamilton
- 3 -
<PAGE> 4
ACKNOWLEDGMENT OF GARY E. METZGER
STATE OF MISSOURI )
) ss.
COUNTY OF GREENE )
On this 26th day of May, 1995, before me personally appeared Gary E.
Metzger as an incorporator of Liberty Bank, to me known to be the person
described in and who executed the foregoing instrument, and acknowledged that he
executed the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal the day and year above mentioned.
/s/ Dola M. Ferrell
--------------------------
My commission expires: 8/17/97 Notary Public
ACKNOWLEDGMENT OF WILLIAM P. GAUT
STATE OF MISSOURI )
) ss.
COUNTY OF GREENE )
On this 26th day of May, 1995, before me personally appeared William P.
Gaut as an incorporator of Liberty Bank, to me known to be the person described
in and who executed the foregoing instrument, and acknowledged that he executed
the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal the day and year above mentioned.
/s/ Denise C. Ritter
--------------------------
My commission expires: 11/23/96 Notary Public
- 4 -
<PAGE> 5
ACKNOWLEDGMENT OF C. TAL WOOTEN
STATE OF MISSOURI )
) ss.
COUNTY OF GREENE )
On this 26th day of May, 1995, before me personally appeared C. Tal
Wooten as an incorporator of Liberty Bank, to me known to be the person
described in and who executed the foregoing instrument, and acknowledged that he
executed the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal the day and year above mentioned.
/s/ Denise C. Ritter
--------------------------
My commission expires: 11/23/96 Notary Public
ACKNOWLEDGMENT OF JACK HOKE
STATE OF MISSOURI )
) ss.
COUNTY OF GREENE )
On this 26th day of May, 1995, before me personally appeared Jack Hoke
as an incorporator of Liberty Bank, to me known to be the person described in
and who executed the foregoing instrument, and acknowledged that he executed the
same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal the day and year above mentioned.
/s/ Dola M. Ferrell
--------------------------
My commission expires: 8/17/97 Notary Public
- 5 -
<PAGE> 6
ACKNOWLEDGMENT OF KENNETH E. HAMILTON
STATE OF MISSOURI )
) ss.
COUNTY OF GREENE )
On this 26th day of May, 1995, before me personally appeared Kenneth E.
Hamilton as an incorporator of Liberty Bank, to me known to be the person
described in and who executed the foregoing instrument, and acknowledged that he
executed the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal the day and year above mentioned.
/s/ Denise C. Ritter
--------------------------
My commission expires: 11/23/96 Notary Public
- 6 -
<PAGE> 7
EMPLOYMENT CONTRACT
This agreement will serve as an employment agreement between Sac River Valley
Bank and Garry Robinson. Terms and compensation under this contract will begin
July 1, 1998 and will remain in effect for a period of nine (9) years from this
date. The present employment contract between Garry Robinson and Sac River
Valley Bank will be cancelled as of the above stated date.
DUTIES
GLR will work in Springfield 3 days per week and in Stockton 2 days per week.
In Springfield GLR will:
Run the Springfield office of SRVB
Hire and train all personnel there
Initiate Springfield loans
Collect and supervise Springfield
In Stockton GLR will:
Continue to handle his Stockton loan portfolio.
Support the Stockton management, to include, but not be limited
to:
Advice on investments
Participate in the training of management personnel
Generally help in the supervision of the operation of the
bank
COMPENSATION
The compensation under this contract will be $144,000 for the first year, paid
in monthly installments with an annual raise of 5%. There will be no bonuses
paid to GLR under this contract. If the after-tax net profit of SRVB drops
below $1,000,000 in any year the following year's salary of GLR will be reduced
by 10% of the total salary for each $100,000 the profit is below $1,000,000 for
the year. The minimum salary to be paid to GLR under this formula is $50,000
annually. At the point that the contract payments fall to $50,000 or below, SRVB
may terminate this contract at is sole discretion.
BENEFITS
Fringe benefits such as health insurance, dental insurance, disability
insurance, vacation, life insurance and retirement plans will be the same as
other officers of the bank. Bank will provide a bank vehicle for GLR (similar to
an 88 Oldsmobile Royale). This vehicle will be updated to a current year model
every three years as is the current procedure.
OTHER TERMS
Should SRVB sell, the contract will be binding in the purchaser. GLR will honor
the terms of the contract with any purchaser. During the term of the contract
GLR will not compete in the banking field with SRVB without the written consent
of SRVB.
SAC RIVER VALLEY BANK /s/ Garry Robinson
--------------------------------
Garry Robinson
/s/
- ------------------------------
Date: Date:
------------------------- ---------------------------
<PAGE> 8
ADDENDUM TO CONTRACT
If during the term of this contract, Garry L. Robinson should become
incapacitated for a period exceeding six months, this contract shall be void.
Incapacitation shall include any act, intentional or unintentional, which shall
render Garry L. Robinson unable to physically or emotionally complete the terms
of this contract. Should a dispute arise in the definition of incapacitation,
the opinion of the local court with legal jurisdiction shall prevail.
<PAGE> 9
ARTICLES OF AGREEMENT
SAC RIVER VALLEY BANK
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, desirous of forming a corporation under the
laws of the State of Missouri, and more particularly under the provisions of
Article 2 Chapter 12 Revised Statutes of Missouri of 1909 and amendments
thereto, for the purpose of establishing a Bank of Deposit and Discount, have
entered into the following agreement:
First: The name of this corporation shall be SAC RIVER VALLEY BANK.
Second: That the Bank shall be located in the City of Stockton, Cedar County,
Missouri.
Third: That the amount of the Capital Stock of the Bank shall be $25,000.00
divided into 250 shares of the par value of one hundred dollars each; that the
same has been Bona Fide subscribed and one-half actually paid up in lawful money
of the United States and is now in the custody of the persons hereinafter named
as the first Board of Directors.
Fourth: That the names and places of residence of the several shareholders and
the number of shares subscribed by each are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Name Residence Number of shares
- --------------------------------------------------------------------------
<S> <C> <C>
J.G. Simmons Stockton, Missouri Four shares
J.M. Hudson Stockton, Missouri Four shares
S.D. Roundtree Stockton, Missouri Four shares
J.A. Headlee Stockton, Missouri Four shares
E.S. Smith Stockton, Missouri Four shares
Sol Hartley Stockton, Missouri Four shares
Wm. Hudson Stockton, Missouri Four shares
W.E. Craig Stockton, Missouri Four shares
J.W. Milligan Stockton, Missouri Four shares
A.W. Hartley Stockton, Missouri Four shares
E.M. Frieze Stockton, Missouri Four shares
W.C. Davis Stockton, Missouri Four shares
H.W. Smith Stockton, Missouri Four shares
Arminta Younger Stockton, Missouri Four shares
G.M. Edge Stockton, Missouri Four shares
Len Hartley Stockton, Missouri Four shares
G.W. Church Stockton, Missouri Four shares
J.R. Sortor Stockton, Missouri Four shares
Chas. Masters Stockton, Missouri Four shares
C.A. Hendricks Stockton, Missouri Four shares
H.O. Hartley Stockton, Missouri Four shares
C.H. Haden Stockton, Missouri Four shares
</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C>
I.P. Haden Stockton, Missouri Four shares
A.M. Brown Stockton, Missouri Four shares
J.W. Collins Stockton, Missouri Four shares
R.H. Edge Fair Play, Missouri Four shares
C.M. Edge Fair Play, Missouri Four shares
L.L. Edge Stockton, Missouri Four shares
Omer Wasson Stockton, Missouri Four shares
J.K. Baker Dunnegan, Missouri Two shares
C.C. Willett Stockton, Missouri Two shares
C.B. Gordon Stockton, Missouri Two shares
Walter Jones Stockton, Missouri Two shares
Harry Jones Stockton, Missouri Two shares
J.H. Harper Stockton, Missouri Four shares
J.W. Craig Stockton, Missouri Two shares
R.L. Preston Stockton, Missouri Two shares
W.T. Hickman Stockton, Missouri Two shares
J.E. Haden Stockton, Missouri Two shares
C.F.P. Baker Dunnegan, Missouri One share
A.J. Locke Stockton, Missouri One share
J.E. Church Stockton, Missouri One share
G.W. Cooper Stockton, Missouri One share
Eber White Stockton, Missouri Four shares
Isaac Odell Stockton, Missouri Two shares
J.A. Worley Stockton, Missouri Four shares
J.P. Johnson Caplinger Mills, Missouri Four shares
J.T. Elliston Caplinger Mills, Missouri One share
U.A. Bush Cane Hill, Missouri Four shares
E.E. Rountree Cane Hill, Missouri Four shares
W.L. Todd Cane Hill, Missouri Four shares
W.H. Potts Wagoner, Missouri Four shares
W.L. Douglas Wagoner, Missouri Two shares
Wm. Zollman Jerico Springs, Missouri Four shares
J.W. Willett Jerico Springs, Missouri Four shares
W.H. Umbarger Jerico Springs, Missouri Four shares
D.G. Kitsmiller Jerico Springs, Missouri Three shares
U.S. Cassel Jerico Springs, Missouri Two shares
W.W. Younger Stockton, Missouri Four shares
J.P. Hartley Carthage, Missouri Two shares
J.M. Baker Bear Creek, Missouri Two shares
Wm. G. Jackson Bear Creek, Missouri Four shares
Jas. W. Jackson Bear Creek, Missouri Four shares
J.M. Campbell Dunnegan, Missouri Two shares
Wm. Roy Cane Hill, Missouri Two shares
Ed Alberti El Dorado Sp'gs, Missouri Four shares
Jnno. G. Rutledge Stockton, Missouri Two shares
A.W.B. Kirkpartrick Dunnegan, Missouri Two shares
J.W. Young Stockton, Missouri Two shares
</TABLE>
- 2 -
<PAGE> 11
<TABLE>
<S> <C> <C>
John S. Brown Stockton, Missouri Four shares
T.B. Simmons Dunnegan, Missouri One share
C.A. Newman Stockton, Missouri Four shares
W.T. Council Stockton, Missouri Four shares
Buller Crisp Crisp, Missouri Four shares
J.T. Haden Stockton, Missouri Four shares
W.F. Rau Stockton, Missouri Four shares
Tincy H. Baker Dunnegan, Missouri One share
Lonnie E. Fox Crisp, Missouri Two shares
</TABLE>
Fifth: That the Board of Directors shall consist of Nine shareholders, and the
following are the names of those agreed upon for the first year,
J.M. Hudson, C.H. Haden, E.S. Smith, W.E. Craig, J.W. Willett, S.D. Rountree,
J.P. Hartley, A.M. Brown and R.L. Preston.
Sixth: The corporation shall continue for Fifty years.
IN TESTIMONY WHEREOF, we have hereunto set our hands and seals on this 24th
day of July, A.D. 1912.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
J.G. Simmons (seal) J.M. Hudson (seal) S.D. Rountree (seal) J.A. Headlee (seal)
E.S. Smith (seal) Sol Hartley (seal) Wm. Hudson (seal) W.E. Craig (seal)
J.W. Milligan (seal) A.W. Hartley (seal) E.M. Frieze (seal) W.C. Davis (seal)
H.W. Smith (seal) Arminta Younger (seal) G.M. Edge (seal) Len Hartley (seal)
G.W. Church (seal) J.R. Sortor (seal) Chas. Masters (seal) C.A. Hendricks (seal)
H.O. Hartley (seal) C.H. Haden (seal) I.P. Haden (seal) A.M. Brown (seal)
J.W. Collins (seal) R.H. Edge (seal) C.M. Edge (seal) L.L. Edge (seal)
Omer Wasson (seal) J.K. Baker (seal) C.C. Willett (seal) C.B. Gordon (seal)
Walter Jones (seal) Harry Jones (seal) J.H. Harper (seal) J.W. Craig (seal)
R.L. Preston (seal) W.T. Hickman (seal) J.E. Haden (seal) C.F.P. Baker (seal)
A.J. Locke (seal) J.E. Church (seal) G.W. Cooper (seal) Eber White (seal)
Isaac Odell (seal) J.A. Worley (seal) J.P. Johnson (seal) U.A. Bush (seal)
J.T. Elliston (seal) E.E. Rountree (seal) W.L. Todd (seal) W.H. Potts (seal)
W.L. Douglas (seal) J.W. Willett (seal) W.H. Umbarger (seal) Wm. Zollman (seal)
D.F. Kitsmiller (seal) U.S. Cassel (seal) W.W. Younger (seal) J.M. Baker (seal)
J.P. Hartley (seal) Wm.G. Jackson (seal) Jas.W. Jackson (seal) Wm. Roy (seal)
J.M. Campbell (seal) Jno.G. Rutledge (seal) A.W.B.Kirkpatrick (seal) J.W. Young (seal)
Ed Alberti (seal) John S. Brown (seal) T.B. Simmons (seal) C.A. Newman (seal)
W.T. Council (seal) _____________ (seal) Bular Crisp (seal) J.T. Haden (seal)
W.F. Rau (seal) Tincy H. Baker (seal) Lonnie E. Fox (seal) (seal)
</TABLE>
State of Missouri )
) SS
County of Cedar )
On this 24th day of July, A.D. 1912 before me personally appeared J.G.
Simmons, J.M. Hudson, S.D. Roundtree, J.A. Headlee, E.S. Smith, Sol Hartley, Wm.
Hudson, W.E. Craig, J.W. Milligan, A.W. Hartley, E.M. Frieze, W.C. Davis, H.W.
Smith, Arminta Younger, G.M. Edge, Len
- 3 -
<PAGE> 12
Hartley, G.W. Church, J.R. Sortor, Chas. Masters, H.O. Hartley, C.H. Haden, I.P.
Haden, A.M. Brown, J.W. Collins, R.H. Edge, C.M. Edge, L.L. Edge, Omer Wasson,
J.K. Baker, C.C. Willett, C.B. Gordon, Walter Joines, Harry Jones, J.H. Harper,
J.W. Craig, G.W. Cooper, Eber White, R.L. Preston, W.T. Hickman, J.E. Haden,
C.F.P. Baker, A.J. Locke, J.E. Church, Isaac Odell, J.A. Worley, J.P. Johnson,
J.T. Elliston, U.A. Bush, E.E. Roundtree, W.L. Todd, W.H. Potts, W.L. Douglas,
Wm. Zollman, J.W. Willett, W.H. Umbarger, D.F. Kittsmiller, U.S. Cassel, W.W.
Younger, J.P. Hartley, J.M. Baker, Wm. G. Jackson, Jas. W. Jackson, J.M.
Campbell, Wm. Roy, Ed Alberti, Jno. G. Rutledge, A.W.B. Kirkpatrick, J.W. Young,
John S. Brown, T.B. Simmons, C.A. Newman, W.T. Council, Buller Crisp, J.T.
Haden, W.F. Rau, Tincy H. Baker, Lonnie E. Fox,
to me known to be the persons described in and who executed the foregoing
instrument and acknowledged that they executed the same as their free act and
deed.
Given under my hand and official seal at my office in the City of
Stockton, Missouri, the day and year above written.
(seal) Chas. A. Hendricks, Notary Public for Cedar county, Missouri.
My term as a Notary expires Nov. 19th 1914.
State of Missouri )
) SS
County of Cedar )
On this 25th day of July, A.D. 1912 before me personally appeared C.A.
Hendricks, to me known to be the person described in and who executed the
foregoing instrument and acknowledged that he executed the same as his free act
and deed. Given under my hand and official seal at my office in the City of
Stockton,
Missouri, the day and year above written.
(seal) James W. Collins, Notary Public.
My term as a Notary will expire Mch. 24th 1916.
Filed for record on the 6th day of August 1912 at 5 o'clock 15 minutes P.M.
O.B. Williams, Recorder
- -------------------------------------------------------------------------------
- 4 -
<PAGE> 13
STATE OF MISSOURI )
) SS.
County of Cedar )
I, O.B. Williams, Clerk of the Circuit Court and Ex-officio Recorder in
and for said County, hereby certify that the foregoing is a true copy of the
original Articles of Agreement for Incorporation therein referred to as the same
appears in Miscellaneous Record Book "A," Page 374 in my office.
Witness my hand and the seal of said Court.
Done at office in Stockton, MO this 8th day
of August, 1912.
O.B. Williams
---------------------------------------------
Clerk of the Circuit Court and Ex-officio Recorder.
For Deputy
------------------------------------------
- 5 -
<PAGE> 1
EXHIBIT 99.2
BY-LAWS
OF
LIBERTY BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the
shareholders for the election of directors and the transaction of whatever other
business may properly come before the meeting, shall be held at the Main Office
of the Liberty Bank, Primrose Street and Fremont Avenue in Springfield, Missouri
or such other place as the Board of Directors may designate, at 10 o'clock A.M.
on the 1st Friday in the month of March of each year. Notice of such meeting
shall be mailed, postage prepaid, at least ten days prior to the date thereof,
addressed to each shareholder at his address appearing on the books of Liberty
Bank. The notice of shareholders meeting shall set forth the time, place and
purpose of the meeting. Any failure to mail such notice or any irregularity
therein shall not affect the validity of such meeting or of any of the
proceedings thereat. The giving of such notice may be waived in writing. If,
from any cause, an election of directors is not made on the said day, the Board
of Directors shall order the election to be held on some subsequent day, as soon
thereafter as practicable, according to the provisions of law; and notice
thereof shall be given in the manner herein provided for the annual meeting,
The shareholders shall meet on the day appointed and shall elect a chairman
and a secretary. The president of the bank shall then make a report to the
shareholders showing the condition of the bank with a review of the business for
the year.
SECTION 1.02. SPECIAL MEETINGS. Except as otherwise specifically
provided by statute, special meetings of the shareholders may be called for any
purpose at any time by the Board of Directors or by any three or more
shareholders owning, in the aggregate, not less than twenty-five per cent of the
stock of Liberty Bank. Every such special meeting, unless otherwise provided by
law, shall be called by mailing, postage prepaid, not less than ten days prior
to the date fixed for such meeting, to each shareholder at the shareholders
address appearing on the books of Liberty Bank, a notice stating the purpose of
the meeting.
SECTION 1.03. NOMINATIONS FOR DIRECTOR. Nominations for election to the Board of
Directors may be made by the Board of Directors or by any stockholder of any
outstanding class of capital stock of the bank entitled to vote for the election
of directors. Nominations, other than those made by or on behalf of the existing
management of the bank, shall be made in writing and shall be delivered or
mailed to the President of the bank and to the Commissioner of Finance of the
State of Missouri not less than 14 days nor more than 50 days prior to any
meeting of stockholders called for the election of directors, provided however,
that if less than 21 days' notice of the meeting is given to shareholders, such
nomination shall be mailed or delivered to the President of the bank and to the
Commissioner of Finance of the State of Missouri not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such notification shall contain the following information to the extent
known to the notifying shareholder: (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of the bank that will be voted for each
proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of capital stock of the bank owned by
the notifying shareholder. Nominations not made in accordance herewith may, in
the discretion of the chairmen of the meeting, be
<PAGE> 2
disregarded, and upon instructions of the chairmen of the meeting, the vote
tellers may disregard all votes cast for each such nominee.
SECTION 1.04. JUDGES OF ELECTION. Every election of directors shall be
managed by three judges, who shall be appointed from among the shareholders by
the Board of Directors. The judges of election shall hold and conduct the
election at which they are appointed to serve; and, after the election, they
shall file with the Cashier a certificate under their hands, certifying the
result thereof and the names of the directors elected. The judges of election,
at the request of the chairman of the meeting, shall act as tellers of any other
vote by ballot taken at such meeting, and shall certify the result thereof.
SECTION 1.05. PROXIES. Shareholders may vote at any meeting of the
shareholders by proxy duly authorized in writing, but no officer or employee of
Liberty Bank shall act as proxy. Proxies shall be valid only for one meeting to
be specified therein, and any adjournments of such meeting. Proxies shall be
dated, signatures notarized and shall be filed with the records of the meeting.
SECTION 1.06. QUORUM. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Agreement of Liberty Bank.
SECTION 1.07. RECORD OF SHAREHOLDERS MEETING. A record shall be made of
the shareholders represented in person and by proxy, after which the
shareholders shall proceed to the election of directors and to the transaction
of any other business that may properly come before the meeting. A record of the
shareholders' meeting, giving the names of the shareholders present and the
number of shares of stock held by each, the names of the shareholders
represented by proxy and the number of shares held by each, and the names of the
proxies, shall be entered in the records of the meeting in the minute book of
the bank. This record shall show the names of the shareholders and the number of
shares voted for each resolution or voted for each candidate for director.
Proxies secured for the meeting shall be dated, and shall be filed with the
records of the meeting. No officer, director, employee, or attorney for Liberty
Bank may act as proxy.
ARTICLE II
Directors
SECTION 2.01. BOARD OF DIRECTORS. The Board of Directors (hereinafter
referred to as the "Board"), shall have power to manage and administer the
business and affairs of Liberty Bank. Except as expressly limited by law, all
corporate powers of Liberty Bank shall be vested in and may be exercised by said
Board.
SECTION 2.02. NUMBER. The Board shall consist of ten shareholders, or
such other number fixed and determined from time to time by resolution of a
majority of the full Board or by resolution of the shareholders at any meeting
thereof; provided, however; that a majority of the full Board of Directors
- 2 -
<PAGE> 3
may not increase the number of directors to a number which; (i) exceeds by more
than two the number of directors last elected by shareholders where such number
was ten or less; and (ii) to a number which exceeds by more than four the number
of directors last elected by shareholders where such number was ten or more, but
in no event shall the number of directors exceed twenty-five.
SECTION 2.03. ORGANIZATION MEETING. The Cashier, upon receiving the
certificate of the judges, of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the Main Office of Liberty Bank for the purpose of organizing the new
Board and electing and appointing officers of Liberty Bank for the succeeding
year. Such meeting shall be appointed to be held on the day of the election or
as soon thereafter as practicable, and, in any event, within thirty days
thereof. If, at the time fixed for such meeting, there shall not be a quorum
present, the directors present may adjourn the meeting, from time to time, until
a quorum is obtained.
SECTION 2.04. REGULAR MEETINGS. The Regular Meetings of the Board of
Directors shall be held, without notice, on the third Tuesday of each month at
the Main Office. When any regular meeting of the Board falls upon a holiday, the
meeting shall be held on the next banking business day unless the Board :shall
designate some other day.
SECTION 2.05. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the President of Liberty Bank, or at the request of
three or more directors. Each member of the Board of Directors shall be given
notice stating the time and place, by telegram, letter, or in person, of each
such special meeting.
SECTION 2.06. QUORUM. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but a less number
may adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. Should there be no quorum at any regular or
special meeting, the members present may adjourn from day to day until a quorum
is in attendance. In the absence of a quorum no business shall be transacted.
SECTION 2.07. VACANCIES. When any vacancy occurs among the directors,
the remaining members of the Board, in accordance with the laws of the State of
Missouri, may appoint a director to fill such vacancy at any regular meeting of
the Board, or at a special meeting called for that purpose.
ARTICLE III
Committees of the Board
SECTION 3.01. POWER TO MANAGE VESTED IN BOARD OF DIRECTORS. The Board
of Directors has power over and is solely responsible for the management and
administration of Liberty Bank. The Board of Directors may delegate such of its
powers (but not any of its responsibilities) to such persons or Committees as
the Board may determine.
SECTION 3.02. LOAN COMMITTEE. There shall be a committee, to be known
as the Loan Committee, consisting of the President and three (3) directors as
shall be designated by the President and three directors appointed by the Board
of Directors annually, to continue to act until succeeded, who shall have power
to discount and purchase bills, notes, and other evidences of debt, and to buy
and sell bills of exchange; and who shall, at each regular meeting of the board
of directors, submit in writing a report
- 3 -
<PAGE> 4
of all bills, notes, and other evidences of debt discounted and purchased by
them for the Liberty Bank since their last report and to exercise, when the
Board is not in session, all other powers of the Board that may lawfully be
delegated, The Loan Committee shall keep minutes of its meetings, and such
minutes shall be submitted at the next regular meeting of the Board of Directors
at which a quorum is present, and any action taken by the Board of Directors
with respect thereto shall be entered in the minutes of the Board of Directors.
The Board of Directors shall approve or disapprove the report of the Loan
Committee, such action to be recorded in the minutes of the meeting.
SECTION 3.03. AUDIT COMMITTEE. There shall be an Audit Committee
composed of not less than three Directors, none of whom may be an officer of
Liberty Bank appointed by the Board annually or more often, whose duty it shall
be to make an examination into the affairs of Liberty Bank, and to report the
result of such examination in writing to the Board at the next regular meeting
thereafter. Such report shall state whether Liberty Bank is in a sound
condition, whether adequate internal audit controls and procedures are being
maintained and shall recommend to the Board of Directors such changes in the
manner of doing business or conducting the affairs of Liberty Bank as shall be
deemed advisable. The Audit Committee shall have the power and authority to
engage the service of an independent certified public accountants or firm of
certified public accountants to assist the Audit Committee in the discharge of
its duties to the Board of Directors.
SECTION 3.04. OTHER COMMITTEES. The Board of Directors may appoint,
from time to time, from its own members, other committees of one or more
persons, for such purposes and with such powers as the Board may determine.
ARTICLE IV
Officers and Employees
SECTION 4.01. CHAIRMAN OF THE BOARD. The Board of Directors shall
appoint one of its members to be Chairman of the Board to serve at the pleasure
of the Board. He shall preside at all meetings of the Board of Directors. The
Chairman of the Board shall supervise the carrying out of the policies adapted
or approved by the Board. He shall have the specific powers conferred by these
By-Laws. He shall also have and may exercise such further powers and duties as
from time to time may be conferred upon, or assigned to, him by the Board of
Directors.
SECTION 4.02. PRESIDENT. The Board of Directors shall appoint one of
its members to be President of Liberty Bank. In the absence of the Chairman, he
shall preside at any meeting of the Board. The President shall have general
executive: powers, and shall have and may exercise any and all other powers and
duties pertaining by law, regulation, or practice, to the office of President,
or imposed by these ByLaws. The President shall be responsible for all such sums
of money and property of every kind as may be intrusted to the care of the
President by the Board of Directors or by the Cashier, or otherwise come into
the hands of the President and shall give bond, with security to be approved by
the Board of Directors in the penal sum of One Million Dollars ($1,000,000.00),
conditioned upon the faithful discharge of the duties of President and will
faithfully and honestly apply and account for all sums of money and other
property of Liberty Bank that may came into the possession of the President, and
pay over and deliver the same to the order of the Board of Directors, or to any
other person or persons authorized by the Board of Directors to receive the
same. The President shall also have and may exercise
- 4 -
<PAGE> 5
such further powers and duties as from time to time may be conferred upon, or
assigned to, him by the Board of Directors.
SECTION 4.03. VICE PRESIDENT. The Board of Directors may appoint one or
more Vice Presidents. Each Vice President shall have such powers and duties as
may be assigned to him by the Board of Directors. One Vice President shall be
designated by the Board of Directors, in the absence of the President, to
perform all the duties of the President.
SECTION 4.04. CASHIER. The Board of Directors shall appoint a Cashier,
or other designated officer who shall be Secretary of the Board and of Liberty
Bank, and shall keep accurate minutes of all meetings. The Cashier shall attend
to the giving of all notices required by these By-Laws to be given. The Cashier
shall be custodian of the corporate seal, records, documents, and papers of
Liberty Bank. The Cashier shall provide for the keeping of proper records of all
transactions of Liberty Bank. The Cashier and the subordinate officers and
clerks shall be appointed to hold their offices, respectively, during the
pleasure of the board of directors. The Cashier shall be responsible for all
moneys, funds and valuables of the bank, and shall give bond, with security to
be approved by the Board of Directors, in the sum of One Million Dollars
($1,000,000.00), conditioned for the faithful ar;d honest discharge of the
duties as such Cashier, and that the Cashier will faithfully apply and account
for all such moneys, funds, and valuables, and deliver the same to the order of
the Board of Directors of Liberty Bank, or to the person or persons authorized
to receive them. The Cashier shall have and may exercise any and all other
powers and duties pertaining by law, regulation or practice, to the office of
Cashier, or imposed by these By-Laws. The Cashier shall also perform such other
duties as may be assigned, from time to time, by the Board of Directors.
SECTION 4.05. OTHER OFFICERS. The Board of Directors may appoint one or
more Assistant Vice Presidents,one or more Assistant Secretaries, one or more
Assistant Cashiers, one or more Managers and Assistant Managers of Branches and
such other officers and Attorneys-in-fact as from time to time may appear to the
Board of Directors to be required or desirable to transact the business of
Liberty Bank. Such officers shall respectively exercise such powers and perform
such duties as pertain to their several offices, or as may be conferred upon, or
assigned to, them by the Board of Directors or the President.
SECTION 4.06. CLERKS AND AGENTS. The Board of Directors may appoint,
from time to time, such Paying Tellers, Receiving Tellers, Note Tellers, Vault
Custodians, bookkeepers and other clerks, agents and employees as it may deem
advisable for the prompt and orderly transaction of the business of Liberty
Bank, define their duties, fix the salaries to be paid them and dismiss them.
Subject to the authority of the Board of Directors, the President, or any other
officer of Liberty Bank authorized by him, may appoint and dismiss all or any
clerks, agents and employees and prescribe their duties and the conditions of
their employment, and from time to time fix their compensation. The Tellers
shall be responsible for all such sums of money, property, and funds of every
description as may from time to time be placed in their hands by the Cashier, or
otherwise come into their possession as Teller; and shall give bond, with
security to be approved by the Board of Directors, in the penal sum of One
Million Dollars ($1,000,000.00) conditioned for the honest and faithful
discharge of the duties as Teller, and that they will faithfully apply, account
for, and pay over all moneys, property, and funds of every description that may
come into his hands, by virtue of their office as Teller, to the order of the
Board of Directors aforesaid, or to such person or persons as may be authorized
to demand and receive the same.
- 5 -
<PAGE> 6
SECTION 4.07. BLANKET BOND. In the discretion of the Board of
Directors, there may be substituted for the bonds provided in Sections 4.02,
4.04 and 4.06 hereof, a blanket bond in the sum of One Million Dollars
($1,000,000.00) covering all officers and employees of Liberty Bank.
SECTION 4.08. TENURE OF OFFICE. The President shall hold his office for
the current year for which the Board of Directors of which he shall be a member
was elected, unless he shall resign, become disqualified, or be removed; and any
vacancy occurring in the office of President shall be filled promptly by the
Board of Directors.
ARTICLE V
Stock and Stock Certificates
SECTION 5.01. TRANSFERS. The stock of Liberty Bank shall be assignable
and transferable only on the books of Liberty Bank, subject to the restrictions
and provisions of the subscription agreement between the subscribers and a stock
purchase agreement between the shareholders and the state banking laws
applicable thereto. When a share is transferred, the certificates therefore
shall be returned to the Liberty Bank, canceled, preserved, and new certificates
issued. Certificates of stock shall state upon the face thereof that the stock
is transferable only upon the books of the Liberty Bank and that the shares are
subject to the restrictions and provisions of the subscription agreement and the
stock purchase agreement. Shares of stock shall be transferable on the books of
Liberty Bank, and a transfer book shall be kept in which all transfers of stock
shall be recorded. Every person becoming a shareholder by such transfer shall,
in proportion to his shares, succeed to all rights and liabilities of the prior
holder of such shares.
SECTION 5.02. STOCK CERTIFICATES. Certificates of stock shall bear the
signature of the President (which may be engraved, printed or impressed), and
shall be signed manually or by facsimile process by the Secretary, Assistant
Secretary, Cashier, Assistant Cashier, or any other officer appointed by the
Board of Directors for that purpose, to be known as an Authorized Officer, and
the seal of Liberty Bank shall be engraved thereon. Each certificate shall
recite on its face that the stock represented thereby is transferable only upon
the books of Liberty Bank properly endorsed.
SECTION 5.03. RIGHTS OF SHAREHOLDERS. In case of any increase in the
capital stock of Liberty Bank other than by way of a stock dividend or employee
stock options, the new shares shall be offered for subscription to the holders
of record of all shares of stock at the time outstanding, in proportion to the
number of shares of such stock held by them respectively, by mailing,
first-class postage prepaid, to such holders, at their respective addresses as
shown on the books of Liberty Bank, transferable subscription warrants
exercisable at any time on or before 30 days from the date of such mailing. If
at the expiration of such subscription rights any of the new shares have not
been subscribed for, such shares shall be offered for subscription to the
holders of record of all other shares of stock at the time outstanding, in
proportion to the number of such shares held by them respectively, and notice
shall be given as above provided. If at the expiration of both of such
subscription rights any of the new shares have not been subscribed for, such
unsubscribed new shares may be issued and sold at such price, not less than the
par value thereof, to such persons and on such terms as the Board of Directors
may determine.
- 6 -
<PAGE> 7
ARTICLE VI
Corporate Seal
The President, the Cashier, the Secretary, or any Assistant Cashier or
Assistant Secretary, or other officer thereunto designated by the Board of
Directors, shall have authority to affix the corporate seal to any document
requiring such seal, and to attest the same. Such seal shall be substantially in
the following form:
(Impression of seal)
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. FISCAL YEAR. The fiscal year of Liberty Bank shall be the
calendar year.
SECTION 7.02. EXECUTION OF INSTRUMENTS. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
in behalf of Liberty Bank by the President, or any Vice President, or the
Secretary, or the Cashier. Any such instruments may also be executed,
acknowledged, verified, delivered or accepted in behalf of Liberty Bank in such
manner and by such other officers as the Board of Directors may from time to
time direct. The provisions of this Section 7.02 are supplementary to any of the
other provisions of these By-Laws.
SECTION 7.03. RECORDS. The Articles of Agreement of Liberty Bank, these
By-Laws and the proceedings of all meetings of the shareholders, the Board of
Directors, standing committees of the Board, shall be recorded in appropriate
minute books provided for the purpose. The minutes of each meeting shall be
signed by the Secretary, Cashier or other officer appointed to act as Secretary
of the meeting.
SECTION 7.04. BANKING HOURS. The Main Office of Liberty Bank shall be
open for business from 9 o'clock a.m., to 4:30 o'clock p.m. of each day,
excepting Saturdays and Sundays and days recognized by the laws of the State of
Missouri and the Federal Reserve System as legal holidays.
ARTICLE IX
By-Laws
SECTION 8.01. INSPECTION. A copy of these By-Laws, with all amendments
thereto, shall at all times be kept in a convenient place at the Main Office of
Liberty Bank, and shall be open for inspection to all shareholders, during
banking hours.
- 7 -
<PAGE> 8
SECTION 8.02. AMENDMENTS. These By-Laws may be amended, altered or
repealed, at any regular meeting of the Board of Directors, by a vote of a
majority of the whole number of the directors or special meeting of the Board of
Directors, provided, however, that the directors shall have been given 10 days'
notice of the intention to change or offer an amendment thereto.
At a meeting of the Board of Directors of Liberty Bank held on the 17th
day of October, 1995, the foregoing By-Laws were adopted.
We, Ron McDowell and Pat L. Sechler, certify that we are the duly
constituted Cashier of Liberty Bank and Secretary of its Board of Directors,
respectively, and as such officers we are the official custodians of its records
and that the foregoing By-Laws are the By-Laws of said Liberty Bank, and all of
them, as now lawfully in force and effect.
IN TESTIMONY WHEREOF, we have hereunto affixed our official signatures
and the seal of the said Liberty Bank, in the City of Springfield, Missouri on
this 17th day of October, 1995.
/s/ Ron McDowell
-------------------------
Ron McDowell, Cashier
/s/ Pat L. Sechler
-------------------------
Pat L. Sechler,
Secretary
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<PAGE> 1
EXHIBIT 99.3
ARTICLES OF AGREEMENT
SAC RIVER VALLEY BANK
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, desirous of forming a corporation under the
laws of the State of Missouri, and more particularly under the provisions of
Article 2 Chapter 12 Revised Statutes of Missouri of 1909 and amendments
thereto, for the purpose of establishing a Bank of Deposit and Discount, have
entered into the following agreement:
First: The name of this corporation shall be SAC RIVER VALLEY BANK.
Second: That the Bank shall be located in the City of Stockton, Cedar County,
Missouri.
Third: That the amount of the Capital Stock of the Bank shall be $25,000.00
divided into 250 shares of the par value of one hundred dollars each; that the
same has been Bona Fide subscribed and one-half actually paid up in lawful money
of the United States and is now in the custody of the persons hereinafter named
as the first Board of Directors.
Fourth: That the names and places of residence of the several shareholders and
the number of shares subscribed by each are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Name Residence Number of shares
- --------------------------------------------------------------------------
<S> <C> <C>
J.G. Simmons Stockton, Missouri Four shares
J.M. Hudson Stockton, Missouri Four shares
S.D. Roundtree Stockton, Missouri Four shares
J.A. Headlee Stockton, Missouri Four shares
E.S. Smith Stockton, Missouri Four shares
Sol Hartley Stockton, Missouri Four shares
Wm. Hudson Stockton, Missouri Four shares
W.E. Craig Stockton, Missouri Four shares
J.W. Milligan Stockton, Missouri Four shares
A.W. Hartley Stockton, Missouri Four shares
E.M. Frieze Stockton, Missouri Four shares
W.C. Davis Stockton, Missouri Four shares
H.W. Smith Stockton, Missouri Four shares
Arminta Younger Stockton, Missouri Four shares
G.M. Edge Stockton, Missouri Four shares
Len Hartley Stockton, Missouri Four shares
G.W. Church Stockton, Missouri Four shares
J.R. Sortor Stockton, Missouri Four shares
Chas. Masters Stockton, Missouri Four shares
C.A. Hendricks Stockton, Missouri Four shares
H.O. Hartley Stockton, Missouri Four shares
C.H. Haden Stockton, Missouri Four shares
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
I.P. Haden Stockton, Missouri Four shares
A.M. Brown Stockton, Missouri Four shares
J.W. Collins Stockton, Missouri Four shares
R.H. Edge Fair Play, Missouri Four shares
C.M. Edge Fair Play, Missouri Four shares
L.L. Edge Stockton, Missouri Four shares
Omer Wasson Stockton, Missouri Four shares
J.K. Baker Dunnegan, Missouri Two shares
C.C. Willett Stockton, Missouri Two shares
C.B. Gordon Stockton, Missouri Two shares
Walter Jones Stockton, Missouri Two shares
Harry Jones Stockton, Missouri Two shares
J.H. Harper Stockton, Missouri Four shares
J.W. Craig Stockton, Missouri Two shares
R.L. Preston Stockton, Missouri Two shares
W.T. Hickman Stockton, Missouri Two shares
J.E. Haden Stockton, Missouri Two shares
C.F.P. Baker Dunnegan, Missouri One share
A.J. Locke Stockton, Missouri One share
J.E. Church Stockton, Missouri One share
G.W. Cooper Stockton, Missouri One share
Eber White Stockton, Missouri Four shares
Isaac Odell Stockton, Missouri Two shares
J.A. Worley Stockton, Missouri Four shares
J.P. Johnson Caplinger Mills, Missouri Four shares
J.T. Elliston Caplinger Mills, Missouri One share
U.A. Bush Cane Hill, Missouri Four shares
E.E. Rountree Cane Hill, Missouri Four shares
W.L. Todd Cane Hill, Missouri Four shares
W.H. Potts Wagoner, Missouri Four shares
W.L. Douglas Wagoner, Missouri Two shares
Wm. Zollman Jerico Springs, Missouri Four shares
J.W. Willett Jerico Springs, Missouri Four shares
W.H. Umbarger Jerico Springs, Missouri Four shares
D.G. Kitsmiller Jerico Springs, Missouri Three shares
U.S. Cassel Jerico Springs, Missouri Two shares
W.W. Younger Stockton, Missouri Four shares
J.P. Hartley Carthage, Missouri Two shares
J.M. Baker Bear Creek, Missouri Two shares
Wm. G. Jackson Bear Creek, Missouri Four shares
Jas. W. Jackson Bear Creek, Missouri Four shares
J.M. Campbell Dunnegan, Missouri Two shares
Wm. Roy Cane Hill, Missouri Two shares
Ed Alberti El Dorado Sp'gs, Missouri Four shares
Jnno. G. Rutledge Stockton, Missouri Two shares
A.W.B. Kirkpartrick Dunnegan, Missouri Two shares
J.W. Young Stockton, Missouri Two shares
</TABLE>
- 2 -
<PAGE> 3
<TABLE>
<S> <C> <C>
John S. Brown Stockton, Missouri Four shares
T.B. Simmons Dunnegan, Missouri One share
C.A. Newman Stockton, Missouri Four shares
W.T. Council Stockton, Missouri Four shares
Buller Crisp Crisp, Missouri Four shares
J.T. Haden Stockton, Missouri Four shares
W.F. Rau Stockton, Missouri Four shares
Tincy H. Baker Dunnegan, Missouri One share
Lonnie E. Fox Crisp, Missouri Two shares
</TABLE>
Fifth: That the Board of Directors shall consist of Nine shareholders, and the
following are the names of those agreed upon for the first year,
J.M. Hudson, C.H. Haden, E.S. Smith, W.E. Craig, J.W. Willett, S.D. Rountree,
J.P. Hartley, A.M. Brown and R.L. Preston.
Sixth: The corporation shall continue for Fifty years.
IN TESTIMONY WHEREOF, we have hereunto set our hands and seals on this 24th
day of July, A.D. 1912.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
J.G. Simmons (seal) J.M. Hudson (seal) S.D. Rountree (seal) J.A. Headlee (seal)
E.S. Smith (seal) Sol Hartley (seal) Wm. Hudson (seal) W.E. Craig (seal)
J.W. Milligan (seal) A.W. Hartley (seal) E.M. Frieze (seal) W.C. Davis (seal)
H.W. Smith (seal) Arminta Younger (seal) G.M. Edge (seal) Len Hartley (seal)
G.W. Church (seal) J.R. Sortor (seal) Chas. Masters (seal) C.A. Hendricks (seal)
H.O. Hartley (seal) C.H. Haden (seal) I.P. Haden (seal) A.M. Brown (seal)
J.W. Collins (seal) R.H. Edge (seal) C.M. Edge (seal) L.L. Edge (seal)
Omer Wasson (seal) J.K. Baker (seal) C.C. Willett (seal) C.B. Gordon (seal)
Walter Jones (seal) Harry Jones (seal) J.H. Harper (seal) J.W. Craig (seal)
R.L. Preston (seal) W.T. Hickman (seal) J.E. Haden (seal) C.F.P. Baker (seal)
A.J. Locke (seal) J.E. Church (seal) G.W. Cooper (seal) Eber White (seal)
Isaac Odell (seal) J.A. Worley (seal) J.P. Johnson (seal) U.A. Bush (seal)
J.T. Elliston (seal) E.E. Rountree (seal) W.L. Todd (seal) W.H. Potts (seal)
W.L. Douglas (seal) J.W. Willett (seal) W.H. Umbarger (seal) Wm. Zollman (seal)
D.F. Kitsmiller (seal) U.S. Cassel (seal) W.W. Younger (seal) J.M. Baker (seal)
J.P. Hartley (seal) Wm.G. Jackson (seal) Jas.W. Jackson (seal) Wm. Roy (seal)
J.M. Campbell (seal) Jno.G. Rutledge (seal) A.W.B.Kirkpatrick (seal) J.W. Young (seal)
Ed Alberti (seal) John S. Brown (seal) T.B. Simmons (seal) C.A. Newman (seal)
W.T. Council (seal) _____________ (seal) Bular Crisp (seal) J.T. Haden (seal)
W.F. Rau (seal) Tincy H. Baker (seal) Lonnie E. Fox (seal) (seal)
</TABLE>
State of Missouri )
) SS
County of Cedar )
On this 24th day of July, A.D. 1912 before me personally appeared J.G.
Simmons, J.M. Hudson, S.D. Roundtree, J.A. Headlee, E.S. Smith, Sol Hartley, Wm.
Hudson, W.E. Craig, J.W. Milligan, A.W. Hartley, E.M. Frieze, W.C. Davis, H.W.
Smith, Arminta Younger, G.M. Edge, Len
- 3 -
<PAGE> 4
Hartley, G.W. Church, J.R. Sortor, Chas. Masters, H.O. Hartley, C.H. Haden, I.P.
Haden, A.M. Brown, J.W. Collins, R.H. Edge, C.M. Edge, L.L. Edge, Omer Wasson,
J.K. Baker, C.C. Willett, C.B. Gordon, Walter Joines, Harry Jones, J.H. Harper,
J.W. Craig, G.W. Cooper, Eber White, R.L. Preston, W.T. Hickman, J.E. Haden,
C.F.P. Baker, A.J. Locke, J.E. Church, Isaac Odell, J.A. Worley, J.P. Johnson,
J.T. Elliston, U.A. Bush, E.E. Roundtree, W.L. Todd, W.H. Potts, W.L. Douglas,
Wm. Zollman, J.W. Willett, W.H. Umbarger, D.F. Kittsmiller, U.S. Cassel, W.W.
Younger, J.P. Hartley, J.M. Baker, Wm. G. Jackson, Jas. W. Jackson, J.M.
Campbell, Wm. Roy, Ed Alberti, Jno. G. Rutledge, A.W.B. Kirkpatrick, J.W. Young,
John S. Brown, T.B. Simmons, C.A. Newman, W.T. Council, Buller Crisp, J.T.
Haden, W.F. Rau, Tincy H. Baker, Lonnie E. Fox,
to me known to be the persons described in and who executed the foregoing
instrument and acknowledged that they executed the same as their free act and
deed.
Given under my hand and official seal at my office in the City of
Stockton, Missouri, the day and year above written.
(seal) Chas. A. Hendricks, Notary Public for Cedar county, Missouri.
My term as a Notary expires Nov. 19th 1914.
State of Missouri )
) SS
County of Cedar )
On this 25th day of July, A.D. 1912 before me personally appeared C.A.
Hendricks, to me known to be the person described in and who executed the
foregoing instrument and acknowledged that he executed the same as his free act
and deed. Given under my hand and official seal at my office in the City of
Stockton,
Missouri, the day and year above written.
(seal) James W. Collins, Notary Public.
My term as a Notary will expire Mch. 24th 1916.
Filed for record on the 6th day of August 1912 at 5 o'clock 15 minutes P.M.
O.B. Williams, Recorder
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<PAGE> 5
STATE OF MISSOURI )
) SS.
County of Cedar )
I, O.B. Williams, Clerk of the Circuit Court and Ex-officio Recorder in
and for said County, hereby certify that the foregoing is a true copy of the
original Articles of Agreement for Incorporation therein referred to as the same
appears in Miscellaneous Record Book "A," Page 374 in my office.
Witness my hand and the seal of said Court.
Done at office in Stockton, MO this 8th day
of August, 1912.
O.B. Williams
---------------------------------------------
Clerk of the Circuit Court and Ex-officio Recorder.
For Deputy
------------------------------------------
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<PAGE> 1
EXHIBIT 99.4
SAC RIVER VALLEY BANK
BY-LAWS
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the
shareholders for the election of directors and the transaction of whatever other
business may properly come before the meeting, shall be held at the Main Office
of the Bank, Stockton, Missouri, or such other place as the Board of Directors
may designate, at 9:00 a.m., or such other hour as the Board of Directors may
designate, on the third Saturday of May of each year. If, from any cause, an
election of directors is not made on the said day, the Board of Directors shall
order the election to be held on some subsequent day, as soon thereafter as
practicable, according to the provisions of law; and notice thereof shall be
given in the manner herein provided for the annual meeting.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically
provided by statute, special meetings of the shareholders may be called for any
purpose at any time by the Board of Directors or by written request of the
owners of a majority of the outstanding stock.
SECTION 1.3. NOTICE OF MEETINGS. Notice of annual or special
shareholders' meetings shall state the place, day and hour of the meeting, and
shall be published at least ten (10) days prior to the meeting and once a week
after the first publication with the last publication being not more than seven
(7) days before the day fixed for such meeting, in some daily or weekly
newspaper printed and published in the City of Stockton, and if there be none
then in some newspaper printed and published in Cedar County, and if there be
none, then in some newspaper printed and published in an adjoining county. A
written or printed copy of the notice shall be delivered personally or mailed to
each shareholder at least ten (10) but not more than fifty (50) days prior to
the day fixed for the meeting, and shall state, in addition to the place, day
and hour, the purpose of any special meeting or an annual meeting at which the
shareholders will consider a change in the par value of the corporation stock,
the issuance of preferred shares, a change in the number of directors, an
increase of the corporate life, an extension or change of its' business, or any
change in its articles of incorporation. Any shareholder may waive notice by
pausing to be delivered to the secretary during, prior, or after the meeting a
written signed waiver of notice, or by attending such meeting except where a
stockholder attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 1.04. CLOSING OF TRANSFER BOOKS. The Board of Directors shall
have the power to close the stock transfer books of the corporation for a period
not exceeding fifty (50) days preceding the date of any meeting of the
shareholders, or the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
shares shall go into effect; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date not exceeding fifty (50) days preceding the date of any meeting of
shareholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversation or exchange of
shares shall go into effect, as a record date for the determination of the
shareholders entitled to notice of, and to vote at, any such meeting or any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of shares; and in such case such shareholders and
only such shareholders as shall be shareholders of record at the time fixed for
the closing of the transfer books or at the time fixed as the record date shall
be entitled to such notice of, and to vote at, such
<PAGE> 2
meeting, any adjournment of rights, or to exercise such rights, as the case may
be, not withstanding any transfer of any shares on the books of the corporation
after such date of closing of the transfer books, or such record date fixed as
aforesaid.
SECTION 1.5 NOMINATIONS FOR DIRECTOR. Nominations for election to the
Board of Directors may be made by the Board of Directors or by any shareholder
of any outstanding class of capital stock of the Bank entitled to vote for the
election of directors.
SECTION 1.6 JUDGES OF ELECTION. Every election of directors shall be
managed by two judges, who shall be appointed from among the shareholders by the
Board of Directors. The judges of election shall hold and conduct the election
at which they are appointed to serve; and, after the election, they shall file
with the Cashier or Secretary a certificate under their hands, certifying the
result thereof and the names of the directors elected. The judges of election,
at the request of the chairman of the meeting, shall act as tellers of any other
vote by ballot at such meeting, and shall certify the result thereof.
SECTION 1.7 VOTING. Each shareholder shall have one (1) vote for each
share of stock entitled to vote under the provisions of the Articles of
Agreement and these By-laws which is registered in his name on the books of the
corporation; but, in the election of directors, cumulative voting shall prevail,
that is to say, each shareholder shall have the right to cast as many votes in
the aggregate as shall equal the number of voting shares so held by him,
multiplied by the number of directors to be elected at such election, and he may
cast in the whole number of such votes for one or more candidates. Directors
shall not be elected in any other manner, unless such cumulative voting be
unanimously waived by all shareholders present, in person or by proxy, and such
waiver by permitted by law.
SECTION 1.8 PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing. Proxies shall be valid only
for one (1) meeting, to be specified therein, and any adjournments of such
meeting. Proxies shall be dated and shall be filed with the records of the
meeting.
SECTION 1.9 QUORUM. A majority of the outstanding capital stock legally
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of shareholders, unless otherwise provided by law; but less than
a quorum may adjourn any meeting, from time to time, and the meeting may be
held, as adjourned, without further notice. A majority of the votes cast shall
decide every question or matter submitted to the shareholders at any meeting,
unless otherwise provided by law or by the Articles of Agreement.
ARTICLE II
DIRECTORS
SECTION 2.1 BOARD OF DIRECTORS. The Board of Directors (hereinafter
referred to as the "Board"), shall have power to manage and administer the
business and affairs of the Bank. Except as expressly limited by law, all
corporation powers of the Bank shall be vested in and may be exercised by said
Board.
SECTION 2.2 NUMBER. The Board shall consist of not less than five (5)
nor more than thirty-five (35) shareholders, the exact number within such
minimum and maximum limits to be fixed and determined from time to time by the
Articles of Agreement, by resolution of the shareholders at any meeting thereof
upon approval of the resolution by the Missouri Commissioner of Finance, or by
the Board at any regular or special meeting thereof, by a two-thirds majority
vote of the total number thereof, provided, however, that the Board may not add
more than two (2) additional directors during any one (1) year and the increase
shall not become effective until approved by the Missouri Commissioner of
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<PAGE> 3
Finance and shall be effective only until the next regular shareholders meeting,
at which time the shareholders shall approve or reject such increase.
SECTION 2.3 ORGANIZATION MEETING. The Cashier or Secretary, upon
receiving the certificate of the judges, of the result of any election, shall
notify the directors-elect of their election and of the time at which they are
required to meet at the Main Office of the Bank for the purpose of organizing
the new Board and electing and appointing officers of the Bank for the
succeeding year.Such meeting shall be appointed to be held on the day of the
election or as soon thereafter as practicable, and, in any event, within thirty
(30) days thereof. If, at the time fixed for such meeting, there shall not be a
quorum present, the directors present may adjourn the meeting, from time to
time, until a quorum is obtained.
SECTION 2.4 REGULAR MEETINGS. The regular meetings of the Board of
Directors shall be held, without notice, on the second Thursday of each month at
the Main Office, or at such place as the Board of Directors may designate. When
any regular meeting of the Board falls upon a holiday, the meeting shall be held
on the next banking business day unless the Board shall designate some other
day. At each regular meeting there shall be submitted to the meeting a list
giving the aggregate of loans, discounts, acceptances and advances, including
overdrafts over $100 to each individual, partnership, corporation or person
whose liability to the Bank has been created, extended, renewed or increased
since the last regular meeting of the Board by more than an amount to be
determined by the Board of Directors, which minimum amount shall not exceed
$10,000, and a list of the aggregate indebtedness and liability to the Bank of
each of the directors, officers and employees thereof. If there is collateral to
the indebtedness, it shall be described as of the date of the meeting.
Charged-off assets and recovered assets shall be presented for inspection of the
board. Additions to the investment account shall be presented to the Board at
least once each quarter. The minutes of the meeting shall indicate the
compliance with the requirements of this section.
SECTION 2.5 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the President of the Bank, or at the request of three
(3) or more directors. Each member of the Board of Directors shall be given
notice stating the time and place, by telephone, letter or in person, of each
such special meeting at least one (1) day prior to the meeting date.
SECTION 2.6 QUORUM. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but a less number
may adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice.
SECTION 2.7 VACANCIES. Vacancies not exceeding one-third of the whole
number of the Board may be filled by the affirmative vote of a majority of the
directors then in office, and the directors so elected may hold office until
such vacancies are filled by the shareholders at a special or annual meeting.
All other vacancies in the office of directors shall be filled by election by
the shareholders.
SECTION 2.8 QUALIFICATIONS. No person shall be nominated, elected or
appointed to serve as a member of the Board of Directors who does not meet all
of the qualifications required by law and the regulations and rules of the
Missouri Commissioner of Finance pertaining to the qualifications for directors
of Missouri banks. Each director shall be a citizen of the United States and at
least three-fourths of the directors shall be residents of Missouri at the time
of their election and during their continuance in office.
SECTION 2.9 ADVISORY DIRECTORS. The Board of Directors of the Bank
shall be authorized to appoint Advisory Directors to serve from the date of
their appointment until the date of the next annual meeting of shareholders and
for such time thereafter as they shall be reappointed as Advisory Directors.
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<PAGE> 4
Such Advisory Directors shall be chosen by the Board of Directors from former
directors or from any others as the Board shall consider qualified to serve.
Their duties shall be to attend, if possible, all meetings of the Board and to
participate in such meetings, but they shall have no vote. Such Advisory
Directors, shall be paid the same compensation as is paid to active directors
unless they be officers of the Bank.
SECTION 2.10 COMMUNICATIONS FROM THE MISSOURI COMMISSIONER OF FINANCE.
Each official communication directed by the Missouri Commissioner of Finance or
one of his deputies to this Bank or to any officer thereof, relating to an
examination or investigation conducted by the Division of Finance or containing
suggestions or recommendations at to the conduct of the business of the Bank
shall be submitted, by the officer receiving it, to the Board of Directors at
the next meeting of the Board, and duly noted in the minutes of the meeting of
the Board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 3.1 DISCOUNT COMMITTEE. If needed, the Board of Directors may
establish a Discount Committee composed of all officers of the Bank, or composed
of a certain number of officers of the Bank that the Board may choose. Any four
(4) officers may constitute a quorum of this committee. This committee shall
meet each full working day of the week at a time selected by the committee. This
committee shall have the power to approve loans that do not adhere to current
loan policy or loans that may be above current loan limits of each individual
officer. This committee shall make overdraft decisions, charge-off decisions to
be presented to Board and many of the various daily decisions that are necessary
to operate the Bank. Minutes of the meetings shall be kept and submitted at the
next regular Board meeting.
SECTION 3.2 EXECUTIVE COMMITTEE. If needed, the Board of Directors may
establish an executive committee. It shall be composed of not less than three
members of the Board of Directors appointed by the Board annually. Vacancies in
the Executive Committee shall be filled by the Board. Two members of the
Executive Committee shall constitute a quorum for the transaction of any and all
business of the Committee and affirmative vote of at least two (2) members of
the Executive Committee shall be necessary to make any actions of the Committee
effective. During the intervals between meetings of the Board of Directors, and
except where specific directions shall have been given by the Board, the
Executive Committee shall possess and may exercise any of the powers and
authority of the Board in the management of the business and affairs of the
Bank, in such manner as the Committee shall deem to be for the best interests of
the Bank. The following powers may not be delegated by the Board to the
Executive Committee; the power or authority to declare dividends, to fill
vacancies on the Board, or to adopt, amend or repeal by-laws. The Executive
Committee shall choose a Chairman and Secretary and may choose to establish a
regular monthly time and place of meeting. Minutes of Executive Committee
meetings shall be kept and such minutes shall be submitted at the next regular
meeting of the Board of Directors at which a quorum is present and any action
taken by the Board with respect thereto shall be entered in the minutes of the
Board.
SECTION 3.3 OTHER COMMITTEES. The Board of Directors may appoint, from
time to time, from its own members, other committees of one or more persons, for
such purposes and with such powers as the Board may determine.
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<PAGE> 5
SECTION 3.4 MEETINGS OF COMMITTEES. The regular dates and hours for
meetings of all committees appointed by the Board of Directors shall be
determined by each of such committees and special meetings may be called by the
Chairman of the Committee, or any two (2) members of the Committee, on
twenty-four (24) hours' actual notice by telephone or in writing or otherwise;
and a special meeting of a committee may be held without notice by unanimous
consent of the members of the Committee.
ARTICLE IV
OFFICERS AND EMPLOYEES
SECTION 4.1 CHAIRMAN OF THE BOARD. The Board of Directors shall appoint
one of its members to be Chairman of the Board to serve at the pleasure of the
Board. He shall preside at all meetings of the Board of Directors. The Chairman
of the Board shall supervise the carrying out of the policies adopted or
approved by the Board. He shall have general executive powers, as well as the
specific powers conferred by these By-laws. He shall also have and may exercise
such further powers and duties as from time to time may be conferred upon, or
assigned to him by the Board of Directors.
SECTION 4.2 PRESIDENT. The Board of Directors shall appoint one of its
members to be President of the Bank. In the absence of the Chairman, he shall
preside at any meeting of the Board. The President shall have general executive
powers and duties pertaining by law, regulation, or practice, to the office of
President, or imposed by these By-laws. He shall also have and may exercise such
further powers and duties as from time to time may be conferred upon, or
assigned to, him by the Board of Directors.
SECTION 4.3 VICE PRESIDENT. The Board of Directors may appoint one or
more Vice Presidents with such designation as to rank as the Board may approve,
such as an Executive Vice President and one or more Senior Vice Presidents. Each
Vice President shall have such powers and duties as may be assigned to him by
the Board of Directors. One Vice President shall be designated by the Board of
Directors, in the absence of the President, to perform all the duties of the
President.
SECTION 4.4 SECRETARY. The Board of Directors shall appoint a
Secretary, Cashier, or other designated officer who shall be Secretary of the
Board and of the Bank, and shall keep accurate minutes of all meetings. he shall
be custodian of the corporate seal, records, documents and papers of the Bank.
He shall also perform such other duties as may be assigned to him from time to
time, by the Board of Directors.
SECTION 4.5 CASHIER. The Board of Directors may appoint a Cashier. The
Cashier shall provide for the keeping of proper records of all transactions of
the Bank. He shall have and may exercise any and all other powers and duties
pertaining by law, regulation or practice, to the office of Cashier, or imposed
by these By-laws. He shall also perform such other duties as may be assigned to
him, from time to time, by the Board of Directors.
SECTION 4.6 OTHER OFFICERS. The Board of Directors may appoint one or
more Assistant Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Cashiers, and such other officers as from time to time may appear to
the Board of Directors to be required or desirable to transact the business of
the Bank. Such officers shall respectively exercise such powers and perform such
duties as pertain to their several offices, or as may be conferred upon, or
assigned to, them by the Board of Directors, the Chairman of the Board or the
President.
SECTION 4.7 OTHER EMPLOYEES. The Board of Directors may appoint from
time to time, such Paying and Receiving Tellers, Note Tellers, Bookkeepers,
Receptionists, Proof Operators, and other
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<PAGE> 6
employees as it may deem advisable for the prompt and orderly transaction of the
business of the Bank, define their duties, fix the salaries to be paid them and
dismiss them. Subject to the authority of the Board of Directors, the President,
or any other officer of the Bank authorized by him, may appoint and dismiss all
or any of the of the employees and prescribe their duties and the conditions of
their employment, and from time to time fix their compensation.
SECTION 4.8 TENURE OF OFFICE. The President shall hold his office for
the current year for which the Board of which he shall be a member was elected,
unless he shall resign, become disqualified, or be removed; and any vacancy
occurring in the office of President shall be filled promptly by the Board of
Directors.
ARTICLE V
STOCK AND STOCK CERTIFICATES
SECTION 5.1 TRANSFERS. Shares of stock shall be transferable on the
books of the Bank, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his shares, succeed to all rights and liabilities of the
prior holder of such shares.
SECTION 5.2 STOCK CERTIFICATES. Certificates of stock shall bear the
signature of the President (which may be engraved, printed or impressed), and
shall be signed manually or by facsimile process by the Secretary, Assistant
Secretary, Cashier, Assistant Cashier, or any other officer appointed by the
Board of Directors for that purpose, to be known as an Authorized Officer, and
the seal of the Bank shall be engraven thereon. Each certificate shall recite on
its face that the stock represented thereby is transferable only upon the books
of the Bank properly endorsed.
ARTICLE VI
CORPORATE SEAL
The President, the Cashier, the Secretary or any Assistant Cashier or
Assistant Secretary, or other officer thereunto designated by the Board of
Directors, shall have authority to affix the corporate seal to any document
requiring such seal, and to attest the same. Such seal shall be substantially in
the following form: Sac River Valley Bank shall be at the top of circular seal,
Stockton, Missouri shall be at the bottom of the circular seal and the center of
the circular seal shall consist of the word "SEAL".
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 FISCAL YEAR. The fiscal year of the Bank shall be the
calendar year.
SECTION 7.2 EXECUTION OF INSTRUMENTS. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, under-takings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
in behalf of the Bank by the Chairman of the Board, or the President, or any
Vice President, or the Secretary, or the Cashier. Any such instruments may also
be executed, acknowledged, verified, delivered or accepted in behalf of
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<PAGE> 7
the Bank in such other manner and by such other officers as the Board of
Directors may from time to time direct. The provisions of this Section 7.2 are
supplementary to any other provision of these By-laws.
SECTION 7.3 RECORDS. The Articles of Agreement, the By-laws, and the
proceedings of all meetings of the stockholders, the Board of Directors,
standing committees of the Board, shall be recorded in the appropriate minute
books provided for the purpose. The minutes of each meeting shall be signed by
the Secretary,m Cashier, or other officer appointed to act as Secretary of the
meeting.
ARTICLE VIII
BY-LAWS
SECTION 8.1 INSPECTION. A copy of the By-laws, with all amendments
thereto, shall at all times be kept in a convenient place at the Main Office of
the Bank, and shall be open for inspection to all shareholders, during banking
hours.
SECTION 8.2 AMENDMENTS. The By-laws may be amended, altered or
repealed, at any regular meeting of the Board of Directors, by a vote of a
majority of the whole number of the Directors.
I, Howard M. Wrenn, CERTIFY that: (1) I am the duly constituted
Secretary of the Board of Directors of Sac River Valley Bank and, as such
officer, am the official custodian of its records; (2) the foregoing By-laws are
the By-laws of said Bank, and all of them are now lawfully in force and effect.
IN TESTIMONY WHEREOF, I have hereunto affixed my official signature and
the seal of the said Bank in the City of Stockton, Missouri, on this 12th day of
June, 1986.
/s/ Howard M. Wrenn
--------------------------
Howard M. Wrenn, Secretary
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