<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1999
REGISTRATION NO. 333-78113
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RIVA BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 6712 58-2398959
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
13004 STARBUCK ROAD
ST. LOUIS, MISSOURI 63141
(314) 514-8491
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
RICHARD C. JENSEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RIVA BANCSHARES, INC.
13004 STARBUCK ROAD
ST. LOUIS, MISSOURI 63141
(314) 514-8491
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
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<S> <C>
ROBERT C. SCHWARTZ STEVEN R. FINLEY
SMITH, GAMBRELL & RUSSELL, LLP GIBSON, DUNN & CRUTCHER LLP
PROMENADE II, SUITE 3100 200 PARK AVENUE
1230 PEACHTREE STREET, N.E. NEW YORK, NEW YORK 10166-0193
ATLANTA, GEORGIA 30309 (212) 351-4000
(404) 815-3758 (212) 351-4035 (FAX)
(404) 685-7058 (FAX)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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 of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED , 1999
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
3,000,000 SHARES
(RIVA BANK LOGO)
RIVA BANCSHARES, INC.
COMMON STOCK
$ PER SHARE
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This is an initial public offering of common stock of Riva Bancshares, Inc. This
is a firm commitment underwriting.
There is currently no public market for the shares. We expect that the price to
the public in the offering will be between $10.00 and $12.00. The market price
of the shares after the offering may be higher or lower than the offering price.
Of the 3,000,000 shares we are offering, up to will be purchased by
an underwriter that is a foreign broker-dealer for sales outside of the United
States.
We have applied to include the common stock on the Nasdaq National Market under
the symbol "RIVA."
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 10.
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PER SHARE TOTAL
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<S> <C> <C>
Price to the public........................ $ $
Underwriting discount......................
Proceeds to Riva Bancshares................
</TABLE>
Riva Bancshares has granted an over-allotment option to the underwriters. Under
this option, the underwriters may elect to purchase a maximum of 450,000
additional shares from Riva Bancshares within 30 days following the date of this
prospectus to cover over-allotments.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
YOU SHOULD NOTE THAT THESE SECURITIES ARE NOT BANK ACCOUNTS OR DEPOSITS AND ARE
NOT FEDERALLY INSURED BY THE FDIC OR ANY OTHER STATE OR FEDERAL AGENCY.
CIBC WORLD MARKETS
JOHNSON RESEARCH & CAPITAL
INCORPORATED
KELTON INTERNATIONAL LIMITED
The date of this prospectus is , 1999.
<PAGE> 3
RIVA BANCSHARES, INC.
IDENTIFIED MARKETS
(RIVA BANCSHARES, INC. IDENTIFIED MARKETS MAP)
We have targeted St. Louis, Kansas City, Columbia, Jefferson City and
Springfield as our initial markets. Upon the acquisition of Premier Bank, we
will have established management teams in St. Louis, Jefferson City, and
Columbia and banking centers in Columbia and Jefferson City. Immediately
following the offering, we intend to open a banking center in St. Louis.
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 4
Risk Factors................................................ 10
Forward-looking Statements.................................. 16
Use of Proceeds............................................. 16
Dividend Policy............................................. 17
Capitalization.............................................. 18
Dilution.................................................... 19
Selected Consolidated Financial Data........................ 20
Pro Forma Financial Data.................................... 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
Business.................................................... 49
Supervision and Regulation.................................. 58
Management.................................................. 63
Certain Transactions........................................ 69
Principal Shareholders...................................... 70
Description of Capital Stock................................ 71
Shares Eligible for Future Sale............................. 74
Underwriting................................................ 76
Legal Matters............................................... 77
Experts..................................................... 77
Where You Can Find More Information......................... 77
Index to Financial Statements............................... F-1
</TABLE>
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Unless otherwise stated, all information contained in this prospectus assumes no
exercise of the over-allotment option granted to the underwriters.
The underwriters are offering the shares subject to various conditions and may
reject all or part of any order. The shares should be ready for delivery on or
about , 1999.
3
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights information contained in other parts of this prospectus.
Because it is a summary, it does not contain all of the information that you
should consider before investing in our common stock. You should read the entire
prospectus carefully.
RIVA BANCSHARES, INC.
OUR BUSINESS
We formed Riva Bancshares, Inc. to create a multi-market bank serving business
customers who are dissatisfied with the impersonal service delivered by
super-regional and national banks. Our strategy is to capitalize on the
opportunities created by widespread consolidation in the banking industry. We
believe we have a significant opportunity to attract and maintain targeted
banking customers within our identified markets. We will offer a broad range of
banking products and services to small and medium-sized businesses, selected
real estate developers and the principals of these businesses. To execute our
strategy, we have assembled a team of five senior executives who have previously
worked together and, as a group, have more than 85 years of in-market banking
experience.
We will capitalize on our management team's lending expertise by emphasizing
commercial/industrial, construction and commercial real estate loans. In
addition, we intend to provide highly personalized and value-added private
banking services, Internet banking and asset management products for business
owners, entrepreneurs, and other professional and executive customers. To
accelerate the implementation of our business plan, we have agreed to acquire
Premier Bank, an independent state-chartered bank with assets of approximately
$67 million and banking centers in Jefferson City and Columbia, Missouri. Upon
completion of the merger, Premier Bank will be renamed Riva Bank.
OUR MARKET OPPORTUNITY
We believe that an opportunity exists as a result of the consolidation in the
banking industry. We believe this consolidation has created an attractive market
segment between the national and super-regional banks, on the one hand, and
community banks on the other hand. Larger financial institutions do not
generally provide the personalized service expected or demanded by many small to
medium-sized businesses and their principals. Smaller community banks lack the
capital strength to provide larger credit facilities and the customer base to
support the delivery of technologically advanced services. Upon completion of
the offering, we will have a lending capacity in excess of $5 million per
borrower. Our executive management team recognized this market opportunity and
elected to leave established careers in the financial services industry to join
with our chief executive officer in executing our business strategy. We have
selected Missouri for our initial activities because of our management team's
extensive experience in this market, local customer relationships, and the
state's favorable economic and demographic environment. We have targeted St.
Louis, Kansas City, Columbia, Jefferson City and Springfield as our initial
markets. Upon the acquisition of Premier Bank, we will have established
management teams in St. Louis, Jefferson City and Columbia and banking centers
in Columbia and Jefferson City. Immediately following the offering, we intend to
open a banking center in St. Louis.
We consider the Missouri economy and its attendant population and deposit growth
conducive to executing our strategy. Missouri has two prominent metropolitan
areas and is experiencing growth in its secondary cities. As of June 30, 1998,
bank deposits totaled approximately $73 billion and the state-wide population
exceeded 5.4 million. In addition, Missouri is adjacent to eight states, which
will facilitate our expansion into additional banking markets.
Missouri has been greatly affected by bank consolidation as out-of-state
financial institutions have entered the state by acquiring Missouri-based banks.
According to the FDIC, as of December 31, 1987, 596 depository institutions were
located in Missouri. By December 31, 1998, there were a total of 383
4
<PAGE> 6
depository institutions in Missouri, representing a decline of approximately 36%
over the referenced period. Several prominent financial institutions including
Boatmen's National Bank, Mark Twain Bank, Roosevelt Bank, Community Federal, and
United Postal Savings, have been acquired by affiliates of NationsBank, N.A. or
Mercantile Bank, N.A. As further evidence of the consolidation, Mercantile
Bancorporation, Inc., the largest independent banking organization headquartered
in Missouri, recently announced that it had entered into an agreement to be
acquired by Firstar Corp., a super-regional bank holding company based in
Milwaukee, Wisconsin.
THE ACQUISITION OF PREMIER BANK
To accelerate the implementation of our business plan, we agreed, in May 1999,
to acquire Premier Bancshares, Inc. and its wholly-owned subsidiary, Premier
Bank. Premier Bank offers us an existing charter as well as banking centers in
two of our five initially-targeted markets. Premier Bank is currently operating
its business in a manner similar to our business plan, targeting small and
medium-sized businesses and providing a high level of service. Premier Bank has
grown its loan portfolio principally through real estate lending. As of June 30,
1999, Premier Bank had total assets of approximately $67 million. While real
estate loans represent a significant concentration of Premier Bank's loans, we
intend to broaden the focus of our loan portfolio. We will use the acquisition
of Premier Bank as a platform to expand our operations by building upon Premier
Bank's existing infrastructure, core processing and outsourcing relationships.
As the completion of the initial public offering is dependent upon the closing
of the acquisition, the acquisition of Premier Bank will close immediately prior
to the closing of the offering. The purchase price for Premier Bank will be $9
million in shares of our common stock, valued at the public offering price. The
number of shares to be issued in the acquisition will vary depending on the
initial public offering price.
EXPERIENCED EXECUTIVE MANAGEMENT TEAM
Our executive management team includes individuals who have significant
experience serving our target markets. Richard C. Jensen, the President and
Chief Executive Officer of Riva Bancshares, has over 30 years of banking
experience, including 25 years in the St. Louis market. Prior to founding Riva
Bancshares, Mr. Jensen served as President of NationsBank St. Louis, formerly
Boatmen's National Bank of St. Louis, which as of June 30, 1998 had
approximately $5.3 billion in total deposits and 71 branches in the St. Louis
market area. We have hired Allan D. Ivie, IV to serve as the President of the
St. Louis market and John S. Rouse as our Chief Credit Officer. We have also
hired Sanford B. Scott as the Senior Vice President of Commercial Real Estate
and Daniel R. Sills as our Chief Financial Officer. All of these senior officers
have worked with Mr. Jensen at either Boatmen's or NationsBank, and the entire
group possesses over 85 years of banking experience in the Missouri markets.
This management team shares the same credit culture, is committed to the highest
level of customer service and responsiveness, and has substantial experience in
serving small and medium-sized businesses in Missouri. In addition, we will
continue to have the resources of current Premier Bank management, including
Bruce W. Wiley, the President of Premier Bank, who will serve as a director and
President of the Columbia and Jefferson City markets. As we expand into new
markets, we will attract local management teams who have significant banking
experience and strong community contacts for local business development.
OUR BANKING MODEL
Our banking model provides for each of our banking centers to have a high degree
of local autonomy in decision-making and lending authority. We will maintain
strict credit policies and procedures at the holding company level, and will
consolidate administrative functions at our company headquarters in St. Louis.
Our business strategy envisions that each banking center will operate as if it
were an independent community bank providing responsive, personalized service.
We will compensate management based on the performance of their banking centers
as well as our overall financial, operating and market performance. As we enter
new markets, we will undertake a marketing campaign using an officer calling
program and community-based promotions. Each market area will be supported by a
local board of directors, which will be provided with financial incentives to
assist in developing banking relationships throughout the community.
5
<PAGE> 7
OUR ADVANTAGE
We believe that we are well positioned to capitalize on the market opportunity
created by the consolidation in the banking industry because of the following:
- Larger Loans than Local Community Banks. Our capital structure will allow
us to make significantly larger loans than smaller community banks.
- Experienced Management Team. Our bank presidents and loan officers have
significant banking experience which has allowed them to develop valuable
customer relationships within our target markets.
- Local Decision-Making. Our management structure is organized to retain
local decision-making authority so that our officers will be able to provide
our customers with expedited loan decisions.
- Multi-Market Banking Franchise. We intend to expand into other markets
similar to our identified markets primarily through establishing new
branches of Riva Bank. We will also regularly evaluate potential
acquisitions of financial institutions in Missouri, as well as markets in
the adjacent states, that would complement or expand our business.
- Personalized Service. Our staff is committed to providing the type of
personalized service not generally available at larger financial
institutions.
- Competitive Technology. Our capital resources will allow us to acquire
technology solutions currently offered by the major national vendors through
strategic alliances and outsourcing arrangements.
OUR BUSINESS STRATEGY
We will implement our strategy by:
- Targeting small and medium-sized business customers who demand high levels
of personalized attention and customer service;
- Establishing a banking center in St. Louis, expanding into Kansas City and
Springfield, while continuing to enhance our current operations in Columbia
and Jefferson City;
- Staffing banking centers with community-minded and responsive management
teams that will have significant local decision-making authority;
- Operating with a few strategically located offices supported by outsourced
core processing and back room operations to increase efficiencies;
- Enhancing private banking relationships by offering a broad spectrum of
products and services, including securities brokerage services and
investment management services; and
- Offering our customers the convenience and advantages of Internet banking
while targeting businesses that have been identified as Internet users to
leverage our banking centers.
6
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THE OFFERING
<TABLE>
<S> <C>
Common stock offered....................... 3,000,000 shares(1)
Common stock to be issued in the Premier
Bank acquisition......................... 818,182 shares(2)
Common stock to be outstanding after the
offering and the Premier Bank
acquisition.............................. 3,828,182 shares(3)
Use of proceeds............................ To provide additional capital to Premier
Bank, redeem our outstanding preferred
stock, fund expansion and for other
general corporate purposes.
Proposed Nasdaq National Market symbol..... "RIVA"
</TABLE>
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(1) Does not include 450,000 shares which may be issued if the underwriters
decide to exercise their over-allotment option.
(2) Based on an assumed initial public offering price of $11.00 per share.
(3) Includes 10,000 shares of our common stock outstanding prior to the
offering. Does not include:
- 500,000 shares of common stock reserved for issuance under our stock
option plan, of which options to purchase 329,475 shares will be granted
on the offering date;
- warrants to purchase 115,798 shares which were issued to founders of Riva
Bancshares;
- warrants to purchase 100,000 shares which were issued to investors in a
June 1998 private placement; and
- warrants to purchase 350,000 shares to be issued to the Premier
shareholders in connection with the merger.
All of these outstanding options and warrants are exercisable at the initial
public offering price, except for 210,000 warrants to be granted to Premier
shareholders, which are exercisable at 120% of the initial public offering
price.
Our temporary offices are located at 13004 Starbuck Road, St. Louis, Missouri
63141 and our telephone number is (314) 514-8491. We are currently in the
process of negotiating for permanent office space in the St. Louis metropolitan
area.
7
<PAGE> 9
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth the summary of selected consolidated financial
data of Premier Bancshares and Riva Bancshares for the periods indicated.
Premier Bancshares' selected consolidated financial data as of December 31, 1997
and 1998 and for each of the years ended December 31, 1996, 1997, and 1998 are
derived from Premier Bancshares' consolidated financial statements, which have
been audited by KPMG LLP, independent auditors. Riva Bancshares' selected
financial data as of December 31, 1998 and for the period from May 1, 1998 (date
of inception) to December 31, 1998 are derived from Riva Bancshares' financial
statements, which have been audited by KPMG LLP, independent auditors. These
selected consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," Riva Bancshares' financial statements and notes and Premier
Bancshares' consolidated financial statements and notes, and financial and other
information included in other parts of this prospectus.
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PREMIER BANCSHARES RIVA BANCSHARES
--------------------------------------------------------- -------------------------------
SIX MONTHS PERIOD FROM
PERIOD FROM YEARS ENDED ENDED MAY 1, 1998 SIX MONTHS
APRIL 1- DECEMBER 31, JUNE 30, (DATE OF ENDED
DECEMBER 31, ------------------------ --------------- INCEPTION) TO JUNE 30,
1995 1996 1997 1998 1998 1999 DECEMBER 31, 1998 1999
------------ ------ ------ ------ ------ ------ ----------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY INCOME STATEMENT:
Interest income........... $ 515 $1,430 $2,175 $3,440 $1,431 $2,297 $ 21 $ 11
Interest expense.......... 302 883 1,309 2,090 884 1,350 -- --
------- ------ ------ ------ ------ ------ ------- -------
Net interest income....... 213 547 866 1,350 547 947 21 11
Provision for loan
losses.................. 64 80 112 292 74 105 -- --
------- ------ ------ ------ ------ ------ ------- -------
Net interest income after
provision for loan
losses.................. 149 467 754 1,058 473 842 21 11
Noninterest income........ 12 47 90 169 76 87 -- --
Noninterest expense....... 324 627 736 1,196 553 858 143 259
------- ------ ------ ------ ------ ------ ------- -------
Income (loss) before
income tax expense...... (163) (113) 108 31 (4) 71 (122) (248)
Income tax expense........ -- -- 11 9 -- 31 -- --
------- ------ ------ ------ ------ ------ ------- -------
Net income (loss)......... $ (163) $ (113) $ 97 $ 22 $ (4) $ 40 $ (122) $ (248)
======= ====== ====== ====== ====== ====== ======= =======
Basic and dilutive
earnings (loss) per
share................... $ (4.65) $(3.54) $ 2.99 $ 0.55 $(0.11) $ 0.96 $(12.18) $(24.83)
======= ====== ====== ====== ====== ====== ======= =======
PERFORMANCE RATIOS:
Net interest margin(1).... 7.13% 3.05% 3.32% 3.23% 2.95% 3.28%
Efficiency ratio(2)....... 140.00 122.02 87.25 97.48 88.83 82.95
Average shareholders'
equity to average
assets.................. 29.53 16.04 10.88 9.24 9.53 7.11
Return on average
assets.................. (2.04) (0.58) 0.34 0.05 (0.02) 0.13
Return on average
shareholders' equity.... (6.91) (3.60) 3.15 0.53 (0.23) 1.82
</TABLE>
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(1) Computed by dividing net interest income by average earning assets.
(2) Computed by dividing noninterest expense by the sum of net interest income
and noninterest income.
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<TABLE>
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PREMIER BANCSHARES RIVA BANCSHARES
----------------------------------------------------- ---------------------------------
AT DECEMBER 31,
------------------------------------- AT AT AT
1995 1996 1997 1998 JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1999
------- ------- ------- ------- ------------- ----------------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY BALANCE SHEET DATA:
Investment securities.......... $ 5,398 $ 6,256 $ 5,418 $ 6,478 $ 9,397 $ -- $ --
Loans, net..................... 6,264 15,206 23,342 41,171 49,164 -- --
Earning assets................. 13,808 23,543 31,060 53,170 61,342 712 146
Total assets................... 15,082 25,652 33,717 57,756 66,692 884 864
Noninterest-bearing deposits... 341 2,576 1,478 2,817 3,014 -- --
Total deposits................. 11,507 22,268 28,353 48,816 57,329 -- --
Federal Home Loan Bank
advances..................... -- -- 940 3,445 3,782 -- --
Note payable................... 300 300 1,050 750 925 -- --
Shareholders' equity........... $ 3,191 $ 3,016 $ 3,222 $ 4,438 $ 4,335 $877 $629
======= ======= ======= ======= ======= ==== ====
ASSET QUALITY RATIOS:
Allowance for loan losses to
total loans.................. 1.00% 0.78% 0.89% 1.05% 1.01%
Non-performing loans to total
loans........................ -- -- 0.69 0.23 0.37
Net charge-offs to average
loans........................ -- 0.22 0.12 0.20 0.10
CAPITAL RATIOS:
Shareholders' equity to
assets....................... 21.16% 11.76% 9.56% 7.68% 6.50%
Total capital to risk-weighted
assets....................... 38.75 18.63 18.17 11.62 9.79
Tier 1 capital to risk-weighted
assets....................... 38.00 17.92 17.06 10.57 8.80
Tier 1 capital to average
assets....................... 22.46 12.97 10.05 7.87 6.87
</TABLE>
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks below and other information in this prospectus
before deciding to invest in our common stock. If any of the following risks
actually occur, our business, financial condition or results of operations could
be materially and adversely affected. In this event, the trading price of our
common stock could decline, and you may lose all or part of your investment.
RIVA BANCSHARES HAS NO OPERATING HISTORY UPON WHICH TO BASE AN ESTIMATE OF OUR
FUTURE PERFORMANCE
We have no operating history on which to base any estimate of future
performance. We incorporated Riva Bancshares on May 1, 1998 and have not engaged
in any banking operations. Our prospects must be considered in light of the
risks, expenses and difficulties frequently encountered by companies in their
early stages of development. We are at risk of not successfully addressing the
following:
- expansion into our identified markets;
- building our customer base;
- developing and retaining customer loyalty;
- responding to competitive developments;
- attracting, retaining and motivating qualified management and employees;
- maintaining efficient operations through outsourcing of back office
operations; and
- upgrading our technologies, products and services.
IF WE FAIL TO MANAGE GROWTH AS WE PURSUE OUR EXPANSION STRATEGY, IT COULD
NEGATIVELY AFFECT OUR OPERATIONS
Failure to manage our growth effectively or failure to attract and retain
qualified personnel could have a material adverse effect on our business, future
prospects, financial condition or results of operations, and could adversely
affect our ability to successfully implement our business strategy.
We intend to pursue an aggressive growth strategy and our results of operations
will be affected by our ability to:
- identify suitable markets;
- build our customer base;
- maintain credit quality;
- attract sufficient deposits to fund our anticipated loan growth;
- attract qualified bank management in each of our targeted markets;
- negotiate agreements with acceptable terms for the acquisition of existing
banks; and
- maintain adequate regulatory capital.
WE WILL HAVE BROAD DISCRETION IN USING THE PROCEEDS OF THE OFFERING
We will have broad discretion in the application of the net proceeds of this
offering. The timing and specific application of the net proceeds will remain in
the sole discretion of our management. Upon completion of the offering, we
intend to contribute approximately $20 million of the net proceeds to the
capital of Riva Bank to enable Riva Bank to increase the size of its loan
portfolio and to allow Riva Bank to make larger loans as a result of its
increased regulatory lending limit, and to use approximately $1 million to
redeem the outstanding Series A Preferred Stock. The remainder of the net
proceeds will be applied in the future as needed to implement our business plan,
including the opening of a banking center in the St. Louis market. We intend to
accomplish our expansion primarily through the opening of additional banking
centers in our identified markets, but our expansion in our target markets could
include one or more acquisitions of existing financial institutions. You will
not have the opportunity to evaluate the
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economic, financial and other relevant information which will be utilized by us
in determining the application of such proceeds.
OUR SUCCESS LARGELY DEPENDS UPON THE SKILL AND EXPERIENCE OF OUR SENIOR
MANAGEMENT TEAM
The success of our operations will depend upon the services of Richard C.
Jensen, our President and Chief Executive Officer, as well as other senior
officers and managers. The loss of any of these individuals could have a
material adverse effect on our business, future prospects, financial condition
or results of operations. We do not have key man life insurance with respect to
any of our officers. Our future success also depends on our ability to identify,
attract and retain qualified senior officers and other employees in our
identified markets.
WE WILL BE VERY DEPENDENT ON THIRD PARTY SUPPLIERS
We are dependent on third parties to provide a number of our core processing
functions. Our financial condition may suffer if the third parties we depend on
for outsourcing our back office operations, data processing and other products
and services either increase the cost of their services or fail to maintain the
operational integrity of their networks. As a result, the failure of the systems
of any of our third party providers could adversely affect our business
operations and financial condition.
OUR RESULTS OF OPERATIONS WILL BE SIGNIFICANTLY AFFECTED BY THE ABILITY OF OUR
BORROWERS TO REPAY THEIR LOANS
Lending money is an essential part of the banking business. However, borrowers
do not always repay their loans. The risk of non-payment is affected by:
- credit risks of a particular borrower;
- changes in economic and industry conditions;
- the duration of the loan; and
- in the case of a collateralized loan, uncertainties as to the future value
of the collateral.
Generally, commercial/industrial, construction and commercial real estate loans
present a greater risk of non-payment by a borrower than other types of loans.
Our focus on making these types of loans, especially our concentration in
commercial real estate loans, will make us more susceptible to the risk of non-
payment than other banks with a more diversified loan portfolio.
OUR FINANCIAL CONDITION AND OTHER RESULTS OF OPERATIONS WOULD BE ADVERSELY
AFFECTED IF OUR ALLOWANCE FOR LOAN LOSSES IS NOT SUFFICIENT TO ABSORB ACTUAL
LOSSES
There is no precise method of predicting loan losses. We can give no assurance
that our allowance for loan losses will be sufficient to absorb actual loan
losses. Excess loan losses could have a material adverse effect on our financial
condition and results of operations. We will attempt to maintain an appropriate
allowance for loan losses to provide for potential losses in our loan portfolio.
We will periodically determine the amount of the allowance for loan losses based
upon consideration of several factors, including:
- an ongoing review of the quality, mix and size of the overall loan
portfolio;
- historical loan loss experience;
- evaluation of non-performing loans;
- assessment of economic conditions and their effects on the existing
portfolio; and
- the amount and quality of collateral, including guarantees, securing loans.
OUR FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY OUR INABILITY TO ATTRACT
SUFFICIENT DEPOSITS TO FUND OUR ANTICIPATED LOAN GROWTH
We anticipate that we will need to attract significant levels of deposits to
fund our anticipated loan growth. Our ability to attract and maintain such
deposit levels will depend on our ability to attract new deposit
11
<PAGE> 13
customers. To the extent that funds generated by our deposit customers are
insufficient to fund our loan growth, we may need to raise additional funds
through public or private financings. We can give no assurance that we would be
able to obtain these funds on terms that are favorable to us.
WE MAY NOT BE ABLE TO EXPAND THROUGH BRANCHING OR FIND SUITABLE ACQUISITION
CANDIDATES
We can give no assurance that we will be able to expand our existing market
presence or successfully enter new markets. In entering new markets, we may
encounter competitors with greater financial and operational resources. In our
attempt to establish new branches of Riva Bank, we may be unable to find
attractive locations, negotiate favorable lease terms, attract customers and may
encounter additional problems experienced by new branches.
Although we intend to expand primarily through selective branch openings, we
intend to evaluate potential acquisitions that would complement or expand our
business. In doing so, we expect to compete with other potential bidders, many
of which may have greater financial resources than we have. Failure to find
suitable acquisition candidates or expand our market presence would adversely
affect our ability to successfully implement our business strategy.
EVEN IF WE ARE ABLE TO FIND SUITABLE ACQUISITION CANDIDATES, WE MAY NOT BE ABLE
TO INTEGRATE ACQUISITIONS WITH OUR EXISTING OPERATIONS
The process of opening new bank locations and evaluating, negotiating and
integrating acquisition transactions will divert management time and resources.
We can give no assurance that we will be able to integrate successfully or
operate profitably any newly-established banking center or acquired financial
institution. We may experience disruption and incur unexpected expenses in
integrating these acquisitions. Failure to successfully integrate these
acquisitions could negatively affect our operations.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO OBTAIN REGULATORY
APPROVALS IN A TIMELY MANNER
The establishment of branches or the acquisitions of banks in our identified
markets and other market areas will be subject to our receiving the necessary
regulatory approvals. Premier Bank has applied for approval to open a branch in
the St. Louis market. Failure to obtain this approval as well as future
regulatory approvals in a timely manner could have a material adverse effect on
our business, future prospects, financial condition or results of operations.
WE COULD BE ADVERSELY AFFECTED BY CHANGES IN THE LAW, ESPECIALLY CHANGES
DEREGULATING THE BANKING INDUSTRY
We will operate in a highly regulated environment and will be subject to
supervision and regulation by several governmental regulatory agencies,
including the Federal Reserve Board, the FDIC, and the Missouri Division of
Finance. These regulations are generally intended to provide protection for
depositors and customers rather than for the benefit of investors. We will be
subject to changes in federal and state law, regulations, governmental policies,
income tax laws and accounting principles. Deregulation could adversely affect
the banking industry as a whole, including our operations. The effects of these
changes could adversely affect our future operations.
INTEREST RATE VOLATILITY COULD SIGNIFICANTLY HARM OUR BUSINESS
Our results of operations will be materially affected by the monetary and fiscal
policies of the federal government and the regulatory policies of governmental
authorities. Our profitability will be dependent to a large extent on our net
interest income, which is the difference between our income on interest-earning
assets, such as loans, and our expense on interest-bearing liabilities, such as
deposits. A change in market interest rates could adversely affect our earnings.
Consequently, we will be particularly sensitive to interest rate fluctuations.
As we plan to hold most of the loans we originate internally, we will face a
greater risk of rapid changes in interest rates than banks which sell their
loans in secondary markets.
12
<PAGE> 14
WE WILL BE COMPETING WITH MANY LARGER FINANCIAL INSTITUTIONS WHICH HAVE FAR
GREATER FINANCIAL RESOURCES THAN WE HAVE
Competition among financial institutions in the state of Missouri and our
identified markets is intense. We will compete with other bank holding
companies, state and national commercial banks, savings and loan associations,
consumer finance companies, credit unions, securities brokerages, insurance
companies, mortgage banking companies, money market mutual funds, asset-based
non-bank lenders and other financial institutions. Many of these competitors
have greater financial resources and lending limits, larger branch networks, and
are able to offer a broader range of products and services than we can. Failure
to compete effectively for deposit, loan and other banking customers in our
identified markets could have a material adverse effect on our business, future
prospects, financial condition or results of operations.
IF A MARKET FOR OUR COMMON STOCK DOES NOT DEVELOP, YOU MAY NOT BE ABLE TO SELL
YOUR SHARES AS QUICKLY AS YOU MAY LIKE
There is no established public market for our common stock. We can not
guarantee:
- that any market for our common stock will develop;
- that any market for our common stock that develops will be liquid;
- that you will be able to sell the common stock you buy in this offering; or
- that you will be able to sell the common stock you buy in this offering at
any particular price.
Although we expect to have our common stock approved for quotation on The Nasdaq
National Market, an active trading market may not develop or continue after this
offering.
FUTURE SALES OF OUR COMMON STOCK COULD DEPRESS THE PRICE OF OUR COMMON STOCK
Sales of a substantial number of shares of common stock in the public market
following this offering, or the perception that sales could occur, could
adversely affect the market price for our common stock. After the offering, we
will have approximately 3,828,182 shares of common stock outstanding (assuming
no exercise of the underwriters' over-allotment option and assuming that 818,182
shares will be issued in the merger). In addition, we have a stock option plan
under which we have reserved options to purchase 500,000 shares of our common
stock as well as outstanding warrants to purchase 565,798 shares of common
stock. Of the 3,828,182 shares which will be outstanding after the offering, the
3,000,000 shares being sold in this offering will be eligible for sale in the
open market without restriction, except for shares purchased by "affiliates" of
Riva Bancshares. 10,000 shares of common stock will be "restricted securities"
as that term is defined in Rule 144 of the Securities Act of 1933 and will
become eligible for sale pursuant to Rule 144 approximately 90 days after the
closing of the merger. Upon completion of the merger our officers, and directors
and existing shareholders hold an aggregate of approximately 375,000 shares of
common stock and have agreed not to sell any of their shares for 180 days
following the closing of the offering without the prior written consent of the
underwriters. Following the expiration of this 180-day lock-up period, these
shares will be eligible for sale in the public market subject to compliance with
certain volume limitations and other conditions of Rule 144. The market price of
the common stock could be materially adversely affected by the sale or
availability for sale of shares now held by our existing shareholders or of
shares which may be issued under our stock option plan.
FUTURE SALES OF OUR COMMON STOCK BY SHAREHOLDERS OF PREMIER BANCSHARES COULD
DEPRESS THE PRICE OF OUR COMMON STOCK
Sales of a substantial number of shares of our common stock by shareholders of
Premier Bancshares following the offering could adversely affect the market
price for our common stock. Assuming an initial public offering price of $11.00
per share, in connection with the acquisition of Premier, approximately 818,182
shares of our common stock will be issued to shareholders of Premier Bancshares
which will be approximately 21% of the outstanding shares after the offering.
Under the terms of the merger agreement, these 818,182 shares may be sold in
increasing amounts during the 120-day period following the offering.
13
<PAGE> 15
After this 120-day period, all Premier Bancshares' shareholders, except
affiliates, will be able to sell their shares without restriction.
In addition, the directors and executive officers of Premier have agreed not to
sell any of their shares for 180 days following the offering. Following the
expiration of this 180-day lock period, these shares will be eligible for sale
in the public market subject to compliance with certain volume limitations and
other conditions of Rule 145 of the Securities Act of 1933.
OUR SUCCESS WILL BE DEPENDENT UPON ECONOMIC CONDITIONS IN MISSOURI AND THE
SURROUNDING STATES
Our success will significantly depend upon economic conditions in Missouri and
the markets in which we will operate. A prolonged economic downturn or recession
in Missouri or in any of our identified markets, could cause our non-performing
assets to increase, which would cause operating losses, impaired liquidity and
the erosion of capital. Such an economic dislocation or recession could result
from a variety of causes, including a prolonged downturn in various industries
upon which these markets depend, or natural disasters such as floods, tornadoes
or earthquakes. Future adverse changes in the Missouri economy or the local
economies of our identified markets could have a material adverse effect on our
business, future prospects, financial condition or results of operations.
WE DO NOT EXPECT TO PAY DIVIDENDS ON OUR COMMON STOCK FOR THE FORESEEABLE FUTURE
We intend to retain any earnings to enhance Riva Bank's capital structure for
the foreseeable future. As a holding company, Riva Bancshares will have no
significant independent sources of revenue. The principal source of funds to pay
dividends on our common stock, to service indebtedness and to fund operations
will be cash dividends and other payments that we receive from Riva Bank.
Accordingly, any dividends paid to our shareholders will depend on Riva Bank's
earnings, capital requirements, financial conditions and other factors
considered relevant by our board of directors.
WE WILL BE RESTRICTED IN OUR ABILITY TO PAY DIVIDENDS TO OUR SHAREHOLDERS
Premier Bank, which is a Missouri state-chartered bank, is restricted in its
ability to pay dividends under state banking laws and regulations. As of June
30, 1999, Premier Bank was unable to pay cash dividends on its common stock
without regulatory approval. In addition, sound banking practices require the
maintenance of adequate levels of capital. Federal regulatory authorities have
adopted standards for the maintenance of capital of banks, and adherence to such
standards may further limit the ability of banks to pay dividends. Therefore,
any money which is used to provide additional capital for Riva Bank after the
acquisition will be difficult for the holding company to recapture for its own
purposes.
OUR ABILITY TO EFFECTIVELY TARGET THE INTERNET BANKING MARKET WILL LARGELY
DEPEND ON OUR ABILITY TO IMPLEMENT THESE SERVICES AND REMAIN COMPETITIVE WITH
OTHER BANKS OFFERING SUCH SERVICES
The success of our Internet banking products and services will depend in large
part on our ability to implement and maintain the appropriate technology. This
includes finding a competitive provider of these services as well as our ability
to remain competitive with banks that are already using the Internet. If we are
unable to implement and maintain the appropriate technology efficiently, it
could affect our results of operations and our ability to compete with financial
institutions. In addition, as we will specifically target those businesses which
will be more likely to use the Internet for their banking needs, the success of
our Internet banking focus will be linked to the overall success of the
Internet.
IT IS POSSIBLE THAT OUR COMPUTER SYSTEMS, OR THOSE OF OUR DATA PROCESSING
VENDOR, WILL FAIL TO OPERATE PROPERLY BEGINNING JANUARY 1, 2000
As the year 2000 approaches, an important business issue has emerged regarding
existing application software programs and operating systems. Many existing
application software and operating products were designed to accommodate only a
two-digit year. For example, "99" is stored on the system to represent 1999. As
a result, any computer programs or equipment that are date dependent may
recognize a date
14
<PAGE> 16
using "00" as the year 1900 rather than 2000. The business of many of our
customers may be negatively affected by the Year 2000 issue, and any financial
difficulties incurred by our customers in connection with the century change
could negatively affect such customer's ability to repay loans. External
factors, including electric and telephone service, are beyond our control and
the failure of such systems could have a material adverse effect on us, our
customers and third parties on whom we will rely for our day-to-day operations.
Premier Bank uses Computer Services Incorporated, a third-party vendor, to
provide its primary banking applications, including core processing systems. In
the event that Premier, CSI or its other significant vendors or loan customers
do not successfully and timely achieve Year 2000 compliance, our business,
future prospects, financial condition or results of operations could be
materially adversely affected.
THE MARKET PRICE OF OUR COMMON STOCK AFTER THE OFFERING MAY BE INFLUENCED BY A
NUMBER OF FACTORS WHICH ARE BEYOND OUR CONTROL
If a market develops for our common stock after this offering, the price for the
common stock will be determined in the market and may be influenced by a number
of factors beyond our control. These factors include:
- depth and liquidity of the market;
- investor perceptions of our company;
- changes in conditions or trends in the banking industry or in the industries
of our significant customers;
- publicly traded comparable companies; and
- general economic and political conditions.
OUR RESULTS MAY FLUCTUATE FROM QUARTER TO QUARTER WHICH MAY AFFECT THE PRICE OF
OUR COMMON STOCK
The trading price of our common stock could be subject to significant
fluctuations in response to quarterly variations in our actual or anticipated
operating results, changes in general market conditions and other factors. In
particular, our quarterly revenues will be difficult to forecast and our
expected expense levels are based in part on our expansion strategy in
anticipation of loan growth and revenues generated from the new banking centers.
If our revenue levels are below expectations, we may be unable or unwilling to
reduce expenses proportionately and our operating results would likely be
adversely affected. Therefore, prior to the full implementation of our business
strategy, we believe that period to period comparisons of our results may not be
as meaningful as those of a company with a history of operations and should not
be relied upon as indications of future performance. It is possible that in
future quarters our operating results will be below the expectations of public
market analysts and investors. If this happens, the market price of our common
stock would likely be negatively affected. In recent years, significant price
and volume fluctuations have occurred in the stock prices of companies that
often have been unrelated or disproportionate to their operating performance. We
can give no assurance that the market price of our common stock will not decline
below the public offering price.
OUR CERTIFICATE OF INCORPORATION CONTAINS PROVISIONS WHICH COULD SERVE TO DETER
OR PREVENT TAKE-OVER ATTEMPTS BY A POTENTIAL PURCHASER OF SHARES OF OUR COMMON
STOCK WHO WOULD BE WILLING TO PAY A PREMIUM OVER MARKET PRICE
Our Certificate of Incorporation contains provisions which give the board of
directors the ability to deter or prevent a merger with a third party, even if
the owners of a majority of the common stock were to favor such a transaction.
Our Certificate of Incorporation also authorizes the board of directors to issue
a series of preferred stock without shareholder action. The issuance of
preferred stock could discourage a third party from attempting to acquire, or
make it more difficult for a third party to acquire, a controlling interest in
our company, and could adversely affect the voting power or other rights of
holders of the common stock. In addition, our Certificate of Incorporation
establishes a staggered board of directors, which means that only one-third of
the members of our board of directors is elected each year and each
15
<PAGE> 17
director serves for a term of three years. These provisions make it more
difficult for a third party to achieve a change in control in our company
without approval of the board of directors. As a result,
you may be deprived of opportunities to sell some or all of your shares at
prices that represent a premium over market prices.
AS AN INVESTOR IN THE OFFERING, YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION
Purchasers in the offering will experience immediate and substantial dilution in
the net tangible book value of the common stock from the initial public offering
price. Without taking into account any changes in net tangible book value after
June 30, 1999, other than to give effect to the issuance of an estimated 818,182
shares in the merger and the sale of 3,000,000 shares of common stock in this
offering, based upon an initial public offering price of $11.00 per share (the
mid-point of the estimated range) and after deducting the underwriting discount
and the estimated offering expenses, our net tangible book value at June 30,
1999 would have been approximately $34.2 million or $8.92 per share. This
represents an immediate increase in net tangible book value of $45.92 per share
to the existing shareholders and an immediate dilution in the net tangible book
value of $2.08 to investors purchasing shares in the offering.
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking information.
These statements are found in the sections entitled "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Dividend Policy," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business." They
include information concerning:
- growth and acquisition strategy;
- liquidity and capital expenditures;
- use of proceeds of the offering;
- financing plans;
- industry trends; and
- payment of dividends.
You can identify these statements by use of terms such as "expect," "believe,"
"goal," "plan," "intend," "estimate," "may," and "will" or similar words. These
forward-looking statements involve known and unknown risks, uncertainties and
other factors, including those described in the "Risk Factors" section and other
parts of this prospectus, that could cause our actual results to differ
materially from those anticipated in these forward-looking statements.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 3,000,000 shares of
common stock will be approximately $30.2 million. If the underwriters fully
exercise the over-allotment option, the net proceeds of the shares sold by Riva
Bancshares will be approximately $34.8 million. "Net proceeds" is what we expect
to receive after paying the underwriting discount and offering expenses. For the
purpose of estimating net proceeds, we are assuming that the public offering
price will be $11.00 per share.
16
<PAGE> 18
Of the net proceeds we receive in this offering, we anticipate using
approximately $20 million to provide Premier Bank with additional capital which
will enable Premier Bank to increase the size of its loan portfolio and allow
Premier Bank to make larger loans as a result of its increased regulatory
lending limit. The additional $20 million in capital will provide Riva Bank with
the additional financial resources to initially fund our banking operations and
to attract additional management to staff our new banking offices as we expand
into our identified markets.
Of the remaining net proceeds for which we have identified uses, we anticipate
using:
- $999,000 to redeem the outstanding 99,900 shares of Series A Preferred
Stock; and
- $90,000 to pay a finder's fee to an affiliate in connection with the
acquisition of Premier Bank.
The remaining net proceeds will be retained at the holding company level to fund
our expansion primarily through branching, including the opening of a banking
center in the St. Louis market, and the acquisition of existing banks in
Missouri and the adjacent states and for other general corporate purposes.
Pending these uses, we will invest the net proceeds of the offering in
short-term, interest-bearing investment-grade securities, certificates of
deposits or guaranteed obligations of the United States.
Our Series A Preferred Stock was issued in June 1998 to a group of European
investors to provide capital primarily to support our start-up costs. Our
directors and officers and their affiliates do not own any shares of the Series
A Preferred Stock. We intend to redeem the Series A Preferred Stock at a
redemption price of $10.00 per share after this offering. In addition, we intend
to pay a $90,000 finder's fee to T. Stephen Johnson & Associates, Inc., an
affiliate of ours, in connection with the acquisition of Premier. The finder's
fee represents one percent of the purchase price of Premier.
Other than the acquisition of Premier, we have no understandings or agreements
with respect to any acquisition.
DIVIDEND POLICY
We have not declared or distributed any dividends to our shareholders since we
incorporated. Our board of directors intends, for the foreseeable future, to
follow a policy of retaining any earnings to provide funds to operate and expand
our businesses. Therefore, it is not likely that any cash dividends on the
common stock will be declared for the foreseeable future.
Because Riva Bancshares' principal operations will be conducted through Riva
Bank, if we decide to pay dividends, Riva Bancshares will generate cash to pay
dividends primarily through dividends paid to the holding company from Riva
Bank. Accordingly, any dividends paid to our shareholders will depend on Riva
Bank's earnings, capital requirements, financial condition and other factors
considered relevant by our board of directors. Premier Bank, which is a Missouri
state-chartered bank, is currently restricted in its ability to pay dividends
under state banking laws and regulations. As of June 30, 1999, Premier Bank was
unable to pay cash dividends on its common stock without regulatory approval.
Under Missouri law, a Missouri state bank may not pay dividends from its
capital. All dividends must be paid out of undivided profits, after deducting
expenses and losses. A Missouri state bank whose surplus account for each
dividend period does not equal at least 40% of the amount of its capital is
required to transfer to its surplus account 10% of its net income for such
dividend period. Retained earnings in excess of any such required transfer to
surplus are available for dividends. In addition, sound banking practices
require the maintenance of adequate levels of capital. Federal regulatory
authorities have adopted standards for the maintenance of capital of banks, and
adherence to such standards may further limit the ability of banks to pay
dividends.
17
<PAGE> 19
CAPITALIZATION
The following table shows:
- the capitalization of Riva Bancshares as of June 30, 1999;
- the capitalization of Riva Bancshares on a pro forma basis to reflect the
issuance of an estimated 818,182 shares in connection with the acquisition
of Premier (at an assumed initial public offering price of $11.00 per
share); and
- the capitalization of Riva Bancshares on a pro forma basis, as adjusted to
reflect the issuance of an estimated 818,182 shares in connection with the
acquisition of Premier, the sale of 3,000,000 shares of common stock in this
offering (at an assumed initial public offering price of $11.00 per share),
the repurchase of 99,900 shares of preferred stock at a redemption price of
$10.00 per share.
The following table should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," Riva Bancshares'
financial statements and notes and Premier's consolidated financial statements
and notes and financial and other information included in other parts of this
prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------------------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
FOR ACQUISITION OF FOR ACQUISITION
RIVA BANCSHARES PREMIER AND OFFERING
--------------- ------------------ ---------------
(in thousands)
<S> <C> <C> <C>
Shareholders' equity:
Preferred stock, $.01 par value per share;
1,000,000 shares authorized; 99,900, 99,900
and 0 shares issued and outstanding........ $ 999 $ 999 $ --
Common stock, $.01 par value per share;
20,000,000 shares authorized; 10,000,
828,182 and 3,828,182 shares issued and
outstanding(1)............................. -- 8 38
Additional paid-in capital.................... -- 4,327 34,487
Warrants to acquire 215,798 shares of common
stock at the initial public offering
price...................................... -- 108 108
Retained earnings (accumulated deficit)....... (370) (151) (151)
Accumulated other comprehensive loss.......... -- (109) (109)
------- ------ -------
Total shareholders' equity................. $ 629 $5,182 $34,373
======= ====== =======
</TABLE>
- ---------------------------
(1) Excludes 500,000 shares reserved for issuance under our stock option plan
and 355,798 shares issuable upon the exercise of the warrants, all of which
are exercisable at the initial public offering price and 210,000 shares
issuable upon the exercise of warrants, which are exercisable at 120% of the
initial public offering price.
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<PAGE> 20
DILUTION
Riva Bancshares' net tangible book value at June 30, 1999 was approximately
$(370,000) or $(37.00) per share of common stock. Net tangible book value per
share represents the amount of our total assets less intangible assets and total
liabilities, divided by the total number of shares of common stock outstanding.
After giving effect to:
- the sale of 3,000,000 shares of common stock in this offering at an assumed
initial public offering price of $11.00 per share and the use of proceeds
from the offering; and
- the issuance of an estimated 818,182 shares in connection with the
acquisition of Premier
our pro forma net tangible book value at June 30, 1999 would have been $34.2
million or $8.92 per share of common stock. This represents an immediate
increase in such pro forma net tangible book value of $45.92 per share to our
existing shareholders, an immediate increase in the pro forma net tangible book
value of $3.62 per share to shareholders of Premier Bancshares and an immediate
dilution in the pro forma net tangible book value of $2.08 per share to
investors purchasing shares of common stock in the offering.
The following table illustrates the resulting per share dilution to new
investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1).......... $11.00
Net tangible book value per share at June 30, 1999........ $(37.00)
Increase per share attributable to Premier Bancshares'
shareholders........................................... 41.79
Increase per share attributable to new investors(2)....... 4.13
-------
Pro forma net tangible book value per share after the
offering.................................................. 8.92
------
Dilution per share to new investors(3)...................... $ 2.08
======
</TABLE>
- ---------------------------
(1) Before deducting the underwriting discount and estimated offering expenses
payable by us.
(2) After deducting the underwriting discount and estimated offering expenses
payable by us.
(3) Excludes 500,000 shares of common stock reserved for issuance under our
stock option plan and 215,798 shares issuable upon exercise of the warrants.
The following table summarizes, on a pro forma basis as of June 30, 1999, the
number of shares of common stock purchased from Riva Bancshares and the total
consideration paid, and the average per share consideration paid to Riva
Bancshares by existing shareholders, shareholders of Premier Bancshares and by
new investors purchasing the shares of common stock in this offering, assuming
an initial public offering price of $11.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders............. 10,000 0.26% $ -- --% $ 0.01
Premier Bancshares'
shareholders.................... 818,182 21.37 4,335,101 11.61 5.30
New investors..................... 3,000,000 78.37 33,000,000 88.39 11.00
--------- ------ ----------- ------
Total........................ 3,828,182 100.00% $37,335,101 100.00%
========= ====== =========== ======
</TABLE>
19
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth selected consolidated financial data of Premier
Bancshares and Riva Bancshares for the periods indicated. Premier Bancshares'
selected consolidated financial data as of December 31, 1997 and 1998 and for
each of the years ended December 31, 1996, 1997 and 1998 are derived from
Premier Bancshares' consolidated financial statements, which have been audited
by KPMG LLP, independent auditors. Riva Bancshares' selected financial data as
of December 31, 1998 and for the period from May 1, 1998 (date of inception) to
December 31, 1998 are derived from Riva Bancshares' financial statements, which
have been audited by KPMG LLP, independent auditors. These selected consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," Riva Bancshares'
financial statements and notes, Premier Bancshares' consolidated financial
statements and notes, and financial and other information included in other
parts of this prospectus.
<TABLE>
<CAPTION>
PREMIER BANCSHARES
-----------------------------------------------------------
PERIOD FROM SIX MONTHS ENDED
APRIL 1 - YEARS ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------ -----------------
1995 1996 1997 1998 1998 1999
------------ ------ ------ ------ ------- -------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY INCOME
STATEMENT:
Interest income...... $ 515 $1,430 $2,175 $3,440 $1,431 $2,297
Interest expense..... 302 883 1,309 2,090 884 1,350
------ ------ ------ ------ ------ ------
Net interest
income............. 213 547 866 1,350 547 947
Provision for loan
losses............. 64 80 112 292 74 105
------ ------ ------ ------ ------ ------
Net interest income
after provision for
loan losses........ 149 467 754 1,058 473 842
Noninterest income... 12 47 90 169 76 87
Noninterest
expense............ 324 627 736 1,196 553 858
------ ------ ------ ------ ------ ------
Income (loss) before
income tax
expense............ (163) (113) 108 31 (4) 71
Income tax expense... -- -- 11 9 -- 31
------ ------ ------ ------ ------ ------
Net income (loss).... $ (163) $ (113) $ 97 $ 22 $ (4) $ 40
====== ====== ====== ====== ====== ======
Basic and dilutive
earnings (loss) per
share.............. $(4.65) $(3.54) $ 2.99 $ 0.55 $(0.11) $ 0.96
====== ====== ====== ====== ====== ======
PERFORMANCE RATIOS:
Net interest
margin(1).......... 7.13% 3.05% 3.32% 3.23% 2.95% 3.28%
Efficiency
ratio(2)........... 140.00 122.02 87.25 97.48 88.83 82.95
Average shareholders'
equity to average
assets............. 29.53 16.04 10.88 9.24 9.53 7.11
Return on average
assets............. (2.04) (0.58) 0.34 0.05 (0.02) 0.13
Return on average
shareholders'
equity............. (6.91) (3.60) 3.15 0.53 (0.23) 1.82
<CAPTION>
RIVA BANCSHARES
--------------------------------------------
PERIOD FROM
MAY 1, 1998 SIX MONTHS
(DATE OF INCEPTION) TO ENDED
DECEMBER 31, 1998 JUNE 30, 1999
---------------------------- -------------
(dollars in thousands, except per share data)
<S> <C> <C>
SUMMARY INCOME
STATEMENT:
Interest income...... $ 21 $ 11
Interest expense..... -- --
------- -------
Net interest
income............. 21 11
Provision for loan
losses............. -- --
------- -------
Net interest income
after provision for
loan losses........ 21 11
Noninterest income... -- --
Noninterest
expense............ 143 259
------- -------
Income (loss) before
income tax
expense............ (122) (248)
Income tax expense... -- --
------- -------
Net income (loss).... $ (122) $ (248)
======= =======
Basic and dilutive
earnings (loss) per
share.............. $(12.18) $(24.83)
======= =======
PERFORMANCE RATIOS:
Net interest
margin(1)..........
Efficiency
ratio(2)...........
Average shareholders'
equity to average
assets.............
Return on average
assets.............
Return on average
shareholders'
equity.............
</TABLE>
- ---------------------------
(1) Computed by dividing net interest income by average earning assets.
(2) Computed by dividing noninterest expense by the sum of net interest income
and noninterest income.
20
<PAGE> 22
<TABLE>
<CAPTION>
PREMIER BANCSHARES RIVA BANCSHARES
----------------------------------------------------- ---------------------------------
AT DECEMBER 31,
------------------------------------- AT AT AT
1995 1996 1997 1998 JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1999
------- ------- ------- ------- ------------- ----------------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY BALANCE SHEET DATA:
Investment securities......... $ 5,398 $ 6,256 $ 5,418 $ 6,478 $ 9,397 $ -- $ --
Loans, net.................... 6,264 15,206 23,342 41,171 49,164 -- --
Earning assets................ 13,808 23,543 31,060 53,170 61,342 712 146
Total assets.................. 15,082 25,652 33,717 57,756 66,692 884 864
Noninterest-bearing
deposits.................... 341 2,576 1,478 2,817 3,014 -- --
Total deposits................ 11,507 22,268 28,353 48,816 57,329 -- --
Federal Home Loan Bank
advances.................... -- -- 940 3,445 3,782 -- --
Note payable.................. 300 300 1,050 750 925 -- --
Shareholders' equity.......... $ 3,191 $ 3,016 $ 3,222 $ 4,438 $ 4,335 $877 $629
======= ======= ======= ======= ======= ==== ====
ASSET QUALITY RATIOS:
Allowance for loan losses to
total loans................. 1.00% 0.78% 0.89% 1.05% 1.01%
Non-performing loans to total
loans....................... -- -- 0.69 0.23 0.37
Net charge-offs to average
loans....................... -- 0.22 0.12 0.20 0.10
CAPITAL RATIOS:
Shareholders' equity to
assets...................... 21.16% 11.76% 9.56% 7.68% 6.50%
Total capital to risk-weighted
assets...................... 38.75 18.63 18.17 11.62 9.79
Tier 1 capital to
risk-weighted assets........ 38.00 17.92 17.06 10.57 8.80
Tier 1 capital to average
assets...................... 22.46 12.97 10.05 7.87 6.87
</TABLE>
21
<PAGE> 23
PRO FORMA FINANCIAL DATA
The unaudited pro forma summary income statement data set forth below assumes
that Riva Bancshares was formed on January 1, 1998 and gives effect to the
acquisition of Premier Bancshares as if the acquisition had occurred on January
1, 1998 and was accounted for as a reverse acquisition. The unaudited pro forma
summary balance sheet data set forth below assumes that Riva Bancshares was
formed on the date indicated. The pro forma financial data set forth below does
not include the effects of this offering. The pro forma financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," Riva Bancshares' financial statements and
notes, Premier Bancshares' consolidated financial statements and notes, and
financial and other information included elsewhere in this prospectus. The pro
forma results are not necessarily indicative of the results that would have been
achieved had the acquisition of Premier Bank occurred on January 1, 1998, or of
future operations.
<TABLE>
<CAPTION>
RIVA PREMIER RIVA
BANCSHARES BANCSHARES BANCSHARES
------------------- ------------ -------------
PERIOD FROM
MAY 1, 1998
(DATE OF INCEPTION) YEAR ENDED
TO DECEMBER 31, PRO FORMA PRO FORMA
DECEMBER 31, 1998 1998 ADJUSTMENTS(1) CONSOLIDATED
------------------- ------------ -------------- -------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
SUMMARY INCOME
STATEMENT DATA:
Interest income..... 21....$....... $ 3,440 $ -- $ 3,461
Interest expense.... --........... 2,090 -- 2,090
------- ------- ----- -------
Net interest
income............ 21........... 1,350 -- 1,371
Provision for loan
losses............ --........... 292 -- 292
------- ------- ----- -------
Net interest income
after provision
for loan losses... 21 1,058 -- 1,079
Noninterest
income............ -- 169 -- 169
Noninterest
expense........... 143 1,196 120 1,459
------- ------- ----- -------
Income (loss) before
income tax
expense........... (122) 31 (120) (211)
Income tax
expense........... -- 9 -- 9
------- ------- ----- -------
Net income (loss)... $ (122) $ 22 $(120) $ (220)
======= ======= ===== =======
Basic and dilutive
earnings (loss)
per share......... $(12.18) $ 0.55 $ (0.27)(2)
======= ======= =======
SUMMARY BALANCE SHEET
DATA:
Investment
securities........ $ -- $ 6,478 $ -- $ 6,478
Loans, net.......... -- 41,171 -- 41,171
Earning assets...... 712 53,170 -- 53,882
Intangible asset.... -- -- 218 218
Total assets 884.......... 57,756 218 58,858
Noninterest-bearing
deposits.......... -- 2,817 -- 2,817
Total deposits...... -- 48,816 -- 48,816
Federal Home
Loan Bank advances... -- 3,445 -- 3,445
Note payable........ -- 750 -- 750
Shareholders'
equity............ 877 4,438 218 5,533
<CAPTION>
RIVA PREMIER
BANCSHARES BANCSHARES RIVA BANCSHARES
-------------- -------------- ---------------
SIX MONTHS SIX MONTHS
ENDED ENDED PRO FORMA PRO FORMA
JUNE 30, 1999 JUNE 30, 1999 ADJUSTMENTS(1) CONSOLIDATED
-------------- -------------- -------------- ---------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
SUMMARY INCOME
STATEMENT DATA:
Interest income..... $ 11 $ 2,297 $ -- $ 2,308
Interest expense.... -- 1,350 -- 1,350
------- ------- ---- -------
Net interest
income............ 11 947 -- 958
Provision for loan
losses............ -- 105 -- 105
------- ------- ---- -------
Net interest income
after provision
for loan losses... 11 842 -- 853
Noninterest
income............ -- 87 -- 87
Noninterest
expense........... 259 858 50 1,167
------- ------- ---- -------
Income (loss) before
income tax
expense........... (248) 71 (50) (227)
Income tax
expense........... -- 31 -- 31
------- ------- ---- -------
Net income (loss)... $ (248) $ 40 $(50) $ (258)
======= ======= ==== =======
Basic and dilutive
earnings (loss)
per share......... $(24.83) $ 0.96 $ (0.31)(2)
======= ======= =======
SUMMARY BALANCE SHEET
DATA:
Investment
securities........ $ -- $ 9,397 $ -- $ 9,397
Loans, net.......... -- 49,164 -- 49,164
Earning assets...... 146 61,342 -- 61,488
Intangible asset.... -- -- 218 218
Total assets 864 66,692 218 67,774
Noninterest-bearing
deposits.......... -- 3,014 -- 3,014
Total deposits...... -- 57,329 -- 57,329
Federal Home
Loan Bank advances... -- 3,782 -- 3,782
Note payable........ -- 925 -- 925
Shareholders'
equity............ 629 4,335 218 5,182
</TABLE>
- ---------------------------
(1) In connection with the sale of units to certain investors and the sale of
shares of common stock and granting of warrants to the founders of Riva
Bancshares, goodwill in the amount of $217,799 is reflected in the pro forma
financial statements. The goodwill
22
<PAGE> 24
is being amortized on an accelerated basis over three years, the term of the
employment contracts of the key members of Riva Bancshares management.
(2) Pro forma earnings (loss) per share have been computed based on an estimated
828,182 shares of common stock outstanding, which includes 818,182 shares of
common stock to be issued to the shareholders of Premier in connection with
the merger and 10,000 shares of common stock of Riva Bancshares which are
currently outstanding.
23
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RIVA BANCSHARES, INC.
Riva Bancshares was incorporated on May 1, 1998 to acquire or establish a bank
in Missouri. Prior to the acquisition of Premier, Riva Bancshares will have no
operating activities. The acquisition of Premier will be closed immediately
prior to the closing of the offering. Upon completion of the merger, Premier's
shareholders will own greater than 50% of the outstanding common stock of Riva
Bancshares, excluding the issuance of the shares in connection with the
offering. Accordingly, the merger will be accounted for as if Premier had
acquired Riva Bancshares, the consolidated financial statements of Premier will
become the historical consolidated financial statements of Riva Bancshares.
Riva Bancshares has funded its start-up and organization costs through the sale
of units, consisting of common stock, preferred stock and warrants to purchase
shares of common stock. Riva Bancshares operated as a development company and
had no operating revenue during 1998. Costs incurred by Riva Bancshares during
1998 primarily related to costs associated with its formation, the development
of its business plan and identification of a potential merger candidate. At
December 31, 1998, the assets of Riva Bancshares consisted solely of the
remaining proceeds from the sale of units. Accordingly, Management's Discussion
and Analysis of Financial Condition and Results of Operations of Riva Bancshares
at December 31, 1998 and for the period then ended is not included in this
prospectus.
PREMIER BANCSHARES, INC.
Management believes that the acquisition of Premier will enable Riva Bancshares
to implement its strategy in the Jefferson City, Columbia and St. Louis market
areas and provide a platform for further expansion into other identified
markets. The purpose of the following discussion is to focus on significant
changes in the results of operations and the financial condition of Premier
during the three years ended December 31, 1996, 1997 and 1998. This discussion
and analysis is intended to supplement information contained in the accompanying
consolidated financial statements and the selected financial data and other
financial information presented elsewhere in this prospectus.
SUMMARY
In April, 1998, Premier opened a branch in Columbia, Missouri. Due primarily to
the one-time start-up costs related to this opening, the increased general
expenses associated with operating an additional branch, and additional
provision for loan losses resulting from the growth in Premier's loan portfolio,
Premier's net income for 1998 decreased $75,000, or 76.9%, to $22,000 from
$97,000 in 1997, an increase of $210,000 from the 1996 net loss of $113,000.
Basic and dilutive earnings (loss) per share were $0.55 for 1998, $2.99 for 1997
and $(3.54) in 1996. 1996 was the first full year of operations for Premier.
Losses or reduced earnings are typical for banks during start-up periods. The
basic and dilutive earnings (loss) per share amounts are based upon Premier's
historical weighted average number of shares outstanding and do not reflect any
pro forma adjustments relating to the offering or the exchange of shares upon
consummation of the merger.
The decrease in net income from 1997 to 1998 was primarily attributable to
increased noninterest expense and provision for loan losses, partially offset by
increased net interest income and noninterest income. Noninterest expense
increased $460,000, or 62.6%, from $736,000 in 1997 to $1.2 million in 1998. The
provision for loan losses increased $180,000, or 159.8%, from $112,000 in 1997
to $292,000 in 1998. Net interest income increased $484,000 to $1.4 million in
1998 from $866,000 in 1997. Noninterest income increased $79,000, or 88.7%, to
$169,000 in 1998 from $90,000 in 1997.
Total assets at December 31, 1998 were $57.8 million, an increase of $24.0
million, or 71.3%, over total assets of $33.7 million at December 31, 1997.
Loans, net increased 76.4% to $41.2 million at
24
<PAGE> 26
December 31, 1998, from $23.3 million at December 31, 1997. Total deposits
increased 72.7% to $48.8 million at December 31, 1998 from $28.4 million at
December 31, 1997.
Shareholders' equity increased to $4.4 million at December 31, 1998 from $3.2
million at December 31, 1997. This increase was attributable to the proceeds
from the issuance of 9,231 additional shares of common stock totaling $1.2
million, retained net income of $22,000, and an increase in accumulated other
comprehensive income resulting from unrealized gains on debt and marketable
equity securities available-for-sale of $26,000, partially offset by the
purchase of 240 shares of treasury stock for $32,000.
The operating performance of Premier is reflected in the calculations of net
income as a percentage of average total assets ("Return on Average Assets") and
net income as a percentage of average shareholders' equity ("Return on Average
Equity"). During 1998, the Return on Average Assets and Return on Average Equity
were 0.05% and 0.53%, respectively, compared to 0.34% and 3.15%, respectively,
during 1997. Premier's ratio of total shareholders' equity to total assets
decreased to 7.68% at December 31, 1998 from 9.55% at December 31, 1997.
25
<PAGE> 27
RESULTS OF OPERATIONS
Net Interest Income
The following table sets forth, for the periods indicated, information related
to Premier's average balance sheet, its yields on average earning assets and its
average rates on interest-bearing liabilities. Such yields and rates are derived
by dividing income or expense by the average balance of the corresponding assets
or liabilities. Average balances have been derived from the daily balances
throughout the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1996 1997 1998
--------------------------- --------------------------- ---------------------------
INTEREST INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- -------- ------ ------- -------- ------ ------- -------- ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans(1)................. $10,856 $1,008 9.29% $19,212 $1,750 9.11% $31,734 $2,850 8.98%
Securities and interest-
bearing deposits(2).... 5,857 359 6.13 5,670 356 6.29 6,474 408 6.29
Federal funds sold....... 1,225 63 5.12 1,245 69 5.52 3,621 182 5.03
------- ------ ------- ------ ------- ------
Total earning assets... 17,938 1,430 7.97 26,127 2,175 8.33 41,829 3,440 8.22
Cash and due from banks.... 375 571 1,111
Premises and equipment,
net...................... 1,168 1,382 1,895
Other assets............... 204 383 811
Allowance for loan
losses................... (93) (157) (290)
------- ------- -------
Total assets........... $19,592 $28,306 $45,356
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing
liabilities:
NOW...................... $ 429 $ 13 3.05% $ 654 $ 20 3.07% $ 828 $ 22 2.69%
Money market deposits.... 1,534 67 4.38 2,339 104 4.43 3,762 149 3.96
Savings deposits......... 1,681 87 5.16 4,615 243 5.26 8,572 402 4.68
Certificates of
deposit................ 11,677 688 5.89 15,382 886 5.76 22,797 1,312 5.75
FHLB advances............ -- -- -- 404 22 5.42 2,134 133 6.21
Note payable............. 300 28 9.25 425 34 7.99 838 72 8.65
------- ------ ------- ------ ------- ------
Total interest-bearing
liabilities.......... 15,621 883 5.65 23,819 1,309 5.50 38,931 2,090 5.37
------- ------ ------- ------ ------- ------
Noninterest-bearing demand
deposits................. 721 1,253 1,982
Other liabilities.......... 108 155 251
Shareholders' equity....... 3,142 3,079 4,192
------- ------- -------
Total liabilities and
shareholders'
equity............... $19,592 $28,306 $45,356
======= ======= =======
Net interest income........ $ 547 $ 866 $1,350
====== ====== ======
Net interest spread........ 2.32% 2.83% 2.85%
Net interest margin........ 3.05% 3.32% 3.23%
</TABLE>
- ---------------------------
(1) Nonaccrual loans are included in the average loan amounts outstanding.
Interest on nonaccrual loans is recorded when received.
(2) The yield on securities is computed based upon the average balance of
securities at amortized cost and does not reflect the unrealized gains or
losses on such securities.
Net interest income is the principal component of a financial institution's
income stream and represents the difference or spread between interest and
certain fee income generated from earning assets and the interest expense paid
on deposits and other borrowed funds. Fluctuations in interest rates, as well as
26
<PAGE> 28
volume and mix changes in earning assets and interest-bearing liabilities, can
materially impact net interest income. Premier had no investments in tax-exempt
securities during 1996, 1997 and 1998. Accordingly, no adjustment is necessary
to facilitate comparisons on a taxable equivalent basis.
Net interest income increased $484,000 to $1.4 million in 1998 from $866,000 in
1997. This increase in net interest income can be attributed to the growth in
average earning assets, partially offset by the growth in interest-bearing
deposits, Federal Home Loan Bank advances and the note payable. The trend in net
interest income is commonly evaluated using net interest margin and net interest
spread. The net interest margin, or net yield on average earning assets, is
computed by dividing fully taxable equivalent net interest income by average
earning assets. The net interest margin decreased 9 basis points to 3.23% in
1998 on average earning assets of $41.8 million from 3.32% in 1997 on average
earning assets of $26.1 million. This change is primarily due to a 11 basis
point decrease in the average yield on earning assets to 8.22% in 1998 from
8.33% in 1997, partially offset by a 13 basis point decrease in the average rate
paid on interest-bearing liabilities to 5.37% in 1998 from 5.50% in 1997. The
decreased yield on earning assets was primarily the result of lower market rates
on loans, which decreased from 9.11% in 1997 to 8.98% in 1998. The decrease in
the cost of interest-bearing liabilities is attributable to a decrease in rates
on all interest-bearing deposit categories, partially offset by an increase in
the average rates paid on Federal Home Loan Bank advances and the note payable.
Net interest income increased $319,000 to $866,000 in 1997 from $547,000 in
1996. This increase in net interest income is attributable to the growth in and
yield on average earning assets and the decrease in the average rate paid on
interest-bearing liabilities, partially offset by the growth in interest-bearing
liabilities. Net interest margin increased 27 basis points to 3.32% in 1997 on
average earning assets of $26.1 million from 3.05% in 1996 on average earning
assets of $17.9 million. The increased yield on earning assets was primarily the
result of the growth in average loans from $10.9 million in 1996 to $19.2
million in 1997, partially offset by a decrease in the average rate earned on
loans from 9.29% in 1996 to 9.11% in 1997. The decrease in the cost of
interest-bearing liabilities is attributable to a decrease in the average rates
paid on certificates deposits and the note payable.
The net interest spread increased two basis points to 2.85% in 1998 from the
1997 net interest spread of 2.83% as the cost of interest-bearing liabilities
decreased 13 basis points, which was substantially offset by the decrease in
yield on average earning assets of 11 basis points. The net interest spread
measures the absolute difference between the yield on average earning assets and
the rate paid on average interest-bearing sources of funds. The net interest
spread eliminates the impact of noninterest-bearing funds and gives a direct
perspective on the effect of market interest rate movements. This measurement
allows management to evaluate the variance in market rates and adjust rates or
terms as needed to maximize spreads.
The net interest spread increased 51 basis points to 2.83% in 1997 from a net
interest spread of 2.32% in 1996. The increase resulted from an increase in the
yield on average earning assets of 36 basis points and a 15 basis point decrease
in the cost of average interest-bearing liabilities.
During recent years, the net interest margins and net interest spreads have been
under pressure, due in part to intense competition for funds with non-bank
institutions and changing regulatory supervision for some financial
intermediaries. This pressure on interest rate margins and spreads was
experienced by the banking industry nationwide.
To counter potential declines in the net interest margin and the interest rate
risk inherent in the balance sheet, Premier adjusts the rates and terms of its
interest-bearing liabilities in response to general market rate changes and the
competitive environment. Premier monitors the amounts of Federal funds sold
throughout the year, investing excess funds to maintain appropriate liquidity in
higher yielding investments such as short-term U. S. government and agency
securities. Premier will continue to manage its consolidated balance sheet and
its interest rate risk based on changing market interest rate conditions.
27
<PAGE> 29
Rate/Volume Analysis of Net Interest Income
The table below presents the changes in interest income and interest expense
attributable to volume and rate changes. The effect of a change in average
balance has been determined by applying the average rate in the initial year to
the change in average balance between the two years. The effect of change in
rate has been determined by applying the average balance in the initial year to
the change in the average rate between the two years. The net change
attributable to the combined impact of the volume and rate has been allocated to
both components in proportion to the relationship of the absolute dollar amounts
of the change in each.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1998
COMPARED WITH COMPARED WITH
DECEMBER 31, 1996 DECEMBER 31, 1997
------------------------------ ----------------------------
INCREASE (DECREASE) DUE TO: INCREASE (DECREASE) DUE TO:
--------------------------- ---------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
------- ----- ------ ------ ---- ------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Earned On:
Loans............................. $762 $(20) $742 $1,125 $(25) $1,100
Securities and interest bearing
deposits........................ (12) 9 (3) 52 -- 52
Federal funds sold................ 1 5 6 120 (7) 113
---- ---- ---- ------ ---- ------
Total earning assets............ 751 (6) 745 1,297 (32) 1,265
---- ---- ---- ------ ---- ------
Interest Paid On:
NOW deposits...................... 7 -- 7 5 (3) 2
Money market deposits............. 36 1 37 57 (12) 45
Savings deposits.................. 154 2 156 188 (29) 159
Certificates of deposit........... 213 (15) 198 428 (2) 426
Federal Home Loan Bank advances... 22 -- 22 111 -- 111
Note payable...................... 10 (4) 6 35 3 38
---- ---- ---- ------ ---- ------
Total interest-bearing
liabilities................... 442 (16) 426 824 (43) 781
---- ---- ---- ------ ---- ------
Net interest income............. $309 $ 10 $319 $ 473 $ 11 $ 484
==== ==== ==== ====== ==== ======
</TABLE>
Provision for Loan Losses
The provision for loan losses is the expense of providing an allowance or
reserve for inherent losses on loans. The amount of the provision for each
period is dependent upon many factors, including loan growth, net charge-offs,
changes in the composition of the loan portfolio, delinquencies, management's
assessment of loan portfolio quality, the value of loan collateral and general
business and economic conditions.
The provision for loan losses charged to operations was $292,000 in 1998
compared to $112,000 in 1997. Net loans charged-off increased to $63,000 in 1998
as compared to $22,000 in 1997. Of the $63,000 in net charge-offs in 1998,
$61,000 was attributable to two real estate loans. Additionally, the balance of
loans outstanding increased 76.7% at December 31, 1998 as compared to December
31, 1997, while the allowance for loan losses increased 109.0%. At December 31,
1998 the allowance for loan losses represented 1.05% of total loans as compared
to 0.89% at December 31, 1997.
The provision for loan losses charged to operations was $112,000 in 1997
compared to $80,000 in 1996. Management's analysis of the allowance for loan
losses during 1997 and 1996 indicated no material changes in the quality of the
loan portfolio, economic outlook or other factors generally considered by
management. Accordingly, the increase in provision for loan losses for 1997 and
1996 was generally due to increases in the amount of loans outstanding.
28
<PAGE> 30
Noninterest Income
The following table presents an analysis of the noninterest income for the
periods indicated with respect to each major category of noninterest income:
<TABLE>
<CAPTION>
% CHANGE % CHANGE
1996 1997 1998 1996-1997 1997-1998
------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Service charges on deposits............ $18,889 $34,930 $ 58,958 84.9% 68.8%
Loss on sale of securities, net........ -- (210) -- -- --
Other noninterest income............... 28,383 54,584 109,559 92.3 100.7
------- ------- --------
Total............................. $47,272 $89,304 $168,517 88.9% 88.7%
======= ======= ========
</TABLE>
Noninterest income consists of revenues generated from a broad range of
financial services, products and activities, including service charges on
deposits and other activities.
Noninterest income increased 88.7% to $169,000 in 1998 from $90,000 in 1997.
This increase resulted from the increase in service charges on deposits of
$24,000, or 68.8%, to $59,000 in 1998 from $35,000 in 1997 due to increased
deposit volume. Other noninterest income, which includes various recurring
noninterest income items such as gain on sale of loans, credit life insurance
income, safe deposit box fees and ATM fees, increased $55,000, or 100.7%, to
$110,000 in 1998 from $55,000 in 1997. The increase related primarily to the
increase in gain on sale of loans from $26,000 in 1997 to $70,000 in 1998,
resulting from the increase in the number of residential mortgage loans sold in
the secondary market.
Noninterest income increased 88.9% to $90,000 in 1997 from $47,000 in 1996. This
increase resulted primarily from higher service charges on deposits and an
increase in other income. Deposit volume growth increased service charges on
deposits by $16,000, or 84.9%, to $35,000 in 1997 from $19,000 in 1996. Other
income increased $26,000, or 92.3%, to $55,000 in 1997 from $28,000 in 1996.
Included in other income is gain on sales of loans, which increased 52.9% from
$17,000 in 1996 to $26,000 in 1997.
Noninterest Expense
The following table presents an analysis of the noninterest expense for the
periods indicated with respect to each major category of noninterest expense:
<TABLE>
<CAPTION>
% CHANGE % CHANGE
1996 1997 1998 1996-1997 1997-1998
-------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits..... $298,307 $354,371 $ 598,308 18.8% 68.8%
Occupancy and equipment expense.... 82,030 118,965 188,108 45.0 58.1
Other noninterest expense.......... 247,024 262,315 409,498 6.2 56.1
-------- -------- ----------
Total.................... $627,361 $735,651 $1,195,914 17.3% 62.6%
======== ======== ==========
</TABLE>
Noninterest expense increased 62.6% to $1.2 million in 1998 from $736,000 in
1997 primarily as a result of the costs associated with the opening of the
Columbia branch in April 1998 and the continued growth in the operations in
Jefferson City. Management attributes this increase to an increase in personnel
costs, occupancy and equipment expense, and other operating expenses. Salaries
and employee benefits increased 68.8% to $598,000 in 1998 from $354,000 in 1997.
This increase is attributable to an increase in the number of full-time
equivalent employees from 11 in 1997 to 17 in 1998 reflecting the increase in
business as a result of the opening of the Columbia branch in April 1998, in
addition to normal increases in salaries. Occupancy and equipment expense
increased 58.1% to $188,000 in 1998 from $119,000 in 1997, primarily as a result
of opening of the new branch in Columbia. The increase in other noninterest
expense is attributable primarily to amounts associated with the operation and
promotion of the new Columbia branch, continued growth in the operations of the
Jefferson City location and an increase of $29,000 in directors' fees. Prior to
1998, due to the start-up nature of Premier, directors fees paid were nominal.
29
<PAGE> 31
Noninterest expense increased to $736,000 in 1997 from $627,000 in 1996.
Increases in personnel costs and occupancy expense were the primary factors for
the increase. Salaries and employee benefits expense increased 18.8% to $354,000
in 1997 from $298,000 in 1996. This increase resulted from an increase in the
number of full-time equivalent employees from seven in 1996 to 11 in 1997,
reflecting the increase in business during the second full year of operations,
in addition to normal increases in salaries. Occupancy and equipment expense
increased 45.0% to $119,000 in 1997 from $82,000 in 1996 due to 1997 including a
full year of depreciation on the Jefferson City location, which opened in 1996.
Other noninterest expenses increased 6.2% to $262,000 in 1997 from $247,000 in
1996. The increase in other noninterest expense is attributable primarily to
growth in the operations of the Jefferson City location.
Income Tax Expense
Income tax expense decreased to $9,000 in 1998 from $11,000 in 1997, reflecting
an effective tax rate of 27.6% for 1998, compared to an effective tax rate of
9.9% for 1997. The increase in the effective tax rate is due to a smaller
decrease in the valuation allowance for deferred tax assets of $6,000 in 1998
compared to $39,000 in 1997. A deferred tax asset valuation allowance is
established if it is more likely than not that all or a portion of the deferred
tax assets will not be realized. The deferred tax valuation allowance was
$57,000 and $63,000 at December 31, 1998 and 1997, respectively.
Certain income and expense items are recognized in different periods for
financial reporting purposes and for income tax return purposes. Deferred income
tax assets and liabilities reflect the differences between the values of certain
assets and liabilities for financial reporting purposes and for income tax
purposes, computed at the current tax rates. Deferred income tax expense is
computed as the change in Premier's deferred tax assets, net of deferred tax
liabilities and the valuation allowance. Premier's deferred income tax assets
consist principally of the financial statement reporting amount of the provision
for loan losses in excess of the amount reported for income tax purposes.
Net Income
Net income decreased 76.9% to $22,000 in 1998 from $97,000 in 1997. The decrease
in net income from 1997 to 1998 was primarily attributable to increased
noninterest expense, related primarily to the opening of the Columbia branch,
increased provision for loan losses, related to growth in the loan portfolio,
partially offset by increased net interest income and noninterest income. Basic
and dilutive earnings per share decreased to $0.55 in 1998 from $2.99 in 1997.
Return on Average Assets decreased 29 basis points to 0.05% in 1998 from 0.34%
in 1997. Return on Average Equity decreased 262 basis points to 0.53% in 1998
from 3.15% in 1997.
Net income for 1997 increased $210,000 from the 1996 net loss of $113,000 to net
income in 1997 of $97,000. The increase in net income for 1997 was attributable
to an increase in net interest income and an increase in noninterest income,
which were partially offset by an increase in noninterest expense and in income
tax expense. Basic and dilutive earnings (loss) per share was $2.99 for 1997 and
$(3.54) in 1996. Return on Average Assets increased 92 basis points to 0.34% in
1997 from (0.58%) in 1996. Return on Average Equity increased 675 basis points
to 3.15% in 1997 from (3.60%) in 1996.
FINANCIAL CONDITION
Earning Assets
Average earning assets increased 60.1% to $41.8 million in 1998 from $26.1
million in 1997. During 1998, loans represented 75.9%, securities and interest
bearing deposits comprised 15.5% and Federal funds sold comprised 8.6% of
average earning assets. In 1997, loans comprised 73.5%, securities and interest
bearing deposits comprised 21.7% and Federal funds sold comprised 4.8% of
average earning assets. The variance in the mix of earning assets is primarily
attributable to continued growth of the loan portfolio. Premier manages its
securities portfolio to minimize interest rate fluctuation risk and to provide
liquidity.
30
<PAGE> 32
In 1998, growth in earning assets was funded primarily through an increase in
all deposit categories, Federal Home Loan Bank advances, the note payable and
shareholders' equity.
Loan Portfolio
Premier's total loans outstanding increased 76.7% to $41.6 million at December
31, 1998 from $23.6 million at December 31, 1997. Loan growth for 1998 was
funded primarily through the growth in deposits. The growth in the loan
portfolio primarily was a result of an increase in real estate loans of $15.1
million, or 78.3%, from December 31, 1997 to December 31, 1998. Average total
loans in 1998 were $31.7 million compared to $19.2 million in 1997. Premier
engages in a full complement of lending activities, including commercial, real
estate, installment and residential mortgage loans held for sale.
The following table presents various categories of loans contained in Premier's
loan portfolio for the periods indicated, the total amount of all loans for such
periods, and the percentage of total loans represented by each category for such
periods:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------
1997 1998
------------------------ ------------------------
BALANCE % OF TOTAL BALANCE % OF TOTAL
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
TYPE OF LOAN
Commercial.............................. $ 2,905,207 12.3% $ 5,292,128 12.7%
Real estate............................. 19,329,657 82.1 34,465,883 82.8
Installment and others.................. 1,317,437 5.6 1,618,363 3.9
Loans held for sale..................... -- -- 233,165 0.6
----------- ----- ----------- -----
Total loans........................ $23,552,301 100.0% 41,609,539 100.0%
===== =====
Allowance for loan losses............... (210,000) (438,841)
----------- -----------
Loans, net......................... $23,342,301 $41,170,698
=========== ===========
</TABLE>
Commercial. This category of loans includes loans made to individual,
partnership or corporate borrowers, and obtained for a variety of business
purposes. At December 31, 1998, commercial loans represented 12.7% of
outstanding loan balances, compared to 12.3% at December 31, 1997.
Real Estate. Real estate loans consist of loans secured by owner-occupied
commercial properties, income producing properties and construction and land
development, as well as first and second mortgage loans on residential
properties. At December 31, 1998, real estate loans represented 82.8% of
outstanding loan balances, compared to 82.1% at December 31, 1997.
Installment and Others. Premier's installment loans consist primarily of loans
to individuals for personal, family and household purposes, education and other
personal expenditures. At December 31, 1998, installment and others represented
3.9% of outstanding loan balances, compared to 5.6% at December 31, 1997.
Loans Held For Sale. This category represents residential real estate loans in
the process of being sold to the secondary market. At December 31, 1998, loans
held for sale represented 0.6% of outstanding loan balances.
Premier's only area of credit concentration is commercial and commercial real
estate loans. Premier has not invested in loans to finance highly leveraged
transactions, such as leveraged buy-out transactions, as defined by the Federal
Reserve Board and other regulatory agencies. In addition, Premier had no foreign
loans or loans to lesser developed countries as of December 31, 1998.
While risk of loss in Premier's loan portfolio is primarily tied to the credit
quality of the borrowers, risk of loss may also increase due to factors beyond
Premier's control, such as local, regional and/or national economic downturns.
General conditions in the real estate market may also impact the relative risk
in
31
<PAGE> 33
Premier's real estate portfolio. Of Premier's target areas of lending
activities, commercial loans are generally considered to have greater risk than
real estate loans or installment loans.
From time to time, management of Premier has originated certain loans which,
because they exceeded Premier's legal lending limit, were sold to other banks.
As a result of the offering, Premier expects to have an increased lending limit.
Accordingly, Premier may, at its discretion, repurchase certain loan
participations, thereby increasing earning assets. Loan participation agreements
allow Premier to repurchase loans at the outstanding principal balance plus
accrued interest, if any, at Premier's discretion.
Premier also purchases participations from other banks. When Premier purchases
these participations, such loans are subjected to Premier's underwriting
standards as if Premier originated the loan. Accordingly, management of Premier
does not believe that loan participations purchased from other banks pose any
greater risk of loss than loans that Premier originates.
The repayment of loans in the loan portfolio as they mature is a source of
liquidity for Premier. The following table sets forth the maturity of Premier's
loan portfolio within specified intervals as of December 31, 1998:
<TABLE>
<CAPTION>
AFTER ONE DUE AFTER
DUE IN ONE THROUGH FIVE
YEAR OR LESS FIVE YEARS YEARS TOTAL
------------ ---------- ---------- -------
(in thousands)
<S> <C> <C> <C> <C>
Commercial.................................... $ 1,378 $ 2,020 $1,894 $ 5,292
Real Estate................................... 15,148 16,978 2,340 34,466
Installment and others........................ 642 845 132 1,619
Loans held for sale........................... -- -- 233 233
------- ------- ------ -------
$17,168 $19,843 $4,599 $41,610
======= ======= ====== =======
</TABLE>
The following table presents the maturity distribution as of December 31, 1998
for loans with predetermined fixed interest rates and floating interest rates by
various maturity periods:
<TABLE>
<CAPTION>
AFTER ONE
DUE IN ONE THROUGH DUE AFTER FIVE
YEAR OR LESS FIVE YEARS YEARS TOTAL
------------ ----------------- -------------- -------
(in thousands)
<S> <C> <C> <C> <C>
Interest Category
Predetermined fixed interest rate... $ 4,324 $ 8,928 $2,246 $15,498
Floating interest rate.............. 19,045 6,745 322 26,112
------- ------- ------ -------
Total............................ $23,369 $15,673 $2,568 $41,610
======= ======= ====== =======
</TABLE>
Asset Quality and Nonperforming Assets
At December 31, 1998 nonaccrual loans totaled $94,000, as compared to nonaccrual
loans of $161,000 at December 31, 1997. At December 31, 1998, no loans were past
due 90 days or more. At December 31, 1997, one loan totaling $315,000 was
contractually past due by 90 days or more as to principal and interest payments
and continued to accrue interest. At December 31, 1998 and 1997 there were no
loans classified as "troubled debt restructurings" as that term is defined in
Statement of Financial Accounting Standards No. 15.
At December 31, 1998 and 1997, there were $899,000 and $436,000, respectively,
of loans in addition to those disclosed above that were internally classified as
substandard which (a) represented or resulted from trends or uncertainties which
management reasonably expects will materially impact future operating results,
liquidity, or capital resources, or (b) represented credits about which
management is aware of any information which causes management to have serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms. There are no loans other than those disclosed above where known
32
<PAGE> 34
information about possible credit problems of borrowers causes management to
have serious doubts as to the ability of such borrowers to comply with loan
repayment terms.
Premier has policies, procedures and underwriting guidelines intended to assist
in maintaining the overall quality of its loan portfolio. Premier monitors its
delinquency levels for any adverse trends. Non-performing assets consist of
loans on nonaccrual status, real estate and other assets acquired in partial or
full satisfaction of loan obligations and loans that are past due 90 days or
more.
Premier's policy generally is to place a loan on nonaccrual status when it is
contractually past due 90 days or more as to payment of principal or interest. A
loan may be placed on nonaccrual status at an earlier date when concerns exist
as to the ultimate collections of principal or interest. At the time a loan is
placed on nonaccrual status, interest previously accrued but not collected is
reversed and charged against current earnings. Recognition of any interest after
a loan has been placed on nonaccrual is accounted for on a cash basis. Loans
that are contractually past due 90 days or more which are well secured or
guaranteed by financially responsible third parties and are in the process of
collection generally are not placed on nonaccrual status.
Allowance for Loan Losses and Net Charge-Offs
The allowance for loan losses represents management's estimate of an amount
adequate to provide for potential losses inherent in the loan portfolio. In its
evaluation of the allowance and its adequacy, management considers loan growth,
changes in the composition of the loan portfolio, the loan charge-off
experience, the amount of past due and nonperforming loans, current economic
conditions, underlying collateral values securing loans and other factors. While
it is Premier's policy to charge-off in the current period the loans in which a
loss is considered probable, there are additional risks of future losses that
cannot be quantified precisely or attributed to particular loans or classes of
loans. Because these risks include the state of the economy, management's
judgment as to the adequacy of the allowance is necessarily approximate and
imprecise.
An analysis of Premier's loss experience is furnished in the following table for
the periods indicated, as well as a detail of the allowance for loan losses:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1998
--------- ---------
<S> <C> <C>
Balance at beginning of period.............................. $120,000 $210,000
Charge-offs
Commercial................................................ (5,807) (1,427)
Real estate............................................... (10,000) (61,159)
Installment and others.................................... (6,833) (2,057)
Loans held for sale....................................... -- --
-------- --------
Total charge-offs...................................... (22,641) (64,643)
Recoveries:
Commercial................................................ -- --
Real estate............................................... -- 1,750
Installment and others.................................... 362 --
Loans held for sale....................................... -- --
-------- --------
Total recoveries....................................... 362 1,750
-------- --------
Net charge-offs............................................. (22,279) (62,893)
Provision for loan losses................................... 112,279 291,734
-------- --------
Balance at end of period.................................... $210,000 $438,841
======== ========
Net charge-offs as a percentage of average loans............ 0.12% 0.20%
Allowance for loan losses as a percentage of total loans.... 0.89 1.05
</TABLE>
33
<PAGE> 35
Net charge-offs were $63,000 or 0.20% of average loans outstanding in 1998 as
compared to $22,000 or 0.12% of average loans outstanding in 1997. The allowance
for loan losses increased 109.0% to $439,000 or 1.05% of loans outstanding at
December 31, 1998 from $210,000 or 0.89% of loans outstanding at December 31,
1997. The allowance for loan losses as a multiple of net loans charged off was
6.98 for the year ended December 31, 1998.
Net charge-offs decreased to $22,000 in 1997, representing 0.12% of average
loans outstanding, from $24,000 in 1996 or 0.22% of average loans outstanding.
The allowance for loan losses increased to $210,000 or 0.89% of loans
outstanding at December 31, 1997, from $120,000 or 0.78% of loans outstanding at
December 31, 1996.
In assessing the adequacy of the allowance for loan losses, management relies
predominantly on its ongoing review of the loan portfolio, which is undertaken
to ascertain whether there are probable losses which must be charged off and to
assess the risk characteristics of the portfolio as a whole. This review
encompasses the judgment of management, utilizing internal loan rating
standards, guidelines provided by the banking regulatory authorities governing
Premier, and their loan portfolio reviews as part of the bank examination
process
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" ("SFAS 114") was issued in May 1993. SFAS 114 requires
that impaired loans be measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate or the fair value of
the collateral if the loan is collateral dependent. Premier adopted SFAS 114
during 1995, its year of formation. At December 31, 1998, Premier held impaired
loans of $94,000 for which specific allocations of $24,000 have been established
within the allowance for loan losses, based upon the fair value of the
collateral. At December 31, 1997, Premier held impaired loans of $161,000 for
which specific allocations of $28,000 have been established within the allowance
for loan losses, based upon the fair value of the collateral. Forgone interest
on impaired loans totaled $7,000 for both 1998 and 1997. For the periods
indicated, the allowance for loan losses was allocated to the various loan
categories as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------
1997 1998
------------------------ ------------------------
CATEGORY AS A CATEGORY AS A
AMOUNT % OF TOTAL AMOUNT % OF TOTAL
-------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Commercial................................. $ 14,526 12.3% $ 26,461 12.7%
Real estate................................ 188,887 82.1 298,885 82.8
Installment and others..................... 6,587 5.6 8,092 3.9
Loans held for sale........................ -- -- -- 0.6
Unallocated................................ -- -- 105,403 --
-------- ----- -------- -----
Total................................. $210,000 100.0% $438,841 100.0%
======== ===== ======== =====
</TABLE>
In considering the adequacy of Premier's allowance for loan losses, management
has focused on the fact that as of December 31, 1998, 12.7% of outstanding loans
are in the category of commercial loans and 82.8% are in real estate loans.
Commercial loans are generally considered by management to have greater risk
than other categories of loans in Premier's loan portfolio. Generally, such
loans are secured by accounts receivable, marketable securities, deposit
accounts, equipment and other fixed assets, which reduces the risk of loss
inherently present in commercial loans. Real estate loans secured by commercial
real estate inherently have a higher risk due to depreciation of the facilities,
limited purposes of the facilities and the effect of general economic
conditions. Premier attempts to limit this risk by generally lending no more
than 80% of the appraised value of the property held as collateral. A portion of
the real estate portfolio represents residential real estate mortgages where the
amount of the original loan generally does not exceed 85% of the appraised value
of the collateral. These loans are considered by management to be well secured
with a low risk of loss. At December 31, 1998, the majority of Premier's
installment and other loans were secured by collateral primarily consisting of
automobiles, boats and other personal property.
34
<PAGE> 36
Premier's primary regulator, the Missouri Division of Finance, conducts periodic
examinations of the loan portfolio. Upon completion, the Missouri Division of
Finance presents its report of examination to Premier's board of directors and
management of Premier. Procedures are also performed related to the loan
portfolio in conjunction with the year-end audit by Premier's independent
accountants. Procedures performed include analyses of historical performance,
the level of nonconforming and rated loans, loan volume and activity, review of
loan files and consideration of economic conditions and other pertinent
information. Findings are communicated verbally to Premier's management.
Information provided from the above two independent sources, together with
information provided by the management of Premier and other information known to
members of Premier's board of directors, is utilized by Premier's board of
directors to monitor the loan portfolio and the allowance for loan losses.
Specifically, Premier's board of directors attempts to identify risks inherent
in the loan portfolio (e.g., problem loans, potential problem loans and loans to
be charged off), assess the overall quality and collectibility of the loan
portfolio, and determine amounts of the allowance for loan losses and the
provision for loan losses to be reported based on the results of their review.
Investment Portfolio
Total debt and marketable equity securities available-for-sale increased 19.6%
to $6.5 million at December 31, 1998 from $5.4 million at December 31, 1997. At
December 31, 1998, debt and marketable equity securities available-for-sale
totaled $6.4 million, with an unrealized gain of $34,000, net of tax effect. At
December 31, 1997, debt and marketable equity securities available-for-sale
totaled $5.4 million, with an unrealized gain of $8,000, net of tax effect.
Average debt and marketable equity securities as a percentage of average earning
assets decreased to 15.5% in 1998 from 21.7% in 1997.
Premier invests primarily in direct obligations of the United States,
obligations guaranteed as to principal and interest by the United States and
obligations of agencies of the United States. In addition, Premier enters into
Federal funds transactions with its principal correspondent banks, and acts as a
net seller of such funds. The sale of Federal funds amounts to a short-term loan
from Premier to another bank.
Proceeds from maturities of debt and marketable equity securities
available-for-sale increased 38.1% to $3.5 million in 1998 from $2.6 million in
1997. No debt and marketable equity securities available-for-sale were sold
during 1998. In 1997, debt and marketable equity securities available-for-sale
of $553,000 were sold with a resulting loss on sales of $210. Such proceeds are
generally used to reinvest in additional debt and marketable equity securities
available-for-sale.
Other investments primarily represent Federal Home Loan Bank stock that is
required for Premier to be a member of and to conduct business with such
institution. Dividends on such investment are determined by the institutions and
are payable quarterly. Other investments increased 121.3% to $176,000 at
December 31, 1998 from $80,000 at December 31, 1997. Other investments are
carried at cost, as such investments do not have readily determinable fair
values.
During 1998 and 1997, Premier did not invest in collateralized mortgage
obligations ("CMOs"). In addition, at December 31, 1998, the debt and marketable
equity securities available-for-sale portfolio did not include any U.S.
government agency investments that are defined as derivatives or structured
notes.
The following table presents, for the periods indicated, the carrying amount of
Premier's debt and marketable equity securities available-for-sale, including
mortgage-backed securities.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------
1997 1998
----------------------- -----------------------
BALANCE % OF TOTAL BALANCE % OF TOTAL
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Treasury securities.................... $ 765,583 14.1% $ 512,810 7.9%
U.S. government corporations and agencies... 3,757,744 69.4 4,893,647 75.6
Obligations of state and political
subdivisions............................. 361,096 6.7 370,159 5.7
Mortgage-backed securities.................. 453,827 8.4 525,429 8.1
---------- ----- ---------- -----
Total debt securities.................... $5,338,250 98.6% $6,302,045 97.3%
---------- ----- ---------- -----
</TABLE>
35
<PAGE> 37
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------
1997 1998
----------------------- -----------------------
BALANCE % OF TOTAL BALANCE % OF TOTAL
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Equity securities:
Federal Home Loan Bank stock................ $ 77,000 1.4% $ 173,400 2.7%
Other....................................... 2,500 -- 2,500 --
---------- ----- ---------- -----
Total equity securities.................. $ 79,500 1.4% $ 175,900 2.7%
---------- ----- ---------- -----
Total.................................... $5,417,750 100.0% $6,477,945 100.0%
========== ===== ========== =====
</TABLE>
At December 31, 1998, $525,000 or 8.1% of the debt and marketable equity
securities available-for-sale portfolio consisted of mortgage-backed securities
compared to $454,000 or 8.4% at December 31, 1997. Premier has segregated its
debt and marketable equity securities portfolio into securities held-to-maturity
and available-for-sale. Debt and marketable equity securities held-to-maturity
are those securities for which management has both the ability and intent to
hold to maturity and are carried at amortized cost. At December 31, 1998 and
1997, no debt and marketable equity securities were classified as held-to-
maturity. Debt and marketable equity securities available-for-sale are
securities identified by management as securities which may be sold prior to
maturity in response to various factors including liquidity needs, capital
compliance, changes in interest rates or portfolio risk management. The
available-for-sale debt and marketable equity securities provide interest income
and serve as a source of liquidity for Premier.
These securities are carried at fair value, with unrealized gains and losses,
net of tax effect, reported as accumulated other comprehensive income, a
separate component of shareholders' equity.
Debt and marketable equity securities available-for-sale with a carrying value
of approximately $1.4 million and $1.5 million at December 31, 1998 and 1997,
respectively, were pledged to secure public funds and for other purposes as
required or permitted by law.
The maturities and weighted average yields of the debt and marketable equity
securities available-for-sale portfolio at December 31, 1998 are presented in
the following table using primarily the stated maturities, excluding the effects
of prepayments.
<TABLE>
<CAPTION>
AFTER ONE AFTER FIVE WEIGHTED
ONE YEAR THROUGH THROUGH AFTER TEN AVERAGE
OR LESS FIVE YEARS TEN YEARS YEARS YIELD(1)
-------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities........... $251,560 $ -- $ 261,250 $ -- 6.24%
U.S. Government corporations and
agencies......................... 501,713 1,352,199 2,784,428 255,307 6.10%
Obligations of states and political
subdivisions..................... -- 370,159 -- -- 6.17%
Mortgage-backed securities......... -- 368,724 156,705 -- 5.96%
-------- ---------- ---------- --------
Total debt securities(2)........... $753,273 $2,091,082 $3,202,383 $255,307 6.10%
======== ========== ========== --------
Weighted average yield............. 6.25% 6.02% 6.20% 5.13%
======== ========== ========== ========
</TABLE>
- ---------------------------
(1) Premier has not invested in any tax-exempt obligations.
(2) As of December 31, 1998, except for the U.S. Government and its agencies,
there was not any issuer within the investment portfolio who represented 10%
or more of the shareholders' equity.
Deposits
Premier's average deposits increased 56.5%, or $13.7 million, to $37.9 million
during 1998 from $24.2 million during 1997. This growth primarily relates to the
Columbia branch opened in April 1998 and the continued growth of the Jefferson
City branch, and resulted in a 52.8% increase in average noninterest-bearing
demand deposits, a 26.6% increase in average NOW accounts, a 60.8% increase in
average money
36
<PAGE> 38
market accounts, an 85.8% increase in average savings accounts and a 48.2%
increase in average certificates of deposit.
Average noninterest-bearing deposits increased 58.2% to $2.0 million in 1998
from $1.3 million in 1997. As a percentage of average total deposits, these
deposits remained constant at 5.2% in 1998 and 1997. Noninterest-bearing
deposits increased 90.6% to $2.8 million at December 31, 1998, from $1.5 million
at December 31, 1997.
Average NOW accounts increased 26.6% to $828,000 in 1998 from $654,000 in 1997.
As a percentage of average total deposits, these deposits decreased to 2.2% of
average total deposits in 1998 as compared to 2.7% in 1997. NOW accounts
increased 72.6% to $1.2 million at December 31, 1998, from $709,000 at December
31, 1997.
Average money market accounts increased 60.8% to $3.8 million in 1998 from $2.3
million in 1997. As a percentage of average total deposits, these deposits
increased to 9.9% of average total deposits in 1998 as compared to 9.6% in 1997.
Money market accounts increased 111.2% to $4.9 million at December 31, 1998,
from $2.3 million at December 31, 1997.
Average savings accounts increased 85.8% to $8.6 million in 1998 from $4.6
million in 1997. As a percentage of average total deposits, these deposits
increase to 22.6% of average total deposits in 1998 as compared to 19.0% in
1997. Savings accounts increased 104.4% to $12.5 million at December 31, 1998,
from $6.1 million at December 31, 1997.
Average certificates of deposit increased 48.2% to $22.8 million in 1998 from
$15.4 million in 1997. As a percentage of average total deposits, these deposits
decreased to 60.1% of average total deposits in 1998 as compared to 63.5% in
1997. Certificates of deposit increased 54.6% to $27.5 million at December 31,
1998, from $17.8 million at December 31, 1997.
The following table presents, for the periods indicated, the average amount of
and average rate paid on each of the following deposit categories:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1997 1998
--------------------- ---------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
DEPOSIT CATEGORY
Noninterest-bearing demand................... $ 1,253,307 --% $ 1,982,363 --%
NOW.......................................... 654,229 3.07 828,494 2.69
Money market deposits........................ 2,339,249 4.43 3,761,926 3.96
Savings deposits............................. 4,614,491 5.26 8,572,118 4.68
Certificates of deposit...................... 15,382,207 5.76 22,796,540 5.75
----------- -----------
Total................................... $24,243,483 5.16% $37,941,441 4.96%
=========== ===========
</TABLE>
37
<PAGE> 39
Certificates of deposit will continue to be a major source of funding for
Premier. However, there is no specific emphasis placed on time deposits of
$100,000 and over. During l998, aggregate average balances of time deposits of
$100,000 and over comprised 4.4% of average total deposits. The average rate on
certificates of deposit of $100,000 or more decreased to 5.40% at December 31,
1998, compared to 5.72% at December 31, 1997. The following table indicates
amounts outstanding of certificates of deposit of $100,000 or more and
respective maturities:
<TABLE>
<CAPTION>
1997 1998
---------------- -----------------
AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------ ------- ------- -------
(dollars in thousands)
<S> <C> <C> <C> <C>
3 months or less..................................... $1,499 5.53% $ 3,662 5.25%
3-6 months........................................... 1,436 5.69 2,454 5.58
6-12 months.......................................... 1,880 5.80 3,854 5.36
Over 12 months....................................... 1,469 5.85 1,226 5.65
------ -------
Total........................................... $6,284 5.72% $11,196 5.40%
====== ==== ======= ====
</TABLE>
Federal Home Loan Bank Advances and Note Payable
Average Federal Home Loan Bank advances increased to $2.1 million in 1998 from
$404,000 in 1997. Premier is a member of the Federal Home Loan Bank of Des
Moines. At December 31, 1998, Premier had a borrowing capacity from the Federal
Home Loan Bank of $4.9 million. The balance of Federal Home Loan Bank advances
outstanding was $3.4 million and $940,000 at December 31, 1998 and 1997,
respectively. At December 31, 1998, $250,000 of the Federal Home Loan Bank
advance balance had a weighted average interest rate of 6.18% and was due to
mature in one year or less, while the remaining $3.2 million, with a weighted
average interest rate of 5.70%, is due to mature after five years. At December
31, 1998, $2.2 million of the Federal Home Loan Bank advances were used to
"match fund" loans made by Premier to borrowers at interest rates ranging from
2.14% to 2.75% over the rate paid on the Federal Home Loan Bank advance. Terms
of the Federal Home Loan Bank advances generally match term loans to the
borrower. Thus, by match funding long-term loans with long-term advances,
Premier can reduce certain interest rate risks. The remaining $1.2 million in
Federal Home Loan Bank advances were for general funding purposes, and are not
specifically matched to any of Premier's loans or securities. Federal Home Loan
Bank advances are secured under a blanket agreement which assigns all Federal
Home Loan Bank stock and one-to-four family mortgage loans equal to 130% of the
outstanding advance balance. The maximum amount of borrowings available pursuant
to Federal Home Loan Bank advances at any month end for 1996, 1997, and 1998 was
$0, $1,500,000, and $3,461,000, respectively.
The average balance of the note payable increased 97.1% to $838,000 in 1998 as
compared to $425,000 in 1997. The outstanding balance of the note payable was
$750,000 and $1,050,000 at December 31, 1998 and 1997, respectively. The note
payable is a term loan with an unaffiliated financial institution that bears
interest at the prime rate (7.75% at December 31, 1998), is due on November 15,
1999 and is secured by 35,020 common shares of Premier Bank stock. The maximum
amount of borrowings available under the note payable at any month end for 1996,
1997, and 1998 was $300,000, $1,050,000, and $1,050,000, respectively.
Capital Resources
Shareholders' equity increased 37.8% to $4.4 million at December 31, 1998 from
$3.2 million at December 31, 1997. This increase was attributable to the
proceeds from the issuance of 9,231 additional shares of common stock totaling
$1.2 million, retained net income of $22,000, and an increase in accumulated
other comprehensive income resulting from unrealized gains on debt and
marketable equity securities available for sale of $26,000, partially offset by
the purchase of 240 shares of treasury stock for $32,000.
38
<PAGE> 40
Average shareholders' equity as a percentage of total average assets is one
measure used to determine capital strength. The ratio of average shareholders'
equity to average assets decreased to 9.24% in 1998 from 10.88% in 1997 and
16.04% in 1996 due to the continued growth of Premier Bank. The actual and
minimum required capital amounts and ratios for Premier Bank at December 31,
1997 and 1998 are as follows:
<TABLE>
<CAPTION>
REGULATORY CAPITAL CALCULATION
-------------------------------------
1997 1998
----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------- -------
(dollars in thousands)
<S> <C> <C> <C> <C>
Tier 1 risk based:
Actual............................................ $ 4,215 22.40% $ 5,074 12.19%
Minimum required.................................. 753 4.00 1,665 4.00
------- ----- ------- -----
Excess above minimum.............................. $ 3,462 18.40% $ 3,409 8.19%
======= ===== ======= =====
Total risk-based:
Actual............................................ $ 4,425 23.51% $ 5,513 13.24%
Minimum required.................................. 1,505 8.00 3,330 8.00
------- ----- ------- -----
Excess above minimum.............................. $ 2,920 15.51% $ 2,183 5.24%
======= ===== ======= =====
Leverage:
Actual............................................ $ 4,215 13.20% $ 5,074 9.09%
Minimum required.................................. 958 3.00 1,675 3.00
------- ----- ------- -----
Excess above minimum.............................. $ 3,257 10.20% $ 3,399 6.09%
======= ===== ======= =====
Total risked weighted assets................... $18,818 $41,729
======= =======
Total average assets........................... $31,925 $55,848
======= =======
</TABLE>
The various federal bank regulators, including the Federal Reserve and the FDIC,
have risk-based capital requirements for assessing bank capital adequacy. These
standards define capital and establish minimum capital standards in relation to
assets and off-balance sheet exposures, as adjusted for credit risks. Capital is
classified into two tiers. For banks, Tier 1 or "core" capital consists of
common shareholders' equity, qualifying noncumulative perpetual preferred stock
and minority interests in the common equity accounts of consolidated
subsidiaries, reduced by goodwill, other intangible assets and certain
investments in other corporations ("Tier 1 Capital"). Tier 2 Capital consists of
Tier 1 Capital, as well as a limited amount of the allowance for loan losses,
certain hybrid capital instruments (such as mandatory convertible debt),
subordinated and perpetual debt and non-qualifying perpetual preferred stock
("Tier 2 Capital").
At December 31, 1994, a risk-based capital measure and a minimum ratio standard
was fully phased in, with a minimum total capital ratio of 8.00% and Tier 1
Capital equal to at least 50% of total capital. The Federal Reserve also has a
minimum leverage ratio of Tier 1 Capital to total assets of 3.00%. The 3.00%
Tier 1 Capital to total assets ratio constitutes the leverage standard for bank
holding companies and Bank Insurance Fund-insured state chartered non-member
banks, and is used in conjunction with the risk-based ratio in determining the
overall capital adequacy of banking organizations. The FDIC has similar capital
requirements for BIF-insured state chartered non-member banks.
The Federal Reserve and the FDIC have emphasized that the foregoing standards
are supervisory minimums and that an institution would be permitted to maintain
such minimum levels of capital only if it were rated a composite "one" under the
regulatory rating systems for bank holding companies and banks. All other bank
holding companies are required to maintain a leverage ratio of 3.00% plus at
least 1.00% to 2.00% of additional capital. These rules further provide that
banking organizations experiencing internal growth or making acquisitions will
be expected to maintain capital positions substantially above the minimum
supervisory levels and comparable to peer group averages, without significant
reliance on intangible assets. The Federal Reserve continues to consider a
"tangible Tier 1 leverage ratio" in evaluation proposals for expansion or new
activities. The tangible Tier 1 leverage ratio is the ratio of a banking
organization's Tier 1 Capital less all intangibles, to total average assets less
all intangibles.
39
<PAGE> 41
Premier Bank's Tier 1 (to risk-weighted assets) capital ratio decreased to
12.19% at December 31, 1998 from 22.40% at December 31, 1997. Premier Bank's
total risk based capital ratio decreased to 13.24% at December 31, 1998 from
23.51% at December 31, 1997. Premier Bank's capital ratios decreased due to the
continued leveraging of existing capital through growth in the loan portfolio.
These ratios exceed the minimum capital adequacy guidelines imposed by
regulatory authorities on banks and bank-holding companies, which are 4.00% for
Tier 1 capital and 8.00% for total risk based capital. The ratios also exceed
the minimum guidelines imposed by the same regulatory authorities to be
considered "well-capitalized," which are 6.00% of Tier 1 capital and 10.00% for
total risk based capital.
Premier does not have any commitments that it believes would reduce Premier
Bank's capital to levels inconsistent with the regulatory definition of a "well
capitalized" financial institution.
Interest Rate Sensitivity and Liquidity Management
Liquidity is the ability of a company to convert assets into cash or cash
equivalents without significant loss and to raise additional funds by increasing
liabilities. Liquidity management involves maintaining Premier's ability to meet
the day-to-day cash flow requirements of its customers, whether they are
depositors wishing to withdraw funds or borrowers requiring funds to meet their
credit needs.
The primary function of asset/liability management is not only to assure
adequate liquidity in order for Premier to meet the needs of its customer base,
but to maintain an appropriate balance between interest-sensitive assets and
interest-sensitive liabilities so that Premier can profitably deploy its assets.
Both assets and liabilities are considered sources of liquidity funding and both
are, therefore, monitored on a daily basis.
Interest rate sensitivity is a function of the repricing characteristics of
Premier's portfolio of assets and liabilities. These repricing characteristics
are the time frames within which the interest-earnings assets and
interest-bearing liabilities are subject to change in interest rates either at
replacement, repricing or maturity during the life of the instruments. Interest
rate sensitivity management focuses on repricing relationships of assets and
liabilities during periods of changes in market interest rates. Interest rate
sensitivity is managed with a view to maintaining a mix of assets and
liabilities that respond to changes in interest rates within an acceptable time
frame, thereby managing the effect of interest rate movements on net interest
income. Interest rate sensitivity is measured as the difference between the
volume of assets and liabilities that are subject to repricing at various time
horizons. The differences are interest sensitivity gaps: less than one month,
one to three months, four to 12 months, one to five years, over five years and
on a cumulative basis.
40
<PAGE> 42
The following table shows interest sensitivity gaps for these different
intervals as of December 31, 1998.
<TABLE>
<CAPTION>
ONE ONE- FOUR- OVER NON-
MONTH THREE TWELVE ONE-FIVE FIVE- INTEREST
OR LESS MONTHS MONTHS YEARS YEARS SENSITIVE TOTAL
------- ------- -------- -------- ------ --------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Securities and
interest-bearing
deposits.......... $ 435 $ 1,388 $ 2,798 $ 2,057 $ 35 $ 176 $ 6,889
Federal funds sold... 5,111 -- -- -- -- -- 5,111
Loans................ 13,927 2,375 7,067 15,673 2,315 253 41,610
------- ------- -------- ------- ------ ------- -------
Total earning
assets.......... $19,473 $ 3,763 $ 9,865 $17,730 $2,350 $ 429 $53,610
======= ======= ======== ======= ====== ======= =======
LIABILITIES
Interest-bearing
liabilities:
NOW deposits......... $ 1,225 -- -- -- -- -- $ 1,225
Money market
deposits.......... 4,858 -- -- -- -- -- 4,856
Savings deposits..... 12,454 -- -- -- -- -- 12,454
Certificates of
deposit $100,000
or more........... 741 2,921 6,308 1,226 -- -- 11,196
Certificates of
deposits less than
$100,000.......... 2,739 4,144 7,574 1,811 -- -- 16,268
Federal Home Loan
Bank advances..... -- -- 250 -- 3,195 -- 3,445
Note payable......... -- -- 750 -- -- -- 750
------- ------- -------- ------- ------ ------- -------
Total interest-
bearing
liabilities..... $22,015 $ 7,065 $ 14,882 $ 3,037 $3,195 -- $50,194
Non-interest bearing
demand deposits...... -- -- -- -- -- $ 2,817 2,817
------- ------- -------- ------- ------ ------- -------
Total
liabilities..... $22,015 $ 7,065 $ 14,882 $ 3,037 $3,195 $ 2,817 $53,011
======= ======= ======== ======= ====== ======= =======
Interest sensitivity
gap:
Amount............... $(2,542) $(3,302) $ (5,017) $14,693 $ (845) $(2,388)
======= ======= ======== ======= ====== =======
Cumulative amount.... $(2,542) $(5,844) $(10,861) $ 3,832 $2,987 $ 599
Percent of total
earning assets.... (4.74)% (6.16)% (9.36)% 27.41% (1.58)% (4.45)%
Cumulative percent of
total earning
assets............ (4.74)% (10.90)% (20.26)% 7.15% 5.57%
Ratio of rate sensitive
assets to rate
sensitive
liabilities.......... 0.88 0.53 0.66 5.84 0.74
Cumulative ratio of
rate sensitive assets
to rate sensitive
liabilities.......... 0.88 0.80 0.75 1.08 1.06
</TABLE>
In the current interest rate environment, the liquidity and maturity structure
of Premier's assets and liabilities are important to the maintenance of
acceptable performance levels. A decreasing rate environment negatively impacts
earnings as Premier's rate-sensitive assets generally reprice faster than its
rate-sensitive liabilities. Conversely, in an increasing rate environment,
earnings are positively impacted. This asset/liability mismatch in pricing is
referred to as gap ratio and is measured as rate sensitive assets divided by
rate sensitive liabilities for a defined time period. A gap ratio of 1.00 means
that assets and liabilities are perfectly matched as to repricing. Management
has specified gap ratio guidelines for a one-
41
<PAGE> 43
year time horizon of between 0.80 and 1.20. At December 31, 1998, Premier had
gap ratios of approximately 0.80 for the next three month time period and 0.75
for the one year period ending December 31, 1999. Thus, over the next twelve
months, rate-sensitive assets will reprice slightly faster than rate-sensitive
liabilities.
The allocations used for the interest rate sensitivity report above were based
on the maturity schedules for the loans and deposits and the duration schedules
for the investment securities. All interest-bearing demand deposits and savings
deposits were allocated to the one month or less category. Changes in the mix of
earning assets or supporting liabilities can either increase or decrease the net
interest margin without affecting interest rate sensitivity. In addition, the
net interest spread between an asset and its supporting liability can vary
significantly while the timing of repricing for both the asset and the liability
remain the same, thus impacting net interest income. This is referred to as
basis risk and, generally, relates to the possibility that the repricing
characteristics of short-term assets tied to Premier's prime lending rate are
different from those of short-term funding sources such as certificates of
deposit.
Varying interest rate environments can create unexpected changes in prepayment
levels of assets and liabilities, which are not reflected in the interest
sensitivity analysis report. Prepayments may have significant effects on
Premier's net interest margin. Because of these factors and in a static test,
interest sensitivity gap reports may not provide a complete assessment of
Premier's exposure to changes in interest rates. Management utilizes
computerized interest rate simulation analysis to determine Premier's interest
rate sensitivity. The table above indicates Premier is in a liability sensitive
gap position for the first year, then moves into a matched position through the
five-year period. Overall, due to the factors cited, current simulation results
indicate a relatively low sensitivity to parallel shifts in interest rates. A
liability sensitive bank will generally benefit from a falling interest rate
environment as the cost of interest-bearing liabilities falls faster than the
yields on interest-bearing assets, thus creating a widening of the net interest
margin. Conversely, an asset sensitive bank will benefit from a rising interest
rate environment as the yields on earning assets rise faster than the costs of
interest-bearing liabilities. Management also evaluates economic conditions, the
pattern of market interest rates and competition to determine the appropriate
mix and repricing characteristics of assets and liabilities required to produce
a targeted net interest margin. In addition to the gap analysis, management uses
rate shock simulation to measure the rate sensitivity of its investment
portfolio. Rate shock simulation is a modeling technique used to estimate the
impact of changes in rates on the market value of Premier's investment
portfolio. Premier measures its interest rate risk by estimating the changes in
the market value resulting from instantaneous and sustained parallel shifts in
interest rates of plus or minus 300 basis points. Premier's most recent rate
shock simulation analysis which was performed as of December 31, 1998, indicates
that a 300 basis points increase in rates would cause a decrease in market value
of investment securities of $640,000. Conversely, a 300 basis points decrease in
rates would cause an increase in market value of investment securities of
$219,000.
While this simulation is a useful measure of Premier's sensitivity to changing
rates, it is not a forecast of the future results and is based on many
assumptions that, if changed, could cause a different outcome. In addition, a
change in U.S. Treasury rates in the designated amounts accompanied by a change
in the shape of the Treasury yield curve would cause significantly different
changes to net interest income than indicated above.
Generally, Premier's commercial and commercial real estate loans are indexed to
the prime rate. A portion of Premier's investment in mortgage-backed securities
is indexed to U.S. Treasury rates. Accordingly, any changes in these indices
will have a direct impact on Premier's interest income. The majority of
Premier's savings deposits are based on competitive interest rates in the
market. Certificates of deposit are generally priced based upon current market
conditions that include changes in the overall interest rate environment and
pricing of such deposits by competitors. Other interest-bearing deposits are not
priced against any particular index, but rather, reflect changes in the overall
interest rate environment. The Federal funds sold rate and other borrowed funds
are indexed to U.S. Treasury rates. Premier adjusts the rates and terms of its
loans and interest-bearing liabilities in response to changes in the interest
rate environment.
42
<PAGE> 44
Premier does not currently engage in trading activities or use derivative
instruments to manage interest rate risk. December 31, 1998, debt securities
available-for-sale with a carrying value of $2.8 million are scheduled to mature
within the next five years. Of this amount, $753,000 is scheduled to mature
within one year. Premier's main source of liquidity is Federal funds sold.
Average Federal funds sold were $3.6 million in 1998, or 8.8% of average earning
assets, compared to $1.2 million in 1997, or 4.8% of average earning assets.
Federal funds sold totaled $5.1 million at December 31, 1998, or 9.6% of earning
assets, compared to $1.8 million at December 31, 1997, or 5.8% of earning
assets.
At December 31, 1998, loans with a carrying value of approximately $39.0 million
are scheduled to mature or reprice within the next five years. Of this amount,
$23.4 million is scheduled to mature or reprice within one year. At December 31,
1998, certificates of deposit with a carrying value of approximately $26.5
million are scheduled to mature within the next three years. Of this amount,
$20.9 million is scheduled to mature within one year.
Premier's average loan-to-deposit ratio was 83.64% during 1998 and 79.25% during
1997. Management attempts to manage Premier's loan-to-deposit ratio on an
average basis, as opposed to on a daily basis.
Premier has short-term funding available through its membership in the Federal
Home Loan Bank. Further, the Federal Home Loan Bank membership provides the
availability of participation in loan programs with varying maturities and
terms. At December 31, 1998, Premier had availability of borrowing up to an
additional $4.9 million from the Federal Home Loan Bank under a line of credit.
There are no known trends, demands, commitments, events or uncertainties that
will result in or that are reasonably likely to result in liquidity increasing
or decreasing in any material way.
It is not anticipated that Riva Bancshares will find it necessary to raise
additional funds to meet expenditures required to operate the business of Riva
Bancshares and Riva Bank over the next twelve months. All anticipated material
expenditures for such period have been identified and provided for out of the
proceeds of the offering.
43
<PAGE> 45
SIX MONTHS ENDED JUNE 30, 1998 AS COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
Total assets at June 30, 1999 were $66.7 million, an increase of $8.9 million,
or 15.4%, over total assets of $57.8 million at December 31, 1998. Premier's net
income for the first six months of 1999 was $40,000, an increase of $44,000 from
the net loss for the first six months of 1998 of $4,000. Basic and dilutive
income (loss) per share was ($0.11) and $0.96 for the first six months of 1998
and 1999, respectively. The increase in net income from the first six months of
1998 to the first six months of 1999 was primarily attributable to increased net
interest income, partially offset by increased noninterest expense. Net interest
income increased $400,000, or 73.2%, from $547,000 for the first six months of
1998 to $947,000 for the first six months of 1999. Noninterest expense increased
$305,000, or 55.0%, from $553,000 for the first six months of 1998 to $858,000
for the first six months of 1999.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income increased $400,000, or 73.2%, from $547,000 for the first
six months of 1998 to $947,000 for the first six months of 1999. Interest income
increased $866,000, or 60.6%, from $1,431,000 for the first six months of 1998
to $2,297,000 for the first six months of 1999, while average earning assets
increased $20,661,000, or 55.7%, during the same time period. Interest expense
increased $466,000, or 52.8%, from $884,000 for the first six months of 1998 to
$1,350,000 for the first six months of 1999, while average earning liabilities
increased $19,774,000, or 46.8%, during the same time period. The primary reason
for the increase in the net interest income during the first six months of 1998
as compared to the first six months of 1999 was an increase in average earning
assets.
Provision for Loan Losses
The provision for loan losses charged to operations was $74,000 and $105,000 for
the first six months of 1998 and 1999, respectively. The allowance for loan
losses as a percentage of total loans was 0.89%, 1.05%, and 1.01% at June 30,
1998, December 31, 1998, and June 30, 1999, respectively. The increase in the
provision for loan losses was generally due to increases in loans outstanding.
Noninterest Income
Noninterest income increased $11,000, or 14.5%, from $76,000 for the first six
months of 1998 to $87,000 for the first six months of 1999.
Noninterest Expense
Noninterest expense increased $305,000, or 55.0%, from $553,000 for the first
six months of 1998 to $858,000 for the first six months of 1999. Salaries and
employee benefits increased $114,000, or 41.4%, occupancy and equipment expense
increased $71,000, or 97.2%, and other noninterest expense increased $120,000,
or 58.4%, during the same time period. The increases were primarily a result of
Premier's continued growth in Jefferson City, Missouri and expansion in
Columbia, Missouri in April 1998.
Income Tax Expense
While no income tax expense was recorded for the first six months of 1998,
income tax expense was $31,000 for the first six months of 1999.
Net Income
Net income (loss) increased $44,000 from ($4,000) for the first six months of
1998 to $40,000 for the first six months of 1999. The increase was a result of
an increase in net interest income of $400,000 and an increase in noninterest
income of $11,000, offset by an increase in noninterest expense of $305,000, an
increase in the provision for loan losses of $31,000, and an increase in income
tax expense of $31,000. Basic and dilutive income (loss) per share was ($0.11)
and $0.96 for the first six months of 1998 and 1999, respectively. Return on
average assets increased 15 basis points from (0.02%) for the first six months
of 1998 to 0.13% for the first six months of 1999. Return on average equity
increased 205 basis points from (0.23%) for the first six months of 1998 to
1.82% for the first six months of 1999.
44
<PAGE> 46
FINANCIAL CONDITION
Earning Assets
Premier increased average earning assets by $20,661,000, or 55.6%, from
$37,095,000 for the first six months of 1998 to $57,756,000 for the first six
months of 1999. This increase is primarily as a result of an increase in average
loans of $20,141,000, or 76.8%, during the same time period.
Loan Portfolio
Premier's total loans outstanding increased $8,054,000, or 19.4%, from December
31, 1998 to June 30, 1999. Loan growth for the first six months of 1999 was
funded primarily through the growth in interest-bearing deposits. The increase
in loans was a result of Premier's continued growth in Jefferson City, Missouri
and expansion in Columbia, Missouri in April 1998.
Asset Quality and Nonperforming Assets
At June 30, 1999, Premier had no nonaccrual loans, while the December 31, 1998
balance totaled $94,000. At June 30, 1999, four loans totaling $9,000 were
contractually past due by 90 days or more as to principal and interest payments
and continued to accrue interest. At June 30, 1999, there were no loans
classified as "troubled debt restructurings" as that term is defined in
Statement of Financial Accounting Standards No. 15.
Allowance for Loan Losses and Net Charge-Offs
Net charge-offs for the first six months of 1998 was $2,000 while net
charge-offs for the first six months of 1999 was $45,000. The allowance for loan
losses to total loans increased from 0.89% at June 30, 1998 and 1.05% at
December 31, 1998 to 1.01% at June 30, 1999.
Investment Portfolio
Total debt and marketable equity securities available-for-sale increased
$2,919,000, or 45.1%, from $6,478,000 at December 31, 1998 to $9,397,000 at June
30, 1999.
Deposits
Total deposits increased $8,513,000, or 17.4%, from $48,816,000 at December 31,
1998 to $57,329,000 at June 30, 1999. During the first six months of 1999, a
targeted effort by Premier resulted in growth of the certificates of deposit
balance of $9,020,000, or 35.3%, from December 31, 1998 to June 30, 1999.
Federal Home Loan Bank Advances and Note Payable
Total Federal Home Loan Bank Advances increased $337,000, or 9.8%, and the note
payable increased $175,000, or 23.3%, from December 31, 1998 to June 30, 1999.
Capital Resources
Shareholders' equity decreased $103,000, or 2.3%, from December 31, 1998 to June
30, 1999. This decrease was attributable to a decrease in accumulated other
comprehensive income (loss) resulting from unrealized losses on debt and
marketable equity securities available-for-sale of $143,000, offset by net
income of $40,000. The ratio of shareholders' equity to assets decreased from
7.68% at December 31, 1998 to 6.50% at June 30, 1999 as a result of an increase
in total assets and a decrease in shareholders' equity.
45
<PAGE> 47
YEAR 2000 READINESS
Riva Bancshares will utilize and will be dependent upon data processing systems
and software to conduct its business. The approach of the Year 2000 presents a
problem in that many computer programs have been written using two digits rather
than four to define the applicable year. Computer programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the Year 2000. For example, computer systems may compute payment, interest,
delinquency or other figures important to the operations of Riva Bancshares
based on the wrong date. This could result in internal system failure or
miscalculation, and also creates risk for Riva Bancshares from third parties
with whom we deal on financial transactions.
Following the acquisition of Premier Bank, Riva Bancshares will use Premier
Bank's existing computer and data processing systems and will be dependent upon
these systems for its own operations. Premier Bank is utilizing CSI, a
third-party vendor, to provide its primary banking applications, including core
processing systems. In addition, Premier Bank also uses CSI's software for
certain ancillary computer applications. Premier has received periodic and other
status reports from CSI with respect to CSI's Year 2000 readiness. CSI also
maintains a secure website for its customers regarding CSI's Year 2000 readiness
efforts. Premier has also reviewed the confidential FDIC examination report of
the Year 2000 Phase II Assessment of CSI conducted by the FDIC on October 19,
1998. On the basis of these materials, Premier has determined that CSI meets all
applicable industry standards for Year 2000 readiness.
The FDIC has issued guidelines for insured financial institutions with respect
to Year 2000 compliance. Premier Bank has developed a Year 2000 action plan
based in part on the guidelines and timetables issued by the FDIC. Premier
Bank's action plan focuses on four primary areas: (1) information systems, (2)
embedded systems located at Premier Bank's offices and within its off-site ATM
machines, (3) third party and customer relationships, and (4) contingency
planning. Premier Bank has designated a Year 2000 compliance team, headed by its
Vice President/Cashier, who reports to the board of directors.
Information Systems. Premier Bank has identified all mission critical
information ("IT") systems and has developed a schedule for testing and
remediation of such systems. Testing of key computer hardware has been
completed, and Premier Bank has also completed mission critical hardware
modification or replacement. Premier Bank has completed its inventory of mission
critical software and is in the process of contacting software vendors for
certification of Year 2000 compliance. Testing of internal mission critical
systems was completed and no problems were identified.
Embedded Systems. Premier Bank has performed a comprehensive inventory of its
embedded systems, such as micro-controllers used to operate security systems,
and has completed its inventory of mission critical non-IT systems. Premier Bank
has contacted manufacturers and vendors of those components utilized in
operations to determine whether such components are Year 2000 compliant. Premier
Bank has remediated or replaced, as applicable, any non-compliant components and
has completed this process for its mission critical systems.
Third Party and Customer Relationships. Premier Bank has contacted its
suppliers and vendors to determine the potential impact of such third parties'
failure to remediate their own Year 2000 issues. These third parties include
other financial institutions, office supply vendors and telephone, electric and
other utility companies. Premier Bank is encouraging its counterparties and
customers to conduct their own Year 2000 assessment and take appropriate steps
to become Year 2000 compliant.
Premier Bank outsources its principal data processing activities to CSI, and
Premier Bank is actively communicating with and monitoring the progress of CSI
to assess the impact of Year 2000 issues on CSI and its ability to provide data
processing services. Premier Bank will consider new business relationships with
alternate providers of products and services if necessary. Additionally, Premier
Bank has initiated communications with its larger and commercial borrowers to
assess the potential impact of Year 2000 on them and their ability to remain
current on loan repayments.
Contingency Plans. As part of Premier Bank's normal business practice, it
maintains contingency plans to follow in the event of emergency situations, some
of which could arise from Year 2000-related problems.
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Premier Bank has formulated a detailed Year 2000 contingency plan, which
assesses several possible scenarios to which Premier Bank may be required to
react. Premier Bank's formal Year 2000 contingency plan was completed in the
first quarter of 1999.
Financial Implications. Management of Premier Bank currently does not expect
the amounts required to be expensed to resolve Year 2000 issues to have a
material effect on its financial position or results of operations. Premier Bank
currently estimates that the costs of assessing, testing and remediation of Year
2000 issues totaled approximately $6,500 in 1998 and are expected to total
approximately $9,000 in 1999. The anticipated costs associated with Premier
Bank's Year 2000 compliance program do not include time and costs that may be
incurred as a result of any potential failure of third parties to become Year
2000 compliant or costs to implement Premier Bank's contingency plans.
Potential Risks. The Year 2000 issue presents a number of risks to the business
and financial condition of Premier Bank. External factors, which include but are
not limited to electric and telephone service, are beyond the control of Premier
Bank and the failure of such systems could have a material adverse effect on
Premier Bank, its customers and third parties on whom Premier Bank relies for
its day-to-day operations. The business of many of Premier Bank's customers may
be negatively affected by the Year 2000 issue, and any financial difficulties
incurred by Premier Bank's customers in connection with the century change could
negatively affect such customer's ability to repay loans to Premier Bank. The
failure of Premier Bank's computer system or applications or those operated by
customers or third parties could have a material adverse effect on Premier
Bank's results of operations and financial condition. In addition, as the Year
2000 approaches, Premier Bank may be required to keep higher levels of
noninterest earning assets due to its need to keep extra cash reserves
available.
The foregoing are forward-looking statements reflecting management's current
assessment and estimates with respect to Premier Bank's Year 2000 compliance
efforts and the impact of Year 2000 issues on Premier Bank's business and
operations. Various factors could cause actual plans and results to differ
materially from those contemplated by such assessments, estimates and
forward-looking statements, many of which are beyond the control of Premier
Bank. Some of these factors include, but are not limited to, representations by
Premier Bank's vendors and counterparties, technological advances, economic
considerations and consumer perceptions. Premier Bank's Year 2000 compliance
program is an ongoing process involving continual evaluation and may be subject
to change in response to new developments.
ACCOUNTING PRONOUNCEMENTS
In June, 1997 the Financial Accounting Standards Board ("FASB") issued Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS 130") which
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. Premier adopted SFAS 130 on January 1,
1998. SFAS 130 is a disclosure requirement and had no impact on Premier's
consolidated financial position and results of operations.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, Disclosures about Segments of an Enterprise and Related Information ("SFAS
131") which establishes standards for the way that public enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim reports issued to stockholders. SFAS 131 is effective for financial
statements for periods beginning after December 15, 1997. As Premier operates as
a single segment, it has no reporting requirements under SFAS 131.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133")
which establishes standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
SFAS 133 requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. In June 1999, the FASB issued Statement of Financial Accounting
Standards No. 137, Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133, an
Amendment of FASB
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Statement No. 133, which defers the effective date of SFAS from fiscal years
beginning after June 15, 1999 to fiscal years beginning after June 15, 2000.
Earlier application of SFAS 133, as amended, is encouraged but the pronouncement
should not be applied retroactively to financial statements of prior periods.
Premier is currently evaluating the requirements and impact of SFAS 133, as
amended, but as Premier has not invested in any investments that are defined as
derivatives, SFAS 133, as amended, is expected to have no impact on its
consolidated financial position or results of operations.
EFFECTS OF INFLATION AND CHANGING PRICES
Inflation generally increases the cost of funds and operating overhead, and to
the extent loans and other assets bear variable rates, the yields on such
assets. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on the performance of a
financial institution than the effects of general levels of inflation. Although
interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services, increases in inflation generally
have resulted in increased interest rates. In addition, inflation affects
financial institutions through increased cost of goods and services purchased,
the cost of salaries and benefits, occupancy expense, and similar items.
Inflation and related increases in interest rates generally decrease the market
value of investments and loans held and may adversely effect liquidity,
earnings, and shareholders' equity. Mortgage originations and refinancings tend
to slow as interest rates increase, and can reduce Premier's earnings from such
activities and the income from the sale of residential mortgage loans in the
secondary market.
MONETARY POLICIES
The results of operations of Riva Bancshares and Riva Bank will be affected by
credit policies of monetary authorities, particularly the Federal Reserve Board.
The instruments of monetary policy employed by the Federal Reserve Board include
open market operations in U.S. Government securities, changes in the discount
rate on member bank borrowings, changes in reserve requirements against member
bank deposits and limitations on interest rates which member banks may pay on
time and savings deposits. In view of changing conditions in the national
economy and in the money markets, as well as the effect of action by monetary
and fiscal authorities, including the Federal Reserve Board, no prediction can
be made as to possible future changes in interest rates, deposit levels, loan
demand or the business and earnings of Riva Bancshares or Riva Bank.
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BUSINESS
GENERAL
We were incorporated on May 1, 1998 to create a multi-market banking franchise
focusing on small to medium-sized business customers, selected real estate
developers and the principals of these businesses who have become dissatisfied
with the impersonal service delivered by super-regional and national banks. We
formed Riva Bancshares with the intent of acquiring an existing financial
institution which would provide a platform for expansion throughout Missouri.
Immediately prior to the closing of the offering, Riva Bancshares will acquire
Premier Bancshares, Inc., a Missouri bank holding company for Premier Bank, an
independent state-chartered commercial bank, as its entry into the Jefferson
City and Columbia, Missouri market areas. Upon completion of the merger, Premier
Bank will be renamed Riva Bank.
Our strategy is to capitalize on the opportunities created by widespread
consolidation in the banking industry. We believe that this consolidation has
compromised customer relationships as the larger regional financial institutions
increasingly focus on larger corporate customers, standardized loan and deposit
products and other services. More specifically, many financial institutions have
centralized their loan approval practices for small businesses, leaving less
responsibility and authority with the traditional loan officer. By virtue of
their banking experience in Missouri, management believes that the most frequent
customer complaints are based on a lack of personalized service and turnover in
lending personnel, which limits the customer's ability to develop a relationship
with his or her banker. As a result of these factors, we believe there currently
exists a significant opportunity to attract and maintain customers who are
dissatisfied with their banks. We also believe we can attract experienced
management personnel within our identified markets.
To implement our business plan, we have assembled a senior management team with
over 85 years of banking experience in our identified markets. Our management
team is headed by Richard C. Jensen, who has over 25 years of banking experience
in the St. Louis market. Prior to founding the company, Mr. Jensen served as
President of NationsBank St. Louis, formerly Boatmen's National Bank of St.
Louis which, as of June 1998, had approximately $5.3 billion in total deposits
and over 71 branches in the St. Louis market. We believe that the combination of
Mr. Jensen's 25 years of experience in the Missouri banking industry, his
extensive network of contacts throughout the state and his management skills
will provide the leadership necessary for Riva Bancshares to implement its
business strategy. In addition, all members of the senior management team have
worked with Mr. Jensen at either Boatmen's National Bank or NationsBank. As a
group, the senior management team has over 85 years of banking experience in the
Missouri markets. The senior management team shares the same credit culture and
will be responsible for maintaining strict credit policies and procedures as
well as managing administrative functions at the company headquarters in St.
Louis. This management team has gained prominence in servicing small and
medium-sized businesses and their principals throughout Missouri, which should
allow them to continue to provide quality service for these types of customers.
We expect that the familiarity of the senior management team with each other, as
well as with the various Missouri communities, will also provide a strong
foundation for implementing our business plan. In addition, we will have the
resources of management of Premier Bank and their existing relationships in the
Columbia and Jefferson City markets.
We intend to open a banking center in the St. Louis market following the
completion of the offering. Future business plans include further expansion in
the Jefferson City and Columbia markets and entry into the markets of Kansas
City and Springfield. We expect to establish banking centers in each new market
area, primarily through the opening of new branches of Riva Bank. We will also,
however, evaluate opportunities for acquisitions of financial institutions in
Missouri as well as markets in the adjacent states that would complement or
expand our business. Within each of our targeted markets, we expect to offer a
broad range of banking products and services by focusing primarily on small and
medium-sized businesses and their principals. Although we will offer a variety
of loan products, we expect to emphasize commercial/industrial and construction
and commercial real estate lending. We will also promote private banking
services and asset management products for our professional and executive
customers.
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We will have a community banking approach that emphasizes responsive and
personalized service to our customers. Our expansion strategy includes
attracting strong local management teams who have significant banking
experience, strong community contacts and strong business development potential
in our identified markets. Once local management teams are assembled, we intend
to establish banking centers in each of the identified markets. We currently
have management teams in place in the St. Louis, Columbia and Jefferson City
markets. Each management team will operate one or more banking centers within
its particular market area, will have a high degree of local decision-making and
lending authority and will operate in a manner that provides responsive,
personalized services similar to an independent community bank. In addition,
local management will be compensated based on the performance of their
respective banking centers and the overall financial and market performance of
the bank. We expect that upon our entry into a new market area, we will
undertake a marketing campaign using an officer calling program and
community-based promotions. Each market area will be supported by a local board
of directors, which will be provided with financial incentives to assist in the
development of banking relationships throughout the community.
Riva Bancshares will provide a variety of centralized support services to each
of the banking centers, including:
- accounting and back office support operations;
- investment portfolio management;
- credit administration and review;
- human resources;
- administration;
- training; and
- strategic planning.
Core processing, check clearing and other similar functions will be outsourced
to third-party vendors. As a result, we believe that these operating strategies
will enable us to achieve cost efficiencies, to maintain consistency in policies
and procedures, and to allow the local management teams to concentrate on
developing and enhancing customer relationships.
ACQUISITION OF PREMIER BANCSHARES, INC.
Based upon a business plan developed by T. Stephen Johnson & Associates, Inc., a
financial services consulting firm ("TSJ&A"), TSJ&A and Richard C. Jensen, the
President and Chief Executive Officer of Riva Bancshares, developed the concept
for Riva Bancshares. Riva Bancshares is a Delaware corporation which was
organized on May 1, 1998 to implement this concept. Mr. Jensen and TSJ&A
evaluated potential bank acquisition candidates in various Missouri markets and
identified Premier as an independent financial institution capable of providing
a platform to implement its business strategy. On May 6, 1999, Riva Bancshares
signed a merger agreement with Premier Bancshares, Inc. and agreed to acquire
all of the outstanding capital stock of Premier in exchange for shares of Riva
Bancshares common stock. The acquisition of Premier Bank provides us with an
existing charter so that we may immediately commence banking operations upon
completion of the merger in two of our five initially-targeted markets. We
intend to use the acquisition of Premier Bank as a platform to expand our
operations by building upon Premier Bank's existing infrastructure, core
processing and outsourcing relationships.
As a result of the merger, the shareholders of Premier Bancshares will receive,
for each share of common stock that they own, the number of shares of Riva
Bancshares common stock equal to the quotient obtained by dividing $215.136 by
the initial public offering price. In addition, the shareholders of Premier
Bancshares will receive warrants to purchase 350,000 shares of Riva Bancshares
common stock. Of these warrants, 140,000 will be exercisable at the initial
public offering price and 210,000 will be exercisable at 120% of the initial
public offering price. These warrants will be exercisable for a period of ten
years from the date of issuance.
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Other than the acquisition of Premier, we have no understandings or agreements
with respect to any acquisition.
STRATEGY OF RIVA BANCSHARES
General
Our business strategy is to create a banking franchise that captures market
share among small and medium-sized businesses, their principals and other
professionals and executives in geographic markets that are familiar to
management. We will implement this strategy by:
- Targeting small and medium-sized business customers who demand high levels
of personalized attention and customer service;
- Establishing a banking center in St. Louis, expanding into Kansas City and
Springfield, while continuing to enhance our current operations in Columbia
and Jefferson City;
- Staffing banking centers with community-minded and responsive management
teams that will have significant local decision-making authority;
- Operating with a few strategically located offices supported by outsourced
core processing and back room operations to increase efficiencies;
- Enhancing private banking relationships by offering a broad spectrum of
products and services, including securities brokerage services and
investment management services; and
- Offering our customers the convenience and advantages offered by Internet
banking while targeting businesses that have been identified as Internet
users to leverage our banking centers.
Our Banking Model
Upon completion of the acquisition of Premier, we will have banking centers in
two of our five initially-targeted markets. We intend to establish a banking
center within each of our identified markets primarily through the branching of
Riva Bank. We may, however, accomplish our expansion strategy by acquiring
existing banks within an identified market if an opportunity for such an
acquisition becomes available. Although each banking center will legally be a
branch of Riva Bank, our business strategy envisions that banking centers
located within each market will operate as if they were independent community
banks.
Local Management Teams. Prior to expanding into a new market area, we will
identify an individual who will serve as the president of that particular market
area, as well as those individuals who will serve on the local board of
directors. Each local president will be primarily responsible for actively
recruiting and assembling a management team, including lending officers, from
the local market area. We believe that a management team familiar with the needs
of its community will provide high quality personalized service to its
customers. The local management team will have a significant amount of
decision-making and lending authority and will be accessible to its customers.
As a result of the consolidation trend in the state of Missouri, we believe
there are significant opportunities to attract experienced bank managers who
would be available to join an institution promoting a community banking concept.
Local Boards of Directors. Each banking center will have a local board of
directors which will be comprised of prominent members of the community,
including business leaders and professionals. These local directors will act as
ambassadors of Riva Bancshares within the community and will be expected to
promote the business development of each banking center.
We will encourage both the members of our local boards of directors as well as
our lending officers to be active in the civic, charitable and social
organizations in their communities. It is anticipated that members of the local
management team will hold leadership positions in a number of community
organizations.
We expect that upon our entry into a new market area, we will undertake a
marketing campaign utilizing an officer calling program, and community-based
promotions and media advertising. Such campaigns will emphasize each banking
center's responsiveness, local management team and special focus on personalized
service.
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The initial banking center established in an identified market will have the
following banking personnel: a President, a Senior Lender, an Associate Lending
Officer, a Credit Analyst, a Branch/Operations Manager and an appropriate number
of financial service managers and tellers.
Lending Officers with Local Decision-Making Authority. It is expected that the
lending officers will be primarily responsible for the sales and marketing
efforts of the banking centers. We will emphasize relationship banking whereby
each customer will be assigned to a specific officer, with other local officers
serving as backup or in supporting roles. We intend to hire the appropriate
number of lending officers necessary to facilitate the development of strong
customer relationships. Our lending officers will be supported by our
organization's ability to make significantly larger loans than smaller community
banks.
We intend to offer salaries to the lending officers that are competitive with
other financial institutions in each market area. Local management will be
compensated based on the performance of their particular banking centers as well
as the overall financial and market performance of the bank. Lending officers
will be compensated based on an annual base salary plus an incentive payment
structure that will be based upon the achievement of certain loan quality and
production goals. Those goals will be evaluated on an annual basis. We believe
that such a compensation structure will provide greater motivation for
participating officers.
It is anticipated that the banking centers will be strategically located in
areas in each market where the local management team determines that there is
the greatest potential to reach the maximum number of small and medium-sized
businesses. It is expected that these banking centers will develop in the areas
surrounding office complexes and other commercial areas. Such determinations
will depend upon the customer demographics of a particular market area and the
accessibility of a particular location to its customers. We expect to lease our
facilities to avoid investing significant amounts of capital in property and
facilities.
Customers
We believe that the recent bank consolidation within the state of Missouri
provides a community-oriented bank significant opportunities to build a
successful, locally-oriented franchise. We further believe that many of the
larger financial institutions do not emphasize a high level of personalized
service to small and medium-sized businesses and their principals. We intend to
focus our marketing efforts on attracting small and medium-sized businesses and
individuals including: service companies, manufacturing companies, commercial
real estate developers, entrepreneurs and professionals, such as physicians and
attorneys. Because we intend to focus on small and medium-sized businesses, we
believe that the majority of our loan portfolio will be in the commercial area
with an emphasis placed on commercial/industrial, construction and commercial
real estate loans secured by real estate, accounts receivable, inventory, and
property, plant and equipment.
Although we expect to concentrate our lending efforts on commercial businesses,
we also anticipate that we will attract a significant amount of consumer
business. We expect that many of our retail customers will be the principals of
our small and medium-sized business customers. These customers will comprise our
private banking clients, for whom Riva Bank is expected to provide investment
management services, asset management services and securities brokerage
services. We intend to offer these services through strategic alliances with
third-party vendors. We intend to emphasize "relationship banking" in order that
each customer will identify and establish a comfort level with the bank officers
within a banking center. We intend to develop our retail business with
individuals who appreciate a high level of personal service, contact with their
lending officer and responsive decision-making. We expect that most of our
business will be developed through our lending officers and local boards of
directors and by pursuing an aggressive strategy of calling on customers
throughout the market area.
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Products and Services
We intend to offer and Premier Bank currently offers a broad array of
traditional banking products and services to our customers.
Loans. We intend to offer a wide range of commercial and consumer loans as
follows:
- Commercial/Industrial. We expect that our commercial lending will
consist primarily of loans for the financing of accounts receivable,
inventory and property, plant and equipment. We also expect to offer
Small Business Administration guaranteed loans. In making these loans,
we intend to manage our credit risk by actively monitoring such measures
as advance rate, cash flow, collateral value and other appropriate
credit factors.
- Commercial Construction. We expect to provide loans for the construction
and development of real estate which would be secured by commercial
properties. These loans generally command higher rates and fees
commensurate with the risk warranted in the construction lending field.
The risk in construction lending is dependent upon the performance of
the builder in building the project to the plans and specifications of
the borrower and the bank's ability to administer and control all phases
of the construction disbursements. Upon completion of the construction
period, this type of loan is typically converted to a permanent loan.
- Commercial Real Estate. We anticipate that we will also offer commercial
real estate loans to developers of both commercial and residential
properties. In making these loans, we intend to manage credit risk by
actively monitoring such measures as advance rate, cash flow, collateral
value and other appropriate credit factors.
- Residential Mortgage. We expect that our real estate loans will consist
of residential first and second mortgage loans and residential
construction loans. We expect that we will make mortgage loans with a
variety of terms, including fixed and floating to variable rates and a
variety of maturities. These loans will be made consistent with our
appraisal policy and real estate lending policy which will detail
maximum loan-to-value ratios and maturities. We expect that these loan-
to-value ratios will be sufficient to compensate for fluctuations in the
real estate market to minimize the risk of loss. We believe that many of
our mortgage loans that conform with secondary market criteria will be
sold in the secondary markets.
- Consumer Loans. We expect that our consumer loans will include lines of
credit and term loans secured by second mortgages on the residences of
borrowers for home improvements, education and other personal
expenditures. The remaining consumer loans will consist of installment
loans to individuals for personal, family and household purposes. In
evaluating these loans, we will require our lending officers to review
the borrower's level and stability of income, past credit history and
the impact of these factors on the ability of the borrower to repay the
loan in a timely manner. In addition, we will require that our banking
centers maintain an appropriate margin between the loan amount and
collateral value. We expect that many of our consumer loans will be made
to the principals of the small and medium-sized businesses for whom we
provide banking services.
Private Banking Services. We also expect to provide other fee generating
services for the principals of our business customers. We intend to offer
services such as securities brokerage and investment services, portfolio and
asset management services, insurance products and will consider other
permissible activities. We also expect to offer investment products and cash
management products.
Internet Banking. We believe that there is a strong need within our market
niche for Internet banking. These services, which would be provided through a
third party, would allow customers to access their bank accounts on a
seven-day-a-week, 24-hour-a-day basis from any personal computer, wherever
located, by means of a secure web browser. This technology gives Internet
banking an advantage over PC-based home banking, which utilizes PC-based
software, requires repeated downloading and limits the user to a specific PC. We
believe that Internet banking will encourage our customers to maintain their
total banking
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relationships with us. We also anticipate using the Internet for direct e-mail
solicitation to small and medium-sized businesses we have identified as current
Internet users. We will market the convenience and advantages of Internet
banking, including on-line bill paying, money transfer and cash management. We
believe that Internet banking will leverage our strategically located banking
centers by attracting customers from within Missouri and adjacent market areas.
We are negotiating with several Internet banking providers about implementing
these services upon completion of the merger and the offering.
Deposits. We intend to offer a broad range of interest-bearing and
noninterest-bearing deposit accounts, including commercial and retail checking
accounts, money market accounts, individual retirement accounts, regular
interest-bearing savings accounts and certificates of deposit with a range of
maturity date options. We anticipate that the primary sources of deposits will
be small and medium-sized businesses and individuals within an identified
market. In each identified market, senior management will have the authority to
set rates within specified parameters in order to remain competitive with other
financial institutions located in the same market. All deposits will be insured
by the FDIC up to the maximum amount permitted by law. In addition, we expect to
implement a service charge fee schedule which will be competitive with other
financial institutions in a community banking center's market area, covering
such matters as maintenance fees on checking accounts, per item processing fees
on checking accounts, returned check charges and other similar fees.
Specialized Consumer Services. We intend to offer specialized products and
services to our customers, such as travelers checks, safe deposit services,
credit cards and consumer lines of credit. Premier Bank currently offers all of
these services and provides credit cards to its customers through a third party.
Courier Services. We expect to offer courier services to our business
customers. Courier services will be provided through a third party, which will
permit us to provide the convenience and personalized service our customers
require by scheduling pick-ups of deposits.
Automatic Teller Machines ("ATMs"). We expect to establish a limited ATM
network and we intend to make other financial institutions' ATMs available to
our customers.
Market Expansion
Riva Bancshares intends to expand into the attractive and growing communities in
the state of Missouri. Once it has assembled a local management team and local
board of directors for a particular market area, Riva Bancshares intends to
establish one or more banking centers in that market. Upon the completion of the
acquisition of Premier Bank, we will have established banking centers in the
Jefferson City and Columbia market areas. Jefferson City is the capital of
Missouri and Columbia is the site of the main campus of the University of
Missouri. In addition, we have assembled a management team in St. Louis and,
immediately following the offering, will open a banking center in the St. Louis
market. The other markets into which we presently intend to expand are Kansas
City and Springfield. We have identified these markets as providing the most
favorable opportunities for growth and intend to establish banking centers
within these markets as soon as practicable. As opportunities arise, we will
also consider expansion into other selected banking markets in the states
adjacent to Missouri.
The consolidation within the banking industry is evidenced by the following
statistics. According to the FDIC, as of December 31, 1987, 596 depository
institutions were located in Missouri. By December 31, 1998, there were a total
of 383 depository institutions in Missouri, representing a decline of
approximately 36% over the ten-year period. Management attributes this decline
to consolidation resulting from the liberalization of interstate banking and
branching laws allowing the entry into, and expansion in, Missouri by numerous
large banks. The result of this consolidation has been a significant reduction
in the number of community-oriented financial institutions focusing on
personalized service to small and medium-sized business customers. We believe
that our strategy, which incorporates a community banking concept, is better
suited to provide a high level of service to small and medium-sized businesses
than larger financial institutions.
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We believe that the state of Missouri in general and the identified markets
within Missouri in particular represent an attractive opportunity to build a
multi-market banking franchise. Missouri has a current population of
approximately 5.4 million making it the fifteenth most populous state in the
country. Missouri has experienced growth in the amount of commercial and
consumer deposits.
Certain demographic and deposit information with respect to each of the
identified markets is discussed below.
St. Louis Market. The St. Louis market area includes the city of St. Louis and
the surrounding counties in both Missouri and Illinois. St. Louis' population
increased from approximately 2.49 million in 1990 to approximately 2.56 million
in 1998, representing an increase of approximately 2.7% over that period
compared to the national increase of 8.31% for the same period. The population
is projected to increase to approximately 2.62 million by 2003. Over the period
from 1990 to 1998, average household income in the St. Louis market has
increased 38.9% compared to the national increase of 38.2% for the same period.
As of June 30, 1998, there were 124 financial institutions represented in St.
Louis with aggregate deposits of $36.1 billion. Deposits in St. Louis increased
$7.6 billion from June 30, 1993 through June 30, 1998, at an annual growth rate
of 4.84% for that period.
Kansas City Market. The Kansas City market area includes the city of Kansas
City as well as surrounding counties in Missouri and Kansas. Kansas City's
population increased from approximately 1.58 million in 1990 to approximately
1.72 million in 1998, representing an increase of approximately 8.6% over that
period compared to the national increase of 8.3% for the same period. The
population is projected to increase to approximately 1.79 million by 2003. Over
the period from 1990 to 1998, average household income in the Kansas City market
increased 42.2% compared to the national increase of 38.2% for the same period.
As of June 30, 1998, there were 136 financial institutions represented in the
Kansas City market with aggregate deposits of $24.2 billion. Deposits in the
Kansas City market increased $4.4 billion from June 30, 1993 through June 30,
1998, at an average annual growth rate of 4.10% for that period.
Springfield Market. The Springfield market area includes the city of
Springfield, as well as the counties of Christian, Greene and Webster.
Springfield's population increased from approximately 264,000 in 1990 to
approximately 305,000 in 1998, representing an increase of approximately 15.5%
over that period compared to the national increase of 8.3% for the same period.
The population is projected to increase to approximately 322,000 by 2003. Over
the period from 1990 to 1998, average household income in the Springfield market
increased 51.3% compared to the national increase of 38.2% for the same period.
As of June 30, 1998, there were 34 financial institutions represented in the
Springfield market with aggregate deposits of $3.9 billion. Deposits in the
Springfield market increased $1.1 billion from June 30, 1993 through June 30,
1998, at an average annual growth rate of 6.85% for that period.
Columbia Market. The Columbia market area includes the city of Columbia, as
well as Boone county. Columbia's population increased from approximately 112,000
in 1990 to approximately 130,000 in 1998, representing an increase of
approximately 15.2% over that period compared to the national increase of 8.3%
for the same period. The population is projected to increase to approximately
138,000 by the year 2003. Over the period from 1990 to 1998, average household
income in the Columbia market increased 52.2% compared to the national increase
of 38.2% for the same period. As of June 30, 1998, there were 12 financial
institutions represented in the Columbia market with aggregate deposits of $1.4
billion. Deposits in the Columbia market increased $300 million from June 30,
1993 through June 30, 1998, at an average annual growth rate of 4.94% for that
period.
Jefferson City Market. The Jefferson City market area includes Jefferson City
and Cole County. Jefferson City's population increased from approximately 35,500
in 1990 to approximately 36,200 in 1998, representing an increase of
approximately 2.0% over that period compared to the national increase of 8.3%
for the same period. The population is projected to increase to approximately
36,800 by 2003. Over the period from 1990 to 1998, average household income in
the Jefferson City market increased 51.1% compared to the national increase of
38.2% for the same period. As of June 30, 1998, there were 16 financial
institutions represented in the Jefferson City market with aggregate deposits of
$1.4 billion.
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Deposits in the Jefferson City market increased $350 million from June 30, 1993
through June 30, 1998, at an average annual growth rate of 5.92% for that
period.
OPERATIONS OF RIVA BANCSHARES
Riva Bancshares will remain in the development stage until the completion of the
acquisition of Premier Bank and the offering. Riva Bancshares' corporate offices
will be located in the St. Louis metropolitan area. Riva Bancshares presently
has six full-time employees.
At the holding company level, Riva Bancshares will provide a variety of support
services for each of the banking centers. These services will include back
office operations, investment portfolio management, credit administration and
review, human resources, training and strategic planning. Riva Bancshares has
hired a Chief Financial Officer, a Chief Credit Officer, and a Senior Vice
President of Commercial Real Estate and the President of the St. Louis market.
Riva Bancshares intends to use Premier Bank's facilities and outsourcing
arrangements for its data processing, operational and back office support
activities. The banking centers will utilize the operational support provided by
Premier Bank to perform account processing, loan accounting, loan support,
network administration and other functions. Premier Bank has developed extensive
procedures for many aspects of its operations, including operating procedures
manuals and compliance procedures. Specific operating procedures for the banking
centers will be developed from the procedures that are currently utilized by
Premier Bank. We believe that Premier Bank's existing operations and support
management are capable of providing continuing operational support for all of
the banking centers.
Outsourcing
We believe that by outsourcing a major portion of our back office operations, we
can realize greater efficiencies and economies of scale. In addition, various
products and services, especially technology-related services, can be offered
through third-party vendors at a substantially lower cost than the costs of
developing these products internally.
Premier Bank is utilizing Computer Services Incorporated to provide its core
data processing and certain customer products. In addition to account level
processing for loans and deposits, Premier Bank also utilizes CSI for computer
network support, proof of deposit processing, on-line support, telephone banking
services, cash management, automated clearing house services and consulting
services.
Credit Administration
We will oversee all credit policy operations at the holding company level while
still granting local lending authority to management in each local market. Our
Chief Credit Officer will be primarily responsible for maintaining a quality
loan portfolio and developing a strong credit culture throughout the entire
organization. The Chief Credit Officer will be responsible for developing and
updating the credit policy and procedures for the organization. In addition, he
will work closely with each lending officer at the banking centers to ensure
that the business being solicited is of the quality and structure that fits our
desired risk profile. Credit quality will be controlled through uniform
compliance to credit policy. Our risk-decision process will be actively managed
in a disciplined fashion to maintain an acceptable risk profile.
Our credit approval process will consist of specific authorities granted to the
lending officers. Loans exceeding a particular lending officer's level of
authority will be reviewed and considered for approval by the next level of
authority. The Chief Credit Officer has ultimate credit decision-making
authority, subject to review by the Chief Executive Officer and our board of
directors. Risk management will require active involvement with our customers
and active management of our portfolio. The Chief Credit Officer will review our
credit policy with the local management teams at least annually but more
frequently if necessary. The results of these reviews will then be presented to
our board of directors. The purpose of these reviews will be to attempt to
ensure that the credit policy remains compatible with our short and
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long-term business strategies. The Chief Credit Officer will also generally
require all individuals charged with risk management to reaffirm their
familiarity with the credit policy annually.
OPERATIONS OF PREMIER BANCSHARES, INC.
Premier Bancshares, Inc. was incorporated in 1994 as a Missouri corporation.
Premier Bank commenced operations on May 15, 1995, as a full service,
state-chartered commercial bank in Jefferson City, Missouri. Premier Bank opened
its branch office in Columbia in April, 1998. Premier Bank owns both of its
facilities. Premier Bank has received regulatory approval to open an additional
branch in a leased facility in Jefferson City which is expected to open in the
first quarter of 2000.
Premier Bank will apply for a branch location in the St. Louis metropolitan area
which would open following the completion of the offering and the merger.
Premier Bank is currently providing many of the products and services which Riva
Bancshares expects to offer. Premier Bank offers a variety of loan products,
including commercial loans, real estate loans, home equity loans,
consumer/installment loans, SBA loans and offers credit cards through a third
party. Premier Bank also offers a broad range of interest-bearing and
noninterest-bearing deposit accounts, including commercial and retail checking
accounts, money market accounts, individual retirement accounts, regular
interest-bearing savings accounts and certificates of deposit. In addition,
Premier Bank provides such consumer services as U.S. Savings Bonds, travelers
checks, cashiers checks, safe deposit boxes, bank-by-mail services, direct
deposit and telephone banking. Premier Bank is also offering limited investment
services, such as securities brokerage, through a third party provider.
Premier Bank engages in a broad array of lending activities, including
commercial/industrial, SBA guaranteed loans, consumer and real estate loans. As
of June 30, 1999, Premier Bank had a legal lending limit for loans of
approximately $1.0 million per borrower.
ASSET/LIABILITY MANAGEMENT
Our objective is to manage assets and liabilities to provide a satisfactory
level of consistent operating profitability. Our Chief Financial Officer is
primarily responsible for monitoring policies and procedures that are designed
to maintain an acceptable composition of the asset/liability mix while adhering
to prudent banking practices. Our management philosophy is to support asset
growth primarily through growth of core deposits. We intend to continue to
invest the largest portion of earning assets in commercial industrial and
construction and commercial real estate loans.
Currently, Premier Bank's asset/liability mix is monitored on a daily basis,
with monthly reports presented to Premier Bank's board of directors. The
objective of this policy is to control interest-sensitive assets and liabilities
so as to minimize the impact of substantial movements in interest rates on
Premier Bank's earnings.
COMPETITION
Competition among financial institutions in the state of Missouri and the
markets in which Premier Bank currently operates and into which we may expand is
intense. We will compete with other bank holding companies, state and national
commercial banks, savings and loan associations, consumer finance companies,
credit unions, securities brokerages, insurance companies, mortgage banking
companies, money market mutual funds, asset-based non-bank lenders and other
financial institutions. Many of these competitors have substantially greater
resources and lending limits, larger branch networks and are able to offer a
broader range of products and services than we will be able to offer.
Various legislative actions in recent years have led to increased competition
among financial institutions. With the enactment of the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 and other laws and regulations
affecting interstate bank expansion, financial institutions located outside of
the state of Missouri may now more easily enter our targeted markets. In
addition, recent legislative and regulatory changes and technological advances
have enabled customers to conduct banking activities
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without regard to geographic barriers through computer and telephone-based
banking and similar services. There can be no assurance that the United States
Congress or the Missouri Legislature or the applicable bank regulatory agencies
will not enact legislation or promulgate rules that may further increase
competitive pressures on Riva Bancshares. Our failure to compete effectively for
deposit, loan and other banking customers in its market areas could have a
material adverse effect on our business, future prospects, financial condition
or results of operations.
DATA PROCESSING
Premier Bank currently has an agreement with CSI to provide its core processing
and certain customer products. We believe that CSI will be able to provide
technologically advanced data processing and customer service-related processing
at a competitive price to support Riva Bancshares' future growth. We believe
that CSI's services are adequate for our business expansion plans.
FACILITIES
Our temporary offices are located at 13004 Starbuck Road, St. Louis, Missouri
63141. We are currently negotiating for office space in the St. Louis
metropolitan area.
Premier Bank's main offices, which contain approximately 7,500 square feet, are
located at 815 West Stadium Boulevard, Jefferson City, Missouri. Premier Bank
also operates a branch office, which contains approximately 5,000 square feet of
office space at 15 South Fifth Street, Columbia, Missouri 65201. Premier Bank
has received regulatory approval and has entered into an agreement to lease
approximately 1,800 square feet for an additional branch facility in Jefferson
City. This branch is expected to open in the first quarter of 2000.
EMPLOYEES
We presently have six full-time employees. We will hire additional employees as
needed to support our growth.
Premier Bank presently has 20 full-time employees and one part-time employee,
including 10 officers. Premier Bank will hire additional employees as needed,
including additional tellers and financial service representatives.
LEGAL PROCEEDINGS
From time to time, Riva Bancshares may be involved in litigation relating to
claims arising out of operations in the normal course of business. As of the
date of this prospectus, neither Riva Bancshares nor Premier Bank is engaged in
any legal proceedings that are expected, individually or in the aggregate, to
have a material effect on Riva Bancshares or Premier Bank.
SUPERVISION AND REGULATION
GENERAL
We will operate in a highly regulated environment, and our business activities
will be supervised by a number of federal regulatory agencies, including the
Federal Reserve Board, the FDIC and the Missouri Division of Finance.
Riva Bancshares will be regulated by the Federal Reserve Board under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"), which requires every
bank holding company to obtain the prior approval of the Federal Reserve Board
before acquiring more than five percent of the voting shares of any bank or all
or substantially all of the assets of a bank, or before merging or consolidating
with another bank holding company. The Federal Reserve Board (pursuant to
regulation and published policy statements) has maintained that a bank holding
company must serve as a source of financial strength to its
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subsidiary banks. In adhering to the Federal Reserve Board policy, Riva
Bancshares may be required to provide financial support to its subsidiary bank
at a time when, absent such Federal Reserve Board policy, Riva Bancshares would
not deem it advisable to provide such assistance.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,
which became effective in November 1994, the restrictions on interstate
acquisitions of banks by bank holding companies were repealed as of September
29, 1995, such that Riva Bancshares and any other bank holding company located
in Missouri is able to acquire a bank located in any other state, and a bank
holding company located outside Missouri can acquire any Missouri-based bank, in
either case subject to certain deposit percentage and other restrictions. The
legislation provides that unless an individual state has elected to prohibit
out-of-state banks from operating interstate branches within its territory,
adequately capitalized and managed bank holding companies will be able to
consolidate their multi-state bank operations into a single bank subsidiary and
to open new branches on an interstate basis. The opening of new branches by an
out-of-state bank would be permitted only if it is expressly permitted by the
laws of the host state. Missouri does not permit the opening of new branches by
an out-of-state bank. Therefore, the only method by which an out-of-state bank
or bank holding company may enter Missouri is through an acquisition. The
authority of a bank to establish and operate branches within a state will
continue to be subject to applicable state branching laws.
A bank holding company is generally prohibited from acquiring control of any
company which is not a bank and from engaging in any business other than the
business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to be
so closely related to banking as to be incident thereto and thus permissible for
bank holding companies. Effective April 21, 1997, the Federal Reserve Board
revised and expanded the list of permissible non-banking activities, which now
includes the following activities:
- extending credit and servicing loans;
- acting as an investment or financial advisor;
- leasing personal and real property or acting as a broker;
- providing management and employee benefits consulting and career counseling
services to nonaffiliated banks and nonbank depository institutions;
- operating nonbank depository institutions;
- performing trust company functions;
- providing agency transactional services, including securities brokerage
services, riskless principal transactions, private placement services, and
acting as a futures commission merchant;
- providing data processing and data transmission services;
- acting as an insurance agent or underwriter with respect to certain limited
types of insurance;
- performing real estate appraisals;
- arranging commercial real estate equity financing;
- providing check-guaranty, collection agency and credit bureau services;
- engaging in asset management, servicing and collection activities;
- providing real estate settlement services;
- acquiring certain debt which is in default;
- underwriting and dealing in obligations of the United States, the states and
their political subdivisions;
- engaging as a principal in foreign exchange trading and dealing in precious
metals;
- providing other support services such as courier services and the printing
and selling of checks; and
- investing in programs designed to promote community welfare.
In determining whether an activity is so closely related to banking as to be
permissible for bank holding companies, the Federal Reserve Board is required to
consider whether the performance of such activities
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by a bank holding company or its subsidiaries can reasonably be expected to
produce benefits to the public such as greater convenience, increased
competition and gains in efficiency that outweigh the possible adverse effects
such as undue concentration of resources, decreased or unfair competition,
conflicts of interest and unsound banking practices. Generally, bank holding
companies are required to obtain the prior approval of the Federal Reserve Board
to engage in any new activity not previously approved by the Federal Reserve
Board.
Riva Bancshares will also be regulated by the Missouri Division of Finance under
Missouri law, which requires that a bank holding company may not obtain control
of any bank if as a result of the acquisition, the total deposits in such bank
together with the total deposits of all banks located in the state of Missouri
controlled by the bank holding company would exceed 13% of the total deposits of
all depository financial institutions in the state, including banks, thrifts and
credit unions. In computing the total deposits in all banks controlled by the
bank holding company and the bank which the holding company seeks to acquire,
certificates of deposit in the face amount of $100,000 or more, deposits from
sources outside the United States and deposits of banks other than banks
controlled by the bank holding company are to be deducted.
Riva Bank, as a subsidiary of Riva Bancshares, will be subject to restrictions
under federal law in dealing with Riva Bancshares and other affiliates, if any.
These restrictions apply to extensions of credit to an affiliate, investments in
the securities of an affiliate and the purchase of assets from an affiliate.
Upon completion of the acquisition, Riva Bank will be the primary subsidiary of
Riva Bancshares. Premier Bank is a Missouri state-chartered bank and, as such,
its primary bank regulatory authorities are the Missouri Division of Finance and
the FDIC. Banks organized under state law which are members of the Federal
Reserve System are regulated and examined primarily by the Federal Reserve Board
and state banking authorities, while banks organized under state law which are
not members of the Federal Reserve System are regulated and examined primarily
by the FDIC and state banking authorities. Premier Bank is a state-chartered
bank which is not a member of the Federal Reserve System. Regulation by the
federal and state banking authorities is designed to protect depositors rather
than shareholders.
CAPITAL ADEQUACY REQUIREMENTS
Both Riva Bancshares and Riva Bank will be subject to regulatory capital
requirements imposed by the Federal Reserve Board and the FDIC. The Federal
Reserve Board and the FDIC have issued risk-based capital guidelines for bank
holding companies and banks which make regulatory capital requirements more
sensitive to differences in risk profiles of various banking organizations. The
capital adequacy guidelines issued by the Federal Reserve Board are applied to
bank holding companies on a consolidated basis. The FDIC's risk capital
guidelines apply directly to state chartered nonmember banks regardless of
whether they are subsidiaries of a bank holding company. Both agencies'
requirements (which are substantially similar), provide that banking
organizations must have capital equivalent to eight percent of weighted risk
assets. The risk weights assigned to assets are based primarily on credit risks.
Both the Federal Reserve Board and the FDIC have also implemented new minimum
capital leverage ratios to be used in tandem with the risk-based guidelines in
assessing the overall capital adequacy of banks and bank holding companies.
Under these rules, banking institutions are required to maintain a ratio of
three percent "Tier 1" capital to total assets (net of goodwill). Tier 1 capital
includes common shareholders equity, noncumulative perpetual preferred stock and
minority interests in the equity accounts of consolidated subsidiaries, less
certain intangible assets.
The FDIC's guidelines provide that intangible assets are generally deducted from
Tier 1 capital in calculating a bank's risk-based capital ratio. However,
certain intangible assets which meet specified criteria ("qualifying
intangibles") such as mortgage servicing rights are retained as a part of Tier 1
capital. The FDIC currently maintains that only mortgage servicing rights and
purchased credit card relationships meet the criteria to be considered
qualifying intangibles. The FDIC's guidelines formerly provided that the amount
of such qualifying intangibles that may be included in Tier 1 capital was
strictly limited to a maximum of 25% of total Tier 1 capital. The FDIC has
amended its guidelines to increase the limitation
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on such qualifying intangibles from 25% to 50% of Tier 1 capital and further to
permit the inclusion of purchased credit card relationships as a qualifying
intangible asset.
Both the risk-based capital guidelines and the leverage ratio are minimum
requirements, applicable only to top-rated banking institutions. Institutions
operating at or near these levels are expected to have well-diversified risk,
high asset quality, high liquidity, good earnings and in general, have to be
considered strong banking organizations rated composite 1 under the CAMELS
rating system for banks. Institutions with lower ratings and institutions with
high levels of risk or experiencing or anticipating significant growth would be
expected to maintain ratios 100 to 200 basis points above the stated minimums.
The Federal Reserve Board and the FDIC have adopted regulations revising their
risk-based capital guidelines to ensure that the guidelines take adequate
account of interest rate risk. Interest rate risk is the adverse effect that
changes in market interest rates may have on a bank's financial condition and is
inherent to the business of banking. Under the new regulations, when evaluating
a bank's capital adequacy, the agency's capital standards now explicitly include
a bank's exposure to declines in the economic value of its capital due to
changes in interest rates. The exposure of a bank's economic value generally
represents the change in the present value of its assets, less the change in the
value of its liabilities, plus the change in the value of its interest rate
off-balance sheet contracts. Concurrently, the agencies issued a joint policy
statement, effective June 26, 1996, to provide guidance on sound practices for
managing interest rate risk. In the policy statement, the agencies emphasize the
necessity of adequate oversight by a bank's board of directors and senior
management and of a comprehensive risk management process. The policy statement
also describes the critical factors affecting the agencies' evaluations of a
bank's interest rate risk when making a determination of capital adequacy. The
agencies' risk assessment approach used to evaluate a bank's capital adequacy
for interest rate risk relies on a combination of quantitative and qualitative
factors. Banks that are found to have high levels of exposure and/or weak
management practices will be directed by the agencies to take corrective action.
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDICIA"), enacted on December 19, 1991, provides for the development of a
regulatory monitoring system requiring prompt corrective action on the part of
banking regulators with regard to certain classes of undercapitalized
institutions. While the FDICIA does not change any of the minimum capital
requirements, it directs each of the federal banking agencies to issue
regulations putting the monitoring plan into effect. The FDICIA creates five
"capital categories" ("well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized") which are defined in the FDICIA and which will be used to
determine the severity of corrective action the appropriate regulator may take
in the event an institution reaches a given level of undercapitalization. For
example, an institution which becomes "undercapitalized" must submit a capital
restoration plan to the appropriate regulator outlining the steps it will take
to become adequately capitalized. Upon approving the plan, the regulator will
monitor the institution's compliance. Before a capital restoration plan will be
approved, any entity controlling a bank (i.e., holding companies) must guarantee
compliance with the plan until the institution has been adequately capitalized
for four consecutive calendar quarters. The liability of the holding company is
limited to the lesser of five percent of the institution's total assets or the
amount which is necessary to bring the institution into compliance with all
capital standards. In addition, "undercapitalized" institutions will be
restricted from paying management fees, dividends and other capital
distributions, will be subject to certain asset growth restrictions and will be
required to obtain prior approval from the appropriate regulator to open new
branches or expand into new lines of business.
As an institution's capital levels decline, the extent of action to be taken by
the appropriate regulator increases, restricting the types of transactions in
which the institution may engage and ultimately providing for the appointment of
a receiver for certain institutions deemed to be critically undercapitalized.
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In order to comply with the FDICIA, the Federal Reserve Board and the FDIC have
adopted regulations defining operational and managerial standards relating to
internal controls, loan documentation, credit underwriting criteria, interest
rate exposure, asset growth, and compensation, fees and benefits.
In response to the directive issued under the FDICIA, the regulators have
established regulations which, among other things, prescribe the capital
thresholds for each of the five capital categories established by the FDICIA.
The following table reflects the capital thresholds:
<TABLE>
<CAPTION>
TOTAL RISK - TIER 1 RISK - TIER 1
BASED CAPITAL BASED CAPITAL LEVERAGE
RATIO RATIO RATIO
------------- ------------- --------
<S> <C> <C> <C>
Well Capitalized(1).................................. >=10% >= 6% >=5%
Adequately Capitalized(1)............................ >=8 >=4 >=4(2)
Undercapitalized(4).................................. <8 <4 <4(3)
Significantly Undercapitalized(4).................... <6 <3 <3
Critically Undercapitalized.......................... -- -- >=2(5)
</TABLE>
- ---------------------------
(1) An institution must meet all three minimums.
(2) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) < 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(4) An institution falls into this category if it is below the specified capital
level for any of the three capital measures.
(5) Ratio of tangible equity to total assets.
REPORTING REQUIREMENTS
As a state-chartered bank, most of Premier Bank's operations are regulated and
examined by the Missouri Division of Finance and the FDIC, including reserves
for loan losses and other contingencies, loans, investments, borrowings,
deposits, mergers, issuances of securities, payments of dividends, interest
rates payable on deposits, interest rates or fees chargeable on loans,
establishment of branches, consolidation or corporate reorganization, and
maintenance of books and records. Although Premier is not required by the
Missouri Division of Finance to conduct an annual external audit of its
financial affairs, if Premier has an audit report prepared, it is required to
file such reports with the Missouri Division of Finance within 15 days after the
receipt of any such report. Premier is also subject to Missouri banking and
usury laws restricting the amount of interest which it may charge in making
loans or other extensions of credit.
As a bank holding company, Riva Bancshares will be required to file with the
Federal Reserve Board an annual report of its operations at the end of each
fiscal year and such additional information as the Federal Reserve Board may
require pursuant to the BHC Act. The Federal Reserve Board may also make
examinations of Riva Bancshares and each of its subsidiaries.
The scope of regulation and permissible activities of Riva Bancshares and Riva
Bank is subject to change by future federal and state legislation. In addition,
regulators may require higher capital levels on a case-by-case basis based on
such factors as the risk characteristics or management of a particular
institution. Riva Bancshares and Premier are not aware of any attributes of
their operating plan that would cause regulators to impose higher requirements.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information concerning Riva Bancshares' executive
officers and directors upon completion of the offering and of the merger.
<TABLE>
<CAPTION>
NAME AGE POSITION(1)
- ---- --- -------------------------------------------
<S> <C> <C>
Richard C. Jensen.......................... 54 Chairman of the Board, President, Chief
Executive Officer and Class I Director
Allan D. Ivie, IV.......................... 38 President of the St. Louis Market
John S. Rouse.............................. 50 Chief Credit Officer
Sanford B. Scott........................... 38 Senior Vice President of Commercial Real
Estate
Daniel R. Sills............................ 40 Chief Financial Officer
Bruce W. Wiley............................. 42 President of the Mid-Missouri Market and
Class III Director(2)
Alan C. Henderson.......................... 53 Class I Director
Gerald G. Kaufman.......................... 52 Class I Director and Vice President(3)
Lewis A. Levey............................. 57 Class II Director
Jacob W. Reby.............................. 51 Class II Director(2)
Harold B. Remley........................... 56 Class III Director(2)
Andrew M. Rosen............................ 48 Class II Director
Patricia D. Whitaker....................... 54 Class II Director
Charles R. Willibrand...................... 72 Class III Director(2)
</TABLE>
- ---------------------------
(1) Upon amendment to its Certificate of Incorporation, the Board of Directors
of Riva Bancshares will be divided into three classes, designated Class I,
Class II and Class III.
(2) Messrs. Reby, Remley, Wiley and Willibrand will serve as directors of Riva
Bancshares upon completion of the merger and the offering.
(3) Upon completion of the offering, Mr. Kaufman will resign from his position
as Vice President of Riva Bancshares but will continue as a director of Riva
Bancshares.
Each of the following directors and executive officers, with the exception of
Mr. Jensen, Mr. Kaufman, Mr. Wiley, Mr. Reby, Mr. Remley and Mr. Willibrand have
been with Riva Bancshares since May 1999.
Richard C. Jensen has served as Chairman of the Board, President, Chief
Executive Officer and a director of Riva Bancshares since July 1998. Mr. Jensen
served as the President of Royal Banks of Missouri from March 1998 to May 1998.
Since 1980, Mr. Jensen served in various positions at NationsBank, N.A. -- St.
Louis, formerly Boatmen's National Bank of St. Louis, most recently as President
since 1997. At NationsBank, Mr. Jensen was responsible for NationsBank's General
Bank, which included over 60 branches in St. Louis, small business, middle
market lending and professional and executive banking. Mr. Jensen has over 25
years of banking experience in Missouri.
Allan D. Ivie, IV has served as the President of the St. Louis market since May
1999. Mr. Ivie served in various positions with NationsBank/Boatmen's National
Bank of St. Louis since 1988, most recently as Senior Vice President of the
Private Client Group where he was primarily responsible for implementing the
Private Client Group after NationsBank's acquisition of Boatmen's. From 1995 to
1997, Mr. Ivie served as Vice President and Director of Private Banking. Mr.
Ivie has over 14 years of banking experience in Missouri.
John S. Rouse has served as Chief Credit Officer of Riva Bancshares since May
1999. Mr. Rouse served in various positions with NationsBank, N.A. and Boatman's
National Bank of St. Louis since 1979. From
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1990 to 1995, Mr. Rouse served as Vice President and Manager of Loan
Originations in the Structured Finance Group and from 1995 to 1997, Mr. Rouse
served as Vice President in the St. Louis Corporate Group with Boatmen's. Since
1997, Mr. Rouse has been the Senior Vice President/Senior Lender in the Private
Client Group with NationsBank where he was responsible for providing credit
approval and administering the loan portfolio for the Private Client Group with
commitments of more than $750 million. Mr. Rouse has over 20 years of banking
experience in Missouri.
Sanford B. Scott has served as Senior Vice President of Commercial Real Estate
of Riva Bancshares since May 1999. Prior to joining Riva Bancshares, Mr. Scott
served in various positions with Nations Bank since 1988, most recently as
Manager and Senior Commercial Mortgage Originator for the Midwest. Prior to this
position, Mr. Scott was manager of the Commercial Real Estate Division for the
Central Region of Boatmen's National Bank of St. Louis, where he managed a $200
million commercial mortgage and construction loan portfolio. From 1985 to 1988,
Mr. Scott served in various positions with Mark Twain Banks, N.A. Mr. Scott has
over 14 years of banking experience in Missouri.
Daniel R. Sills has served as Chief Financial Officer of Riva Bancshares since
May 1999. Prior to joining Riva Bancshares, Mr. Sills worked in the financial
institutions consulting group as a certified public accountant with KPMG LLP in
St. Louis since 1997. From 1993 to 1997, Mr. Sills served in various positions
at Boatmen's Bancshares (now NationsBank) including Chief Financial Officer of
Boatmen's Credit Card Bank and Boatmen's Merchant Processing Company. From 1989
to 1993, Mr. Sills was with KPMG LLP in St. Louis where he was responsible for
conducting consulting engagements for a wide range of financial institution
clients.
Bruce W. Wiley is currently President and Chief Executive Officer of Premier
Bancshares, Inc. and Premier Bank. In 1994, Mr. Wiley and other investors
founded Premier. Upon completion of the merger and the offering, Mr. Wiley will
continue with Premier Bank as President of the Mid-Missouri market and a
director and Vice President of Riva Bancshares. Mr. Wiley has over six years of
banking experience in Missouri.
Alan C. Henderson has served as the President, Chief Executive Officer and as a
director of RehabCare Group, Inc., a publicly traded company since June 1998.
From 1990 to 1998, Mr. Henderson served as Executive Vice President and Chief
Financial Officer of RehabCare Group, Inc. Mr. Henderson is also a director of
General American Capital Corporation, a registered investment company and a
member of the Health Services Board of Mercantile Bank, N.A.
Gerald G. Kaufman has served as a director and Vice President of Riva Bancshares
since its inception. Since 1997, Mr. Kaufman has served as the President of T.
Stephen Johnson & Associates, Inc. an investment banking firm located in
Atlanta, Georgia. Prior to his service with TSJ&A, Mr. Kaufman was President of
Bretton Woods Group, a management consulting and investment banking firm. From
1980 to 1991, Mr. Kaufman served as the Managing Director for Bank Earnings
International, one of the nation's largest bank consulting firms. Mr. Kaufman
began his banking career with Citizens and Southern National Bank, Atlanta,
Georgia in 1973 as a Vice President in Bank Operations and the International
Banking Division.
Lewis A. Levey is a private investor engaged in real estate management and
development and real estate consulting. Mr. Levey was a founding partner and
Vice Chairman of Paragon Group, Inc., a fully integrated, self-managed real
estate investment trust operating a multi-billion dollar investment portfolio in
18 states from 1994 to 1997 until it merged with Camden Property Trust, a real
estate investment trust whose shares are listed on the New York Stock Exchange.
Since 1997, Mr. Levey has served as Trust Manager and a Director of Camden
Property Trust. Mr. Levey is a member of various industry organizations
including the Urban Land Institute and a former member of the Board of Directors
of the National Multi-Housing Council. Mr. Levey also serves on the Board of
Directors of Grand Center, Inc., the St. Louis Psychoanalytic Institute and
other civic, educational and charitable groups.
Jacob W. Reby is a member of the law firm of Lewis, Rice & Fingersh, L.C. in St.
Louis, Missouri specializing in corporate, real estate and banking law since
1991. Prior to 1991, Mr. Reby was a partner with the law firm of Popkin & Stern
in St. Louis, Missouri. Mr. Reby has co-authored several publications, including
Acquiring or Selling the Closely Held Business and Banking and Lending
Institution Forms.
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Mr. Reby serves on the board of directors of various charitable organizations,
including the AMC Cancer Research Center Foundation, the Saint Louis Art Fair
and the Clayton Child Center.
Harold B. Remley is currently a director of Premier Bancshares and Premier Bank
and upon completion of the merger will serve as a Class III Director of Riva
Bancshares. Mr. Remley is the owner of Remley's Insurance, Inc. which has been
engaged in the general insurance agency business in Jefferson City, Missouri
since 1968. Mr. Remley is also the President of R.R.R. Real Estate, Inc., a
family-owned business engaged in the rental of various real estate properties
located in Jefferson City.
Andrew M. Rosen is currently the Senior Vice President and Treasurer of Brown
Group, Inc., one of the largest shoe retailers in the country. Mr. Rosen has
been with Brown Group since 1974. Mr. Rosen has served as past President of the
Financial Executives Institute and the Washington University Business School
Alumni Executive Committee. Mr. Rosen also serves on the boards of Junior
Achievement of Mississippi Valley Inc. and the Harris Stowe College Advisory
Board.
Patricia D. Whitaker is the President and Chief Executive Officer of Interior
Space Inc., an interior design firm. Ms. Whitaker serves on the boards of the
Hawthorn Foundation, the March of Dimes, the YMCA, the St. Louis Arts and
Education Council, McKendree College and the St. Louis Forum.
Charles R. Willibrand is currently the Chairman of the board of directors of
Premier Bancshares and Premier Bank and upon completion of the merger will serve
as a Class III Director of Riva Bancshares. From 1964 to 1992, Mr. Willibrand
was President and Chief Executive Officer of Play-Mor Trailers, Inc. in
Westphalia, Missouri and he serves as a consultant for that business. Mr.
Willibrand is also the President of Mid-America Distributing Co., a wholesaler
of recreational vehicles' parts and accessories. In addition, Mr. Willibrand has
owned and operated Willibrand's Tire & Service in Westphalia, Missouri since
1951.
BOARD OF DIRECTORS
Upon completion of the merger and the offering, the number of directors of Riva
Bancshares will be fixed at ten. The ByLaws provide for the board of directors
to consist of not less than two, nor more than 25 persons, with the precise
number to be determined from time to time by the board of directors. Upon
amendment to the Certificate of Incorporation, the directors will be divided
into three classes, designated Class I, Class II and Class III. Each class
consists, as nearly as may be possible, of one-third of the total number of
directors. The term of Riva Bancshares' initial Class I Directors will expire at
the first annual meeting of shareholders to be held in 2000; the term of Riva
Bancshares' initial Class II Directors will expire at the second annual meeting
of shareholders to be held in 2001; and the term of Riva Bancshares' initial
Class III Directors will expire at the third annual meeting of shareholders to
be held in 2002. At each annual meeting of shareholders, successors to the class
of directors whose term expires at the annual meeting will be elected for a
three-year term. If the number of directors is changed, an increase or decrease
will be apportioned among the classes so as to maintain the number of directors
in each class as equally as possible. Any additional director of any class
elected to fill a vacancy resulting from an increase in such class will hold
office for a term that will expire at the next annual meeting, but in no event
will a decrease in the number of directors shorten the term of any incumbent
director. Any director elected to fill a vacancy due to resignation, removal or
death will have the same remaining term as that of his predecessor. In the case
of the removal of a director from office, the resulting vacancy on the board of
directors will be filled by the vote of a majority of the outstanding shares of
common stock. Any other vacancy on the board of directors will be filled by a
majority vote of the remaining directors then in office or by action of the
shareholders. Any director may be removed, with or without cause, at any regular
or special meeting of shareholders called for that purpose. The effect of the
classified board of directors is to make it more difficult for a person, entity
or group to effect a change in control of Riva Bancshares through the
acquisition of a large block of Riva Bancshares' voting stock. The executive
officers of Riva Bancshares serve at the pleasure of the board of directors.
Pursuant to the merger agreement, each of the Premier directors will be elected
as Class III directors and will serve for a term of three years and until their
successors have been elected and qualified. During the
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initial term of the Class III directors, if a vacancy is created as a result of
the resignation, removal or death of one of the Class III directors, the
remaining Premier directors will be able to nominate such director's
replacement. In addition, the existing Premier directors will have the ability
to nominate the Class III directors at the next two elections of Class III
directors.
The board of directors will have an Executive Committee, an Audit Committee and
a Compensation Committee. The Executive Committee will exercise the authority of
the board of directors in accordance with the company's By-Laws between regular
meetings of the board of directors. The Audit Committee will review and make
recommendations to the board of directors on Riva Bancshares' audit procedures
and independent auditors' report to management and will recommend to the board
of directors the appointment of the independent auditors for Riva Bancshares.
The Compensation Committee will review and make recommendations to the board of
directors with respect to the compensation of officers of Riva Bancshares and
will assist the board in the administration of Riva Bancshares' stock option
plan.
EXECUTIVE COMPENSATION
The following table provides certain summary information for the fiscal year
ended December 31, 1998 concerning compensation paid or accrued by Riva
Bancshares to or on behalf of its Chief Executive Officer. No other executive
officer of Riva Bancshares had total annual salary and bonus which exceeded
$100,000 during the last fiscal year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------- -----------------------------------
NUMBER
RESTRICTED OF
STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS AWARDED COMPENSATION
--------------------------- ---- -------- ----- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard C. Jensen
Chairman, President and Chief
Executive Officer................. 1998 $114,583 $-- 10,000(1) -- $--
</TABLE>
- ---------------------------
(1) In August 1998, Riva Bancshares issued 250,000 shares of common stock to Mr.
Jensen at a price of $.01 per share. On April 29, 1999. Riva Bancshares
repurchased 144,727 of these shares at a price of $.01 per share. Prior to
the initial public offering, Riva Bancshares intends to repurchase an
additional 95,273 of these shares at a price of $.01 per share.
EMPLOYMENT AGREEMENTS
Riva Bancshares and Richard C. Jensen have entered into an employment agreement
which provides that Mr. Jensen will serve as the President and Chief Executive
Officer of Riva Bancshares and as President and Chief Executive Officer of Riva
Bank upon completion of the merger and the offering. Mr. Jensen also serves as a
member of the board of directors and will serve on Riva Bank's board of
directors after the closing of the merger. Mr. Jensen's employment agreement has
a three-year term and provides for a minimum annual base salary of $250,000.
Upon completion of the offering, Mr. Jensen will receive a payment of $150,000.
In addition, the Board will grant options to Mr. Jensen to purchase up to
125,000 shares of common stock at the initial public offering price of the
common stock sold in the offering. This option will be exercisable for a period
of ten years.
After the closing of the offering, in the event of a "change in control" of Riva
Bancshares (as defined in the employment agreement), Mr. Jensen will be entitled
to give written notice to Riva Bancshares of termination of the employment
agreement and to receive a cash payment equal to approximately 300% of the
compensation received by Mr. Jensen in the one-year period immediately preceding
the change in control. In addition, if Mr. Jensen elects to terminate the
employment agreement pursuant to a change in control, Mr. Jensen will further be
entitled to, in lieu of options, an amount in cash or common stock equal to the
excess of the fair market value of the common stock as of the date of closing of
the transaction effecting the change of control over the per share exercise
price of the options held by Mr. Jensen, times the number of shares of common
stock subject to such options.
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If the board of directors determines that Riva Bancshares is unable to close the
offering, then the employment agreement may be terminated by the board of
directors at any time during the term of the employment agreement without notice
with the condition that Mr. Jensen will be entitled to liquidated damages in the
amount of $250,000. If Mr. Jensen is terminated for cause (as that term is
defined in the employment agreement), the employment agreement may be terminated
by the board of directors without notice and without further obligation than for
salary already earned. Upon 30 days' written notice to Mr. Jensen, Riva
Bancshares may terminate the employment agreement without cause with the
condition that Mr. Jensen will be entitled to the same compensation as he would
have been entitled to receive in the event of a change of control of Riva
Bancshares. Likewise, Mr. Jensen may, upon thirty days' written notice to Riva
Bancshares, terminate the employment agreement without cause. In the event of
termination by Mr. Jensen, Riva Bancshares will have no further obligation other
than for salary earned and Riva Bancshares will be entitled to enforcement of
the non-compete and non-solicitation provisions. After the closing of the
offering, in the event of Mr. Jensen's death, Riva Bancshares will pay to Mr.
Jensen's designated beneficiary an amount equal to Mr. Jensen's base salary
through the end of the month in which Mr. Jensen's death occurred. The
employment agreement also contains a non-compete provision which provides that
if Mr. Jensen terminates his employment agreement, he will not for a period of
12 months, without the prior written consent of Riva Bancshares, either directly
or indirectly, serve as an executive officer of any bank, bank holding company
or other financial institution within St. Louis County, Missouri. The employment
agreement further obligates Mr. Jensen to protect the confidentiality of Riva
Bancshares' information following termination of his employment.
Riva Bancshares has also entered into employment agreements with its executive
officers, including Mr. Ivie, Mr. Rouse, Mr. Scott, and Mr. Sills. All of these
employment agreements provide for a three year term. These employment agreements
provide for annual base salaries to be paid in the following amounts: Mr. Ivie
($125,000), Mr. Rouse ($130,000), Mr. Scott ($120,000), and Mr. Sills
($125,000). The employment agreements also provide for the grant of options to
purchase shares at the initial public offering price which are exercisable for a
term of 10 years. Messrs. Ivie, Scott, and Rouse will receive options to
purchase up to 30,000 shares and Mr. Sills will receive options to purchase up
to 20,000 shares. Otherwise, these agreements contain similar provisions to
those contained in Mr. Jensen's employment agreement.
Riva Bancshares has entered into an employment agreement with Bruce W. Wiley,
the President of Premier Bank. Mr. Wiley's agreement provides for a five year
term commencing at the closing of the offering. Mr. Wiley's employment agreement
provides for an annual base salary of $150,000 and the grant of options to
purchase up to 70,000 shares of Riva Bancshares common stock at the initial
public offering price. Of these options, 30,000 options will be granted under
Riva Bancshares' stock option plan on the same terms as options issued to other
members of senior management and will vest over a period of three years. The
remaining 40,000 options will be granted on the same terms as those warrants
which were issued to certain founders of Riva Bancshares in April 1999 and will
be exercisable for 10 years. In addition, Mr. Wiley's employment agreement
provides that he will serve as a director of Riva Bancshares and his title
following the merger and the offering will be President of the Middle Missouri
Market area. In the event of a "change in control" of Riva Bancshares (as
defined in the employment agreement), Mr. Wiley may elect to give written notice
to Riva Bancshares of termination of the agreement and to receive a cash payment
equal to approximately 300% of the compensation received by him in the one year
period immediately preceding the change in control. Mr. Wiley's employment
agreement also contains certain non-compete and non-solicitation provisions
which are similar to those described in the employment agreement of Mr. Jensen
discussed above.
STOCK OPTION PLAN
On April 29, 1999, the board of directors adopted the 1999 Stock Option Plan
(the "1999 Plan") to promote Riva Bancshares' growth and financial success.
Options may be granted under the 1999 Plan to Riva Bancshares' directors,
officers and employees, as well as certain consultants and advisors. The 1999
Plan contemplates the grant of nonqualified stock options and incentive stock
options as defined in
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Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The
1999 Plan is not qualified under Section 401(a) of the Code and is not subject
to the provisions of the Employee Retirement Income Security Act of 1974, as
amended. The 1999 Plan provides for option grants to purchase up to an aggregate
of 500,000 shares of common stock, subject to adjustment under certain
circumstances (the "Option Shares"). The 1999 Plan will expire upon the earlier
to occur of: (1) the date on which all Option Shares have been issued upon
exercise of options under the 1999 Plan; or (2) the tenth anniversary of the
1999 Plan's effective date. The 1999 Plan will be administered by the board of
directors or by a committee appointed by the board and consisting of least two
non-employee board members.
The exercise price of options granted under the 1999 Plan will be determined by
the board of directors, but will in no event be less than 100% of the market
price of the common stock on the grant date. However, nonqualified stock options
may be granted at an exercise price of no less than 75% of the market price of
the common stock on the date of grant. Vested options under the 1999 Plan may be
exercised in whole or in part, but in no event later than 10 years from the
grant date. If an optionee during his or her lifetime ceases to be an officer,
director, employee, consultant or advisor of Riva Bancshares or any subsidiary
of Riva Bancshares for any reason other than his or her death or total
disability, any option or unexercised portion thereof which is exercisable on
the date the optionee ceases employment will expire 90 days following the date
the optionee ceases to be an officer, director or employee of Riva Bancshares or
of a subsidiary of Riva Bancshares, but in no event after the term provided in
the optionee's option agreement. If an optionee dies or becomes totally disabled
while he or she is an officer, director or employee of Riva Bancshares or of a
subsidiary of Riva Bancshares, the option may be exercised by a legatee or
legatees of the optionee under his or her last will or by his or her personal
representative or representatives at any time within one year following his or
her death or total disability, but in no event after the term provided in his or
her option agreement. Options granted under the 1999 Plan will only be
assignable or transferable by the optionee by will or the laws of descent and
distribution. During the optionee's lifetime, options are only exercisable by
him or her. The board of directors may at any time terminate, modify or amend
the 1999 Plan in any respect, except that without shareholder approval the board
of directors may not:
- increase the number of Option Shares,
- extend the period during which options may be granted or exercised,
- change the class of 1999 Plan participants, or
- otherwise materially modify the requirements as to eligibility for
participation in the 1999 Plan.
In no event will the termination, modification or amendment of the 1999 Plan,
without the written consent of an optionee, affect his or her rights under an
option or right previously granted to him or her. The 1999 Plan must be approved
by Riva Bancshares' shareholders within 12 months from the adoption of the 1999
Plan by the board of directors.
No stock options were granted during the fiscal year ended December 31, 1998.
Upon completion of the offering, Riva Bancshares will grant options to purchase
an aggregate of 329,475 shares to certain of its officers and directors.
COMPENSATION OF DIRECTORS
Directors of Riva Bancshares will not receive any compensation based on their
attendance at board meetings until Riva Bank becomes cumulatively profitable.
Upon consummation of the offering, directors of Riva Bancshares will be entitled
to receive stock option awards under the 1999 Plan. The members of the local
boards of directors will receive compensation in a format to be determined by
the board of directors of Riva Bank. Such compensation may be incentive-based
and include cash and options to purchase common stock. Under the terms of the
merger agreement, if, during the four years following the merger, any options
are granted to the former directors of Premier Bank, then we have agreed to
issue a proportionate amount of options to the remaining former shareholders of
Premier Bank.
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CERTAIN TRANSACTIONS
TSJ&A has provided consulting services during the organization and formation of
Riva Bancshares. Gerald G. Kaufman, a director and Vice President of Riva
Bancshares, is President of TSJ&A. Specific responsibilities undertaken by TSJ&A
include assisting management of Riva Bancshares in formulating Riva Bancshares'
business plan, conducting a feasibility analysis, drafting proposed
administrative and operational procedures, and preparing the necessary
regulatory filings for approval of the formation of Riva Bancshares and the
acquisition of Premier Bank. As compensation for its services, TSJ&A is being
paid a monthly fee of $25,000 until the closing of the offering and the merger.
In addition, TSJ&A will receive a finder's fee in connection with the
acquisition of Premier of $90,000 (one percent of the aggregate purchase price),
which finder's fee will be paid from the proceeds of the offering.
Once Premier Bank becomes a wholly-owned subsidiary of Riva Bancshares, Premier
Bank will be renamed Riva Bank. Riva Bank may extend loans from time to time to
certain of Riva Bancshares' directors, their associates and members of the
immediate families of the directors and executive officers of Riva Bancshares.
These loans will be made in the ordinary course of business on substantially the
same terms, including interest rates, collateral and repayment terms, as those
prevailing at the time for comparable transactions with persons not affiliated
with Riva Bancshares or Riva Bank, and will not involve more than the normal
risk of collectibility or present other unfavorable features.
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<PAGE> 71
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of shares of the common stock as of July 29, 1999, and as adjusted to
reflect the sale of the shares offered hereby and the shares offered in
connection with the merger, with respect to (1) each director of Riva
Bancshares; (2) each person, including any "group" as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, who is known by Riva
Bancshares to own beneficially more than five percent of the outstanding shares
of the common stock and (3) all directors and executive officers of Riva
Bancshares as a group. Unless otherwise indicated, each shareholder has sole
voting and investment power with respect to the indicated shares.
<TABLE>
<CAPTION>
OWNERSHIP
OWNERSHIP PRIOR AFTER THE MERGER
TO THE OFFERING AND THE OFFERING
-------------------- -----------------------
NAME OF BENEFICIAL OWNER SHARES(1) PERCENT SHARES(1) PERCENT(2)
------------------------ --------- ------- --------- ----------
<S> <C> <C> <C> <C>
Richard C. Jensen................................... 10,000 100.0% 135,000(3) 3.2%
Allan D. Ivie, IV................................... -- * -- *
John S. Rouse....................................... -- * -- *
Sanford B. Scott.................................... -- * -- *
Daniel R. Sills..................................... -- * -- *
Alan C. Henderson................................... -- * -- *
Gerald G. Kaufman................................... -- * 14,475(4) *
Bruce W. Wiley...................................... -- * 113,733(5) 2.9%
Lewis A. Levey...................................... -- * -- *
Jacob W. Reby....................................... -- * -- *
Harold B. Remley.................................... -- * 84,548(6) 2.1%
Andrew M. Rosen..................................... -- * -- *
Patricia D. Whitaker................................ -- * -- *
Charles R. Willibrand............................... -- * 84,548(7) 2.1%
All executive officers and directors as a group (14
persons).......................................... 10,000 100.0% 432,304(8) 10.6%
</TABLE>
- ---------------------------
* Less than 1%.
(1) Pursuant to the rules of the Commission, the determinations of "beneficial
ownership" of common stock are based upon Rule 13d-3 under the Exchange
Act, which provides that shares will be deemed to be "beneficially owned"
where a person has, either solely or in conjunction with others, the power
to vote or to direct the voting of shares and/or the power to dispose, or
to direct the disposition of, shares or where a person has the right to
acquire any such power within 60 days after the date such "beneficial
ownership" is determined. Shares of common stock that a beneficial owner
has the right to acquire within 60 days pursuant to the exercise of stock
options or warrants are deemed to be outstanding for the purpose of
computing the percentage ownership of such owner but are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) The percentages are based upon the aggregate number of shares of common
stock issued and outstanding as of July 29, 1999, as adjusted to reflect
the 3,000,000 shares issuable pursuant to the offering (assuming no
exercise of the underwriters' over-allotment option), the 818,182 shares
issuable pursuant to the merger (assuming an $11.00 initial public offering
price of the common stock in the offering, the mid-point of the estimated
range) and the shares to be repurchased at a price of $.01 per share.
(3) Includes 125,000 shares issuable upon the exercise of immediately
exercisable options to be granted simultaneously with the closing of the
offering and excludes the shares to be repurchased at a price of $.01 per
share. Mr. Jensen's business address is 13004 Starbuck Road, St. Louis,
Missouri 63141.
(4) Includes 14,475 shares issuable upon the exercise of immediately
exercisable options to be granted simultaneously with the closing of the
offering.
(5) Includes 55,060 shares issuable upon the exercise of immediately
exercisable warrants to be granted simultaneously with the closing of the
offering and 58,673 shares issuable upon conversion and exchange of shares
of Premier's common stock pursuant to the merger.
(6) Includes 25,875 shares issuable upon exercise of immediately exercisable
warrants and 58,673 shares issuable upon conversion and exchange of shares
of Premier's common stock pursuant to the merger.
(7) Includes 25,875 shares issuable upon exercise of immediately exercisable
warrants and 58,673 shares issuable upon conversion and exchange of shares
of Premier's common stock pursuant to the merger.
(8) Includes 246,285 shares issuable upon the exercise of immediately
exercisable options and warrants to be granted upon completion of the
offering.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Riva Bancshares is authorized to issue 20,000,000 shares of common stock, $.01
par value per share, and 1,000,000 shares of preferred stock, $.01 par value per
share, of which 100,000 shares of preferred stock have been designated as the
Series A Preferred Stock. As of the date hereof, 10,000 shares of common stock
and 99,900 shares of Series A Preferred Stock are issued and outstanding, held
by 1 and 12 shareholder(s) of record, respectively.
The following summary of the common stock and preferred stock is qualified in
its entirety by reference to the Certificate of Incorporation, the By-Laws, and
the Delaware General Corporation Law, as amended ("Delaware Law").
COMMON STOCK
Subject to such preferential rights as may be granted by the board of directors
in connection with any issuances of preferred stock, holders of shares of common
stock are entitled to receive such dividends as may be declared by the board of
directors in its discretion from funds legally available for that purpose. At
this time, the board of directors intends to retain all earnings to support
anticipated growth in the current operations of Riva Bancshares and to finance
future expansion. Additional restrictions on the payment of cash dividends may
be imposed in connection with future issuances of preferred stock and
indebtedness by Riva Bancshares. Further declarations and payments of cash
dividends, if any, will also be determined in light of then-current conditions,
including Riva Bancshares' earnings, operations, capital requirements,
liquidity, financial condition, restrictions in financing agreements and other
factors deemed relevant by the board of directors. Upon the liquidation,
dissolution or winding up of Riva Bancshares, after payment of creditors, the
remaining net assets of Riva Bancshares will be distributed pro rata to the
holders of common stock, subject to any liquidation preference of the holders of
preferred stock. There are no preemptive rights, conversion rights, or
redemption or sinking fund provisions with respect to the shares of common
stock. All of the outstanding shares of common stock are, and the shares to be
outstanding upon completion of the offering will be, duly and validly authorized
and issued, fully paid and nonassessable.
Holders of common stock are entitled to one vote per share of common stock held
of record on all such matters submitted to a vote of the shareholders. Holders
of common stock do not have cumulative voting rights. As a result, the holders
of a majority of the outstanding shares of common stock voting for the election
of directors can elect all the directors, and, in such event, the holders of the
remaining shares of common stock will not be able to elect any persons to the
board of directors.
PREFERRED STOCK
The board of directors may, without approval of Riva Bancshares' shareholders,
from time to time authorize the issuance of preferred stock in one or more
series for such consideration and, within certain limits, with such relative
rights, preferences and limitations as the board of directors may determine. The
relative rights, preferences and limitations that the board of directors has the
authority to determine as to any such series of preferred stock include, among
other things, dividend rights, voting rights, conversion rights, redemption
rights and liquidation preferences. Because the board of directors has the power
to establish the relative rights, preferences and limitations of each series of
preferred stock, it may afford to the holders of any such series, preferences
and rights senior to the rights of the holders of shares of common stock.
Although the board of directors has no present intention to do so, it could
cause the issuance of preferred stock which could discourage an acquisition
attempt or other transactions that some, or a majority of, the shareholders
might believe to be in their best interests, or in which the shareholders might
receive a premium for their shares of common stock over the market price of such
shares.
Riva Bancshares presently has 99,900 shares of preferred stock outstanding,
designated as the Series A Preferred Stock. The terms of the Series A Preferred
Stock provide that no dividends or other distributions
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shall be declared or payable on the Series A Preferred Stock. The terms of the
Series A Preferred Stock provide for a liquidation preference in the event of a
winding up, liquidation or dissolution of First Premier in the amount of $10.00
per share for an aggregate liquidation preference of $999,000. Except as may be
required by law, the holders of the Series A Preferred Stock do not have any
voting rights. The terms of the Series A Preferred Stock may be redeemed, at the
option of Riva Bancshares, at a price of $10.00 per share. Riva Bancshares
intends to redeem the outstanding shares of Series A Preferred Stock with the
proceeds of the offering.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
Supermajority Voting Requirements. Under Delaware Law, the shareholders have
the power to adopt, amend or repeal bylaws; however, the certificate of
incorporation may confer such power upon the board of directors, although in
doing so it may not divest the shareholders of their power to adopt, amend or
repeal the bylaws. Riva Bancshares' Certificate of Incorporation (the
"Certificate") provides that the board of directors is authorized to make,
repeal, alter, amend and rescind Riva Bancshares' Bylaws. The Certificate also
contains a supermajority (75%) voting requirement for amendments to the Bylaws
by the shareholders.
In addition to the supermajority vote required to amend the Bylaws, the
Certificate provides in Article X that the following provisions of the
Certificate may be amended or repealed only by the affirmative vote of the
holders of not less than 75% of the then outstanding common stock of Riva
Bancshares: (i) Article IX, which limits or eliminates the monetary liability of
directors for a breach of their fiduciary duty in certain circumstances; (ii)
Article VI, which provides that elections of directors need not be by written
ballot unless the Bylaws so provide; (iii) Article VII, which allows the board
of directors to amend or repeal any provision of the Bylaws and requires the
affirmative vote of 75% of the shareholders for the shareholders to adopt,
amend, alter or repeal the Bylaws; and (iv) Article VIII, which eliminates the
ability of shareholders to take action by written consent. Delaware Law provides
generally that a corporation's certificate of incorporation may be amended by a
vote of shareholders holding a majority of the outstanding stock. Where the
certificate of incorporation requires a supermajority vote with respect to a
particular matter, however, the same supermajority vote is required to amend
such supermajority voting requirement of the certificate of incorporation.
Therefore, both Delaware Law and the Certificate provide that in order to amend
or repeal the provisions in the Certificate which require the affirmative vote
of the holders of not less than 75% of the then outstanding common stock, the
same 75% vote will be necessary to amend such provisions.
These supermajority voting provisions could render more difficult or discourage
a merger, tender offer, proxy contest or the assumption of control of Riva
Bancshares by a large stockholder or group of shareholders. To the extent that
these provisions enable the board of directors to resist a takeover or change in
control of Riva Bancshares, it could make it more difficult to remove the
existing board of directors and management.
Certain Business Combinations. In the past several years, a number of states
have adopted special laws designed to make certain kinds of "unfriendly"
corporate takeovers, or other transactions involving a corporation and one or
more of its significant shareholders, more difficult. Under Section 203 of the
Delaware Law ("Section 203") certain "business combinations" with "interested
stockholders" of Delaware corporations are subject to a three-year moratorium
unless specified conditions are met.
Section 203 prohibits certain mergers, consolidations, sales of assets and other
transactions with an "interested stockholder" (generally a 15% stockholder or
group of stockholders) for three years following the date the stockholder became
an interested stockholder. This prohibition on business combinations is subject
to certain exceptions, the most significant of which are that the prohibition
does not apply if: (1) the business combination or transaction in which the
stockholder becomes an interested stockholder is approved by the corporation's
board of directors prior to the stockholder becoming an interested stockholder;
(2) the business combination is with an interested stockholder who became an
interested stockholder in a transaction whereby he acquired 85% of the
corporation's voting stock, excluding shares
72
<PAGE> 74
held by directors who are also officers and certain employee stock plans; or (3)
the business combination is approved by the corporation's board of directors and
authorized at a meeting by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder.
Section 203 only applies to Delaware corporations which have a class of voting
stock that is listed on a national securities exchange, authorized for quotation
on the Nasdaq National Market, or held of record by more than 2,000
shareholders. Because Riva Bancshares' common stock will be listed on the Nasdaq
National Market, it is anticipated that Section 203 will be applicable to Riva
Bancshares. A Delaware corporation may elect not to be governed by Section 203
by including a provision to that effect in its certificate of incorporation or
bylaws. The Certificate does not contain any such provision and, accordingly,
the Company believes Section 203 will apply to it.
Riva Bancshares expects that Section 203 will have the effect of encouraging any
potential acquiror to negotiate with the board of directors. Section 203 also
might have the effect of limiting the ability of a potential acquiror to engage
in certain tactics (such as "two-tier pricing") that can result in dissimilar
treatment of a corporation's shareholders. At the time Section 203 was adopted
by the Delaware Legislature, a number of corporations had been subject to tender
offers for, or other acquisitions of, more than 15% but less than 85% of their
outstanding stock. In many cases, such purchases were followed by business
combinations in which the purchaser either paid a lower price for the remaining
outstanding shares than the price it paid in acquiring its original interest in
the corporation, or paid a less desirable form of consideration. Federal
securities laws and regulations applicable to business combinations govern the
disclosure required to be made to minority shareholders in order to consummate
such a transaction, but do not assure shareholders that the terms of the
business combination will be fair to them or that they can effectively prevent
its consummation. Moreover, the statutory right of the remaining shareholders of
the corporation to dissent in connection with certain business combinations and
receive the "fair value" of their shares in cash may involve significant expense
to such dissenting shareholders and may not be meaningful in all cases. Such an
appraisal standard as applied under Delaware Law does not take into account any
appreciation of the stock's market value due to anticipation of the business
combination and may not recognize that the market value of the shares may be
adversely influenced by the interested person's controlling stock ownership. In
addition, in the case of some business combinations, such as a sale of assets or
a reclassification or recapitalization of a corporation's capital stock, the
statutory right of dissent is not available at all. Section 203 was intended to
partially close these "gaps" in federal and state law and to prevent certain of
the potential inequities of business combinations.
Shareholders should note, however, that the application of Section 203 to Riva
Bancshares will confer upon the board of directors the power to reject a
proposed business combination in certain circumstances, even though a potential
acquiror may be offering a substantial premium for Riva Bancshares' shares over
the then-current market price. Section 203 should also discourage certain
potential acquirors unwilling to comply with its provisions.
INDEMNIFICATION
This provision of the Certificate of Incorporation will limit the remedies
available to a shareholder who is dissatisfied with a decision of the board of
directors protected by this provision, and such shareholder's only remedy in
that circumstance may be to bring a suit to prevent the action of the board of
directors. In many situations, this remedy may not be effective, including
instances when shareholders are not aware of a transaction or an event prior to
action of the board of directors in respect of such transaction or event.
TRANSFER AGENT AND REGISTRAR
United Missouri Bank, N.A. Kansas City, Missouri will be the Transfer Agent and
Registrar for the common stock.
73
<PAGE> 75
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering and the merger, Riva Bancshares will have
3,828,182 shares of common stock outstanding (assuming no exercise of the
underwriters' over-allotment option and assuming the issuance of 818,182 shares
in the merger), outstanding options to purchase 329,475 shares of common stock
and outstanding warrants to purchase 565,798 shares of common stock. Of these
shares, the 3,000,000 shares in this offering will be eligible for sale in the
open market without restriction (except for any such shares purchased by or
issued to "affiliates" of Riva Bancshares). The 818,182 shares to be issued in
the merger to shareholders of Premier Bancshares who are not affiliates may be
sold in increasing amounts during the 120-day period following the offering
based on the terms of the merger agreement. The remaining 10,000 shares of
common stock will be "restricted securities" as that term is defined in Rule 144
("Rule 144") promulgated under the Securities Act of 1933, as amended (the
"Securities Act") and will become eligible for sale under Rule 144 approximately
90 days after the closing of the merger. Such shares must be held for one year
from the date of acquisition before they may be resold pursuant to Rule 144,
unless the resale of such shares is made pursuant to an effective registration
statement under the Securities Act or another exemption from registration is
available.
Generally, Rule 144 provides that beginning 90 days after the date of this
prospectus, a person (or persons whose shares are aggregated) who has
beneficially owned "restricted" securities for a least one year, including a
person who may be deemed an "affiliate" of Riva Bancshares, as the term
"affiliate" is defined under the Securities Act, is entitled to sell in
"broker's transactions" or in transactions directly with a "market marker,"
within any three-month period, a number of shares that does not exceed the
greater of one percent of the then outstanding shares of common stock or the
average weekly trading volume of the common stock on any national securities
exchange and/or over-the-counter market during the four calendar weeks preceding
such sale. Sales under Rule 144 are also subject to certain notice requirements
and the availability of current public information about Riva Bancshares. A
person (or persons whose shares are aggregated) who is not deemed an "affiliate"
of Riva Bancshares would be entitled to sell such shares under Rule 144 without
regard to the volume, public information, manner of sale or notice provisions
and limitations described above, once a period of at least two years had elapsed
since the later of the date the shares were acquired from Riva Bancshares or one
of its affiliates.
Upon completion of the offering, options to purchase 329,475 shares of common
stock will be granted to certain officers and directors of Riva Bancshares
pursuant to its stock option plan. After the offering, Riva Bancshares intends
to file a registration statement on Form S-8 under the Securities Act to
register the shares of common stock issuable upon exercise of such options.
Accordingly, such shares will be freely tradeable by holders who are not
affiliates of Riva Bancshares and, subject to the volume and manner of sale
limitations of Rule 144, by holders who are affiliates of Riva Bancshares.
Riva Bancshares' officers and directors and certain of its existing shareholders
have agreed, for a period of 180 days from the date of this prospectus, not to
sell or otherwise dispose, directly or indirectly, of any shares without prior
written consent of the underwriters. Upon completion of the acquisition of
Premier and the offering, our officers and directors will beneficially own an
aggregate of approximately 375,000 shares. These restricted shares of common
stock will be eligible for sale pursuant to Rule 144 in the public market 365
days from the date of their purchase from Riva Bancshares.
Premier Bancshares and its directors have agreed, for a period of 180 days after
the effective date of this registration statement, not to sell or otherwise
transfer any shares of common stock owned by such director or officer. Following
the expiration of the 180-day lock-up period, these shares will be eligible for
sale in the open market subject to certain volume limitations and other
conditions of Rule 145 of the Securities Act.
74
<PAGE> 76
Pursuant to the terms of the merger agreement, Premier's shareholders, except
for those shareholders who serve as directors and/or officers of Premier, will
not sell or otherwise transfer any shares of common stock which they own, except
as permitted in the schedule set forth below:
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF SHARES PERMITTED
TIME TABLE FOR SALE BY EACH PREMIER SHAREHOLDER
- ---------- ----------------------------------------
<S> <C>
From the date of pricing the offering through the
date of closing the offering................... No sales are permitted
From 1 to 30 days after closing.................. 10%
From 31 to 60 after closing...................... 20%
From 61 to 90 days after closing................. 40%
From 91 to 120 days after closing................ 60%
From 121 days and thereafter..................... 100%
</TABLE>
Warrants to purchase 100,000 shares of common stock were granted to certain
European investors in June 1998. The exercise price for these warrants will be
the initial public offering price of the common stock, and the warrants will be
exercisable for a seven-year period beginning on the date that the offering is
completed. Warrants to purchase 115,798 shares were granted to certain founders
of the company. These warrants are exercisable at the initial public offering
price for a 10-year period beginning on the date that the offering is completed.
The shares underlying these warrants will be "restricted securities," within the
meaning of Rule 144 and must be held for one year following the date of exercise
before they may be resold pursuant to Rule 144, unless the resale of such shares
is made pursuant to an effective registration statement under the Securities Act
or an exemption from registration is available. Finally, upon completion of the
offering, warrants to purchase an aggregate of 350,000 shares will be granted to
shareholders of Premier Bancshares. Of the warrants to be granted to the
shareholders of Premier Bancshares, 140,000 will be exercisable at an exercise
price equal to the initial public offering price and 210,000 will be exercisable
at 120% of the initial public offering price. The warrants issued to the Premier
shareholders, except for those issued to affiliates, and the underlying shares,
may be resold without restriction.
Prior to the offering, there has been no public market for the common stock of
Riva Bancshares, and no prediction can be made as to the effect, if any, that
future sales of shares or the availability of shares for sale will have on the
market price for common stock prevailing from time to time. Sales of substantial
amounts of common stock in the public market, or the perception of the
availability of shares for sale, could adversely affect the prevailing market of
the common stock and could impair Riva Bancshares' ability to raise capital
through the sale of its equity securities.
75
<PAGE> 77
UNDERWRITING
Riva Bancshares entered into an underwriting agreement with the underwriters
named below. CIBC World Markets Corp., Johnson Research & Capital Incorporated
and Kelton International Limited are acting as representatives of the
underwriters.
The underwriting agreement provides for the purchase of a specific number of
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter has severally agreed to purchase
the number of shares of common stock set forth opposite its name below.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
CIBC World Markets Corp.....................................
Johnson Research & Capital Incorporated.....................
Kelton International Limited................................
---------
Total.................................................. 3,000,000
=========
</TABLE>
This is a firm commitment underwriting. This means that the underwriters have
agreed to purchase all of the shares offered by this prospectus (other than
those covered by the over-allotment option described below) if any are
purchased. Pursuant to the underwriting agreement, if an underwriter defaults in
its commitment to purchase shares, the commitments of non-defaulting
underwriters may be increased or the underwriting agreement may be terminated,
depending on the circumstances.
The representatives have advised us that the underwriters propose to offer the
shares directly to the public at the public offering price that appears on the
cover page of this prospectus. In addition, the representatives may offer some
of the shares to certain securities dealers at such price less a concession of
$ per share. The underwriters may also allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers. After the shares are released for sale to the public, the
representatives may change the offering price and other selling terms at various
times.
We have granted the underwriters an over-allotment option. This option, which is
exercisable for up to 45 days after the date of this prospectus, permits the
underwriters to purchase a maximum of 450,000 additional shares. If the
underwriters exercise all or part of this option, they will purchase shares
covered by the option at the initial public offering price that appears on the
cover page of this prospectus, less the underwriting discount. If this option is
exercised in full, the total price to public will be $ and the total
proceeds to us will be $ . The underwriters have severally agreed that,
to the extent the over-allotment option is exercised, they will each purchase a
number of additional shares proportionate to each underwriter's initial amount
reflected in the foregoing table.
We will pay all of the expenses of the offering, excluding the underwriting
discount, which we estimate will be approximately $500,000.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
Mr. Robin C. Kelton serves as Chairman of the Board of Directors of Kelton
International Limited, an underwriter and one of the representatives. Mr. Kelton
has received warrants to purchase 14,475 shares of common stock with an exercise
price equal to the initial offering price of the common stock. In addition,
Kelton International Limited received a fee of $75,000 for its services as
placement agent in connection with the issuance of units consisting of shares of
common stock, preferred stock and warrants to purchase shares of common stock to
certain European investors in a private placement on June 19, 1998. Kelton
International Limited (i) is a foreign broker-dealer with a principal place of
business in the United Kingdom, (ii) is not registered with the SEC as a
broker-dealer, (iii) is not a member of the National Association of Securities
Dealers, Inc., (iv) will agree not to sell any of the shares of common stock
76
<PAGE> 78
offered hereby within the United States, its territories or its possessions, or
to nationals or residents of the United States, except for certain underwriting
syndicate sales, and (v) will agree to comply with certain rules of NASD
Regulation, Inc. as if it were a member of the NASD. Kelton International
Limited was organized and first registered as a broker-dealer within the past
four years. Prior to the organization of Kelton International Limited, its
principals and officers were actively involved in investment banking activities
with other broker-dealers.
Affiliates of Riva Bancshares and Premier Bancshares have agreed to a 180-day
"lock-up" with respect to approximately 375,000 shares of common stock. This
means that, subject to certain exceptions, for a period of 180 days following
the date of this prospectus, Riva Bancshares and such persons may not offer,
sell, pledge or otherwise dispose of Riva Bancshares common stock without the
prior written consent of the representatives.
Rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for or purchase shares before distribution of the shares is
completed. However, the underwriters may engage in the following activities in
accordance with the rules:
- Stabilizing transactions -- The representatives may make bids or purchases
for the purpose of pegging, fixing or maintaining the price of shares, so
long as stabilizing bids do not exceed a specified maximum.
- Over-allotments and syndicate covering transactions -- The underwriters may
create a short position in the shares by selling more shares than are set
forth on the cover page of this prospectus. If a short position is created
in connection with the offering, the representatives may engage in syndicate
covering transactions by purchasing shares in the open market. The
representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option.
LEGAL MATTERS
Certain legal matters in connection with the offering are being passed upon for
Riva Bancshares by Smith, Gambrell & Russell, LLP, Suite 3100, 1230 Peachtree
Street, N.E., Atlanta, Georgia 30309, counsel to Riva Bancshares. Certain legal
matters in connection with the offering are being passed upon for the
underwriters by Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New York
10166.
EXPERTS
The financial statements of Riva Bancshares and the consolidated financial
statements of Premier included in this prospectus have been audited by KPMG LLP,
independent auditors, as stated in their reports appearing in this prospectus
and are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Riva Bancshares has filed a Registration Statement on Form S-1 with the
Securities and Exchange Commission in connection with this offering. In
addition, upon completion of the offering, Riva Bancshares will be required to
file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
the registration statement and any other documents filed by Riva Bancshares at
the Securities and Exchange Commission's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the Public Reference
Room. Riva Bancshares' Securities and Exchange Commission filings are also
available to the public at the Securities and Exchange Commission's internet
site at "http://www.sec.gov."
This prospectus is part of the registration statement and does not contain all
of the information included in the registration statement. Whenever a reference
is made in this prospectus to any contract or other
77
<PAGE> 79
document of Riva Bancshares, the reference may not be complete and you should
refer to the exhibits that are a part of the registration statement for a copy
of the contract or document.
After the offering, Riva Bancshares expects to provide annual reports to its
shareholders that include financial information examined and reported on by Riva
Bancshares' independent public accountants.
78
<PAGE> 80
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
FINANCIAL STATEMENTS FOR RIVA BANCSHARES, INC.
Independent Auditors' Report.............................. F-2
Balance Sheet as of December 31, 1998..................... F-3
Statement of Operations for the period from May 1, 1998
(date of inception) through December 31, 1998.......... F-4
Statement of Shareholders' Equity for the period from May
1, 1998 (date of inception) through December 31,
1998................................................... F-5
Statement of Cash Flows for the period from May 1, 1998
(date of inception) through December 31, 1998.......... F-6
Notes to Financial Statements............................. F-7
Balance Sheet as of June 30, 1999 (Unaudited)............. F-12
Statement of Operations for the period from May 1, 1998
(date of inception) through June 30, 1998 and the Six
Months Ended June 30, 1999 (Unaudited)................. F-13
Statement of Shareholders' Equity for the Six Months Ended
June 30, 1999 (Unaudited).............................. F-14
Statement of Cash Flows for the period from May 1, 1998
(date of inception) through June 30, 1998 and the Six
Months Ended June 30, 1999 (Unaudited)................. F-15
Note to Unaudited Financial Statements.................... F-16
FINANCIAL STATEMENTS FOR PREMIER BANCSHARES, INC.
Independent Auditors' Report.............................. F-17
Consolidated Balance Sheets as of December 31, 1997 and
1998................................................... F-18
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1997 and 1998....................... F-19
Consolidated Statements of Shareholders' Equity and
Comprehensive Income for the Years Ended December 31,
1996, 1997 and 1998.................................... F-20
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997 and 1998....................... F-21
Notes to Consolidated Financial Statements................ F-22
Consolidated Balance Sheet as of June 30, 1999
(Unaudited)............................................ F-36
Consolidated Statements of Operations for the Six Months
Ended June 30, 1998 and 1999 (Unaudited)............... F-37
Consolidated Statements of Shareholders' Equity and
Comprehensive Income for the Six Months Ended June 30,
1999 (Unaudited)....................................... F-38
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1999 (Unaudited)............... F-39
Note to Unaudited Consolidated Financial Statements....... F-40
</TABLE>
F-1
<PAGE> 81
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Riva Bancshares, Inc.:
We have audited the accompanying balance sheet of Riva Bancshares, Inc., a
development stage corporation (the Company), as of December 31, 1998 and the
related statements of operations, shareholders' equity, and cash flows for the
period May 1, 1998 (date of inception) through December 31, 1998. 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 audit.
We conducted our audit 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 audit provides 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 the Company as of December 31,
1998 and the results of its operations and its cash flows for the period May 1,
1998 (date of inception) through December 31, 1998, in conformity with generally
accepted accounting principles.
KPMG LLP
St. Louis, Missouri
April 8, 1999, except for note 5 for
which the date is July 29, 1999
F-2
<PAGE> 82
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 711,515
Other Assets................................................ 172,598
-----------
Total assets........................................... $ 884,113
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued payroll taxes....................................... $ 1,158
Obligation to repurchase common stock....................... 5,650
-----------
Total liabilities...................................... 6,808
-----------
Shareholders' equity:
Series A preferred stock; $0.01 par value; 1,000,000
shares authorized; 99,900 shares issued and
outstanding; redemption price of $10.00................ 999,000
Common stock; $0.01 par value; 20,000,000 shares
authorized; 575,000 shares issued and outstanding...... 5,750
Common stock to be repurchased (565,000 shares at $0.01
per share)............................................. (5,650)
-----------
Common stock outstanding after repurchase.............. 100
-----------
Deficit accumulated during development stage.............. (121,795)
-----------
Total shareholders' equity............................. 877,305
-----------
Total liabilities and shareholders' equity............. $ 884,113
===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 83
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MAY 1, 1998 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1998
<TABLE>
<S> <C>
Income:
Interest income........................................... $ 20,508
Other income.............................................. 52
-----------
Total income...................................... 20,560
-----------
Expenses:
Salary and benefits....................................... 120,761
Other..................................................... 21,594
-----------
Total expenses......................................... 142,355
-----------
Net loss............................................... $ (121,795)
===========
Basic and diluted loss per share............................ $ (12.18)
===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 84
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 1, 1998 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
DEFICIT
SERIES A ACCUMULATED
PREFERRED STOCK COMMON STOCK DURING
------------------- ----------------- DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT STAGE TOTAL
-------- -------- -------- ------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of units........................... 99,900 $999,000 100,000 $1,000 -- 1,000,000
Issuance of common stock.................... -- -- 475,000 4,750 -- 4,750
Common stock to be repurchased.............. -- -- (565,000) (5,650) -- (5,650)
Net loss.................................... -- -- -- -- (121,795) (121,795)
------ -------- -------- ------ ---------- ----------
Balance, December 31, 1998.................. 99,900 $999,000 10,000 $ 100 (121,795) 877,305
====== ======== ======== ====== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 85
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MAY 1, 1998 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1998
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (121,795)
Adjustments to reconcile net loss to net cash used in
operating activities:
Increase in other assets............................... (172,598)
Increase in accrued payroll taxes...................... 1,158
Net cash used in operating activities................ (293,235)
Cash flows from financing activities -- proceeds from the
issuance of units and common stock........................ 1,004,750
-----------
Net increase in cash................................. 711,515
Cash, beginning of period................................... --
-----------
Cash, end of period......................................... $ 711,515
===========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 86
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Missouri Holdings, Inc. was incorporated on May 1, 1998 for the purpose of
becoming a bank holding company. The name of the corporation was subsequently
changed to Riva Bancshares, Inc. (the Company). The Company is in the
development stage and will remain in the development stage until the
consummation of an acquisition or merger with a banking organization.
Operations through December 31, 1998 relate primarily to expenditures for
incorporating and organizing the Company.
Basis of Presentation
The accompanying financial statements have been prepared on the accrual basis of
accounting in conformity with generally accepted accounting principles. The
presentation of financial statements in accordance 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.
Organizational Costs
The Company has elected to early adopt the provisions of SOP 98-5, Reporting on
the Costs of Start-Up Activities, which requires that start-up costs (including
organizational costs) be expensed as incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Loss Per Share
As the Company has no dilutive instruments, basic loss per share and dilutive
loss per share are equal. Basic loss per share is computed by dividing net loss
by 10,000, the weighted average number of common shares outstanding during the
period after giving effect to the obligation to repurchase 565,000 shares.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.
Stock Options
The Company applies the measurement provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for
stock options and accordingly, recognizes no compensation expense as the
exercise price of stock options equals the market price of the underlying
F-7
<PAGE> 87
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
stock at grant date. Pro forma information regarding net income and earnings per
share is required by Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation related to stock option grants. At
December 31, 1998, the Company had granted no stock options.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income (SFAS 130), which was issued in June 1997, establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. SFAS 130 requires that all items required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements, and requires an enterprise to (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS 130 is effective for fiscal years beginning after
December 15, 1997. The Company has no other comprehensive income for the period
from May 1, 1998 (date of inception) through December 31, 1998.
(2) RELATED PARTY TRANSACTIONS
In 1998, the Company entered into an agreement with T. Stephen Johnson &
Associates to provide consulting services during the development stage of the
Company. The president of T. Stephen Johnson & Associates is a director of the
Company. The consulting agreement provides for a monthly payment of $25,000
until the closing of the offering and a finder's fee for the successful
completion of a bank acquisition equal to 1% of the aggregate purchase price,
plus reimbursement of expenses. Fees paid to T. Stephen Johnson & Associates for
the period from May 1, 1998 (date of inception) through December 31, 1998
amounted to $126,540.
(3) SHAREHOLDERS' EQUITY
Sale of Units
In June 1998, the Company sold 100 units to accredited European investors at the
price of $10,000 per unit plus a distribution fee of $750 per unit paid by the
purchaser to Kelton International Limited. Each unit was comprised of (a) 999
shares of Series A preferred stock, (b) 1,000 shares of common stock, and (c)
warrants to purchase 1,000 shares of common stock at the initial public offering
price for a period of ten years following the initial public offering.
The net proceeds from the sale of units is being used to provide funding for the
operations of the Company during the development stage.
The Series A preferred stock, which the Company contemplates redeeming with a
portion of the proceeds of the initial public offering, is non-voting and, at
the option of the Company, is redeemable at a cash redemption price of $10 per
share.
In July 1999, based on discussions with the underwriters for the initial public
offering, the Company agreed to repurchase the 100,000 shares of common stock
issued to European investors at $0.01 per share.
F-8
<PAGE> 88
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Sale of Founders Shares
In August 1998, the Company sold 475,000 shares of common stock to investors as
founders shares at $0.01 per share. Such investors include the President and
Chief Executive Officer of the Company, certain directors of the Company, T.
Stephen Johnson, and other employees of T. Stephen Johnson & Associates. In
April 1999, based on discussions with the underwriters for the initial public
offering, the Company agreed to repurchase 275,000 founders shares at $0.01 per
share and issue 115,798 warrants to certain non-employee investors. In July
1999, the Company agreed to repurchase 290,000 additional founders shares at
$0.01 per share.
(4) INCOME TAXES
For the period May 1, 1998 through December 31, 1998 no income tax expense or
benefit has been recognized. The primary reconciling difference between the
income tax benefit and the amount of benefit that would be expected by the
result of applying the federal statutory rate of 34% to the loss before income
taxes for the period from May 1, 1998 (date of inception) through December 31,
1998 is as follows:
<TABLE>
<S> <C>
Expected federal income tax benefit......................... $ (41,410)
Establishment of valuation allowance........................ 41,410
-----------
Income tax expense..................................... $ --
===========
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets at December 31, 1998 are as follows:
<TABLE>
<S> <C>
Deferred tax assets - net operating loss carryforward....... 41,410
Less valuation allowance.................................. 41,410
-----------
Net deferred tax asset................................. $ --
===========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon generation of future taxable income during the periods in which
those temporary differences become deductible. Management considers projected
future taxable income and tax planning strategies in making this assessment.
Management does not believe it is more likely than not the Company will realize
the benefits of these deductible differences. Accordingly, a valuation allowance
has been established for the deferred tax asset.
At December 31, 1998, the Company had a net operating loss carryforward for
federal income tax purposes of approximately $140,000, which is available to
offset future federal taxable income, if any, through 2013.
(5) SUBSEQUENT EVENTS
Acquisition Activity
On May 6, 1999, the Company entered into a definitive agreement with Premier
Bancshares, Inc. (Premier), the bank holding company for Premier Bank, located
in Jefferson City, Missouri. At December 31, 1998, Premier had consolidated
total assets of $57.8 million, loans of $41.2 million, deposits
F-9
<PAGE> 89
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
of $48.8 million, and shareholders' equity of $4.4 million. The definitive
agreement was amended on July 22 and July 29, 1999. Under the amended agreement,
the shareholders of Premier will exchange their shares of common stock, in a
tax-free reorganization, for $9.0 million of newly issued shares of common stock
of the Company (valued at the initial public offering price of the common stock
of the Company). The transaction, which requires the approval of bank regulatory
authorities and the shareholders of the Company and Premier, is expected to
close in the third quarter of 1999.
Employment Agreements
The Company and Richard C. Jensen entered into an employment agreement which
provides that Mr. Jensen will serve as the President and Chief Executive Officer
of the Company and as President and Chief Executive Officer of Premier Bank upon
completion of the merger and the initial public offering. Mr. Jensen also serves
as a member of the board of directors of the Company and will serve on Premier
Bank's board of directors after the closing of the initial public offering. Mr.
Jensen's employment agreement has a three-year term and provides for a minimum
annual base salary of $250,000. Upon completion of the initial public offering,
Mr. Jensen will receive a payment of $150,000. In addition, the Board will issue
an option to Mr. Jensen to purchase up to 125,000 shares of common stock at the
initial public offering price of the common stock. This option will be
exercisable for a period of ten years. After the closing of the initial public
offering, in the event of a "change in control" of the Company (as defined in
his employment agreement), Mr. Jensen will be entitled to give written notice to
the Company of termination of the employment agreement and to receive a cash
payment equal to approximately 300% of the compensation received by Mr. Jensen
in the one-year period immediately preceding the change in control. In addition,
if Mr. Jensen elects to terminate the employment agreement pursuant to a change
in control, Mr. Jensen will further be entitled to, in lieu of shares of common
stock issuable upon the exercise of options, an amount in cash or common stock
equal to the excess of the fair market value of the common stock as of the date
of closing of the transaction effecting the change in control over the per share
exercise price of the options held by Mr. Jensen, times the number of shares of
common stock subject to such options. In the event that the board of directors
determines in its sole discretion that the Company is unable to close the
initial public offering, then the employment agreement may be terminated by the
board of directors at any time during the term of the employment agreement
without notice, with the condition that Mr. Jensen will be entitled to
liquidated damages in the amount of $250,000.
In connection with the agreement to acquire Premier Bancshares, Inc., the
Company has agreed entered into an employment agreement with Bruce W. Wiley, the
current President of Premier Bank. Mr. Wiley's employment agreement provides for
a five-year term commencing at the closing of the initial public offering. Mr.
Wiley's employment agreement provides for an annual base salary of $150,000 and
the grant of an option to purchase up to 70,000 shares of Company common stock
at the initial public offering price. 30,000 options will be granted under the
Company's stock option plan on the same terms as options issued to other members
of senior management and will vest over a period of three years. The remaining
40,000 options will be granted on the same terms as those warrants which were
issued to certain founders of the Company in April 1998 and will also be
exercisable for 10 years. In addition, Mr. Wiley's employment agreement provides
that he will serve as a director of the Company and his title following the
merger and the initial public offering will be President of the Mid-Missouri
Market. In the event of a "change in control" of the Company (as defined in his
employment agreement), Mr. Wiley's employment agreement provides that he may
elect to give written notice to the Company of termination of his employment
agreement and to receive a cash payment equal to approximately 300% of the
compensation received by him in the one-year period immediately preceding the
change in control.
F-10
<PAGE> 90
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In addition, the Company has also entered into employment agreements with four
additional executive officers. All of these employment agreements provide for a
three-year term. These employment agreements provide for annual base salaries
and the grant of options to purchase up to an aggregate of 110,000 shares at the
initial public offering price. These options will be exercisable for a period of
ten years.
Stock Option Plan
On April 29, 1999, the board of directors adopted the 1999 Stock Option Plan
(the 1999 Plan) to promote the Company's growth and financial success. Options
may be granted under the 1999 Plan to the Company's directors, officers, and
employees, as well as certain consultants and advisors. The 1999 Plan
contemplates the grant of nonqualified stock options and incentive stock
options. The 1999 Plan provides for option grants to purchase up to an aggregate
of 500,000 shares of common stock, subject to adjustment under certain
circumstances (the Option Shares). The 1999 Plan will expire upon the earlier to
occur of: (a) the date on which all Option Shares have been issued upon exercise
of options under the 1999 Plan; or (b) the tenth anniversary of the 1999 Plan's
effective date. The 1999 Plan will be administered by the board of directors or
by a committee appointed by the board and consisting of at least two
non-employee board members.
The exercise price of incentive stock options granted under the 1999 Plan will
be determined by the board of directors, but will in no event be less than 100%
of the market price of one share of common stock on the option grant date.
Nonqualified stock options under the 1999 Plan may be granted at an exercise
price of no less than 75% of the market price of the common stock on the date of
the grant. Vested options under the 1999 Plan may be exercised in whole or in
part, but in no event later than 10 years from the grant date. The board of
directors may at any time terminate, modify, or amend the 1999 Plan in any
respect, except that without shareholder approval the board of directors may
not:
- - Increase the number of Option Shares,
- - Extend the period during which options may be granted or exercised,
- - Change the class of 1999 Plan participants, or
- - Otherwise materially modify the requirements as to eligibility for
participation in the 1999 Plan.
In no event will the termination, modification, or amendment of the 1999 Plan,
without the written consent of an optionee, affect his or her rights under an
option or right previously granted him or her. The 1999 Plan must be approved by
the Company's shareholders within twelve months from the adoption of the 1999
Plan by the board of directors.
F-11
<PAGE> 91
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 145,746
Other assets................................................ 718,215
---------
Total assets........................................... $ 863,961
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued payroll taxes....................................... $ 3,550
Obligation to repurchase common stock....................... 2,900
Accrued expenses............................................ 228,518
---------
Total liabilities...................................... 234,968
---------
Shareholders' equity:
Series A preferred stock; $0.01 par value; 1,000,000
shares authorized; 99,900 shares issued and
outstanding; redemption price of $10.00................ 999,000
Common stock; $0.01 par value; 20,000,000 shares
authorized; 300,000 shares issued and outstanding...... 3,000
Common stock to be repurchased (290,000 shares at $0.01
per share)............................................. (2,900)
---------
Common stock outstanding after repurchase.............. 100
---------
Deficit accumulated during development stage.............. (370,107)
---------
Total shareholders' equity............................. 628,993
---------
Total liabilities and shareholders' equity............. $ 863,961
=========
</TABLE>
See accompanying note to unaudited financial statements.
F-12
<PAGE> 92
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 1, 1998 (DATE OF INCEPTION) THROUGH JUNE 30, 1998 AND THE SIX
MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM SIX
MAY 1, 1998 MONTHS
(DATE OF INCEPTION) ENDED
THROUGH JUNE 30, JUNE 30,
1998 1999
------------------- ---------
<S> <C> <C>
Income:
Interest income........................................... $ -- $ 10,381
Other income.............................................. -- 179
-------- ---------
Total income...................................... -- 10,560
-------- ---------
Expenses:
Salary and benefits....................................... -- 227,963
Other..................................................... -- 30,909
-------- ---------
Total expenses......................................... -- 258,872
-------- ---------
Net loss............................................... $ -- $(248,312)
======== =========
Basic and diluted loss per share............................ $ -- $ (24.83)
======== =========
</TABLE>
See accompanying note to unaudited financial statements.
F-13
<PAGE> 93
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
DEFICIT
SERIES A ACCUMULATED
PREFERRED STOCK COMMON STOCK DURING
------------------- --------------- DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT STAGE TOTAL
-------- -------- ------ ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998..................... 99,900 $999,000 10,000 $100 (121,795) $877,305
Net loss....................................... -- -- -- -- (248,312) (248,312)
------ -------- ------ ---- -------- --------
Balance, June 30, 1999......................... 99,900 $999,000 10,000 $100 (370,107) $628,993
====== ======== ====== ==== ======== ========
</TABLE>
See accompanying note to unaudited financial statements.
F-14
<PAGE> 94
RIVA BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE PERIOD MAY 1, 1998 (DATE OF INCEPTION) THROUGH JUNE 30, 1998 AND THE SIX
MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM SIX
MAY 1, 1998 MONTHS
(DATE OF INCEPTION) ENDED
THROUGH JUNE 30, JUNE 30,
1998 1999
------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ -- $(248,312)
Adjustments to reconcile net loss to net cash used in
operating activities:
Increase in other assets............................... -- (317,099)
Increase in accrued payroll taxes...................... -- 2,392
---------- ---------
Net cash used in operating activities................ -- (563,019)
Cash provided by (used in) financing activities:
Proceeds from the issuance of units....................... 1,000,000 --
Repurchase of common stock................................ -- (2,750)
---------- ---------
Net cash provided by (used in) financing
activities........................................ 1,000,000 (2,750)
---------- ---------
Net increase (decrease) in cash........................ 1,000,000 (565,769)
Cash, beginning of period................................... -- 711,515
---------- ---------
Cash, end of period......................................... $1,000,000 $ 145,746
========== =========
</TABLE>
See accompanying note to unaudited financial statements.
F-15
<PAGE> 95
RIVA BANCSHARES, INC.
(A DEVELOPMENTAL STAGE CORPORATION)
NOTE TO THE UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE A BASIS OF PRESENTATION
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included.
F-16
<PAGE> 96
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Premier Bancshares, Inc.:
We have audited the accompanying consolidated balance sheets of Premier
Bancshares, Inc. and subsidiary (the Company) as of December 31, 1997 and 1998,
and the related consolidated statements of operations, shareholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
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 Premier Bancshares,
Inc. and subsidiary as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
St. Louis, Missouri
February 12, 1999, except for note 17
for which the date is July 29, 1999
F-17
<PAGE> 97
PREMIER BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
----------- ----------
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 514,002 1,156,049
Interest-bearing deposits................................... 497,540 410,774
Federal funds sold.......................................... 1,802,000 5,111,000
----------- ----------
Cash and cash equivalents.............................. 2,813,542 6,677,823
Debt and marketable equity securities available-for-sale, at
fair value................................................ 5,417,750 6,477,945
Loans, net.................................................. 23,342,301 41,170,698
Premises and equipment, net................................. 1,393,233 2,543,762
Accrued interest receivable................................. 268,335 348,624
Other assets................................................ 481,681 536,976
----------- ----------
Total assets........................................... $33,716,842 57,755,828
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing....................................... $ 1,478,183 2,817,137
Interest-bearing.......................................... 26,874,744 45,998,685
----------- ----------
Total deposits......................................... 28,352,927 48,815,822
Federal Home Loan Bank advances............................. 940,000 3,445,153
Note payable................................................ 1,050,000 750,000
Accrued interest payable.................................... 115,715 207,529
Other liabilities........................................... 36,616 99,163
----------- ----------
Total liabilities...................................... 30,495,258 53,317,667
----------- ----------
Commitments and contingencies
Shareholders' equity:
Common stock, $1 par value, 100,000 shares authorized,
32,843 and 41,834 shares issued and outstanding in 1997
and 1998, respectively................................. 32,843 41,834
Surplus................................................... 3,394,172 4,553,421
Accumulated deficit....................................... (213,383) (191,030)
Accumulated other comprehensive income.................... 7,952 33,936
----------- ----------
Total shareholders' equity............................. 3,221,584 4,438,161
----------- ----------
Total liabilities and shareholders' equity............. $33,716,842 57,755,828
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-18
<PAGE> 98
PREMIER BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
---------- --------- ---------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans................................ $1,008,332 1,750,020 2,849,946
Interest and dividends on debt and marketable equity
securities............................................. 359,220 356,490 407,387
Interest on federal funds sold............................ 62,763 68,702 182,177
---------- --------- ---------
Total interest income.................................. 1,430,315 2,175,212 3,439,510
---------- --------- ---------
Interest expense:
Interest on deposits...................................... 855,131 1,253,198 1,884,612
Interest on Federal Home Loan Bank advances............... -- 21,905 132,748
Interest on note payable.................................. 27,744 33,975 72,140
---------- --------- ---------
Total interest expense................................. 882,875 1,309,078 2,089,500
---------- --------- ---------
Net interest income.................................... 547,440 866,134 1,350,010
Provision for loan losses................................... 80,582 112,279 291,734
---------- --------- ---------
Net interest income after provision for loan losses.... 466,858 753,855 1,058,276
---------- --------- ---------
Noninterest income:
Service charges on deposits............................... 18,889 34,930 58,958
Loss on sale of securities, net........................... -- (210) --
Gain on sale of loans, net................................ 16,922 26,270 70,055
Other noninterest income.................................. 11,461 28,314 39,504
---------- --------- ---------
Total noninterest income............................... 47,272 89,304 168,517
---------- --------- ---------
Noninterest expense:
Salaries and employee benefits............................ 298,307 354,371 598,308
Occupancy and equipment expense........................... 82,030 118,965 188,108
Other noninterest expense................................. 247,024 262,315 409,498
---------- --------- ---------
Total noninterest expense.............................. 627,361 735,651 1,195,914
---------- --------- ---------
Income (loss) before income tax expense................ (113,231) 107,508 30,879
Income tax expense.......................................... -- 10,613 8,526
---------- --------- ---------
Net income (loss)...................................... $ (113,231) 96,895 22,353
========== ========= =========
Basic and diluted earnings (loss) per share................. $ (3.54) 2.99 0.55
========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE> 99
PREMIER BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON STOCK ACCU- COMPRE- TOTAL
---------------- TREASURY MULATED HENSIVE SHAREHOLDERS'
SHARES AMOUNT SURPLUS STOCK DEFICIT INCOME EQUITY
------ ------- --------- -------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995..... 35,020 $35,020 3,605,580 (307,530) (189,517) 47,633 3,191,186
Retirement of treasury stock..... (3,000) (3,000) (304,530) 307,530 -- -- --
Transfer from accumulated deficit
to surplus..................... -- -- 7,530 -- (7,530) -- --
Comprehensive income:
Net loss....................... -- -- -- -- (113,231) -- (113,231)
Other comprehensive income --
change in unrealized gain
(loss) on securities
available-for-sale, net of
tax.......................... -- -- -- -- -- (61,756) (61,756)
---------
Total comprehensive income... (174,987)
------ ------- --------- -------- -------- ------- ---------
Balance at December 31, 1996..... 32,020 32,020 3,308,580 -- (310,278) (14,123) 3,016,199
Issuance of common stock......... 823 823 85,592 -- -- -- 86,415
Comprehensive income:
Net income..................... -- -- -- -- 96,895 -- 96,895
Other comprehensive income --
change in unrealized gain
(loss) on securities
available-for-sale, net of
tax and reclassification
amount....................... -- -- -- -- -- 22,075 22,075
---------
Total comprehensive income... 118,970
------ ------- --------- -------- -------- ------- ---------
Balance at December 31, 1997..... 32,843 32,843 3,394,172 -- (213,383) 7,952 3,221,584
Issuance of common stock......... 9,231 9,231 1,190,799 -- -- -- 1,200,030
Purchase of treasury stock....... -- -- -- (31,790) -- -- (31,790)
Retirement of treasury stock..... (240) (240) (31,550) 31,790 -- -- --
Comprehensive income:
Net income..................... -- -- -- -- 22,353 -- 22,353
Other comprehensive income --
change in unrealized gain
(loss) on securities
available-for-sale, net of
tax.......................... -- -- -- -- -- 25,984 25,984
---------
Total comprehensive income... 48,337
------ ------- --------- -------- -------- ------- ---------
Balance at December 31, 1998..... 41,834 $41,834 4,553,421 -- (191,030) 33,936 4,438,161
====== ======= ========= ======== ======== ======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE> 100
PREMIER BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
------------ ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ (113,231) $ 96,895 $ 22,353
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 59,405 73,823 115,188
Provision for loan losses............................... 80,582 112,279 291,734
Loss on sale of securities.............................. -- 210 --
Gain on sale of loans, net.............................. (16,922) (26,270) (70,055)
Increase in accrued interest receivable................. (15,438) (83,205) (80,289)
Increase in accrued interest payable.................... 25,100 29,768 91,814
Increase in other assets................................ (3,459) (459,880) (55,295)
Other, net.............................................. (9,877) 43,701 49,161
Originations of loans held for sale....................... (1,705,300) (2,060,385) (6,194,486)
Proceed from sales of loans held for sale................. 1,722,222 2,086,655 6,041,376
------------ ----------- ------------
Net cash provided by (used in) operating activities... 23,082 (186,409) 211,501
------------ ----------- ------------
Cash flows from investing activities:
Proceeds from sales of debt and marketable equity
securities available-for-sale........................... -- 553,120 --
Proceeds from maturities and principal payments on debt
and marketable equity securities available-for-sale..... 1,726,054 2,564,969 3,542,196
Purchases of debt and marketable equity securities
available-for-sale...................................... (2,693,239) (2,260,555) (4,575,742)
Net increase in loans..................................... (9,022,096) (8,249,077) (17,896,966)
Purchases of premises and equipment, net.................. (709,899) (67,658) (1,252,996)
------------ ----------- ------------
Net cash used in investing activities................. (10,699,180) (7,459,201) (20,183,508)
------------ ----------- ------------
Cash flows from financing activities:
Net increase in deposits.................................. 10,761,404 6,084,663 20,462,895
Federal Home Loan Bank advances........................... -- 1,940,000 2,805,000
Principal payments on Federal Home Loan Bank advances..... -- (1,000,000) (299,847)
Proceeds from note payable................................ -- 1,050,000 --
Repayment of note payable................................. -- (300,000) (300,000)
Purchase of treasury stock................................ -- -- (31,790)
Proceeds from sale of common stock........................ -- 86,415 1,200,030
------------ ----------- ------------
Net cash provided by financing activities............. 10,761,404 7,861,078 23,836,288
------------ ----------- ------------
Net increase in cash and cash equivalents............. 85,306 215,468 3,864,281
Cash and cash equivalents at beginning of year.............. 2,512,768 2,598,074 2,813,542
------------ ----------- ------------
Cash and cash equivalents at end of year.................... $ 2,598,074 $ 2,813,542 $ 6,677,823
============ =========== ============
Supplemental information -- interest paid................... $ 857,775 $ 1,279,310 $ 1,997,686
============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE> 101
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997, AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Premier Bancshares, Inc. provides a full range of banking services to corporate
and individual customers throughout Jefferson City and Columbia, Missouri,
through its wholly owned subsidiary, Premier Bank (the Bank). Premier
Bancshares, Inc. and the Bank (the Company), which operate as a single business
segment, are subject to competition from other financial and nonfinancial
institutions providing financial products in these Missouri markets.
Additionally, the Company is subject to the regulations of certain federal and
state agencies and undergoes periodic examinations by those regulatory agencies.
The accounting and reporting policies of the Company conform, in all material
respects, to generally accepted accounting principles within the banking
industry.
The more significant of the Company's accounting policies are set forth below:
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions, including the determination of the allowance for
loan losses, that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results differ from those
estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of Premier
Bancshares, Inc. and the Bank. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, cash and cash
equivalents include cash, due from banks, interest-bearing deposits, and
federal funds sold.
Investment Securities
At the time of purchase for the periods covered, all debt and equity
securities were classified as available-for-sale. Unrealized gains and
losses, net of tax, are excluded from earnings and reported as accumulated
other comprehensive income, a separate component of shareholders' equity,
until realized. A decline in the market value of any security below cost
that is deemed other than temporary results in a charge to earnings and the
establishment of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the lives of the
respective securities as an adjustment to yield using the interest method.
Dividend and interest income is recognized when earned. Realized gains and
losses are included in earnings and are derived using the specific-
identification method for determining the cost of securities sold.
The Bank, as a member of the Federal Home Loan Bank System administered by
the Federal Housing Finance Board, is required to maintain an investment in
the capital stock of the Federal Home Loan Bank (FHLB) in an amount equal
to the greater of 1% of the Bank's total mortgage-related assets at the
beginning of each year, 0.3% of the Bank's total assets at the beginning of
each
F-22
<PAGE> 102
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
year, or 5% of advances from the FHLB to the Bank. This investment is
recorded at cost which represents redemption value.
Loans
Interest on loans is credited to income based upon the principal amount
outstanding. The recognition of interest income is discontinued when, in
management's judgment, the interest will not be collectible in accordance
with the contractual terms of the loan agreement or when either principal
or interest is past due over 90 days. Subsequent payments received on such
loans are applied to principal if there is any doubt as to the
collectibility of such principal; otherwise, such receipts are recorded as
interest income. Loans are returned to accrual status when management
believes full collectibility of principal and interest is expected.
A loan is considered impaired when it is probable the Company will be
unable to collect all amounts due -- both principal and
interest -- according to the contractual terms of the loan agreement. When
measuring impairment, the expected future cash flows of an impaired loan
are discounted at the loan's effective interest rate. Alternatively,
impairment is measured by reference to an observable market price, if one
exists, or the fair value of the collateral for a collateral-dependent
loan. Regardless of the historical measurement method used, the Company
measures impairment based on the fair value of the collateral when
foreclosure is probable. Additionally, impairment of a restructured loan is
measured by discounting the total expected future cash flows at the loan's
effective rate of interest as stated in the original loan agreement. The
Company uses its nonaccrual policy for recognizing interest income on
impaired loans.
The Company originates certain loans which are sold in the secondary
mortgage market. These long-term, fixed-rate loans are sold on a
note-by-note basis. Immediately upon locking in an interest rate, the
Company enters into an agreement to sell the mortgage loan without
recourse. The Company allocates the entire cost of loans originated to the
mortgage loans, as the Company does not retain servicing. These loans held
for sale are included in loans, net in the consolidated balance sheets.
The allowance for loan losses is available to absorb loan charge-offs. The
allowance is increased by provisions charged to expense and reduced by loan
charge-offs less recoveries. The provision charged to expense is that
amount which management believes is sufficient to bring the balance of the
allowance for loan losses to a level adequate to absorb potential loan
losses, based on their knowledge and evaluation of the current loan
portfolio and the current economic environment in which the borrowers of
the Bank operate.
Management believes the allowance for loan losses is adequate to absorb
losses in the loan portfolio. While management uses available information
to recognize loan losses, future additions to the allowance may be
necessary based on changes in economic conditions and changes in the
financial condition of borrowers. Additionally, regulatory agencies, as an
integral part of the examination process, periodically review the Bank's
allowance for loan losses. Such agencies may require the Bank to increase
its allowance for loan losses based on their judgments and interpretations
about information available to them at the time of their examinations.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the respective assets, which is 50 years for buildings, and
range from 3 to 10 years for furniture, fixtures, and equipment. Property
additions and betterments are capitalized, while maintenance and repairs
which do not extend the useful life of the asset are expensed as incurred.
F-23
<PAGE> 103
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
Premier Bancshares, Inc. and the Bank file consolidated income tax returns.
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period which includes the enactment date.
Treasury Stock
The purchase of the Company's common stock is recorded at cost. Upon
subsequent reissuance or retirement, the treasury stock account is reduced
by the average cost basis of such common stock.
Earnings (Loss) Per Share
As the Company has no dilutive instruments, basic earnings (loss) per share
and dilutive earnings (loss) per share are equal. Basic earnings (loss) per
share is computed by dividing net income (loss) by 32,020, 32,375, and
40,443, the weighted average number of common shares outstanding during
1996, 1997, and 1998, respectively.
Financial Instruments
Financial instruments are defined as cash, evidence of an ownership
interest in any entity, or a contract that both imposes on one entity a
contractual obligation to deliver cash or another financial instrument to a
second entity, and conveys to that second entity a contractual right to
receive cash or another financial instrument from the first entity.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flow
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured as the amount by
which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
130, Reporting Comprehensive Income, during 1998. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. SFAS No. 130 requires that all items
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements, and requires an
enterprise to (a) classify items of other comprehensive income by their
nature in a financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position.
The
F-24
<PAGE> 104
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company reports comprehensive income in the consolidated statements of
shareholders' equity and comprehensive income. The adoption of SFAS No. 130
did not have an effect on the financial position or results of operations
of the Company.
(2) REGULATORY RESTRICTIONS AND CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements administered by
federal and state banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary, actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines, the Bank must
meet specific capital guidelines that involve quantitative measures of assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The capital amounts and classification of the Bank are
subject to qualitative judgments by the regulators about components,
risk-weightings, and other factors. As of December 31, 1997 and 1998, without
prior approval of the regulatory banking authorities, the Bank was unable to pay
cash dividends on its common stock.
Quantitative measures established by regulations to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
following table) of total and Tier I capital to risk-weighted assets, and of
Tier I capital to adjusted average assets. Management believes, as of December
31, 1998, the Bank meets all capital and adequacy requirements to which it is
subject.
The Bank is also subject to the regulatory framework for prompt corrective
action. The Bank's most recent notification from the Federal Deposit Insurance
Corporation, dated November 30, 1998, categorized it 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 to adjusted average assets ratios as set forth in the following
table. There are no obligations or events since November 30, 1998 that
management believes have changed the Bank's category.
The actual and required capital amounts and ratios for the Bank as of December
31, 1997 and 1998 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
REQUIREMENTS TO
CAPITAL BE CLASSIFIED AS
ACTUAL REQUIREMENTS WELL CAPITALIZED
-------------- -------------- ----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
1997:
Total capital (to risk-weighted
assets).............................. $4,425 23.51% $1,505 8.00% $1,882 10.00%
Tier I capital (to risk-weighted
assets).............................. 4,215 22.40 753 4.00 1,129 6.00
Tier I capital (to average assets)...... 4,215 13.20 958 3.00 1,596 5.00
====== ===== ====== ==== ====== =====
</TABLE>
<TABLE>
<CAPTION>
REQUIREMENTS TO
CAPITAL BE CLASSIFIED AS
ACTUAL REQUIREMENTS WELL CAPITALIZED
-------------- -------------- ----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
1998:
Total capital (to risk-weighted
assets).............................. $5,513 13.24% $3,330 8.00% $4,163 10.00%
Tier I capital (to risk-weighted
assets).............................. 5,074 12.19 1,665 4.00 2,498 6.00
Tier I capital (to average assets)...... 5,074 9.09 1,675 3.00 2,792 5.00
====== ===== ====== ==== ====== =====
</TABLE>
F-25
<PAGE> 105
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) DEBT AND MARKETABLE EQUITY SECURITIES
The amortized cost and fair values of debt and marketable equity securities
available-for-sale at December 31, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
1997
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Treasury securities....................... $ 759,840 5,743 -- 765,583
U.S. Government corporations and agencies...... 3,753,039 8,394 (3,689) 3,757,744
Obligations of state and political
subdivisions................................ 358,748 3,286 (938) 361,096
Mortgage-backed securities..................... 454,575 2,671 (3,419) 453,827
---------- ------ ------ ---------
5,326,202 20,094 (8,046) 5,338,250
---------- ------ ------ ---------
Marketable equity securities:
Federal Home Loan Bank stock................... 77,000 -- -- 77,000
Other.......................................... 2,500 -- -- 2,500
---------- ------ ------ ---------
79,500 -- -- 79,500
---------- ------ ------ ---------
$5,405,702 20,094 (8,046) 5,417,750
========== ====== ====== =========
</TABLE>
<TABLE>
<CAPTION>
1998
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Treasury securities..................... $ 506,230 6,580 -- 512,810
U.S. Government corporations and agencies.... 4,860,592 35,828 (2,773) 4,893,647
Obligations of state and political
subdivisions.............................. 359,279 10,880 -- 370,159
Mortgage-backed securities................... 524,525 3,355 (2,451) 525,429
---------- ------ ------ ---------
6,250,626 56,643 (5,224) 6,302,045
---------- ------ ------ ---------
Marketable equity securities:
Federal Home Loan Bank stock................. 173,400 -- -- 173,400
Other........................................ 2,500 -- -- 2,500
---------- ------ ------ ---------
175,900 -- -- 175,900
---------- ------ ------ ---------
$6,426,526 56,643 (5,224) 6,477,945
========== ====== ====== =========
</TABLE>
F-26
<PAGE> 106
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The amortized cost and fair values of debt securities available-for-sale at
December 31, 1997 and 1998, by contractual maturity, are shown below. Actual
maturities may differ from contractual maturities because borrowers have the
right to repay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
1997 1998
----------------------- ----------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Due in one year or less...................... $ 499,372 499,807 750,225 753,273
Due after one year through five years........ 3,765,535 3,770,534 2,231,764 2,091,082
Due after five years through ten years....... 1,061,295 1,067,909 3,010,558 3,202,383
Due after ten years.......................... -- -- 258,079 255,307
---------- --------- --------- ---------
$5,326,202 5,338,250 6,250,626 6,302,045
========== ========= ========= =========
</TABLE>
Debt and marketable equity securities with carrying values aggregating
$1,464,302 and $1,369,034 at December 31, 1997 and 1998, respectively, were
pledged to secure public funds and for other purposes as required or permitted
by law.
(4) LOANS
The composition of the loan portfolio at December 31, 1997 and 1998 is as
follows:
<TABLE>
<CAPTION>
1997 1998
----------- ----------
<S> <C> <C>
Commercial.................................................. $ 2,905,207 5,292,128
Real estate................................................. 19,329,657 34,465,883
Installment and others...................................... 1,317,437 1,618,363
Loans held for sale......................................... -- 233,165
----------- ----------
23,552,301 41,609,539
Allowance for loan losses................................... (210,000) (438,841)
----------- ----------
Loans, net............................................. $23,342,301 41,170,698
=========== ==========
</TABLE>
The Bank grants commercial, residential mortgage, and installment loans to
customers primarily in their service area of Jefferson City and Columbia,
Missouri. The Company has a diversified loan portfolio, with no particular
concentration of credit in any one economic sector in this service area;
however, a substantial portion of the portfolio is concentrated in and secured
by real estate. The ability of the Company's borrowers to honor their
contractual obligations is dependent upon the local economies and their effect
on the real estate market.
Following is a summary of activity for the year ended December 31, 1998, of
loans to executive officers and directors or to entities in which such
individuals had beneficial interest as shareholders, officers, or directors.
Such loans were made in the normal course of business on substantially the same
terms, including interest rates and collateral, as those prevailing at the same
time for comparable transactions with other persons, and did not involve more
than the normal risk of collectibility.
<TABLE>
<S> <C>
Balance at December 31, 1997................................ $273,332
New loans................................................... 886,100
Payments received........................................... (654,098)
--------
Balance at December 31, 1998................................ $505,334
========
</TABLE>
F-27
<PAGE> 107
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Transactions in the allowance for loan losses for the years ended December 31,
1996, 1997, and 1998 are summarized as follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- ------- -------
<S> <C> <C> <C>
Balance at January 1........................................ $ 63,430 120,000 210,000
Provision charged to expense................................ 80,582 112,279 291,734
Loans charged-off........................................... (24,012) (22,641) (64,643)
Recoveries of loans previously charged-off.................. -- 362 1,750
-------- ------- -------
Balance at December 31...................................... $120,000 210,000 438,841
======== ======= =======
</TABLE>
A summary of impaired loans at December 31, 1997 and 1998 follows:
<TABLE>
<CAPTION>
1997 1998
-------- ------
<S> <C> <C>
Nonaccrual loans............................................ $161,234 94,072
Impaired loans continuing to accrue interest................ -- --
-------- ------
Total impaired loans................................... $161,234 94,072
======== ======
Allowance for losses on impaired loans...................... $ 27,532 24,072
Impaired loans with no related allowance for loan losses.... -- --
======== ======
</TABLE>
The average balance of impaired loans during 1997 and 1998 was $82,690 and
$158,233, respectively.
There were no nonaccrual or impaired loans as of and for the year ended December
31, 1996. A summary of interest income on nonaccrual and other impaired loans
for 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
IMPAIRED LOANS
NONACCRUAL CONTINUING TO
LOANS ACCRUE INTEREST TOTAL
---------- --------------- -----
<S> <C> <C> <C>
1997:
Income recognized........................................ $ -- -- --
Interest income had interest accrued..................... 7,399 -- 7,399
====== ===== =====
1998:
Income recognized........................................ $ -- -- --
Interest income had interest accrued..................... 7,650 -- 7,650
====== ===== =====
</TABLE>
(5) PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
1997 1998
---------- ---------
<S> <C> <C>
Land........................................................ $ 400,000 650,000
Buildings................................................... 872,839 1,552,925
Furniture, fixtures, and equipment.......................... 236,578 545,114
---------- ---------
1,509,417 2,748,039
Less accumulated depreciation............................... 116,184 204,277
---------- ---------
$1,393,233 2,543,762
========== =========
</TABLE>
Amounts charged to occupancy expense for depreciation aggregated $43,769,
$60,193, and $102,467 for the years ended December 31, 1996, 1997, and 1998,
respectively.
F-28
<PAGE> 108
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1998, the Bank had entered into an operating lease for a
facility which begins in February 2000 and expires in 2005. Minimum future lease
payments required are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1999...................................................... $ --
2000...................................................... 24,475
2001...................................................... 26,700
2002...................................................... 26,700
2003...................................................... 26,700
2004 and thereafter....................................... 28,925
--------
$133,500
========
</TABLE>
(6) INTEREST-BEARING DEPOSITS
A summary of interest-bearing deposits at December 31, 1997 and 1998 is as
follows:
<TABLE>
<CAPTION>
1997 1998
----------- ----------
<S> <C> <C>
NOW and money market demand accounts........................ $ 3,008,584 6,080,659
Savings..................................................... 6,091,624 12,454,092
Other time deposits:
Less than $100,000........................................ 11,490,200 16,267,823
$100,000 and over......................................... 6,284,336 11,196,111
----------- ----------
$26,874,744 45,998,685
=========== ==========
</TABLE>
Interest expense on deposits for the years ended December 31, 1996, 1997, and
1998 is summarized as follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- --------- ---------
<S> <C> <C> <C>
NOW and money market demand accounts...................... $ 80,291 123,663 171,269
Savings................................................... 86,675 242,812 401,601
Other time deposits....................................... 688,165 886,723 1,311,742
-------- --------- ---------
$855,131 1,253,198 1,884,612
======== ========= =========
</TABLE>
The maturities of other time deposits at December 31, 1998 are show below.
Expected maturities may differ from contractual maturities because depositors
may redeem deposits early.
<TABLE>
<S> <C>
Due in three months or less................................. $ 7,032,398
Due in greater than three months through one year........... 13,901,527
Due in greater than one year through three years............ 5,550,580
Due in greater than three years............................. 979,429
-----------
$27,463,934
===========
</TABLE>
F-29
<PAGE> 109
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) FEDERAL HOME LOAN BANK ADVANCES
At December 31, 1998 and 1997, the Bank has fixed rate advances outstanding with
the Federal Home Loan Bank of Des Moines, with stated maturities as follows:
<TABLE>
<CAPTION>
1997 1998
------------------- ---------------------
WEIGHTED WEIGHTED
INTEREST 1998 INTEREST
AMOUNT RATE AMOUNT RATE
-------- -------- ---------- --------
<S> <C> <C> <C> <C>
Due in one year or less..................... $500,000 6.02% $ 250,000 6.18%
Due after five years........................ 440,000 6.43 3,195,153 5.70
-------- ==== ---------- ====
$940,000 $3,445,153
======== ==========
</TABLE>
The Bank maintains an $8.3 million line of credit with the FHLB and had
availability under that line of $4.9 million at December 31, 1998.
FHLB advances are secured under a blanket agreement which assigns all FHLB stock
and one-to-four family mortgage loans equal to 130% of the outstanding advance
balance.
(8) NOTE PAYABLE
The note payable at December 31, 1998 is a term loan between the Company and an
unaffiliated financial institution which bears interest at the prime rate (7.75%
at December 31, 1998), is due on November 15, 1999, and is secured by 35,020
common shares of the Bank.
(9) OTHER COMPREHENSIVE INCOME
The Company's other comprehensive income included the following components:
<TABLE>
<CAPTION>
1996 1997 1998
-------- ------ ------
<S> <C> <C> <C>
Net realized and unrealized gain (loss) on securities
available-for-sale, net of tax......................... $(61,756) 22,214 25,984
Less adjustment for net securities loss realized in net
income, net of tax..................................... -- (139) --
-------- ------ ------
$(61,756) 22,075 25,984
======== ====== ======
</TABLE>
(10) INCOME TAXES
The components of income tax expense for the years ended December 31, 1996,
1997, and 1998 are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- ------- ------
<S> <C> <C> <C>
Current expense:
Federal............................................... $ -- 8,926 --
State................................................. -- 1,687 8,526
Increase(decrease)in the beginning of the year balance
of the valuation allowance for deferred tax
assets............................................. 42,895 (39,038) (6,416)
Deferred -- federal..................................... (42,895) 39,038 6,416
-------- ------- ------
$ -- 10,613 8,526
======== ======= ======
</TABLE>
F-30
<PAGE> 110
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of expected income tax expense to federal income tax expense,
computed by applying the federal statutory rate of 34% to income (loss) before
income tax expense for the years ended December 31, 1996, 1997, and 1998 to
reported income tax expense, is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Income tax expense (benefit) at statutory rate......... $(38,499) $ 36,553 $ 10,499
Increase (decrease) in income taxes resulting from:
State income tax, net of federal income tax
benefit........................................... -- 1,113 5,627
Officer's life insurance -- book to tax treatment.... -- 861 (4,222)
Change in the beginning of the year balance of the
valuation allowance for deferred tax assets
allocated to income tax expense................... 42,895 (39,038) (6,416)
Other, net........................................... (4,396) 11,124 3,038
-------- -------- --------
Income tax expense................................ $ -- $ 10,613 $ 8,526
======== ======== ========
</TABLE>
The tax effect of temporary differences which give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1997 and
1998 are presented below:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Book provision for loan loss in excess of tax............. $ 54,143 $126,213
Deferred compensation..................................... 849 3,818
Available-for-sale securities market valuation............ 4,096 17,483
Organizational costs...................................... 10,258 5,862
Net operating loss carryforward........................... 71,545 16,503
-------- --------
Gross deferred tax assets.............................. 140,891 169,879
Less valuation allowance.................................. (63,311) (56,895)
-------- --------
Net deferred tax assets, net........................... 77,580 112,984
-------- --------
Deferred tax liabilities:
Premises and equipment, basis............................. (25,791) (51,299)
Accrual to cash conversion for book to tax accounting
methods................................................ (44,638) (41,717)
Other..................................................... (3,055) (2,486)
-------- --------
Total gross deferred tax liabilities................... (73,484) (95,502)
-------- --------
Net deferred tax assets................................ $ 4,096 $ 17,482
======== ========
</TABLE>
At December 31, 1998, the Company has net operating loss carryforwards (NOLs) of
approximately $50,000. Their utilization is subject to annual limitations. The
NOLs for the Company at December 31, 1998 expire during 2009 through 2011.
The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. A valuation allowance is provided on deferred tax assets
when it is more likely than not that some portion of the assets will not be
realized. The valuation allowance for deferred tax assets as of December 31,
1996 was $102,349. The net change in the total valuation allowance for the years
ended December 31, 1997 and 1998 was a decrease of $39,038 and $6,416,
respectively.
F-31
<PAGE> 111
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) EMPLOYEE BENEFITS
During 1997, the Company adopted a SIMPLE IRA for all employees meeting certain
eligibility requirements. An eligible employee may make a salary reduction
election, expressed as a percentage of compensation, not to exceed $6,000 for
any calendar year. The Company makes contributions to the plan equal to the
employees' salary reduction contributions up to a limit of 3% of the employee's
compensation for the calendar year subject to certain provisions which could
reduce such contributions. All contributions are fully vested and
nonforfeitable; there are no withdrawal restrictions, and no cost or penalty for
transfer to another IRA. Employer matching contributions to the plan totaled
$4,232 and $8,239 in 1997 and 1998, respectively.
In 1997, the Company's Board entered into a Director Deferred Fee Agreement
(Agreement) with five of the six Directors and one Company officer; the
Agreement provides the participants with the opportunity to defer fees and to
accumulate assets for retirement. The Board has determined that it is in the
best interest of the Company to recover the cost of the benefit obligations by
purchasing life insurance. These life insurance policies are owned by the
Company and are designed to insure against the contingent liability associated
with the premature death of any of the Directors. The Company did not make any
contributions related to the Agreement during 1998. The current surrender value
of the life insurance policies, included in other assets in the consolidated
balance sheets, totaled $452,468 and $473,621 at December 31, 1997 and 1998,
respectively. The accrued benefit obligations totaled $2,496 and $11,232 at
December 31, 1997 and 1998, respectively, and is included in other liabilities
in the consolidated balance sheets.
(12) OTHER NONINTEREST EXPENSE
Other noninterest expense for the years ended December 31, 1996, 1997, and 1998
are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Data processing........................................ $ 25,599 $ 49,911 $ 61,502
Professional services.................................. 42,206 26,826 44,927
Directors' fees........................................ 5,300 8,650 38,000
Advertising............................................ 45,376 25,484 51,706
Postage and supplies................................... 22,670 20,075 50,231
Other.................................................. 105,873 131,369 163,132
-------- -------- --------
$247,024 $262,315 $409,498
======== ======== ========
</TABLE>
(13) COMMITMENTS AND CONTINGENCIES
During the normal course of business, various legal claims have arisen which, in
the opinion of management, will not result in any material liability to the
Company.
(14) DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
The Bank issues financial instruments with off-balance sheet risk in the normal
course of the business of meeting the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. These instruments may involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the consolidated balance sheets.
The contractual amounts of these instruments reflect the extent of involvement
the Bank has in such particular classes of financial instruments.
F-32
<PAGE> 112
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The exposure to credit loss in the event of nonperformance by the other party to
the financial instrument for commitments to extend credit and standby letters of
credit is represented by the contractual amount of such instruments. The Bank
uses the same credit policies in making commitments and conditional obligations
as they do for on-balance-sheet financial instruments included in the
consolidated balance sheets. Following is a summary of off-balance-sheet
financial instruments at December 31, 1997 and 1998, respectively:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Financial instruments whose contractual amounts represent:
Commitments to extend credit.............................. $3,940,969 6,937,356
Standby letters of credit................................. 53,985 53,148
---------- ----------
Total off-balance-sheet financial instruments.......... $3,994,954 6,990,504
========== ==========
</TABLE>
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. At December 31, 1998, $1,461,268 represent fixed rate
loan commitments. Since certain of the commitments may expire without being
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Bank upon extension of credit, is based on management's credit evaluation of
the borrower. Collateral held varies, but is generally residential or
income-producing commercial property, inventory, accounts receivable, or
equipment.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. These guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.
(15) PARENT COMPANY FINANCIAL INFORMATION
Condensed balance sheets as of December 31, 1997 and 1998 and the related
condensed schedules of operations and cash flows for the years ended December
31, 1996, 1997, and 1998 of the Company (parent company only) are as follows:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1998
---------- ---------
<S> <C> <C>
Assets:
Cash...................................................... $ 39,903 39,879
Investment in Bank........................................ 4,227,653 5,107,802
Other assets.............................................. 17,297 47,917
---------- ---------
Total assets........................................... $4,284,853 5,195,598
========== =========
Liabilities:
Note payable.............................................. $1,050,000 750,000
Other liabilities......................................... 13,269 7,437
---------- ---------
Total liabilities...................................... 1,063,269 757,437
Total shareholders' equity.................................. 3,221,584 4,438,161
---------- ---------
Total liabilities and shareholders' equity............. $4,284,853 5,195,598
========== =========
</TABLE>
F-33
<PAGE> 113
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED SCHEDULES OF OPERATIONS
<TABLE>
<CAPTION>
1996 1997 1998
--------- ------- --------
<S> <C> <C> <C>
Revenue.................................................... $ -- -- --
Expenses:
Interest expense......................................... 27,744 33,975 72,140
Other operating expenses................................. 29,100 15,485 44,388
--------- ------- --------
Total expenses........................................ 56,844 49,460 116,528
--------- ------- --------
Loss before income tax expense (benefit) and equity in
undistributed income (loss) of Bank................. (56,844) (49,460) (116,528)
Income tax expense (benefit)............................... -- -- --
--------- ------- --------
Loss before equity in undistributed income (loss) of
Bank................................................ (56,844) (49,460) (116,528)
Equity in undistributed income (loss) of Bank.............. (56,387) 146,355 138,881
--------- ------- --------
Net income (loss)..................................... $(113,231) 96,895 22,353
========= ======= ========
</TABLE>
CONDENSED SCHEDULES OF CASH FLOWS
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $(113,231) 96,895 22,353
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Equity in undistributed (income) loss of Bank....... 56,387 (146,355) (138,881)
Other, net.......................................... 6,450 143 (1,736)
--------- --------- ---------
Net cash used in operating activities............. (50,394) (49,317) (118,264)
--------- --------- ---------
Cash flows from investing activities -- capital
contribution to Bank................................... -- (750,000) (750,000)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from note payable............................. -- 1,050,000 --
Repayment of note payable.............................. -- (300,000) (300,000)
Purchase of treasury stock............................. -- -- (31,790)
Proceeds from sale of common stock..................... -- 86,415 1,200,030
--------- --------- ---------
Net cash provided by financing activities......... -- 836,415 868,240
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................... (50,394) 37,098 (24)
Cash and cash equivalents at beginning of year........... 53,199 2,805 39,903
--------- --------- ---------
Cash and cash equivalents at end of year................. $ 2,805 39,903 39,879
========= ========= =========
</TABLE>
(16) RESTRICTIVE STOCK AGREEMENT
Effective December 1994, all persons who purchase shares of common stock in the
offer and sale of shares of the Company were required to enter into the
Restrictive Stock Agreement which provides that all parties give the Company and
its shareholders a right of first refusal to purchase their shares of common
stock should they decide to transfer them to unrelated third parties (including
involuntary transfers). The purchase price for such shares is the lower of the
book value of the shares of common stock to be transferred or the amount of a
legitimate third party offer; provided that book value shall be increased by (i)
20% if the purchase occurs between January 1, 1997 and December 31, 1997 and
(ii) 25% if the purchase occurs on or after January 1, 1998. Additionally, the
parties to the Restrictive Stock Agreement
F-34
<PAGE> 114
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
may choose to vote to value shares of common stock at a price that is different
than book value, by the affirmative vote of 80% of the shares of common stock
subject to the Restrictive Stock Agreement. Also, under this Restrictive Stock
Agreement, the Company must buy shares of common stock owned by employees who
cease to be employed by the Company. On December 4, 1998, the Restrictive Stock
Agreement was amended to explicitly state that its provisions would not apply to
the pending potential transaction with First Premier Financial Corporation.
(17) ACQUISITION ACTIVITY
On May 6, 1999, the Company entered into a definitive agreement with Riva
Bancshares, Inc. (Riva Bancshares). The definitive agreement was amended on July
22 and July 29, 1999. Under the amended agreement, the shareholders of the
Company will exchange their shares in a tax free reorganization for $9 million
of newly issued shares of common stock of Riva Bancshares, valued at the initial
public offering price of Riva Bancshares' common stock. The transaction is
subject to the receipt of regulatory approval and the approval of the
shareholders of the Company and Riva Bancshares and is expected to close in the
third quarter of 1999. The transaction is contingent upon a number of factors,
including the successful initial public offering of Riva Bancshares' common
stock.
F-35
<PAGE> 115
PREMIER BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1999
-----------
<S> <C>
ASSETS
Cash and due from banks..................................... $ 1,439,432
Interest-bearing deposits................................... 410,774
Federal funds sold.......................................... 2,370,000
-----------
Cash and cash equivalents.............................. 4,220,206
Debt and marketable equity securities available-for-sale, at
fair value................................................ 9,397,026
Loans, net.................................................. 49,163,775
Premises and equipment, net................................. 2,510,978
Accrued interest receivable................................. 462,252
Other assets................................................ 938,116
-----------
Total assets........................................... $66,692,353
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing....................................... $ 3,014,492
Interest-bearing.......................................... 54,314,848
-----------
Total deposits......................................... 57,329,340
Federal Home Loan Bank advances............................. 3,782,227
Note payable................................................ 925,000
Accrued interest payable.................................... 240,368
Other liabilities........................................... 80,317
-----------
Total liabilities...................................... 62,357,252
-----------
Commitments and contingencies
Shareholders' equity:
Common stock, $1 par value, 100,000 shares authorized,
41,834 shares issued and outstanding................... 41,834
Surplus................................................... 4,553,421
Accumulated deficit....................................... (150,779)
Accumulated other comprehensive loss...................... (109,375)
-----------
Total shareholders' equity............................. 4,335,101
-----------
Total liabilities and shareholders' equity............. $66,692,353
===========
</TABLE>
See accompanying note to unaudited consolidated financial statements.
F-36
<PAGE> 116
PREMIER BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Interest income:
Interest and fees on loans................................ $1,173,686 $1,982,720
Interest and dividends on debt and marketable equity
securities............................................. 188,964 241,872
Interest on federal funds sold............................ 67,867 72,833
---------- ----------
Total interest income.................................. 1,430,517 2,297,425
---------- ----------
Interest expense:
Interest on deposits...................................... 802,739 1,212,635
Interest on Federal Home Loan Bank advances............... 40,079 105,850
Interest on note payable.................................. 40,730 31,524
---------- ----------
Total interest expense................................. 883,548 1,350,009
---------- ----------
Net interest income.................................... 546,969 947,416
Provision for loan losses................................... 74,057 105,000
---------- ----------
Net interest income after provision for loan losses.... 472,912 842,416
---------- ----------
Noninterest income:
Service charges on deposits............................... 24,971 26,999
Gain on sale of loans, net................................ 32,923 24,431
Other noninterest income.................................. 18,184 35,372
---------- ----------
Total noninterest income............................... 76,078 86,802
---------- ----------
Noninterest expense:
Salaries and employee benefits............................ 275,143 388,918
Occupancy and equipment expense........................... 72,971 143,933
Other noninterest expense................................. 205,314 325,116
---------- ----------
Total noninterest expense.............................. 553,428 857,967
---------- ----------
Income (loss) before income tax expense................ (4,438) 71,251
Income tax expense.......................................... -- 31,000
---------- ----------
Net income (loss)...................................... $ (4,438) $ 40,251
========== ==========
Basic and diluted income (loss) per share................... $ (0.11) $ 0.96
========== ==========
</TABLE>
See accompanying note to unaudited consolidated financial statements.
F-37
<PAGE> 117
PREMIER BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON STOCK ACCU- COMPRE- TOTAL
---------------- MULATED HENSIVE SHAREHOLDERS'
SHARES AMOUNT SURPLUS DEFICIT LOSS EQUITY
------ ------- ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998............ 41,834 $41,834 $4,553,421 $(191,030) $ 33,936 $4,438,161
Comprehensive income:
Net income............................ -- -- -- 40,251 -- 40,251
Other comprehensive loss -- change in
unrealized gain (loss) on securities
available-for-sale, net of tax...... -- -- -- -- (143,311) (143,311)
----------
Total comprehensive income (loss)... (103,060)
------ ------- ---------- --------- --------- ----------
Balance at June 30, 1999................ 41,834 $41,834 $4,553,421 $(150,779) $(109,375) $4,335,101
====== ======= ========== ========= ========= ==========
</TABLE>
See accompanying note to unaudited consolidated financial statements.
F-38
<PAGE> 118
PREMIER BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ (4,438) $ 40,251
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................... 41,391 92,413
Provision for loan losses.............................. 74,057 105,000
Gain on sale of loans, net............................. (32,923) (24,431)
Increase in accrued interest receivable................ (45,905) (113,628)
Increase in accrued interest payable................... 57,638 32,839
Increase in other assets............................... (44,440) (401,140)
Other, net............................................. 30,073 54,910
------------ ------------
Net cash provided by (used in) operating
activities..................................... 75,453 (213,786)
------------ ------------
Cash flows from investing activities:
Proceeds from maturities and principal payments on debt
and marketable equity securities available-for-sale.... 1,539,241 1,950,685
Purchases of debt and marketable equity securities
available-for-sale..................................... (2,974,966) (5,095,848)
Net increase in loans..................................... (8,027,198) (8,073,646)
Purchases of premises and equipment, net.................. (540,327) (65,486)
Proceeds from sale of premises and equipment, net......... -- 14,872
------------ ------------
Net cash used in investing activities............. (10,003,250) (11,269,423)
------------ ------------
Cash flows from financing activities:
Net increase in deposits.................................. 10,377,917 8,513,518
Federal Home Loan Bank advances........................... 2,100,000 640,000
Principal payments on Federal Home Loan Bank advances..... (258,868) (302,926)
Proceeds from note payable................................ -- 175,000
Repayment of note payable................................. (300,000) --
Proceeds from sale of common stock........................ 1,200,030 --
------------ ------------
Net cash provided by financing activities......... 13,119,079 9,025,592
------------ ------------
Net increase (decrease) in cash and cash
equivalents.................................... 3,191,282 (2,457,617)
Cash and cash equivalents at beginning of period............ 2,813,542 6,677,823
------------ ------------
Cash and cash equivalents at end of period.................. $ 6,004,824 $ 4,220,206
============ ============
Supplemental information -- interest paid................... $ 825,910 $ 1,317,161
============ ============
</TABLE>
See accompanying note to unaudited consolidated financial statements.
F-39
<PAGE> 119
PREMIER BANCSHARES, INC. AND SUBSIDIARY
NOTE TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE A BASIS OF PRESENTATION
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included.
F-40
<PAGE> 120
- --------------------------------------------------------------------------------
(RIVA BANK LOGO)
RIVA BANCSHARES, INC.
3,000,000 SHARES
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
, 1999
CIBC WORLD MARKETS
JOHNSON RESEARCH & CAPITAL
INCORPORATED
KELTON INTERNATIONAL LIMITED
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO DEALER,
SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE INFORMATION THAT IS NOT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY
OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
UNTIL , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 121
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered, other than the underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 9,591
NASD Filing Fees............................................ 4,640
Printing and Engraving Expenses............................. 100,000*
Legal Fees and Expenses..................................... 200,000*
Accounting Fees and Expenses................................ 125,000*
Miscellaneous............................................... 60,769*
--------
Total.................................................. $500,000
========
</TABLE>
- ---------------------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation and By-Laws require Riva Bancshares to
indemnify the directors and officers of Riva Bancshares to the fullest extent
permitted by law. In addition, as permitted by Delaware Law, the Certificate of
Incorporation and By-Laws provide that no director of Riva Bancshares shall be
personally liable to Riva Bancshares or its shareholders for monetary damages
for breach of duty of care or other duty as a director if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of Riva Bancshares and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. This
provision, however, shall not eliminate or limit the liability of a director:
- for any breach of the director's duty of loyalty to the corporation or its
shareholders,
- for act or omissions not in good faith or which involve intentional
misconduct or knowing violation of law,
- under Section 174 of Delaware Law, involving the payment of unlawful
dividends, stock repurchases or redemptions, or
- for any transaction from which the director derived an improper personal
benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On June 19, 1998, Riva Bancshares sold 100 equity units ("Units"), whereby each
Unit was comprised of 1,000 shares of common stock, 999 shares of the Series A
Preferred Stock, and a warrant to purchase 1,000 shares of common stock. The
Units were sold to 12 foreign investors at a purchase price of $10,000 per Unit,
for a total consideration of $1,000,000. The Units were sold with the assistance
of Kelton International, Ltd. The fees paid to Kelton International, Ltd.
($75,000 total) were paid by the foreign investors directly to Kelton
International, Ltd., over and above the purchase price of the Units. The Units
were issued in reliance upon an exemption from the registration requirements of
the Securities Act, pursuant to the provisions of Rule 506 promulgated
thereunder. Prior to the initial public offering, Riva Bancshares intends to
repurchase the 100,000 shares of common stock at a price of $.01 per share.
On August 17, 1998, Riva Bancshares sold 475,000 shares of common stock to
certain founding officers and directors of Riva Bancshares for a purchase price
of $.01 per share. These shares were issued in reliance upon an exemption from
the registration requirements of the Securities Act, pursuant to the provisions
of Rule 506 promulgated thereunder. On April 29, 1999, Riva Bancshares
repurchased 275,000 of these shares, at a price of $.01 per share and
subsequently canceled these shares. Prior to the initial public offering, Riva
Bancshares intends to repurchase an additional 190,000 of these shares at a
price of $.01 per share. In consideration for their agreement to allow Riva
Bancshares to repurchase their shares,
II-1
<PAGE> 122
Riva Bancshares granted warrants to purchase up to 115,798 shares to these
shareholders. The warrants have a term of ten years and are exercisable at the
initial public offering price.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C> <C>
1 -- Form of Underwriting Agreement
2.1 -- Agreement and Plan of Merger, dated as of May 6, 1999 by and
between Riva Bancshares, Inc. and Premier Bancshares, Inc.*
2.2 -- Amendment No. 1 to Agreement and Plan of Merger, dated July
22, 1999.
2.3 -- Amended and Restated Agreement and Plan of Merger, dated
July 29, 1999.
3.1 -- Certificate of Incorporation of Riva Bancshares.*
3.1.1 -- Certificate of Designations, Preferences and Rights of
Series A Preferred Stock of Riva Bancshares.*
3.1.2 -- Certificate of Amendment No. 1 to the Certificate of
Incorporation of Riva Bancshares.*
3.1.3 -- Certificate of Amendment No. 2 to the Certificate of
Incorporation of Riva Bancshares.*
3.1.4 -- Form of Amended and Restated Certificate of Incorporation of
Riva Bancshares.
3.2 -- By-Laws of Riva Bancshares, as amended.*
3.2.1 -- Amended and Restated By-Laws of Riva Bancshares.
4.1 -- Specimen Common Stock Certificate.
4.2 -- See Exhibits 3.1 and 3.2 for provisions of the Certificate
of Incorporation, as amended, and By-Laws of Riva Bancshares
defining rights of the holders of the common stock of Riva
Bancshares.
5 -- Opinion of Smith, Gambrell & Russell, LLP.*
10.1 -- Employment Agreement dated July 16, 1998 between Riva
Bancshares and Richard C. Jensen*
10.1.1 -- Amendment No. 1 to Employment Agreement between Riva
Bancshares and Richard C. Jensen dated June 3, 1999.*
10.2 -- Form of Employment Agreement between Riva Bancshares and
Riva Bancshares's executive officers.*
10.3 -- Riva Bancshares' 1999 Stock Option Plan.
10.4 -- Data Processing Agreement between Premier Bank and Computer
Services, Inc.*
23.1 -- Consent of Smith, Gambrell & Russell, LLP (contained in
their opinion at Exhibit 5).
23.2(a) -- Consent of KPMG LLP with respect to the financial statements
of Riva Bancshares.
23.2(b) -- Consent of KPMG LLP with respect to the consolidated
financial statements of Premier.
24 -- Power of Attorney (included in original signature page to
this Registration Statement).
99.1 -- Consent of Persons to be named as Directors of Riva
Bancshares
</TABLE>
- ---------------------------
* Previously filed.
II-2
<PAGE> 123
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(f) To provide to the underwriter at the closing specified in the underwriting
agreements certificates in such denominations and registered in such names as
required by the underwriters to permit prompt delivery to each purchaser.
II-3
<PAGE> 124
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form S-1 and has authorized this Amendment No. 2
to be signed on its behalf by the undersigned, in the City of St. Louis, State
of Missouri, on the 28th day of July, 1999.
RIVA BANCSHARES, INC.
By: /s/ RICHARD C. JENSEN
------------------------------------
Richard C. Jensen
Chairman, President and Chief
Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 2 was signed by the following persons in the capacities and on the
dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RICHARD C. JENSEN Chairman of the Board, President July 28, 1999
- ----------------------------------------------------- and Chief Executive Officer
Richard C. Jensen (Principal Executive Officer) and
Director
/s/ DANIEL R. SILLS Secretary, Treasurer and Chief July 28, 1999
- ----------------------------------------------------- Financial Officer (Principal
Daniel R. Sills Financial and Accounting Officer)
/s/ ALAN C. HENDERSON Director July 28, 1999
- -----------------------------------------------------
Alan C. Henderson
* Director July 28, 1999
- -----------------------------------------------------
Gerald G. Kaufman
/s/ LEWIS A. LEVEY Director July 28, 1999
- -----------------------------------------------------
Lewis A. Levey
* Director July 28, 1999
- -----------------------------------------------------
Andrew M. Rosen
* Director July 28, 1999
- -----------------------------------------------------
Patricia D. Whitaker
</TABLE>
*By: /s/ RICHARD C. JENSEN
---------------------------------
Richard C. Jensen
Attorney-in-fact
II-4
<PAGE> 125
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C> <C>
1 -- Form of Underwriting Agreement
2.1 -- Agreement and Plan of Merger, dated as of May 6, 1999 by and
between Riva Bancshares Financial Corporation and Premier
Bancshares.*
2.2 -- Amendment No. 1 to Agreement and Plan of Merger, dated July
22, 1999.
2.3 -- Amended and Restated Agreement and Plan of Merger, dated
July 29, 1999.
3.1 -- Certificate of Incorporation of Riva Bancshares.*
3.1.1 -- Certificate of Designations, Preferences and Rights of
Series A Preferred Stock of Riva Bancshares.*
3.1.2 -- Certificate of Amendment No. 1 to the Certificate of
Incorporation of Riva Bancshares.*
3.1.3 -- Certificate of Amendment No. 2 to the Certificate of
Incorporation of Riva Bancshares.*
3.1.4 -- Form of Amended and Restated Certificate of Incorporation of
Riva Bancshares.
3.2 -- By-Laws of Riva Bancshares, as amended.*
3.2.1 -- Amended and Restated By-Laws of Riva Bancshares.
4.1 -- Specimen Common Stock Certificate.
4.2 -- See Exhibits 3.1 and 3.2 for provisions of the Certificate
of Incorporation, as amended, and By-Laws of Riva Bancshares
defining rights of the holders of the common stock of Riva
Bancshares.
5 -- Opinion of Smith, Gambrell & Russell, LLP.*
10.1 -- Employment Agreement dated July 16, 1998 between Riva
Bancshares and Richard C. Jensen*
10.1.1 -- Amendment No. 1 to Employment Agreement between Riva
Bancshares and Richard C. Jensen dated June 3, 1999.*
10.2 -- Form of Employment Agreement between Riva Bancshares and
Riva Bancshares's executive officers.*
10.3 -- Riva Bancshares' 1999 Stock Option Plan.
10.4 -- Data Processing Agreement between Premier Bank and Computer
Services, Inc.*
23.1 -- Consent of Smith, Gambrell & Russell, LLP (contained in
their opinion at Exhibit 5).
23.2(a) -- Consent of KPMG LLP with respect to the financial statements
of Riva Bancshares.
23.2(b) -- Consent of KPMG LLP with respect to the consolidated
financial statements of Premier.
24 -- Power of Attorney (included in original signature page to
this Registration Statement).
99.1 -- Consent of Persons to be Named as Directors of Riva
Bancshares.
</TABLE>
- ---------------------------
* Previously filed.
<PAGE> 1
EXHIBIT 1
[FORM OF UNDERWRITING AGREEMENT]
3,000,000 Shares of Common Stock
RIVA BANCSHARES, INC.
UNDERWRITING AGREEMENT
, 1999
-----------
CIBC World Markets Corp.
Pauli Johnson Capital & Research Incorporated
Kelton International Limited
c/o CIBC World Markets Corp.
One World Financial Center
New York, New York 10281
On behalf of the Several
Underwriters named on
Schedule I attached hereto.
Ladies and Gentlemen:
Riva Bancshares, Inc., a Delaware corporation (the "Company") proposes,
subject to the terms and conditions contained herein, to sell to you and the
other underwriters named on Schedule I to this Agreement (the "Underwriters"),
for whom you are acting as representatives (the "Representatives"), an aggregate
of 3,000,000 shares (the "Firm Shares") of the Company's Common Stock, $0.01 par
value per share (the "Common Stock"). The respective amounts of the Firm Shares
to be purchased by each of the several Underwriters are set forth opposite their
names on Schedule I hereto. In addition, the Company proposes to grant to the
Underwriters an option to purchase up to an additional 450,000 shares (the
"Option Shares") of Common Stock for the purpose of covering over-allotments in
connection with the sale of the Firm Shares. The Firm Shares and the Option
Shares are collectively called the "Shares." To induce the Underwriters to enter
into this Agreement, Premier Bancshares, Inc. ("Bancshares") and Premier Bank
("PB") are entering into this Agreement for the purposes set forth herein.
1. SALE AND PURCHASE OF THE SHARES. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:
(a) The Company agrees to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at a price of $____ per share
(the "Initial Price"), the number of Firm Shares set forth opposite the
name of such Underwriter under the column Number of Firm Shares on
Schedule I to this Agreement, subject to adjustment in accordance with
Section 11 hereof.
(b) The Company grants to the several Underwriters an
option to purchase, severally and not jointly, all or any part of the
Option Shares at the Initial Price. The
<PAGE> 2
number of Option Shares to be purchased by each Underwriter shall be
the same percentage (adjusted by the Representatives to eliminate
fractions) of the total number of Option Shares to be purchased by the
Underwriters as such Underwriter is purchasing of the Firm Shares. Such
option may be exercised only to cover over-allotments in the sales of
the Firm Shares by the Underwriters and may be exercised in whole or in
part at any time on or before 12:00 noon, New York City time, on the
business day before the Firm Shares Closing Date (as defined below),
and thereafter from time to time within 30 days after the date of this
Agreement, in each case upon written or telegraphic notice, or oral or
telephonic notice confirmed by written or telegraphic notice, by the
Representatives to the Company no later than 12:00 noon, New York City
time, on the business day before the Firm Shares Closing Date or at
least two business days before the Option Shares Closing Date (as
defined below), as the case may be, setting forth the number of Option
Shares to be purchased and the time and date (if other than the Firm
Shares Closing Date) of such purchase.
2. DELIVERY AND PAYMENT. Delivery by the Company of the Firm
Shares to the Representatives for the respective accounts of the Underwriters,
and payment of the purchase price by certified or official bank check or checks
payable in New York Clearing House (same day) funds drawn to the order of the
Company for the shares purchased from the Company against delivery of the
respective certificates therefor to the Representatives, shall take place at the
offices of Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New York
10166, at 10:00 a.m., New York City time, on the third business day following
the date of this Agreement, or at such time on such other date, not later than
10 business days after the date of this Agreement, as shall be agreed upon by
the Company and the Representatives (such time and date of delivery and payment
are called the "Firm Shares Closing Date").
In the event the option with respect to the Option Shares is exercised
in whole or in part on one or more occasions, delivery by the Company of the
Option Shares to the Representatives for the respective accounts of the
Underwriters and payment of the purchase price thereof in immediately available
funds by wire transfer or by certified or official bank check or checks payable
in New York Clearing House (same day) funds to the Company shall take place at
the offices of Gibson, Dunn & Crutcher LLP specified above at the time and on
the date (which may be the same date as, but in no event shall be earlier than,
the Firm Shares Closing Date) specified in the notice referred to in Section
1(b) (such time and date of delivery and payment are called the "Option Shares
Closing Date"). The Firm Shares Closing Date and the Option Shares Closing Date
are called, individually, a "Closing Date" and, together, the "Closing Dates."
Certificates evidencing the Shares shall be registered in such names
and shall be in such denominations as the Representatives shall request at least
two full business days before the Firm Shares Closing Date or, in the case of
Option Shares, on the day of notice of exercise of the option as described in
Section l(b) and shall be made available to the Representatives for checking and
packaging, at such place as is designated by the Representatives, on the full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).
2
<PAGE> 3
3. REGISTRATION STATEMENT AND PROSPECTUS; PUBLIC OFFERING. The
Company has prepared and filed in conformity with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the published
rules and regulations thereunder (the "Rules") adopted by the Securities and
Exchange Commission (the "Commission"), a Registration Statement (as hereinafter
defined) on Form S-1 (No. 333-78113), including a preliminary prospectus
relating to the Shares, and such amendments thereto as may have been required to
the date of this Agreement. Copies of such Registration Statement (including all
amendments thereof) and of the related Preliminary Prospectus (as hereinafter
defined) have heretofore been delivered by the Company to you. The term
"Preliminary Prospectus" means any preliminary prospectus (as described in Rule
430 of the Rules) included at any time as a part of the Registration Statement
or filed with the Commission by the Company with the consent of the
Representatives pursuant to Rule 424(a) of the Rules. The term "Registration
Statement" as used in this Agreement means the initial registration statement
(including all exhibits and financial schedules), as amended at the time and on
the date it becomes effective (the "Effective Date"), including the information
(if any) deemed to be part thereof at the time of effectiveness pursuant to Rule
430A of the Rules. If the Company has filed an abbreviated registration
statement to register additional Shares pursuant to Rule 462(b) under the Rules
(the "462(b) Registration Statement") then any reference herein to the
Registration Statement shall also be deemed to include such 462(b) Registration
Statement. The term "Prospectus" as used in this Agreement means the prospectus
included in the Registration Statement in the form first used to confirm sales
of the Shares.
The Company understands that the Underwriters propose to make a public
offering of the Shares, as set forth in and pursuant to the Prospectus, as soon
after the Effective Date and the date of this Agreement as the Representatives
deem advisable. The Company hereby confirms that the Underwriters and dealers
have been authorized to distribute or cause to be distributed each Preliminary
Prospectus and are authorized to distribute the Prospectus (as from time to time
amended or supplemented if the Company furnishes amendments or supplements
thereto to the Underwriters).
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter, as of the date hereof and as of the
Firm Shares Closing Date giving effect to the transactions contemplated by the
Merger Agreement (as defined below) as follows:
(a) On the Effective Date, the Registration Statement
complied, and on the date of the Prospectus, the date any
post-effective amendment to the Registration Statement becomes
effective, the date any supplement or amendment to the Prospectus is
filed with the Commission and each Closing Date, the Registration
Statement and the Prospectus (and any amendment thereof or supplement
thereto) will comply, in all material respects, with the applicable
provisions of the Securities Act and the Rules. The Registration
Statement did not, as of the Effective Date, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading. On the Effective Date and on the
other dates referred to above the Prospectus did not and will not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
3
<PAGE> 4
misleading. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement or any
amendment thereto or pursuant to Rule 424(a) of the Rules) and when any
amendment thereof or supplement thereto was first filed with the
Commission, such preliminary prospectus as amended or supplemented
complied in all material respects with the applicable provisions of the
Securities Act and the Rules and did not contain any untrue statement
of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Notwithstanding the
foregoing, none of the representations and warranties in this paragraph
4(a) shall apply to statements in, or omissions from, the Registration
Statement or the Prospectus made in reliance upon, and in conformity
with, information herein or otherwise furnished in writing by the
Representatives on behalf of the several Underwriters for use in the
Registration Statement or the Prospectus. With respect to the preceding
sentence, the Company acknowledges that the only information furnished
in writing by the Representatives on behalf of the several Underwriters
for use in the Registration Statement or the Prospectus are the
following paragraphs appearing under the caption "Underwriting" in the
Prospectus: (i) the fourth full paragraph, concerning the terms of the
offering; and (ii) the eleventh full paragraph, including the text set
forth in the bullet points, concerning stabilization and syndicate
covering transactions.
(b) The Registration Statement is effective under the
Securities Act and no stop order preventing or suspending the
effectiveness of the Registration Statement or suspending or preventing
the use of the Prospectus has been issued and no proceedings for that
purpose have been instituted or are threatened under the Securities
Act. Any required filing of the Prospectus and any supplement thereto
pursuant to Rule 424(b) of the Rules has been or will be made in the
manner and within the time period required by such Rule 424(b).
(c) The Company and Bancshares have entered into the
Agreement and Plan of Merger, dated as of May 6, 1999 and filed as an
exhibit to the Registration Statement, pursuant to which Bancshares
will merge with and into the Company (the "Merger Agreement") and PB
will become a wholly-owned subsidiary of the Company. The Merger
Agreement has been duly and validly authorized, executed and delivered
by the Company and constitutes a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
(d) The financial statements of the Company (including
all notes and schedules thereto) included in the Registration Statement
and Prospectus present fairly the financial condition, the results of
operations, the statements of cash flows and the statements of
shareholders' equity and the other information purported to be shown
therein of the Company at the respective dates and for the respective
periods to which they apply; and such financial statements and related
schedules and notes have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout the
4
<PAGE> 5
periods involved, and all adjustments necessary for a fair presentation
of the results for such periods have been made. The summary and
selected financial data included in the Prospectus present fairly the
information shown therein as at the respective dates and for the
respective periods specified and the summary and selected financial
data have been presented on a basis consistent with the consolidated
financial statements so set forth in the Prospectus and other financial
information. The pro forma financial statements and other pro forma
financial information included in the Registration Statement have been
prepared on a basis consistent with the Company's, Bancshare's or PB's
historical statements, except for the pro forma adjustments specified
therein, and give effect to assumptions made on a reasonable basis and
present fairly in all material respects the historical and proposed
transactions contemplated by the Registration Statement and this
Agreement. The other financial and statistical information and data
included in the Registration Statement are accurately presented in all
material respects and prepared on a basis consistent with the financial
statements and the books and records of the Company, Bancshares and PB.
(e) KPMG LLP, whose reports are filed with the Commission
as a part of the Registration Statement, are, and during the periods
covered by their reports were, independent public accountants as
required by the Securities Act and the Rules.
(f) The Company and each of its Subsidiaries (as
hereinafter defined) are corporations duly organized, validly existing
and in good standing under the laws of the State of Delaware. The
Company and each such subsidiary or other entity controlled directly or
indirectly by the Company as of the date hereof and as of the Closing
Date (including Bancshares), as set forth on Schedule II hereto
(collectively, the "Subsidiaries"), is duly qualified to do business
and are in good standing as a foreign corporation in each jurisdiction
in which the nature of the business conducted by it or location of the
assets or properties owned, leased or licensed by it requires such
qualification, except for such jurisdictions where the failure to so
qualify individually or in the aggregate would not have a material
adverse effect on the assets or properties, business, results of
operations or financial condition of the Company, Bancshares or PB,
either individually or taken as a whole (a "Material Adverse Effect").
The Company does not own, lease or license any asset or property or
conduct any business outside the United States of America. The Company
and each of its Subsidiaries have all requisite corporate power and
authority, and all necessary authorizations, approvals, consents,
orders, licenses, certificates and permits of and from all governmental
or regulatory bodies or any other person or entity (collectively, the
"Permits"), to own, lease and license its assets and properties and
conduct its business, all of which are valid and in full force and
effect, as described in the Registration Statement and the Prospectus,
except where the lack of such Permits individually or in the aggregate
would not have a Material Adverse Effect. The Company and each of its
Subsidiaries have fulfilled and performed in all material respects all
of their obligations with respect to such Permits and no event has
occurred that allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material
impairment of the rights of the Company thereunder. Except as may be
required under the Securities Act and state and foreign Blue Sky laws,
no other Permits are required to enter into, deliver and perform this
Agreement, the Merger Agreement and to issue and sell the Shares.
5
<PAGE> 6
(g) Each of the Company and its Subsidiaries owns or
possesses adequate and enforceable rights to use all trademarks,
trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, know-how and other similar rights and
proprietary knowledge (collectively, "Intangibles") described in the
Prospectus as being owned by it necessary for the conduct of its
business. Neither the Company nor any of its Subsidiaries has received
any notice of, or is aware of, any infringement of or conflict with
asserted rights of others with respect to any Intangibles.
(h) The Company and each of its Subsidiaries have good
and marketable title in fee simple to all items of real property and
good and marketable title to all personal property described in the
Prospectus as being owned by it. Any real property and buildings
described in the Prospectus as being held under lease by the Company
and each of its Subsidiaries is held by it under valid, existing and
enforceable leases, free and clear of all liens, encumbrances, claims,
security interests and defects, except such as are described in the
Registration Statement and the Prospectus or would not individually or
in the aggregate have a Material Adverse Effect.
(i) There is no litigation or governmental proceeding to
which the Company or its Subsidiaries is subject or which is pending
or, to the knowledge of the Company, threatened, against the Company or
any of its Subsidiaries, which individually or in the aggregate might
have a Material Adverse Effect or affect the consummation of the
transactions contemplated by this Agreement or the Merger Agreement or
which is required to be disclosed in the Registration Statement and the
Prospectus that is not so disclosed.
(j) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
except as described therein: (A) there has not been any material
adverse change with regard to the assets or properties, business,
results of operations or financial condition of the Company; (B)
neither the Company nor its Subsidiaries have sustained any loss or
interference with its assets, businesses or properties (whether owned
or leased) from fire, explosion, earthquake, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or any
court or legislative or other governmental action, order or decree
which would have a Material Adverse Effect; and (C) since the date of
the latest balance sheet included in the Registration Statement and the
Prospectus, except as reflected therein, neither the Company nor its
Subsidiaries has (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, except such
liabilities or obligations incurred in the ordinary course of business,
(ii) entered into any transaction not in the ordinary course of
business or (iii) declared or paid any dividend or made any
distribution on any shares of its stock or redeemed, purchased or
otherwise acquired or agreed to redeem, purchase or otherwise acquire
any shares of its stock.
6
<PAGE> 7
(k) There is no document, contract or other agreement of
a character required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement
which is not described or filed as required by the Securities Act or
the Rules. Each description of a contract, document or other agreement
in the Registration Statement and the Prospectus accurately reflects in
all respects the terms of the underlying document, contract or
agreement. Each agreement described in the Registration Statement and
Prospectus or listed in the Exhibits to the Registration Statement is
in full force and effect and is valid and enforceable by and against
the Company or any of its Subsidiaries, as the case may be, in
accordance with its terms. Neither the Company nor any of its
Subsidiaries, nor to the Company's knowledge, any other party, is in
default in the observance or performance of any term or obligation to
be performed by it under any such agreement, and no event has occurred
which with notice or lapse of time or both would constitute such a
default, in any such case which default or event individually or in the
aggregate would have a Material Adverse Effect. No default exists, and
no event has occurred which with notice or lapse of time or both would
constitute a default, in the due performance and observance of any
term, covenant or condition, by the Company or any of its Subsidiaries
of any other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which it or its properties or business
may be bound or affected which default or event individually or in the
aggregate would have a Material Adverse Effect.
(l) Neither the Company nor any of its Subsidiaries is in
violation of any term or provision of its charter or by-laws or of any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation.
(m) Neither the execution, delivery and performance of
this Agreement or the Merger Agreement by the Company nor the
consummation of any of the transactions contemplated hereby or thereby
(including the issuance and sale by the Company of the Shares) will
give rise to a right to terminate or accelerate the due date of any
payment due under, or conflict with or result in the breach of any term
or provision of, or constitute a default (or an event which with notice
or lapse of time or both would constitute a default) under, or require
any consent or waiver under, or result in the execution or imposition
of any lien, charge or encumbrance upon any properties or assets of the
Company or any of its Subsidiaries pursuant to the terms of, any
indenture, mortgage, deed of trust or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which
either the Company or any of its Subsidiaries or any of their
properties or businesses is bound, or any franchise, license, permit,
judgment, decree, order, statute, rule or regulation applicable to the
Company or any of its Subsidiaries or violate any provision of the
charter or by-laws of the Company or any of its Subsidiaries, except
for such consents or waivers which have already been obtained and are
in full force and effect.
(n) The Company has authorized and outstanding capital
stock as set forth under the caption "Capitalization" in the
Prospectus. The certificates evidencing the Shares are in due and
proper legal form and have been duly authorized for issuance by the
Company. All of the issued and outstanding shares of Common Stock have
been duly and validly issued and are fully paid and nonassessable.
There are no statutory preemptive or
7
<PAGE> 8
other similar rights to subscribe for or to purchase or acquire any
shares of Common Stock of the Company or its Subsidiaries or any such
rights pursuant to its Certificate of Incorporation or by-laws or any
agreement or instrument to or by which the Company or any of its
Subsidiaries is a party or bound. The Shares, when issued and sold
pursuant to this Agreement, will be duly and validly issued, fully paid
and nonassessable and none of them will be issued in violation of any
preemptive or other similar right. Except as disclosed in the
Registration Statement and the Prospectus, there is no outstanding
option, warrant or other right calling for the issuance of, and there
is no commitment, plan or arrangement to issue, any share of stock of
the Company or its Subsidiaries or any security convertible into, or
exercisable or exchangeable for, such stock. The Common Stock and the
Shares conform in all material respects to all statements in relation
thereto contained in the Registration Statement and the Prospectus. All
outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued, and are fully paid and nonassessable and
are owned directly by the Company, free and clear of any security
interests, liens, encumbrances, equities or claims.
(o) No holder of any security of the Company has the
right to have any security owned by such holder included in the
Registration Statement or to demand registration of any security owned
by such holder during the period ending 180 days after the date of this
Agreement. Each director and executive officer of the Company, and each
holder of 1% or more of the issued and outstanding Common Stock of the
Company, has delivered to the Representatives such person's enforceable
written lock-up agreement in the form attached to this Agreement on
Schedule III (the "Lock-Up Agreement").
(p) All necessary corporate action has been duly and
validly taken by the Company to authorize the execution, delivery and
performance of this Agreement and the Merger Agreement and the issuance
and sale of the Shares by the Company. This Agreement and the Merger
Agreement have been duly and validly authorized, executed and delivered
by the Company and constitute legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
(q) Neither the Company nor any of its Subsidiaries are
involved in any labor dispute nor, to the knowledge of the Company, is
any such dispute threatened. The Company is not aware of any existing
or imminent labor disturbance by the employees of any of its or its
Subsidiaries principal suppliers or contractors which individually or
in the aggregate would have a Material Adverse Effect. The Company is
not aware of any threatened or pending litigation between the Company
or its Subsidiaries and any of its or their executive officers which
individually or in the aggregate, if adversely determined, could have a
Material Adverse Effect and has no reason to believe that such officers
will not remain in the employment of the Company or its Subsidiaries.
(r) No transaction has occurred between or among the
Company and any of its officers, directors or 5% or greater
shareholders or any affiliate or affiliates of any such
8
<PAGE> 9
officer, director or 5% or greater shareholder that is required to be
described in and is not described in the Registration Statement and the
Prospectus.
(s) The Company has not taken, nor will it take, directly
or indirectly, any action designed to or which might reasonably be
expected to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation
of the price of the Common Stock to facilitate the sale or resale of
any of the Shares.
(t) The Company and its Subsidiaries have filed all
Federal, state, local and foreign tax returns which are required to be
filed through the date hereof, or have received extensions thereof, and
have paid all taxes shown on such returns and all assessments received
by them to the extent that the same are material and have become due.
There are no tax audits or investigations nor are there any material
proposed additional tax assessments against the Company or any of its
Subsidiaries.
(u) The Shares have been duly authorized for quotation on
the Nasdaq National Market ("Nasdaq") of The Nasdaq Stock Market, Inc.,
subject to official Notice of Issuance. A registration statement has
been filed on Form 8-A pursuant to Section 12 of the Exchange Act,
which registration statement complies in all material respects with the
Exchange Act.
(v) The Company has complied with all of the requirements
and filed the required forms as specified in Florida Statutes Section
517.075.
(w) The books, records and accounts of the Company and
its Subsidiaries accurately and fairly reflect, in reasonable detail,
the transactions in, and dispositions of, the assets of, and the
results of operations of, the Company and its Subsidiaries. The Company
and each of its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(x) The Company and its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are customary in the businesses in which
they are engaged or propose to engage after giving effect to the
transactions described in the Prospectus. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse
Effect. Neither the Company nor any Subsidiary has been denied any
insurance coverage which it has sought or for which it has applied.
9
<PAGE> 10
(y) Each approval, consent, order, authorization,
designation, declaration or filing of, by or with any regulatory,
administrative or other governmental body necessary in connection with
the execution and delivery by the Company of this Agreement and the
Merger Agreement and the consummation of the transactions herein and
therein contemplated required to be obtained or performed by the
Company (except such additional steps as may be necessary to qualify
the Shares for public offering by the Underwriters under state
securities or Blue Sky laws) have been obtained or made and are in full
force and effect.
(z) No officer, director or 5% or greater shareholder of
the Company has any affiliation with any NASD member firm.
(aa) (i) Each of the Company and its Subsidiaries is in
compliance in all material respects with all rules, laws and
regulations relating to the use, treatment, storage and disposal of
toxic substances and protection of health or the environment
("Environmental Laws") which are applicable to its business; (ii) none
of the Company or its Subsidiaries has received any notice from any
governmental authority or third party of an asserted claim under
Environmental Laws; (iii) each of the Company and its Subsidiaries has
received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and is in
compliance with all terms and conditions of any such permit, license or
approval; (iv) no facts currently exist that will require the Company
or its Subsidiaries to make future material capital expenditures to
comply with Environmental Laws; and (v) no property which is or has
been owned, leased or occupied by the Company or its Subsidiaries has
been designated as a Superfund site pursuant to the Comprehensive
Environmental Response, Compensation of Liability Act of 1980, as
amended (42 U.S.C. Section 9601, et. seq.) ("CERCLA") or otherwise
designated as a contaminated site under applicable state or local law.
(bb) The Company is not and, after giving effect to the
offering and sale of the Shares and the application of proceeds thereof
as described in the Prospectus, will not be an "investment company" or
an entity controlled by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended (the "Investment Company
Act").
(cc) Neither the Company, its Subsidiaries nor any other
person associated with or acting on behalf of the Company or its
Subsidiaries, including any director, officer, agent or employee of the
Company or its Subsidiaries, has, directly or indirectly, while acting
on behalf of the Company or its Subsidiaries (i) used any corporate
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds; (iii) violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any other unlawful
payment.
(dd) All material disclosure regarding year 2000
compliance that is required to be described under the Securities Act
and the regulations and pronouncements of the
10
<PAGE> 11
Commission has been included in the Prospectus. Neither the Company nor
any Subsidiary will incur material operating expenses or costs to
ensure that its information systems will be year 2000 compliant.
(ee) The deposit accounts and investment certificates of
the Subsidiaries are duly insured by the Federal Deposit Insurance
Corporation (the "FDIC") to the fullest extent permitted by law. No
charge, investigation or proceeding for the termination or revocation
of either the Company or any of its Subsidiaries' charter, good
standing or FDIC insurance is pending, or to the knowledge of the
Company, threatened.
(ff) Neither the Company nor any of its Subsidiaries are
subject to any order of the Federal Reserve Board (the "FRB"), the
FDIC, the Missouri Department of Finance or the Office of the
Comptroller of the Currency, nor are the Company or any of its
Subsidiaries subject to any agreement or consent with, or board
resolution adopted at the instigation of, any such regulatory
authorities. The Company and its Subsidiaries have conducted and are
conducting their businesses so as to comply in all material respects
with all applicable federal and state laws, rules, regulations,
decisions, directives and orders (including without limitation the
rules, regulations, decisions, directives and orders of the FRB, the
FDIC, the Missouri Department of Finance and the Office of the
Comptroller of the Currency). No charge, investigation or proceeding
with respect to the Company or its Subsidiaries is pending or, to the
best of the Company's knowledge, threatened, by or before any
regulatory, administrative or governmental agency, body or authority.
(gg) The Company and each of its Subsidiaries are in
compliance with all applicable capital requirements. The Company and
each of its Subsidiaries are "well capitalized" as defined in FDIC
regulations and will be "well capitalized" after the payment of any
special assessment levied by the FDIC, and neither the Company nor any
Subsidiary is, to the Company's knowledge, threatened with or being
considered for receivership or any special supervision by the FRB, the
FDIC, the Missouri Department of Finance or the Office of the
Comptroller of the Currency.
(hh) The Company is a "bank holding company" within the
meaning of the Bank Holding Company Act of 1956, as amended.
(ii) The Company has not offered, or caused the
Underwriters to offer, Shares to any person with the specific intent to
unlawfully influence (i) a customer or supplier of the Company to alter
the customer's or supplier's level or type of business with the Company
or (ii) a trade journalist or publication to write or publish favorable
information about the Company or its business.
5. REPRESENTATIONS AND WARRANTIES OF PREMIER BANCSHARES, INC. AND
PREMIER BANK. Bancshares and PB hereby represent and warrant to each Underwriter
as follows:
(a) This Agreement and the Merger Agreement have been
duly and validly authorized, executed and delivered by Bancshares and
constitute legal, valid and binding obligations of Bancshares and PB,
enforceable against Bancshares and PB in accordance
11
<PAGE> 12
with their terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
(b) The financial statements of Bancshares and PB
(including all notes and schedules thereto) included in the
Registration Statement and Prospectus present fairly the financial
condition, the results of operations, the statements of cash flows and
the statements of shareholders' equity and the other information
purported to be shown therein of Bancshares and PB at the respective
dates and for the respective periods to which they apply; and such
financial statements and related schedules and notes have been prepared
in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved, and all
adjustments necessary for a fair presentation of the results for such
periods have been made. The summary and selected financial data
included in the Prospectus present fairly the information shown therein
as at the respective dates and for the respective periods specified and
the summary and selected financial data have been presented on a basis
consistent with the consolidated financial statements so set forth in
the Prospectus and other financial information.
(c) KPMG LLP, whose reports are filed with the Commission
as a part of the Registration Statement, are, and during the periods
covered by their reports were, independent public accountants as
required by the Securities Act and the Rules.
(d) Bancshares is a corporation duly organized, validly
existing and in good standing under the laws of the State of Missouri.
PB is a corporation duly organized, validly existing and in good
standing under the laws of the State of Missouri. Each of Bancshares
and Premier is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the nature of the
business conducted by it or location of the assets or properties owned,
leased or licensed by it requires such qualification, except for such
jurisdictions where the failure to so qualify individually or in the
aggregate would not have a Material Adverse Effect. Neither Bancshares
nor PB owns, leases or licenses any asset or property or conducts any
business outside the United States of America. Each of Bancshares and
PB has all requisite corporate power and authority, and all Permits to
own, lease and license its assets and properties and conduct its
business, all of which are valid and in full force and effect, as
described in the Registration Statement and the Prospectus, except
where the lack of such Permits individually or in the aggregate would
not have a Material Adverse Effect. Each of Bancshares and PB has
fulfilled and performed in all material respects all of their
obligations with respect to such Permits and no event has occurred that
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of Bancshares or PB thereunder.
(e) Each of Bancshares and PB owns or possesses adequate
and enforceable rights to use all Intangibles described in the
Prospectus as being owned by it necessary for the conduct of its
business. Neither Bancshares nor PB has received any notice of, or is
aware of, any infringement of or conflict with asserted rights of
others with respect to any Intangibles.
12
<PAGE> 13
(f) Each of Bancshares and PB has good and marketable
title in fee simple to all items of real property and good and
marketable title to all personal property described in the Prospectus
as being owned by it. Any real property and buildings described in the
Prospectus as being held under lease by either Bancshares or PB is held
by it under valid, existing and enforceable leases, free and clear of
all liens, encumbrances, claims, security interests and defects, except
such as are described in the Registration Statement and the Prospectus
or would not individually or in the aggregate have a Material Adverse
Effect.
(g) There is no litigation or governmental proceeding to
which either Bancshares or PB is subject or which is pending or, to the
knowledge of Bancshares or PB, threatened, against either Bancshares or
PB, which individually or in the aggregate might have a Material
Adverse Effect or affect the consummation of the transactions
contemplated by this Agreement or the Merger Agreement or which is
required to be disclosed in the Registration Statement and the
Prospectus that is not so disclosed.
(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
except as described therein: (A) there has not been any material
adverse change with regard to the assets or properties, business,
results of operations or financial condition of either Bancshares or
PB; (B) neither Bancshares nor PB has sustained any loss or
interference with its assets, businesses or properties (whether owned
or leased) from fire, explosion, earthquake, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or any
court or legislative or other governmental action, order or decree
which would have a Material Adverse Effect; and (C) since the date of
the latest balance sheet included in the Registration Statement and the
Prospectus, except as reflected therein, neither Bancshares nor PB has
(i) issued any securities or incurred any liability or obligation,
direct or contingent, for borrowed money, except such liabilities or
obligations incurred in the ordinary course of business, (ii) entered
into any transaction not in the ordinary course of business or (iii)
declared or paid any dividend or made any distribution on any shares of
its stock or redeemed, purchased or otherwise acquired or agreed to
redeem, purchase or otherwise acquire any shares of its stock.
(i) There is no document, contract or other agreement of
a character required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement
which is not described or filed as required by the Securities Act or
the Rules. Each description of a contract, document or other agreement
that relates to either Bancshares or PB in the Registration Statement
and the Prospectus accurately reflects in all respects the terms of the
underlying document, contract or agreement. Each agreement that relates
to either Bancshares or PB described in the Registration Statement and
Prospectus or listed in the Exhibits to the Registration Statement is
in full force and effect and is valid and enforceable by and against
Bancshares or PB, as the case may be, in accordance with its terms.
Neither Bancshares nor PB, nor to Bancshares' or PB's knowledge, any
other party, is in default in the observance or performance of any term
or obligation to be performed by it under any such agreement, and no
event has occurred which with notice or lapse of time or both would
constitute such a default, in any such case which default or event
individually or in the aggregate would have a Material
13
<PAGE> 14
Adverse Effect. No default exists, and no event has occurred which with
notice or lapse of time or both would constitute a default, in the due
performance and observance of any term, covenant or condition, by
Bancshares or PB of any other agreement or instrument to which either
Bancshares or PB is a party or by which it or its properties or
business may be bound or affected which default or event individually
or in the aggregate would have a Material Adverse Effect.
(j) Neither Bancshares nor PB is in violation of any term
or provision of its charter or by-laws or of any franchise, license,
permit, judgment, decree, order, statute, rule or regulation, where the
consequences of such violation individually or in the aggregate would
have a Material Adverse Effect.
(k) Neither the execution, delivery and performance of
this Agreement or the Merger Agreement by Bancshares and PB nor the
consummation of any of the transactions contemplated hereby or thereby
(including the issuance and sale by the Company of the Shares) will
give rise to a right to terminate or accelerate the due date of any
payment due under, or conflict with or result in the breach of any term
or provision of, or constitute a default (or an event which with notice
or lapse of time or both would constitute a default) under, or require
any consent or waiver under, or result in the execution or imposition
of any lien, charge or encumbrance upon any properties or assets of
Bancshares or PB pursuant to the terms of, any indenture, mortgage,
deed of trust or other agreement or instrument to which Bancshares or
PB is a party or by which either Bancshares or PB or any of their
properties or businesses is bound, or any franchise, license, permit,
judgment, decree, order, statute, rule or regulation applicable to
Bancshares or PB or violate any provision of the charter or by-laws of
Bancshares or PB, except for such consents or waivers which have
already been obtained and are in full force and effect.
(l) All necessary corporate action has been duly and
validly taken by Bancshares and PB to authorize the execution, delivery
and performance of this Agreement and the Merger Agreement.
(m) Neither Bancshares nor PB is involved in any labor
dispute nor, to the knowledge of Bancshares or PB, is any such dispute
threatened, which dispute individually or in the aggregate would have a
Material Adverse Effect. Neither Bancshares nor PB is aware of any
existing or imminent labor disturbance by the employees of any of its
principal suppliers or contractors which individually or in the
aggregate would have a Material Adverse Effect. Neither Bancshares nor
PB is aware of any threatened or pending litigation between either
Bancshares or PB and any of PB's or the Company's executive officers
which individually or in the aggregate, if adversely determined, could
have a Material Adverse Effect and has no reason to believe that such
officers will not remain in the employment of PB.
(n) Each of Bancshares and PB has filed all Federal,
state, local and foreign tax returns which are required to be filed
through the date hereof, or have received extensions thereof, and have
paid all taxes shown on such returns and all assessments received by
14
<PAGE> 15
them to the extent that the same are material and have become due.
There are no tax audits or investigations pending which if adversely
determined would have a Material Adverse Effect; nor are there any
material proposed additional tax assessments against either Bancshares
or PB.
(o) Each of Bancshares and PB has complied with all of
the requirements and filed the required forms as specified in Florida
Statutes Section 517.075.
(p) The books, records and accounts of Bancshares and PB
accurately and fairly reflect, in reasonable detail, the transactions
in, and dispositions of, the assets of, and the results of operations
of, each of Bancshares and PB. Each of Bancshares and PB maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(q) Each of Bancshares and PB are insured by insurers of
recognized financial responsibility against such losses and risks and
in such amounts as are customary in the businesses in which they are
engaged. Neither Bancshares nor PB has any reason to believe that it
will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect. Neither Bancshares nor PB has
been denied any insurance coverage which it has sought or for which it
has applied.
(r) Each approval, consent, order, authorization,
designation, declaration or filing of, by or with any regulatory,
administrative or other governmental body necessary in connection with
the execution and delivery by Bancshares and PB of this Agreement and
the Merger Agreement and the consummation of the transactions
contemplated herein and therein that are required to be obtained or
performed by each of Bancshares and PB have been obtained or made and
are in full force and effect.
(s) No officer, director or 5% or greater shareholder of
Bancshares or PB has any affiliation with any NASD member firm.
(t) (i) Each of Bancshares and PB is in compliance in all
material respects with all Environmental Laws which are applicable to
its business; (ii) none of Bancshares or PB has received any notice
from any governmental authority or third party of an asserted claim
under Environmental Laws; (iii) each of Bancshares and PB has received
all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and is in
compliance with all terms and conditions of any such permit, license or
approval; (iv) to the knowledge of Bancshares and PB, no facts
currently exist that will
15
<PAGE> 16
require Bancshares or PB to make future material capital expenditures
to comply with Environmental Laws; and (v) no property which is or has
been owned, leased or occupied by Bancshares or PB has been designated
as a Superfund site pursuant to the CERCLA or otherwise designated as a
contaminated site under applicable state or local law.
(u) Neither Bancshares nor PB, after giving effect to the
offering and sale of the Shares and the application of proceeds thereof
as described in the Prospectus, will be an "investment company" or an
entity controlled by an "investment company" within the meaning of the
Investment Company Act.
(v) Neither Bancshares nor PB nor any other person
associated with or acting on behalf of Bancshares or PB, including any
director, officer, agent or employee of Bancshares or PB, has, directly
or indirectly, while acting on behalf of Bancshares or PB (i) used any
corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity; (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds; (iii) violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any other unlawful
payment.
(w) All material disclosure regarding year 2000
compliance that is required to be described under the Securities Act
and the regulations and pronouncements of the Commission has been
included in the Prospectus. Neither Bancshares nor PB will incur
material operating expenses or costs to ensure that its information
systems will be year 2000 compliant.
(x) The deposit accounts and investment certificates of
PB are duly insured by the FDIC to the fullest extent permitted by law.
No charge, investigation or proceeding for the termination or
revocation of either Bancshares or PB or of their charter, good
standing or FDIC insurance is pending, or to the knowledge of the
either Bancshares or PB, threatened.
(y) Neither Bancshares nor PB is subject to any order of
the FRB, the FDIC, the Missouri Department of Finance or the Office of
the Comptroller of the Currency, nor is Bancshares or PB subject to any
agreement or consent with, or board resolution adopted at the
instigation of, any such regulatory authorities. Bancshares and PB have
conducted and are conducting their businesses so as to comply in all
material respects with all applicable federal and state laws, rules,
regulations, decisions, directives and orders (including without
limitation the rules, regulations, decisions, directives and orders of
the FRB, the FDIC, the Missouri Department of Finance and the Office of
the Comptroller of the Currency). No charge, investigation or
proceeding with respect to Bancshares or PB is pending or, to the best
knowledge of Bancshares or PB, is threatened, by or before any
regulatory, administrative or governmental agency, body or authority.
(z) Each of Bancshares and PB is in compliance with all
applicable capital requirements. Each of Bancshares and PB is "well
capitalized" as defined in FDIC regulations and will be "well
capitalized" after the payment of any special assessment
16
<PAGE> 17
levied by the FDIC, and neither Bancshares nor PB is, to the knowledge
of Bancshares or PB, threatened with or being considered for
receivership or any special supervision by the FRB, the FDIC, the
Missouri Department of Finance or the Office of the Comptroller of the
Currency.
(aa) Bancshares is a "bank holding company" within the
meaning of the Bank Holding Company Act of 1956, as amended.
(bb) Neither Bancshares nor PB has offered, or caused the
Underwriters to offer, Shares to any person with the specific intent to
unlawfully influence (i) a customer or supplier of the Company,
Bancshares or PB to alter the customer's or supplier's level or type of
business with the Company, Bancshares or PB or (ii) a trade journalist
or publication to write or publish favorable information about the
Company, Bancshares or PB or its business.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations
of the Underwriters under this Agreement are several and not joint. The
respective obligations of the Underwriters to purchase the Shares are subject to
each of the following terms and conditions:
(a) Notification that the Registration Statement has
become effective shall have been received by the Representatives and
the Prospectus shall have been timely filed with the Commission in
accordance with Section 7(a)(i) of this Agreement.
(b) No order preventing or suspending the use of any
preliminary prospectus or the Prospectus shall have been or shall be in
effect and no order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall
be pending before or threatened by the Commission, and any requests for
additional information on the part of the Commission (to be included in
the Registration Statement or the Prospectus or otherwise) shall have
been complied with to the satisfaction of the Commission and the
Representatives.
(c) The representations and warranties of the Company,
Bancshares and PB contained in this Agreement and in the certificates
delivered pursuant to Sections 6(d), 6(e) and 6(f) shall be true and
correct when made and on and as of each Closing Date as if made on such
date. The Company, Bancshares and PB shall have performed all covenants
and agreements and satisfied all the conditions contained in this
Agreement required to be performed or satisfied by them at or before
such Closing Date.
(d) The Representatives shall have received on each
Closing Date a certificate, addressed to the Representatives and dated
such Closing Date, of the chief executive officer and the chief
financial officer of the Company, to the effect that (i) they have
carefully examined the Registration Statement, the Prospectus and this
Agreement and that the representations and warranties of the Company in
this Agreement are true and correct on and as of such Closing Date with
the same effect as if made on such Closing Date and the Company has
performed all covenants and agreements and satisfied all conditions
contained in this Agreement required to be performed or satisfied by it
at or
17
<PAGE> 18
prior to such Closing Date, and (ii) no stop order suspending the
effectiveness of the Registration Statement has been issued and to the
best of their knowledge, no proceedings for that purpose have been
instituted or are pending under the Securities Act.
(e) The Representatives shall have received on each
Closing Date a certificate, addressed to the Representatives and dated
such Closing Date, of Bancshares and PB, to the effect that they have
carefully examined the Registration Statement, the Prospectus and this
Agreement and that the representations and warranties of each of
Bancshares and PB in this Agreement are true and correct on and as of
such Closing Date with the same effect as if made on such Closing Date.
(f) The Representatives shall have received on each
Closing Date a certificate, addressed to the Representatives and dated
such Closing Date, of Bancshares and PB, to the effect that the
representations and warranties of Bancshares and PB in this Agreement
are true and correct on and as of such Closing Date with the same
effect as if made on such Closing Date and each of Bancshares and PB
has performed all covenants and agreements and satisfied all conditions
contained in this Agreement required to be performed or satisfied by it
at or prior to such Closing Date.
(g) The Representatives shall have received at the time
this Agreement is executed and on each Closing Date a signed letter
from KPMG LLP addressed to the Representatives and dated, respectively,
the date of this Agreement and each such Closing Date, in form and
substance reasonably satisfactory to the Representatives, confirming
that they are independent accountants within the meaning of the
Securities Act and the Rules, that the response to Item 10 of the
Registration Statement is correct insofar as it relates to them and
stating in effect that:
(i) in their opinion the audited financial
statements and financial statement schedules included in the
Registration Statement and the Prospectus and reported on by
them comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and
the Rules;
(ii) on the basis of a reading of the amounts
included in the Registration Statement and the Prospectus
under the headings "Prospectus Summary--Summary Consolidated
Financial Data" and "Selected Consolidated Financial Data,"
carrying out certain procedures (but not an examination in
accordance with Generally Accepted Auditing Standards) which
would not necessarily reveal matters of significance with
respect to the comments set forth in such letter, a reading of
the minutes of the meetings of the shareholders and directors
of the Company, Bancshares and PB, and inquiries of certain
officials of the Company, Bancshares and PB who have
responsibility for financial and accounting matters of the
Company, Bancshares and PB as to transactions and events
subsequent to the date of the latest audited financial
statements, except as disclosed in the Registration Statement
and the Prospectus, nothing came to their attention which
caused them to believe that:
18
<PAGE> 19
(A) the amounts in "Prospectus
Summary--Summary Consolidated Financial Data" and
"Selected Consolidated Financial Data" included in
the Registration Statement and the Prospectus do not
agree with the corresponding amounts in the audited
and unaudited financial statements from which such
amounts were derived; or
(B) with respect to the Company,
Bancshares and PB, there were, at a specified date
not more than five business days prior to the date of
the letter, any increases in the current liabilities
and long-term liabilities of the Company, Bancshares
and PB or any decreases in net income or in working
capital or the shareholders' equity in the Company,
Bancshares and PB, as compared with the amounts shown
on the Company's, Bancshares and PB audited balance
sheet for the fiscal year ended December 31, 1998 and
the three months ended March 31, 1999 included in the
Registration Statement;
(iii) they have performed certain other procedures
as may be permitted under Generally Acceptable Auditing
Standards as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company, Bancshares and PB) set forth in the Registration
Statement and the Prospectus and reasonably specified by the
Representatives agrees with the accounting records of the
Company, Bancshares and PB; and
(iv) based upon the procedures set forth in
clauses (ii) and (iii) above and a reading of the amounts
included in the Registration Statement under the headings
"Prospectus Summary--Summary Consolidated Financial Data" and
"Selected Consolidated Financial Data" included in the
Registration Statement and Prospectus and a reading of the
financial statements from which certain of such data were
derived, nothing has come to their attention that gives them
reason to believe that the "Prospectus Summary--Summary
Consolidated Financial Data" and "Selected Consolidated
Financial Data" included in the Registration Statement and
Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Securities
Act and the Rules or that the information set forth therein is
not fairly stated in relation to the financial statements
included in the Registration Statement or Prospectus from
which certain of such data were derived and are not in
conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the
audited financial statements included in the Registration
Statement and Prospectus.
References to the Registration Statement and the Prospectus in
this paragraph (g) are to such documents as amended and supplemented at
the date of the letter.
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<PAGE> 20
(h) The Representatives shall have received on each
Closing Date from Smith, Gambrell and Russell, LLP, counsel for the
Company, an opinion, addressed to the Representatives and dated such
Closing Date, and stating in effect that:
(i) Each of the Company and its Subsidiaries has
been duly organized and is validly existing as a corporation
in good standing under the laws of the State of Delaware. Each
of the Company and its Subsidiaries is duly qualified and in
good standing as a foreign corporation in each jurisdiction in
which the character or location of its assets or properties
(owned, leased or licensed) or the nature of its businesses
makes such qualification necessary, except for such
jurisdictions where the failure to so qualify individually or
in the aggregate would not have a Material Adverse Effect.
(ii) Each of the Company and its Subsidiaries has
all requisite corporate power and authority to own, lease and
license its assets and properties and conduct its business as
now being conducted and as described in the Registration
Statement and the Prospectus and, with respect to the Company,
to enter into, deliver and perform this Agreement and the
Merger Agreement and to issue and sell the Shares.
(iii) The Company has an authorized and issued
capital structure as set forth in the Registration Statement
and the Prospectus under the caption "Capitalization"; the
certificates evidencing the Shares are in due and proper legal
form and have been duly authorized for issuance by the
Company; all outstanding shares of Common Stock of the Company
have been duly and validly authorized and issued and are fully
paid and nonassessable and none of them was issued in
violation of any preemptive or other similar right. The
Shares, when issued and sold pursuant to this Agreement will
be duly and validly issued, outstanding, fully paid and
nonassessable and none of them will have been issued in
violation of any preemptive or other similar right. There are
no preemptive rights or any restrictions upon the voting or
transfer of any securities of the Company pursuant to the
Company's Certificate of Incorporation or by-laws or other
governing documents or any other instrument to which the
Company is a party or by which it may be bound. There is no
outstanding option, warrant or other right calling for the
issuance of any shares of Common Stock (other than the Shares)
or any security convertible into, exercisable for, or
exchangeable for Common Stock. The capital stock of the
Company conforms in all material respects to the descriptions
thereof contained in the Registration Statement and the
Prospectus.
(iv) The issued and outstanding shares of capital
stock of each of the Company's Subsidiaries have been duly
authorized and validly issued, are fully paid and
nonassessable and are owned directly by the Company, free and
clear of any perfected security interest or any other security
interests, liens, encumbrances, equities or claims, other than
those contained in the Registration Statement and the
Prospectus.
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(v) All necessary corporate action has been duly
and validly taken by the Company to authorize the execution,
delivery and performance of this Agreement, the Merger
Agreement and the issuance and sale of the Shares. This
Agreement and the Merger Agreement have been duly and validly
authorized, executed and delivered by the Company.
(vi) Neither the execution, delivery and
performance of this Agreement or the Merger Agreement by the
Company nor the consummation of any of the transactions
contemplated hereby or thereby (including the issuance and
sale by the Company of the Shares) will give rise to a right
to terminate or accelerate the due date of any payment due
under, or conflict with or result in the breach of any term or
provision of, or constitute a default (or any event which with
notice or lapse of time, or both, would constitute a default)
under, or require consent or waiver under, or result in the
execution or imposition of any lien, charge or encumbrance
upon any properties or assets of the Company or the
Subsidiaries pursuant to the terms of any indenture, mortgage,
deed of trust, note or other agreement or instrument of which
such counsel is aware and to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the
Subsidiaries or any of their properties or businesses is
bound, or any franchise, license, permit, judgment, decree,
order, statute, rule or regulation of which such counsel is
aware or violate any provision of the charter or by-laws of
the Company or any Subsidiary.
(vii) No default exists, and no event has occurred
which with notice or lapse of time, or both, would constitute
a default in the due performance and observance of any term,
covenant or condition by the Company or the Subsidiaries of
any indenture, mortgage, deed of trust, note or any other
agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which any of their assets,
properties or businesses may be bound or affected, where the
consequences of such default individually or in the aggregate
would have a Material Adverse Effect.
(viii) The Company and its Subsidiaries are not in
violation of any (A) term or provision of their charter or
by-laws or (B) any franchise, license, permit, judgment,
decree, order, statute, rule or regulation (except for the
consequences of the violation of this subsection (B),
individually or in the aggregate, which would not have a
Material Adverse Effect).
(ix) No consent, approval, authorization or order
of any court or governmental agency or regulatory body is
required for the execution, delivery or performance of this
Agreement or the Merger Agreement by the Company or the
consummation of the transactions contemplated hereby, except
such as have been obtained under the Securities Act and such
as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by
the several Underwriters.
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<PAGE> 22
(x) There is no litigation or governmental or
other proceeding or investigation, before any court or before
or by any public body or board pending or threatened against,
or involving the assets, properties or businesses of, the
Company or its Subsidiaries which individually or in the
aggregate could have a Material Adverse Effect.
(xi) The statements in the Prospectus under the
captions "Risk Factors" "Management's Discussion and Analysis
of Financial Condition and Results of Operations,"
"Supervision and Regulation," "Management--Employment
Agreements," "Management--Stock Option Plan," "Certain
Transactions," "Description of Capital Stock," "Shares
Eligible for Future Sale" and Item 14 of the Registration
Statement, insofar as such statements constitute a summary of
documents referred to therein or matters of law, are fair
summaries in all material respects and accurately present the
information called for with respect to such documents and
matters. Accurate copies of all contracts and other documents
required to be filed as exhibits to, or described in, the
Registration Statement have been so filed with the Commission
or are fairly described in the Registration Statement, as the
case may be.
(xii) The Registration Statement, all preliminary
prospectuses and the Prospectus and each amendment or
supplement thereto (except for the financial statements and
schedules and other financial and statistical data included
therein, as to which such counsel expresses no opinion) comply
as to form in all material respects with the requirements of
the Securities Act and the Rules.
(xiii) The Registration Statement is effective
under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or,
to such counsel's knowledge, are threatened, pending or
contemplated. Any required filing of the Prospectus and any
supplement thereto pursuant to Rule 424(b) under the
Securities Act has been made in the manner and within the time
period required by such Rule 424(b).
(xiv) The Company is not an "investment company"
or an entity controlled by an "investment company" as such
terms are defined in the Investment Company Act of 1940, as
amended.
To the extent deemed advisable by such counsel, they may rely
as to matters of fact on certificates of responsible officers of the
Company. Copies of such certificates and other opinions shall be
furnished to the Representatives and counsel for the Underwriters.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of
the Company, Bancshares, PB, representatives of the Representatives and
representatives of the independent certified public accountants of the
Company, at which conferences the contents of the Registration
Statement and the Prospectus and related matters were discussed and,
although such
22
<PAGE> 23
counsel is not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in
the Registration Statement and the Prospectus (except as specified in
the foregoing opinion), on the basis of the foregoing, no facts have
come to the attention of such counsel which lead such counsel to
believe that the Registration Statement at the time it became effective
(except with respect to the financial statements and schedules and
other financial data, as to which such counsel need express no belief)
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus as amended or
supplemented (except with respect to the financial statements and
schedules and other financial data, as to which such counsel need make
no statement) on the date thereof contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(i) The Representatives shall have received on each
Closing Date from Suelthaus & Walsh, P.C., counsel for Bancshares and
PB, an opinion, addressed to the Representatives and dated such Closing
Date, and stating in effect that:
(i) Each of Bancshares and PB has been duly
organized and is validly existing as a corporation in good
standing under the laws of the State of Missouri. Each of
Bancshares and PB is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the
character or location of its assets or properties (owned,
leased or licensed) or the nature of its businesses makes such
qualification necessary, except for such jurisdictions where
the failure to so qualify individually or in the aggregate
would not have a Material Adverse Effect.
(ii) Each of Bancshares and PB has all requisite
corporate power and authority to own, lease and license its
assets and properties and conduct its business as now being
conducted and as described in the Registration Statement and
the Prospectus and to enter into, deliver and perform the
Merger Agreement and this Agreement.
(iii) All of the outstanding shares of capital
stock of Bancshares and PB have been duly and validly
authorized and issued and are fully paid and nonassessable and
none of them was issued in violation of any preemptive or
other similar right. There are no preemptive rights or any
restrictions upon the voting or transfer of any securities of
Bancshares or PB pursuant to Bancshare's or PB's Articles of
Incorporation or by-laws or other governing documents or any
other instrument to which either Bancshares or PB is a party
or by which it may be bound. There is no outstanding option,
warrant or other right calling for the issuance of any shares
of capital stock of Bancshares or PB.
(iv) All necessary corporate action has been duly
and validly taken by each of Bancshares and PB to authorize
the execution, delivery and performance of this Agreement and
the Merger Agreement. This Agreement and the Merger Agreement
has been duly and validly authorized, executed and delivered
by Bancshares and PB.
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<PAGE> 24
(v) Neither the execution, delivery and
performance of this Agreement or the Merger Agreement by
either of Bancshares or PB nor the consummation of any of the
transactions contemplated hereby or thereby will give rise to
a right to terminate or accelerate the due date of any payment
due under, or conflict with or result in the breach of any
term or provision of, or constitute a default (or any event
which with notice or lapse of time, or both, would constitute
a default) under, or require consent or waiver under, or
result in the execution or imposition of any lien, charge or
encumbrance upon any properties or assets of Bancshares or PB
pursuant to the terms of any indenture, mortgage, deed of
trust, note or other agreement or instrument of which such
counsel is aware and to which Bancshares or PB is a party or
by which Bancshares or PB or any of their properties or
businesses is bound, or any franchise, license, permit,
judgment, decree, order, statute, rule or regulation of which
such counsel is aware or violate any provision of the charter
or by-laws of Bancshares or PB.
(vi) No default exists, and no event has occurred
which with notice or lapse of time, or both, would constitute
a default in the due performance and observance of any term,
covenant or condition by Bancshares or PB of any indenture,
mortgage, deed of trust, note or any other agreement or
instrument to which Bancshares or PB is a party or by which
any of their assets, properties or businesses may be bound or
affected, where the consequences of such default individually
or in the aggregate would have a Material Adverse Effect.
(vii) Neither Bancshares nor PB are in violation
of any (A) term or provision of their charter or by-laws or
(B) any franchise, license, permit, judgment, decree, order,
statute, rule or regulation (except for the consequences of
the violation of this subsection (B), individually or in the
aggregate, which would not have a Material Adverse Effect).
(viii) No consent, approval, authorization or order
of any court or governmental agency or regulatory body is
required for the execution, delivery or performance of this
Agreement by Bancshares or PB or the consummation of the
transactions contemplated hereby, except such as have been
obtained under the Securities Act and such as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the several
Underwriters.
(ix) There is no litigation or governmental or
other proceeding or investigation, before any court or before
or by any public body or board pending or threatened against,
or involving the assets, properties or businesses of,
Bancshares or PB which individually or in the aggregate could
have a Material Adverse Effect.
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<PAGE> 25
(x) The statements in the Prospectus under the
captions "Risk Factors" and "Supervision and Regulation"
insofar as such statements constitute a summary of documents
referred to therein or matters of law, are fair summaries in
all material respects and accurately present the information
called for with respect to such documents and matters.
(xi) Neither Bancshares nor PB is an "investment
company" or an entity controlled by an "investment company" as
such terms are defined in the Investment Company Act of 1940,
as amended.
To the extent deemed advisable by such counsel, they may rely
as to matters of fact on certificates of responsible officers of
Bancshares or PB. Copies of such certificates and other opinions shall
be furnished to the Representatives and counsel for the Underwriters.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of
the Company, Bancshares, PB, representatives of the Representatives and
representatives of the independent certified public accountants of the
Company, at which conferences the contents of the Registration
Statement and the Prospectus and related matters were discussed and,
although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus
(except as specified in the foregoing opinion), on the basis of the
foregoing, no facts have come to the attention of such counsel which
lead such counsel to believe that the Registration Statement at the
time it became effective (except with respect to the financial
statements and schedules and other financial data, as to which such
counsel need express no belief) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
that the Prospectus as amended or supplemented (except with respect to
the financial statements and schedules and other financial data, as to
which such counsel need make no statement) on the date thereof
contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(j) All proceedings taken in connection with the sale of
the Firm Shares and the Option Shares as herein contemplated shall be
reasonably satisfactory in form and substance to the Representatives
and their counsel and the Underwriters shall have received from Gibson,
Dunn & Crutcher LLP a favorable opinion, addressed to the
Representatives and dated such Closing Date, with respect to the
Shares, the Registration Statement and the Prospectus, and such other
related matters, as the Representatives may reasonably request, and the
Company shall have furnished to Gibson, Dunn & Crutcher LLP such
documents as they may reasonably request for the purpose of enabling
them to pass upon such matters.
(k) If the Shares have been qualified for sale in
Florida, the Representatives shall have received on each Closing Date
certificates, addressed to the Representatives,
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<PAGE> 26
and dated such Closing Date, of an executive officer of the Company, to
the effect that the signer of such certificate has reviewed and
understands the provisions of Section 517.075 of the Florida Statutes,
and represents that the Company has complied, and at all times will
comply, with all provisions of Section 517.075 and further, that as of
such Closing Date, neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba.
(l) The transactions contemplated by the Merger Agreement
shall have been consummated.
(m) The Representatives shall have received copies of the
Lock-Up Agreements executed by each entity or person described in
Section 4(o).
(n) The Company shall have furnished or caused to be
furnished to the Representatives such further certificates or documents
as the Representatives shall have reasonably requested.
(o) The Shares shall have been duly approved for
quotation on the Nasdaq National Market.
7. COVENANTS OF THE COMPANY.
(a) The Company covenants and agrees with each
Underwriter as follows:
(i) The Company shall prepare the Prospectus in
a form approved by the Representatives and file such
Prospectus pursuant to Rule 424(b) under the Securities Act
not later than the Commission's close of business on the
second business day following the execution and delivery of
this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Securities Act.
(ii) The Company shall promptly advise the
Representatives in writing (A) when any amendment to the
Registration Statement shall have become effective, (B) of any
request by the Commission for any amendment of the
Registration Statement or the Prospectus or for any additional
information, (C) of the prevention or suspension of the use of
any preliminary prospectus or the Prospectus or of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution
or threatening of any proceeding for that purpose and (D) of
the receipt by the Company of any notification with respect to
the suspension of the qualification of the Shares for sale in
any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company shall not file any
amendment of the Registration Statement or supplement to the
Prospectus unless the Company has furnished the
Representatives a copy for its review prior to filing and
shall not file any such proposed amendment or supplement to
which the Representatives reasonably
26
<PAGE> 27
object. The Company shall use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as
soon as possible the withdrawal thereof.
(iii) If, at any time when a prospectus relating
to the Shares is required to be delivered under the Securities
Act and the Rules, any event occurs as a result of which the
Prospectus as then amended or supplemented would include any
untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the
light of the circumstances under which they were made not
misleading, or if it shall be necessary to amend or supplement
the Prospectus to comply with the Securities Act or the Rules,
the Company promptly shall prepare and file with the
Commission, subject to the second sentence of paragraph (ii)
of this Section 7(a), an amendment or supplement which shall
correct such statement or omission or an amendment which shall
effect such compliance.
(iv) The Company shall make generally available
to its security holders and to the Representatives as soon as
practicable, but not later than 45 days after the end of the
12-month period beginning at the end of the fiscal quarter of
the Company during which the Effective Date occurs (or 90 days
if such 12-month period coincides with the Company's fiscal
year), an earnings statement (which need not be audited) of
the Company, covering such 12-month period, which shall
satisfy the provisions of Section 11(a) of the Securities Act
or Rule 158 of the Rules.
(v) The Company shall furnish to the
Representatives and counsel for the Underwriters, without
charge, signed copies of the Registration Statement (including
all exhibits thereto and amendments thereof) and to each other
Underwriter a copy of the Registration Statement (without
exhibits thereto) and all amendments thereof and, so long as
delivery of a prospectus by an Underwriter or dealer may be
required by the Securities Act or the Rules, as many copies of
any preliminary prospectus and the Prospectus and any
amendments thereof and supplements thereto as the
Representatives may reasonably request.
(vi) The Company shall cooperate with the
Representatives and their counsel in endeavoring to qualify
the Shares for offer and sale in connection with the offering
under the laws of such jurisdictions as the Representatives
may designate and shall maintain such qualifications in effect
so long as required for the distribution of the Shares;
provided, however, that the Company shall not be required in
connection therewith, as a condition thereof, to qualify as a
foreign corporation or to execute a general consent to service
of process in any jurisdiction or subject itself to taxation
as doing business in any jurisdiction.
(vii) Without the prior written consent of CIBC
World Markets Corp., for a period of 180 days after the date
of this Agreement, the Company shall not (A) issue, register
with the Commission (other than on Form S-8 or on any
successor form), offer, pledge, sell, contract to sell, sell
any option or contract to
27
<PAGE> 28
purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock or (B) enter into any swap or
other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the
Common Stock, whether any such transaction described in clause
(A) or (B) above is to be settled by delivery of Common Stock
or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to the issuance of the Shares
pursuant to the Registration Statement and the issuance of
shares pursuant to the Company's stock option plan as
described in the Registration Statement and the Prospectus. In
the event that during this period, (1) any shares are issued
pursuant to the Company's stock option plan or any other
compensation plan that are exercisable during such 180 day
period or (2) any registration is effected on Form S-8 or on
any successor form relating to shares that are exercisable
during such 180 day period, the Company shall cause each such
grantee or purchaser or holder of such registered securities
to enter into a Lock-Up Agreement in the form set forth on
Schedule III hereto.
(viii) On or before completion of this offering,
the Company shall make all filings required under applicable
securities laws and by the Nasdaq National Market (including
any required registration under the Exchange Act).
(ix) The Company shall file timely and accurate
reports in accordance with the provisions of Florida Statutes
Section 517.075, or any successor provision, and any
regulation promulgated thereunder, if at any time after the
Effective Date, the Company or any of its affiliates commences
engaging in business with the government of Cuba or any person
or affiliate located in Cuba.
(b) The Company agrees to pay, or reimburse if paid by
the Representatives, whether or not the transactions contemplated
hereby are consummated or this Agreement is terminated, all costs and
expenses incident to the public offering of the Shares and the
performance of the obligations of the Company under this Agreement
including those relating to: (i) the preparation, printing, filing and
distribution of the Registration Statement including all exhibits
thereto, each preliminary prospectus, the Prospectus, all amendments
and supplements to the Registration Statement and the Prospectus, and
the printing, filing and distribution of this Agreement; (ii) the
preparation and delivery of certificates for the Shares to the
Underwriters; (iii) the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the various
jurisdictions referred to in Section 7(a)(vi), including the reasonable
fees and disbursements of counsel for the Underwriters in connection
with such registration and qualification and the preparation, printing,
distribution and shipment of preliminary and supplementary Blue Sky
memoranda; (iv) the furnishing (including costs of shipping and
mailing) to the Representatives and to the Underwriters of copies of
each preliminary prospectus, the Prospectus and all amendments or
supplements to the Prospectus, and of the several documents required by
this Section to be so furnished, as may be reasonably requested for
28
<PAGE> 29
use in connection with the offering and sale of the Shares by the
Underwriters or by dealers to whom Shares may be sold; (v) the filing
fees of the NASD in connection with its review of the terms of the
public offering and reasonable fees and disbursements of counsel for
the Underwriters in connection with such review; (vi) inclusion of the
Shares for quotation on the Nasdaq National Market; and (vii) all
transfer taxes, if any, with respect to the sale and delivery of the
Shares by the Company to the Underwriters. Subject to the provisions of
Section 7(d) and Section 10, the Underwriters agree to pay, whether or
not the transactions contemplated hereby are consummated or this
Agreement is terminated, all costs and expenses incident to the
performance of the obligations of the Underwriters under this Agreement
not payable by the Company pursuant to the preceding sentence,
including the fees and disbursements of counsel for the Underwriters.
8. INDEMNIFICATION.
(a) The Company, Bancshares and PB agree, jointly and
severally, to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act
against any and all losses, claims, damages and liabilities, joint or
several (including any reasonable investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted), to which
they, or any of them, may become subject under the Securities Act, the
Exchange Act or other Federal or state law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus,
the Registration Statement or the Prospectus or any amendment thereof
or supplement thereto, or arise out of or are based upon any omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading; provided, however, that such indemnity shall not inure to
the benefit of any Underwriter (or any person controlling such
Underwriter) on account of any losses, claims, damages or liabilities
arising from the sale of the Shares to any person by such Underwriter
if such untrue statement or omission or alleged untrue statement or
omission was made in such preliminary prospectus, the Registration
Statement or the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with information furnished in writing
to the Company, Bancshares or PB by the Representatives on behalf of
any Underwriter specifically for use therein.
(b) Each Underwriter agrees, severally and not jointly,
to indemnify and hold harmless the Company, Bancshares and PB and each
person, if any, who controls the Company, Bancshares or PB within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, each director of the Company, and each officer of the
Company who signs the Registration Statement, to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only
insofar as such losses, claims, damages or liabilities arise out of or
are based upon any untrue statement or omission or alleged untrue
statement or omission with respect to such Underwriter which was made
in any preliminary prospectus, the Registration Statement or the
Prospectus, or any amendment thereof or supplement thereto, contained
in the following paragraphs
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<PAGE> 30
appearing under the caption "Underwriting" in the Prospectus: (i) the
fourth full paragraph, concerning the terms of the offering; and (ii)
the eleventh full paragraph, including the text set forth in the bullet
points, concerning stabilization and syndicate covering transactions.
(c) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after receipt of notice
of commencement of any action, suit or proceeding against such party in
respect of which a claim is to be made against an indemnifying party or
parties under this Section, notify each such indemnifying party of the
commencement of such action, suit or proceeding, enclosing a copy of
all papers served. No indemnification provided for in Section 8(a) or
8(b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given
was unaware of the proceeding to which such notice would have related
and was prejudiced by the failure to give such notice, but the omission
so to notify such indemnifying party of any such action, suit or
proceeding shall not relieve it from any liability that it may have to
any indemnified party for contribution or otherwise than under this
Section. In case any such action, suit or proceeding shall be brought
against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and
the approval by the indemnified party of such counsel, the indemnifying
party shall not be liable to such indemnified party for any legal or
other expenses, except as provided below and except for the reasonable
costs of investigation subsequently incurred by such indemnified party
in connection with the defense thereof. The indemnified party shall
have the right to employ its counsel in any such action, but the fees
and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of counsel by such
indemnified party has been authorized in writing by the indemnifying
parties, (ii) the indemnified party shall have been advised by counsel
that there may be one or more legal defenses available to it which are
different from or additional to those available to the indemnifying
party (in which case the indemnifying parties shall not have the right
to direct the defense of such action on behalf of the indemnified
party) or (iii) the indemnifying parties shall not have employed
counsel to assume the defense of such action within a reasonable time
after notice of the commencement thereof, in each of which cases the
fees and expenses of counsel shall be at the expense of the
indemnifying parties. An indemnifying party shall not be liable for any
settlement of any action, suit, proceeding or claim effected without
its written consent.
9. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 8(a) or 8(b) for any reason is held to be unavailable to or insufficient
to hold harmless an indemnified party under Section 8(a) or 8(b), then each
indemnifying party shall contribute to the aggregate losses, claims, damages and
liabilities (including any investigation, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting any contribution
received by any person entitled hereunder to
30
<PAGE> 31
contribution from any person who may be liable for contribution) to which the
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares or, if such allocation
is not permitted by applicable law or indemnification is not available as a
result of the indemnifying party not having received notice as provided in
Section 8 hereof, in such proportion as is appropriate to reflect not only the
relative benefits referred to above but also the relative fault of the Company
on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Underwriters shall be
deemed to be in the same proportion as (x) the total proceeds from the offering
(net of underwriting discounts but before deducting expenses) received by the
Company, as set forth in the table on the cover page of the Prospectus, bear to
(y) the underwriting discounts received by the Underwriters, as set forth in the
table on the cover page of the Prospectus. The relative fault of the Company or
the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact related to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 9
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above. Notwithstanding
the provisions of this Section 9, (i) in no case shall any Underwriter (except
as may be provided in the Agreement Among Underwriters) be liable or responsible
for any amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder; and (ii) the Company shall be liable
and responsible for any amount in excess of such underwriting discount;
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Exchange Act shall have the same rights to contribution
as such Underwriter, and each person, if any, who controls the Company within
the meaning of the Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) in the
immediately preceding sentence of this Section 9. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section,
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties from whom contribution may be sought
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise than under this
Section. No party shall be liable for contribution with respect to any action,
suit, proceeding or claim settled without its written consent. The Underwriter's
obligations to contribute pursuant to this Section 9 are several in proportion
to their respective underwriting commitments and not joint.
31
<PAGE> 32
10. TERMINATION. This Agreement may be terminated with respect to
the Shares to be purchased on a Closing Date by the Representatives by notifying
the Company at any time:
(a) in the absolute discretion of the Representatives at
or before any Closing Date: (i) if on or prior to such date, any
domestic or international event or act or occurrence has materially
disrupted, or in the opinion of the Representatives will in the future
materially disrupt, the securities markets; (ii) if there has occurred
any new outbreak or material escalation of hostilities or other
calamity or crisis the effect of which on the financial markets of the
United States is such as to make it, in the judgment of the
Representatives, inadvisable to proceed with the offering; (iii) if
there shall be such a material adverse change in general financial,
political or economic conditions or the effect of international
conditions on the financial markets in the United States is such as to
make it, in the judgment of the Representatives, inadvisable or
impracticable to market the Shares; (iv) if trading in the Shares has
been suspended by the Commission or trading generally on the New York
Stock Exchange, Inc., on the American Stock Exchange, Inc. or the
Nasdaq National Market has been suspended or limited, or minimum or
maximum ranges for prices for securities shall have been fixed, or
maximum ranges for prices for securities have been required, by said
exchanges or by order of the Commission, the NASD or any other
governmental or regulatory authority; (v) if a banking moratorium has
been declared by any state or Federal authority; or (vi) if, in the
judgment of the Representatives, there has occurred a Material Adverse
Effect; or
(b) at or before any Closing Date, that any of the
conditions specified in Section 6 shall not have been fulfilled when
and as required by this Agreement.
If this Agreement is terminated pursuant to any of its provisions,
neither the Company, Bancshares nor PB, shall be under any liability to any
Underwriter, and no Underwriter shall be under any liability to the Company,
Bancshares or PB, except that (y) if this Agreement is terminated by the
Representatives or the Underwriters because of any failure, refusal or inability
on the part of the Company, Bancshares or PB to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company, Bancshares or PB
will reimburse the Underwriters for all out-of-pocket expenses (including the
reasonable fees and disbursements of their counsel) incurred by them in
connection with the proposed purchase and sale of the Shares or in contemplation
of performing their obligations hereunder and (z) no Underwriter who shall have
failed or refused to purchase the Shares agreed to be purchased by it under this
Agreement, without some reason sufficient hereunder to justify cancellation or
termination of its obligations under this Agreement, shall be relieved of
liability to the Company, Bancshares or PB or to the other Underwriters for
damages occasioned by its failure or refusal.
11. SUBSTITUTION OF UNDERWRITERS. If one or more of the
Underwriters shall fail (other than for a reason sufficient to justify the
cancellation or termination of this Agreement under Section 10) to purchase on
any Closing Date the Shares agreed to be purchased on such Closing Date by such
Underwriter or Underwriters, the Representatives may find one or more substitute
underwriters to purchase such Shares or make such other arrangements as the
Representatives may deem advisable or one or more of the remaining Underwriters
may agree to purchase such Shares in such proportions as may be approved by the
Representatives, in each
32
<PAGE> 33
case upon the terms set forth in this Agreement. If no such arrangements have
been made by the close of business on the business day following such Closing
Date,
(a) if the number of Shares to be purchased by the
defaulting Underwriters on such Closing Date shall not exceed 10% of
the Shares that all the Underwriters are obligated to purchase on such
Closing Date, then each of the nondefaulting Underwriters shall be
obligated to purchase such Shares on the terms herein set forth in
proportion to their respective obligations hereunder; provided, that in
no event shall the maximum number of Shares that any Underwriter has
agreed to purchase pursuant to Section 1 be increased pursuant to this
Section 11 by more than one-ninth of such number of Shares without the
written consent of such Underwriter, or
(b) if the number of Shares to be purchased by the
defaulting Underwriters on such Closing Date shall exceed 10% of the
Shares that all the Underwriters are obligated to purchase on such
Closing Date, then the Company shall be entitled to one additional
business day within which it may, but is not obligated to, find one or
more substitute underwriters reasonably satisfactory to the
Representatives to purchase such Shares upon the terms set forth in
this Agreement.
In any such case, either the Representatives or the Company shall have
the right to postpone the applicable Closing Date for a period of not more than
five business days in order that necessary changes and arrangements (including
any necessary amendments or supplements to the Registration Statement or
Prospectus) may be effected by the Representatives and the Company. If the
number of Shares to be purchased on such Closing Date by such defaulting
Underwriter or Underwriters shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, and none of the
nondefaulting Underwriters or the Company shall make arrangements pursuant to
this Section within the period stated for the purchase of the Shares that the
defaulting Underwriters agreed to purchase, this Agreement shall terminate with
respect to the Shares to be purchased on such Closing Date without liability on
the part of any nondefaulting Underwriter to the Company and without liability
on the part of the Company, except in both cases as provided in Sections 7(b),
8, 9 and 10. The provisions of this Section shall not in any way affect the
liability of any defaulting Underwriter to the Company or the nondefaulting
Underwriters arising out of such default. A substitute underwriter hereunder
shall become an Underwriter for all purposes of this Agreement.
12. MISCELLANEOUS. The respective agreements, representations,
warranties, indemnities and other statements of the Company or its officers,
Bancshares, PB and of the Underwriters set forth in or made pursuant to this
Agreement shall remain in full force and effect, regardless of any investigation
made by or on behalf of any Underwriter, the Company, Bancshares, PB or any of
the officers, directors or controlling persons referred to in Sections 8 and 9
hereof, and shall survive delivery of and payment for the Shares. The provisions
of Sections 7(b), 8, 9 and 10 shall survive the termination or cancellation of
this Agreement.
This Agreement has been and is made for the benefit of the
Underwriters, the Company, Bancshares and PB and their respective successors and
assigns, and, to the extent expressed herein, for the benefit of persons
controlling any of the Underwriters or the Company, and
33
<PAGE> 34
directors and officers of the Company, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" shall not include any
purchaser of Shares from any Underwriter merely because of such purchase.
All notices and communications hereunder shall be in writing and mailed
or delivered or by telephone or telegraph if subsequently confirmed in writing,
(a) if to the Underwriters, c/o CIBC World Markets Corp., CIBC Oppenheimer
Tower, World Financial Center, New York, New York 10281, attention: Mark C.
Biderman, with a copy to Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York,
New York 10166, attention: Steven R. Finley and (b) if to the Company, to its
agent for service as such agent's address appears on the cover page of the
Registration Statement with a copy to Smith, Gambrell & Russell, LLP, Suite
3100, 1230 Peachtree Street, N.E., Atlanta, Georgia 30309, attention: Robert C.
Schwartz and (c) if to Bancshares or PB, 815 West Stadium Boulevard, P.O. Box
10600, Jefferson City, Missouri 65110-6000, with a copy to Suelthaus & Walsh,
P.C., 7733 Forsyth Boulevard, St. Louis, Missouri 63105, attention:
Kenneth H. Suelthaus.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflict of
laws.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
34
<PAGE> 35
Please confirm that the foregoing correctly sets forth the agreement
among us.
Very truly yours,
RIVA BANCSHARES, INC.
By:
-------------------------------------------
Richard C. Jensen
President and Chief Executive Officer
PREMIER BANCSHARES, INC.
By:
-------------------------------------------
Name:
Title:
PREMIER BANK
By:
-------------------------------------------
Name:
Title:
Confirmed:
CIBC WORLD MARKETS CORP.
PAULI JOHNSON CAPITAL & RESEARCH INCORPORATED
KELTON INTERNATIONAL LIMITED
Acting severally on behalf of itself and as representative of the several
Underwriters named in Schedule I annexed hereto.
By CIBC WORLD MARKETS CORP.
By:
------------------------------
Mark C. Biderman
Managing Director
35
<PAGE> 36
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF FIRM
UNDERWRITER SHARES
---------------------------------------------------------- --------------
<S> <C>
CIBC World Markets Corp....................................
Pauli Johnson Capital & Research Incorporated..............
Kelton International Limited...............................
[Others]...................................................
[Others]...................................................
[Others]...................................................
Total.................................................. 3,000,000
=========
</TABLE>
<PAGE> 37
SCHEDULE II
SUBSIDIARIES OF THE COMPANY
<PAGE> 38
SCHEDULE III
[FORM OF LOCK-UP AGREEMENT FOR OFFICERS, DIRECTORS
AND 1% SHAREHOLDERS]
, 1999
---------- --
CIBC World Markets Corp.
Pauli Johnson Capital & Research Incorporated
Kelton International Limited
c/o CIBC World Markets Corp.
CIBC Oppenheimer Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
The undersigned understands that CIBC World Markets Corp. ("CIBC")
Pauli Johnson Capital & Research Incorporated ("Pauli") and Kelton International
Limited ("Kelton") (collectively, the "Underwriters") propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") with Riva Bancshares,
Inc., a Delaware corporation (the "Company"), Premier Bancshares, Inc., a
Missouri corporation, and Premier Bank, a Missouri corporation, providing for
the public offering (the "Public Offering") by the several Underwriters,
including CIBC, Pauli and Kelton (the "Underwriters"), of 3,000,000 shares (the
"Shares") of the Common Stock, $0.01 par value, of the Company (the "Common
Stock").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of CIBC on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 180 days after the date of the final prospectus relating
to the Public Offering, (1) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (2) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (1) or (2) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise.
III-1
<PAGE> 39
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
-------------------------
(Name)
-------------------------
-------------------------
(Address)
III-2
<PAGE> 1
EXHIBIT 2.2
AMENDMENT NO. 1
TO THE
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
RIVA BANCSHARES, INC. (FORMERLY FIRST PREMIER FINANCIAL CORPORATION)
AND
PREMIER BANCSHARES, INC.
This Amendment No. 1 to that certain Agreement and Plan of Merger,
dated as of May 6, 1999 (the "Amendment"), is made and entered into this 22nd
day of July, 1999, by and between Riva Bancshares, Inc., formerly First Premier
Financial Corporation ("Riva Bancshares"), a Delaware corporation having its
principal office located in St. Louis, Missouri, and Premier Bancshares, Inc.
("Premier"), a Missouri corporation having its principal office located in
Jefferson City, Missouri.
W I T N E S S E T H:
WHEREAS, Riva Bancshares and Premier entered into that certain
Agreement and Plan of Merger dated as of May 6, 1999 (the "Agreement"); and
WHEREAS, the parties to the Agreement have determined that it is in
their respective best interests to (i) provide the Board of Directors of Premier
with the opportunity to ratify and approve the selection and appointment of
certain directors to the Board of Directors of Riva Bancshares; (ii) to allow
the Board of Directors of Premier to designate three members of its present
Board of Directors (the "Premier Directors") to serve as Class III directors of
Riva Bancshares upon completion of the merger of Premier with and into Riva
Bancshares (the "Merger"); and (iii) in the event that a vacancy in the Riva
Bancshares' Board of Directors is created as a result of the resignation,
removal or death of one of the Premier Directors, to provide the remaining
Premier Directors with the ability to nominate such director's replacement; and
WHEREAS, the Boards of Directors of the parties have determined that is
in their respective best interests and the respective best interests of their
shareholders that the Agreement be amended;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereby amend the Agreement in the manner hereinafter set forth.
(1) Section 2.3 is hereby added to the Agreement and shall read as
follows:
"2.3 Directors. The Board of Directors of Premier hereby approves
and ratifies the selection and appointment of the following individuals to serve
as members of the Board of Directors of Riva Bancshares:
(a) Alan C. Henderson;
(b) Lewis A. Levey;
(c) Jacob W. Reby;
(d) Andrew M. Rosen; and
(e) Patricia D. Whitaker."
(2) Section 2.4 is hereby added to the Agreement and shall read as
follows:
"2.4 Premier Directors. At the Effective Time, the number of
members of the Board of Directors of Riva Bancshares shall be increased to ten
and the following members of the Board of Directors of Premier
<PAGE> 2
(the "Premier Directors") shall be nominated by the Riva Bancshares Board of
Directors and elected to such Board:
(a) Harold B. Remley;
(b) Bruce W. Wiley; and
(c) Charles R. Willibrand.
Each of the Premier Directors shall be elected as Class III Directors of Riva
Bancshares and shall serve for a term of three years and until their successors
have been elected and qualified; provided, however, that in the event that
during the initial term of the Premier Directors, a vacancy is created as a
result of the resignation, removal or death of one of the Premier Directors, the
remaining Premier Directors shall nominate such director's replacement, whose
term shall expire at the next election of the Class III Directors."
(3) The parties further agree that all capitalized terms not
otherwise defined herein shall have the meanings assigned to such terms in the
Agreement.
(4) Except as otherwise provided herein, all terms and provisions
of the Agreement shall remain in full force and effect.
(5) This Amendment may be executed in counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their officers thereunto duly authorized and have
caused this Amendment to be dated as of the date and year first above written.
RIVA BANCSHARES, INC.
By: /s/ Richard C. Jensen
-----------------------------------------------
Name: Richard C. Jensen
Title: Chairman, President and Chief Executive Officer
PREMIER BANCSHARES, INC.
By: /s/ Charles R. Willibrand
-----------------------------------------------
Name: Charles R. Willibrand
Title: Chairman of the Board
3
<PAGE> 1
EXHIBIT 2.3
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
RIVA BANCSHARES, INC.
AND
PREMIER BANCSHARES, INC.
DATED AS OF JULY 29, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger.................................................................................1
1.2 Time and Place of Closing..............................................................2
1.3 Effective Time.........................................................................2
ARTICLE 2
TERMS OF MERGER
2.1 Certificate of Incorporation...........................................................2
2.2 Bylaws.................................................................................2
2.3 Directors..............................................................................2
2.4 Premier Directors......................................................................2
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares...................................................................3
3.2 Anti-Dilution Provisions...............................................................4
3.3 Shares Held by Premier.................................................................4
3.4 Fractional Shares......................................................................4
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures....................................................................4
4.2 Rights of Former Premier Shareholders..................................................5
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PREMIER
5.1 Organization, Standing, and Power......................................................6
5.2 Authority; No Breach by Agreement......................................................6
5.3 Capital Stock..........................................................................7
5.4 Premier Subsidiaries...................................................................7
5.5 Regulatory Filings; Financial Statements...............................................8
5.6 Notes and Obligations. ................................................................8
5.7 Absence of Certain Changes or Events...................................................8
5.8 Tax Matters............................................................................8
5.9 Assets.................................................................................9
5.10 Environmental Matters.................................................................10
5.11 Compliance With Laws..................................................................10
5.12 Labor Relations.......................................................................11
5.13 Employee Benefit Plans................................................................11
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
5.14 Material Contracts....................................................................13
5.15 Legal Proceedings.....................................................................13
5.16 Reports...............................................................................14
5.17 Statements True and Correct...........................................................14
5.18 Accounting, Tax and Regulatory Matters................................................14
5.19 Anti-Takeover Provisions..............................................................14
5.20 Derivatives Contracts.................................................................14
5.21 Year 2000.............................................................................15
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF RIVA BANCSHARES
6.1 Organization, Standing, and Power.....................................................15
6.2 Authority; No Breach By Agreement.....................................................15
6.3 Capital Stock.........................................................................16
6.4 Riva Bancshares Subsidiaries..........................................................16
6.5 Financial Statements..................................................................16
6.6 Absence of Certain Changes or Events..................................................17
6.7 Tax Matters...........................................................................17
6.8 Compliance With Laws..................................................................17
6.9 Assets................................................................................18
6.10 Legal Proceedings.....................................................................18
6.11 Reports...............................................................................18
6.12 Statements True and Correct...........................................................19
6.13 Accounting, Tax and Regulatory Matters................................................19
6.14 Environmental Matters.................................................................19
6.15 Derivatives Contracts.................................................................20
6.16 Outstanding Premier Common Stock......................................................20
6.17 Material Contracts....................................................................20
6.18 Employee Benefit Plans................................................................20
6.19 Year 2000.............................................................................22
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Premier......................................................23
7.2 Negative Covenants of Premier.........................................................23
7.3 Covenants of Riva Bancshares..........................................................25
7.4 Adverse Changes In Condition..........................................................25
7.5 Reports...............................................................................25
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval.........................26
8.2 Share Purchases by and Option Grants to Premier Shareholders..........................26
8.3 Restrictions on Transfer of Shares Held by Premier Directors,
Officers and Shareholders.............................................................27
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
8.4 Agreement as to Efforts to Consummate.................................................28
8.5 Applications..........................................................................28
8.6 Access to Information; Confidentiality................................................28
8.7 Current Information...................................................................29
8.8 Other Actions.........................................................................29
8.9 Press Releases........................................................................29
8.10 No Solicitation.......................................................................29
8.11 Accounting and Tax Treatment..........................................................30
8.12 Anti-Takeover Provisions..............................................................30
8.13 Agreement of Affiliates...............................................................30
8.14 Employee Benefits and Contracts.......................................................30
8.15 Management Contracts..................................................................30
8.16 Indemnification and Directors' Liability Insurance....................................31
8.17 Filings with State of Missouri........................................................31
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party...............................................32
9.2 Conditions to Obligations of Riva Bancshares..........................................33
9.3 Conditions to Obligations of Premier..................................................34
ARTICLE 10
TERMINATION
10.1 Termination...........................................................................35
10.2 Effect of Termination.................................................................36
10.3 Non-Survival of Representations and Covenants.........................................38
ARTICLE 11
MISCELLANEOUS
11.1 Definitions...........................................................................38
11.2 Expenses..............................................................................44
11.3 Brokers and Finders...................................................................44
11.4 Entire Agreement......................................................................45
11.5 Amendments............................................................................45
11.6 Obligations of Riva Bancshares........................................................45
11.7 Waivers...............................................................................45
11.8 Assignment............................................................................45
11.9 Notices...............................................................................46
11.10 Governing Law.........................................................................46
11.11 Counterparts..........................................................................46
11.12 Captions..............................................................................47
11.13 Severability..........................................................................47
11.14 Enforcement of Agreement..............................................................47
</TABLE>
iii
<PAGE> 5
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
1. Form of agreement of affiliates of Premier Bancshares, Inc.
(Section 8.13)
2. Form of opinion of Suelthaus & Walsh, P.C. (Section 9.2(e))
3. Form of opinion of Smith, Gambrell & Russell, LLP (Section
9.3(f))
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement") is made and entered into as of July 29, 1999, by and between RIVA
BANCSHARES, INC. ("Riva Bancshares"), a Delaware corporation having its
principal office located in St. Louis, Missouri, and PREMIER BANCSHARES, INC., a
Missouri corporation having its principal office located in Jefferson City,
Missouri ("Premier").
PREAMBLE
The Boards of Directors of Riva Bancshares and Premier are of the
opinion that the acquisition described herein is in the best interests of the
Parties and their respective shareholders. This Agreement provides for the
acquisition of Premier by Riva Bancshares pursuant to the merger of Premier with
and into Riva Bancshares (the "Merger"). At the effective time of such Merger,
the outstanding shares of the capital stock of Premier shall be converted into
the right to receive shares of the common stock of Riva Bancshares (except as
provided herein). As a result, shareholders of Premier shall become shareholders
of Riva Bancshares. The transactions described in this Agreement are subject to
the approvals of the shareholders of Riva Bancshares and Premier, the Board of
Governors of the Federal Reserve System, the Division of Finance of the Missouri
Department of Economic Development, and the satisfaction of certain other
conditions described in this Agreement. It is the intention of the Parties 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, and will be a
tax free exchange for the shareholders of Premier except for cash received in
connection with fractional shares and the exercise of dissenters' rights. Unless
expressly stated otherwise herein, this Agreement shall be deemed to supersede
all prior warranties, representations, covenants and agreements between the
parties hereto.
Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
WHEREAS, Riva Bancshares and Premier entered into that certain
Agreement and Plan of Merger dated as of May 6, 1999; and
WHEREAS, Riva Bancshares and Premier entered into that certain
Amendment No. 1 to the Agreement and Plan of Merger, dated as of July 22, 1999;
and
WHEREAS, the Boards of Directors of the parties have determined that is
in their respective best interests and the respective best interests of their
shareholders that the Agreement and Plan of Merger be further amended and
restated into one document;
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
Parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time, Premier shall be merged with and into Riva Bancshares in
accordance with the provisions of the General and
1
<PAGE> 7
Business Corporation Law of Missouri (the "GBCL") and the Delaware General
Corporation Laws ("DGCL"). The separate existence of Premier shall thereupon
cease, and Riva Bancshares shall be the Surviving Corporation resulting from the
Merger and shall continue to be governed by the DGCL. The Merger shall have the
effects specified in ss. 351.450 RSMo of the GBCL and ss. 251 of the DGCL. The
Merger shall be consummated pursuant to the terms of this Agreement, which has
been approved and adopted by the respective Boards of Directors of Riva
Bancshares and Premier.
1.2 Time and Place of Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") will be immediately prior to the
closing of Riva Bancshares' public offering referred to Section 9.1(g) herein.
The Closing will take place at a time, place and date specified by the Parties
as they, acting through their chief executive officers or chief financial
officers, may mutually agree.
1.3 Effective Time. The Merger and other transactions contemplated
by this Agreement shall become effective as set forth in the certificate of
merger (the "Certificate of Merger") which shall be filed with the office of the
Secretary of State of Delaware. The term "Effective Time" shall mean the date
and time when the Merger becomes effective, as set forth in the Certificate of
Merger. Subject to the terms and conditions hereof, unless otherwise mutually
agreed upon in writing by each Party, the Parties shall use their reasonable
best efforts to cause the Effective Time to occur on the date of Closing.
ARTICLE 2
TERMS OF MERGER
2.1 Certificate of Incorporation. Pursuant to the Merger, the
Certificate of Incorporation of Riva Bancshares in effect immediately prior to
the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until otherwise amended or repealed in accordance with applicable
Law.
2.2 Bylaws. Pursuant to the Merger, the Bylaws of Riva Bancshares
in effect immediately prior to the Effective Time shall be the bylaws of the
Surviving Corporation until otherwise amended or repealed, in accordance with
applicable Law.
2.3 Directors. The Board of Directors of Premier hereby approves
and ratifies the selection and appointment of the following individuals to serve
as members of the Board of Directors of Riva Bancshares:
(a) Alan C. Henderson;
(b) Lewis A. Levey;
(c) Jacob W. Reby;
(d) Andrew M. Rosen; and
(e) Patricia D. Whitaker.
2.4 Premier Directors. At the Effective Time, the number of members
of the Board of Directors of Riva Bancshares shall be increased to ten and the
following members of the Board of Directors of Premier (the "Premier Directors")
shall be nominated by the Riva Bancshares Board of Directors and elected to such
Board:
(a) Harold B. Remley;
(b) Bruce W. Wiley; and
(c) Charles R. Willibrand.
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Each of the Premier Directors shall be elected as Class III directors of Riva
Bancshares and shall serve for a term of three years and until their successors
have been elected and qualified; provided, however, that the current members of
the Board of Directors of Premier (the "Current Premier Directors") shall have
the right to nominate the successors to the Premier Directors at the two
elections of Class III directors subsequent to the next election of the Class
III directors and Riva Bancshares agrees to solicit proxies on behalf of such
nominees; provided, further, that in the event that during the first three terms
of the Class III directors, a vacancy is created as a result of the resignation,
removal or death of one of the Premier Directors or their successors, the
Current Premier Directors shall nominate such director's replacement.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this
Article 3, at the Effective Time, by virtue of the Merger and without any action
on the part of Riva Bancshares or Premier, or the shareholders of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of Riva Bancshares Capital Stock issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
(b) Except for Premier Common Stock issued and outstanding
immediately prior to the Effective Time as to which dissenters' rights
have been perfected and not withdrawn, and subject to Section 3.4
relating to fractional shares, each share of Premier Common Stock
issued and outstanding at the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the number of
shares of Riva Bancshares Common Stock equal to the quotient obtained
by dividing $215.136 by the initial public offering price of one share
of Riva Bancshares Common Stock as determined by Riva Bancshares'
underwriters in the public offering referred to in Section 9.1(g) of
this Agreement, rounded to the nearest third decimal point (the
"Exchange Ratio"). Notwithstanding the foregoing, in no event shall
more than 42,000 shares of Common Stock of Premier be converted to Riva
Bancshares Common Stock.
(c) Notwithstanding Section 3.1(b) of this Agreement, Premier
Common Stock issued and outstanding at the Effective Time which is held
by a holder who has not voted in favor of the Merger and who has
demanded payment of the fair value of such shares ("Dissenting Premier
Shares") in accordance with ss. 351.455 RSMo of the GBCL (the "Dissent
Provisions") shall not be converted into or represent the right to
receive the Riva Bancshares Common Stock payable thereon pursuant to
Section 3.1(b) of this Agreement, and shall be entitled only to such
rights of appraisal as are granted by the Dissent Provisions, unless
and until such holder fails to perfect or effectively withdraws or
otherwise loses the right to appraisal. If, after the Effective Time,
any such holder fails to perfect or effectively withdraws or loses the
right to appraisal, such shares of Premier Common Stock shall be
treated as if they had been converted at the Effective Time into the
right to receive the Riva Bancshares Common Stock payable thereon
pursuant to Section 3.1(b) of this Agreement. Premier shall give Riva
Bancshares prompt notice upon receipt by Premier of any written
objection to the Merger and such written demands for payment of the
fair value of shares of Premier Common Stock, and the withdrawals of
such demands, and any other instruments provided to Premier pursuant to
the Dissent Provisions (any shareholder duly making such demand being
hereinafter called a "Dissenting Shareholder"). Each Dissenting
Shareholder that becomes entitled, pursuant to the Dissent Provisions,
to payment for any shares of Premier Common Stock held by such
Dissenting Shareholder shall receive such payment from Riva Bancshares
(but only after the amount
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thereof shall have been agreed upon or at the times and in the amounts
required by the Dissent Provisions) and all of such Dissenting
Shareholders' shares of Premier Common Stock shall be canceled. Premier
shall not, except with the prior written consent of Riva Bancshares,
voluntarily make any payment with respect to, or settle or offer to
settle, any demand for payment by any Dissenting Shareholder.
(d) All shares of Riva Bancshares issued pursuant to Section
3.1 shall be subject to the restrictions set forth in Section 8.3 and
shall bear an appropriate restrictive legend on the face of the
certificate representing such shares. Riva Bancshares shall instruct
its transfer agent and registrar to issue separate certificates to each
Premier shareholder for each period of restriction on trading with
respect to shares, each certificate to be for the number of shares that
are restricted for each individual period; fractional shares shall not
be represented by such individual certificates, and numbers of shares
shall be rounded down to the next lower whole number, with the final
certificate (representing shares restricted for 120 days after closing)
including any fractional shares omitted from the other certificates due
to this rounding. At such time or times as the restrictions no longer
apply with respect to one or more such certificates, Riva Bancshares
shall promptly assist any former shareholder of Premier in causing such
restrictive legend to be removed, including, but not limited to giving
written authorization to Riva Bancshares' transfer agent and registrar
to permit such shares to be sold.
3.2 Anti-Dilution Provisions. In the event Riva Bancshares changes
the number of shares of Riva Bancshares Common Stock issued and outstanding
prior to the Effective Time as a result of a stock split, stock dividend,
recapitalization, reclassification, or similar transaction with respect to such
stock and the record date therefor (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 Shares Held by Premier. Each share of Premier Capital Stock, if
any, held by any Premier Company, other than in a fiduciary capacity or as a
result of debts previously contracted, shall be canceled and retired at the
Effective Time and no consideration shall be issued in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Premier Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of Riva 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 share of Riva
Bancshares Common Stock multiplied by the initial public offering price of one
share of Riva Bancshares Common Stock as determined by Riva Bancshares'
underwriters in the public offering referred to in Section 9.1(g) of this
Agreement.
3.5 Options. There are no outstanding options to purchase Premier
Common Stock ("Premier Options").
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. At the Effective Time, Riva Bancshares
shall deposit or shall cause to be deposited with UMB Bank, N.A., Kansas City,
Missouri (the "Exchange Agent") certificates
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evidencing shares of Riva Bancshares Common Stock in such amount necessary to
provide all consideration required to be exchanged by Riva Bancshares for
Premier Common Stock pursuant to the terms of this Agreement. Promptly after the
Effective Time, Riva Bancshares shall cause the Exchange Agent to mail to the
former shareholders of Premier appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Premier Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). After the
Effective Time, each holder of shares of Premier Common Stock issued and
outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to the Exchange Agent and shall upon
surrender thereof promptly receive in exchange therefor the consideration
provided in Section 3.1 of this Agreement, together with all undelivered
dividends or distributions in respect of such shares (without interest thereon)
pursuant to Section 4.2 of this Agreement. To the extent required by Section 3.4
of this Agreement, each holder of shares of Premier Common Stock issued and
outstanding at the Effective Time also shall receive, upon surrender of the
certificate or certificates representing such shares, cash in lieu of any
fractional share of Riva Bancshares Common Stock to which such holder may be
otherwise entitled (without interest). Riva Bancshares shall not be obligated to
deliver the consideration to which any former holder of Premier Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
certificate or certificates representing the shares of Premier Common Stock for
exchange as provided in this Section 4.1. The certificate or certificates of
Premier Common Stock so surrendered shall be duly endorsed as the Exchange Agent
may require. Any other provision of this Agreement notwithstanding, neither Riva
Bancshares nor the Exchange Agent shall be liable to a holder of Premier Common
Stock for any amounts paid or property delivered in good faith to a public
official pursuant to any applicable abandoned property Law. In the event that
any shareholder of Premier is unable to surrender a certificate because it is
lost or destroyed, the Exchange Agent may make distribution to that shareholder
upon receipt of such affidavits, undertakings, indemnity bonds, and other
agreements as are customary in such circumstances.
4.2 Rights of Former Premier Shareholders. At the Effective Time,
the stock transfer books of Premier shall be closed as to holders of Premier
Common Stock immediately prior to the Effective Time and no transfer of Premier
Common Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1 of
this Agreement, each certificate theretofore representing shares of Premier
Common Stock shall from and after the Effective Time represent for all purposes
only the right to receive the consideration provided in Sections 3.1 and 3.4 of
this Agreement in exchange therefor, subject, however, to Riva 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 Premier in
respect of such shares of Premier 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 Riva Bancshares on the Riva
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 issuable pursuant to this Agreement, but beginning 30 days after the
Effective Time no dividend or other distribution payable to the holders of
record of Riva Bancshares Common Stock as of any time subsequent to the
Effective Time shall be delivered to the holder of any certificate representing
shares of Premier Common Stock issued and outstanding at the Effective Time
until such holder surrenders such certificate for exchange as provided in
Section 4.1 of this Agreement. However, upon surrender of such Premier Common
Stock certificate, or in the case of lost or destroyed certificates delivery of
the requisite affidavits, undertakings, indemnity bonds and other agreements
customary in such circumstances, both the Riva Bancshares Common Stock
certificate (together with all such undelivered dividends or other distributions
without interest) and any undelivered dividends and cash payments to be paid for
fractional share interests (without interest) shall be delivered and paid with
respect to each share represented by such certificate. Any portion of the
consideration (including the proceeds of any investments thereof) which had been
made payable to the Exchange Agent pursuant to Section 4.1 of this Agreement
that remain unclaimed by the shareholders of Premier for six (6) months after
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the Effective Time shall be paid to Riva Bancshares. Any shareholders of Premier
who have not theretofore complied with this Article 4 shall thereafter look only
to Riva Bancshares for payment of their shares of Riva Bancshares Common Stock
and cash in lieu of fractional shares and unpaid dividends and distributions on
the Riva Bancshares Common Stock deliverable in respect of each Premier share of
Common Stock such shareholder holds as determined pursuant to this Agreement, in
each case, without any interest thereon.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PREMIER
Premier hereby represents and warrants to Riva Bancshares as follows:
5.1 Organization, Standing, and Power. Premier is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Missouri, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its material Assets.
Premier is duly qualified or licensed to transact business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Premier and its Subsidiaries taken
as a whole.
5.2 Authority; No Breach by Agreement.
(a) Premier has the corporate power and authority necessary to
execute and deliver this Agreement and, subject to the approval and
adoption of this Agreement by the shareholders of Premier and the
receipt of the consents sent forth in Section 9.1(b), to perform its
obligations under this Agreement and consummate the transactions
contemplated hereby. The execution, delivery, and performance of this
Agreement by Premier and the consummation by Premier 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 Premier, subject to the approval of this
Agreement by its shareholders as contemplated by Section 8.1 of this
Agreement. Subject to such requisite shareholder approval (and assuming
due authorization, execution and delivery by Riva Bancshares and
Premier) and to such Consents of Regulatory Authorities as required by
applicable Law, this Agreement represents a legal, valid, and binding
obligation of Premier, enforceable against Premier in accordance with
its terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting the enforcement of creditors' rights generally
and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the
court before which any proceeding may be brought). The Premier Board of
Directors will have received from GRA Thompson White & Company, PC, a
letter dated on or about the date of the Proxy Statement to the effect
that, in the opinion of such firm, the Exchange Ratio is fair, from a
financial point of view, to the holders of Premier Common Stock.
(b) Neither the execution and delivery of this Agreement by
Premier, nor the consummation by Premier of the transactions
contemplated hereby, nor compliance by Premier with any of the
provisions hereof, will (i) conflict with or result in a breach of any
provision of Premier's Articles of Incorporation or Bylaws, or, (ii)
except as disclosed in Section 5.2(b) of the Disclosure Schedule,
constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any
Premier Company under, any Contract or Permit of any
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Premier Company, where such Default or Lien, or any failure to obtain
such Consent, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Premier and its Subsidiaries
taken as a whole, or, (iii) subject to receipt of the requisite
Consents referred to in Section 9.1(b) of this Agreement, violate any
Law or Order applicable to any Premier Company or any of their
respective material Assets.
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws,
and other than notices to or Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, and other than Consents,
filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Premier, no notice to, filing with, or Consent of,
any public body or authority is necessary for the consummation by
Premier of the Merger and the other transactions contemplated in this
Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of Premier consists of 100,000
shares of Premier Common Stock, of which 41,834 shares are issued and
outstanding as of the date of this Agreement and not more than 42,000
shares will be issued and outstanding at the Effective Time. All of the
issued and outstanding shares of capital stock of Premier are duly and
validly issued and outstanding and are fully paid and nonassessable
under the GBCL. None of the outstanding shares of capital stock of
Premier has been issued in violation of any preemptive rights. Premier
has no options or warrants to purchase shares of Premier Common Stock.
(b) Except as set forth in Section 5.3(a) of this Agreement,
there are no shares of Premier Capital Stock or other equity securities
of Premier outstanding and no outstanding Rights relating to Premier
Capital Stock.
5.4 Premier Subsidiaries. Premier has disclosed in Section 5.4 of
the Disclosure Schedule all of the Premier Subsidiaries as of the date of this
Agreement. Except as disclosed in Section 5.4 of the Disclosure Schedule,
Premier or one of its Subsidiaries owns all of the issued and outstanding shares
of capital stock of each Premier Subsidiary. No equity securities of any Premier
Subsidiary are or may become required to be issued (other than to another
Premier Company) by reason of any Rights, and there are no Contracts by which
any Premier Subsidiary is bound to issue (other than to another Premier Company)
additional shares of its capital stock or Rights or by which any Premier Company
is or may be bound to transfer any shares of the capital stock of any Premier
Subsidiary (other than to another Premier Company). There are no Contracts
relating to the rights of any Premier Company to vote or to dispose of any
shares of the capital stock of any Premier Subsidiary. All of the shares of
capital stock of each Premier Subsidiary held by a Premier Company are fully
paid and nonassessable under the applicable corporation or banking Law of the
jurisdiction in which such Subsidiary is incorporated or organized and, except
as set forth in Section 5.4 of the Disclosure Schedule, are owned by the Premier
Company free and clear of any Lien. Each Premier Subsidiary is either a bank or
a corporation, and is duly organized, validly existing, and (as to corporations)
in good standing under the Laws of the jurisdiction in which it is incorporated
or organized, and has the corporate power and authority necessary for it to own,
lease, and operate its Assets and to carry on its business as now conducted.
Each Premier Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in each jurisdiction where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a
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Material Adverse Effect on Premier and its Subsidiaries taken as a whole. Each
Premier Subsidiary that is a depository institution is an "insured institution"
as defined in the Federal Deposit Insurance Act and applicable regulations
thereunder, and the deposits of which are insured by the Bank Insurance Fund.
5.5 Regulatory Filings; Financial Statements. Premier has filed and
made available to Riva Bancshares copies of the Premier Financial Statements and
all reports of any outside auditors, consultants or advisors to Premier. Each of
the Premier Financial Statements (including, in each case, any related notes),
including any Premier Financial Statements filed after the date of this
Agreement until the Effective Time, was prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements), and fairly present the
consolidated financial position of Premier and its Subsidiaries at the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount and except for the
absence of certain footnote information in the unaudited interim financial
statements.
5.6 Notes and Obligations.
(a) Except as set forth in Section 5.6 of the Disclosure
Schedule, or as provided in the loss reserve described in subparagraph
(b) below, without conducting any independent investigation, to the
Knowledge of Premier no notes receivable or any other obligations owned
by Premier or any Premier Company or due to any of them, shown on the
Premier Financial Statements or any such notes receivable and
obligations on the date hereof and as of the Effective Time have not
been and will not be genuine, legal, valid and collectible obligations
of the respective makers thereof and are not and will not be subject to
any offset or counterclaim. Except as set forth in subparagraph (b)
below, all such notes and obligations are evidenced by written
agreements, true and correct copies of which will be made available to
Riva Bancshares for examination prior to the Effective Time. All such
notes and obligations were entered into by either Premier or a Premier
Company in the ordinary course of its business and in compliance with
all applicable laws and regulations, except as to any non-compliance
which has not and will not have a Material Adverse Effect on Premier.
(b) Premier has established a loss reserve on the Premier
Financial Statements which is adequate to cover anticipated losses
which might result from such items as the insolvency or default of
borrowers or obligors on such loans or obligations, defects in the
notes or evidences of obligation (including losses of original notes or
instruments), offsets or counterclaims properly chargeable to such
reserve, or the availability of legal or equitable defenses which might
preclude or limit the ability of Premier to enforce the note or
obligation, and the representations set forth in subparagraph (a) above
are qualified in their entirety by the aggregate of such loss reserves.
5.7 Absence of Certain Changes or Events. Since December 31, 1998,
except as disclosed in Section 5.7 of the Disclosure Schedule, (i) there have
been no events, changes, or occurrences which have had, or are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Premier,
and (ii) Premier has not taken any action, or failed to take any action, prior
to the date of this Agreement, which action or failure, if taken after the date
of this Agreement, would represent or result in a material breach or violation
of any of the covenants and agreements of Premier provided in Article 7 of this
Agreement.
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5.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any
Premier Company have been timely filed for periods ended on or before
December 31, 1997, and all Tax Returns filed are complete and accurate
in all material respects to the Knowledge of Premier. All Taxes shown
on filed Tax Returns have been paid. There is no audit examination,
deficiency, or refund Litigation with respect to any Taxes that is
reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on Premier
and its Subsidiaries taken as a whole, except as reserved against in
the Premier Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 5.8(a) of the Disclosure Schedule.
All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid.
(b) No Premier Company has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax
due that is currently in effect.
(c) Adequate provision for any Taxes due or to become due for
any Premier Company for the period or periods through and including the
date of the Premier Financial Statements has been made and is reflected
on the Premier Financial Statements.
(d) Deferred Taxes of each Premier Company have been adequately
provided for in the Premier Financial Statements.
(e) Each Premier Company is in compliance with, and its records
contain all information and documents (including properly completed
Internal Revenue Service Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under
federal, state, and local Tax Laws, and such records identify with
specificity all accounts subject to backup withholding under Section
3406 of the Internal Revenue Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier
and its Subsidiaries taken as a whole.
(f) Except as disclosed in Section 5.8(f) of the Disclosure
Schedule, no Premier Company has made any payments, is obligated to
make any payments, or is a party to any contract, agreement, or other
arrangement that could obligate any Premier Company to make any
payments that would be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code.
(g) There are no Liens with respect to Taxes upon any of the
Assets of any Premier Company.
(h) No Premier Company has filed any consent under Section
341(f) of the Internal Revenue Code concerning collapsible
corporations.
(i) All material elections with respect to Taxes affecting any
Premier Company as of the date of this Agreement have been or will be
timely made as set forth in Section 5.8 of the Disclosure Schedule.
After the date hereof, other than as set forth in Section 5.8(a) of the
Disclosure Schedule, no election with respect to Taxes will be made
without the prior written consent of Riva Bancshares, which consent
will not be unreasonably withheld.
5.9 Assets. Except as disclosed in Section 5.9 of the Disclosure
Schedule, each Premier Company has good and marketable title, free and clear of
all Liens, to all of its respective Assets. All tangible
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properties used in the businesses of each Premier Company are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with Premier's past practices. All Assets which are material
to Premier's business held under leases or subleases by any Premier Company, are
held under valid Contracts which to the Knowledge of Premier are enforceable in
accordance with their respective terms (except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. Each
Premier Company currently maintains insurance in amounts, scope, and coverage as
disclosed in Section 5.9 of the Disclosure Schedule. No Premier Company has
received written notice from any insurance carrier that (i) such insurance will
be canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. Except as disclosed in Section 5.9 of the Disclosure Schedule, there
are presently no claims pending under such policies of insurance and no notices
have been given by any Premier Company under such policies. The Assets of
Premier include all required assets, leases and Permits necessary to operate its
business as presently conducted.
5.10 Environmental Matters.
(a) To the Knowledge of Premier, each Premier Company, its
Participation Facilities, and its Loan Properties are, and have been,
in compliance with all Environmental Laws, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Premier and its Subsidiaries taken as a
whole.
(b) To the Knowledge of Premier, there is no Litigation pending
or threatened before any court, governmental agency, or authority or
other forum in which any Premier Company or any of its Loan Properties
or Participation Facilities has been or, with respect to threatened
Litigation, may be named as a defendant or potentially responsible
party (i) for alleged noncompliance (including by any predecessor) with
any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on,
under, or involving any of its Loan Properties or Participation
Facilities, except for such Litigation pending or threatened that is
not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Premier and its Subsidiaries taken as a
whole.
(c) To the Knowledge of Premier, there is no reasonable basis
for any Litigation of a type described above in subsection (b), except
such as is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Premier.
(d) To the Knowledge of Premier, except as disclosed in Section
5.10(d) of the Disclosure Schedule, during the period of (i) Premier's
ownership or operation of any of their respective properties, (ii)
Premier's participation in the management of any Participation
Facility, or (iii) Premier's holding a security interest in a Loan
Property, there have been no releases of Hazardous Material in, on,
under, or affecting any Participation Facility or Loan Property of any
Premier Company, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier
and its Subsidiaries taken as a whole.
5.11 Compliance With Laws. Premier is duly registered as a bank
holding company under the BHC Act. Except as set forth in Section 5.11 of the
Disclosure Schedule, each Premier Company has in effect all Permits necessary
for it to own, lease, or operate its material Assets and to carry on its
business as now
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conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Premier and its Subsidiaries taken as a whole. No Premier Company is presently
in default under any such Permit, other than defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Premier and its Subsidiaries taken as a whole. Except as disclosed in Section
5.11 of the Disclosure Schedule, no Premier Company:
(a) to the Knowledge of Premier, is in violation of any Laws or
Orders, applicable to its business or employees conducting its
business, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
Premier and its Subsidiaries taken as a whole; and
(b) has received any written notification or communication from
any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that any
Premier Company is not in substantial compliance with any of the Laws
or Orders which such governmental authority or Regulatory Authority
enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier
and its Subsidiaries taken as a whole, (ii) threatening to revoke any
Permits, the revocation of which is reasonably likely to have, a
Material Adverse Effect on Premier and its Subsidiaries taken as a
whole, or (iii) requiring any Premier Company to enter into or consent
to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or to adopt any
Board resolution or similar undertaking, which restricts materially the
conduct of its business, or in any manner relates to its capital
adequacy, its credit or reserve policies, its management, or the
payment of dividends.
5.12 Labor Relations. No Premier Company is the subject of any
Litigation asserting that it has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state law) or seeking
to compel it or any other Premier Company to bargain with any labor organization
as to wages or conditions of employment, nor is there any strike or other labor
dispute involving any Premier Company, pending or, to the Knowledge of Premier,
threatened, nor is there any activity involving any employees of any Premier
Company seeking to certify a collective bargaining unit or engaging in any other
organization activity.
5.13 Employee Benefit Plans.
(a) Premier has disclosed in Section 5.13(a) of the Disclosure
Schedule and has delivered or made available to Riva Bancshares prior
to the execution of this Agreement, copies in each case of, all
pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus, or
other incentive plans, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other
health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" (as
that term is defined in Section 3(3) of ERISA), currently adopted,
maintained by, sponsored in whole or in part by, or contributed to by
Premier for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries and under
which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate
(collectively, the "Premier Benefit Plans"). Any of the Premier Benefit
Plans which is an "employee pension benefit plan" (as that term is
defined in Section 3(2) of ERISA), is referred to herein as a "Premier
ERISA Plan." No Premier Benefit Plan is or has been a multiemployer
plan within the meaning of Section 3(37) of ERISA.
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(b) Except as disclosed in Section 5.13(b) of the Disclosure
Schedule, all Premier Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
Premier, and each Premier ERISA Plan which is intended to be qualified
under Section 401(a) of the Internal Revenue Code has received a
favorable determination letter from the Internal Revenue Service, and
Premier is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. To the Knowledge
of Premier, it has not engaged in a transaction with respect to any
Premier Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject it to a Tax
imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier.
(c) Except as disclosed in Section 5.13(c) of the Disclosure
Schedule, no Premier ERISA Plan has any "unfunded current liability"
(as that term is defined in Section 302(d)(8)(A) of ERISA) and the fair
market value of the assets of any such plan exceeds the plan's "benefit
liabilities," as that term is defined in Section 4001(a)(16) of ERISA,
when determined under actuarial factors that would apply if the plan
terminated in accordance with all applicable legal requirements. Except
as disclosed in Section 5.13(c) of the Disclosure Schedule, since the
date of the most recent actuarial valuation, there has been (i) no
material change in the financial position of any Premier ERISA Plan,
(ii) no change in the actuarial assumptions with respect to any Premier
ERISA Plan, and (iii) no increase in benefits under any Premier ERISA
Plan as a result of plan amendments or changes in applicable Law which
is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Premier or materially adversely affect the
funding status of any such plan. Neither any Premier ERISA Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by Premier, or the
single-employer plan of any entity which is considered one employer
with Premier under Section 4001 of ERISA or Section 414 of the Internal
Revenue Code or Section 302 of ERISA (whether or not waived) (an "ERISA
Affiliate") has an "accumulated funding deficiency" within the meaning
of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
which is reasonably likely to have a Material Adverse Effect on
Premier. Premier has not provided, and is not required to provide,
security to an Premier ERISA Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue
Code.
(d) Within the six-year period preceding the Effective Time, no
Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by Premier with respect to any ongoing, frozen,
or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate, which Liability is reasonably likely to have a
Material Adverse Effect on Premier. Premier has not incurred any
withdrawal Liability with respect to a multiemployer plan under
Subtitle B of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate), which Liability is reasonably
likely to have a Material Adverse Effect on Premier. No notice of a
"reportable event," within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been
required to be filed for any Premier ERISA Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 5.13(e) of the Disclosure
Schedule, Premier has no Liability for retiree health and life benefits
under any of the Premier Benefit Plans and there are no restrictions on
the rights of Premier to amend or terminate any such plan without
incurring any
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Liability thereunder, which Liability is reasonably likely to have a
Material Adverse Effect on Premier.
(f) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation,
golden parachute, or otherwise) becoming due to any director or any
employee of Premier or any of its Subsidiaries from Premier or any of
its Subsidiaries under any Premier Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Premier Benefit Plan,
or (iii) result in any acceleration of the time of payment or vesting
of any such benefit, where such payment, increase, or acceleration is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Premier.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of
employees and former employees of Premier and their respective
beneficiaries, other than entitlements accrued pursuant to funded
retirement plans subject to the provisions of Section 412 of the
Internal Revenue Code or Section 302 of ERISA, have been fully
reflected on the Premier Financial Statements to the extent required by
and in accordance with GAAP.
5.14 Material Contracts. Except as disclosed in Section 5.14(a) of
the Disclosure Schedule, neither Premier nor any of its Subsidiaries is a party
to or subject to the following: (i) any employment, severance, termination,
consulting, or retirement Contract providing for aggregate payments to any
Person in any calendar year in excess of $50,000, (ii) any Contract relating to
the borrowing of money by Premier or the guarantee by Premier of any such
obligation exceeding $50,000 (other than Contracts evidencing deposit
liabilities, purchases of federal funds, fully-secured repurchase agreements,
and Federal Home Loan Bank advances of depository institution Subsidiaries,
trade payables, and Contracts relating to borrowings or guarantees made in the
ordinary course of business), and (iii) any other Contract or amendment thereto
as of the date of this Agreement not made in the ordinary course of business to
which Premier is a party or by which it is bound (together with all Contracts
referred to in Sections 5.9 and 5.13(a) of this Agreement, the "Premier
Contracts"). With respect to each Premier Contract and except as disclosed in
Section 5.14(b) of the Disclosure Schedule: (i) the Contract is in full force
and effect; (ii) neither Premier nor any of its Subsidiaries, as the case may
be, is in Default thereunder, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Premier and its Subsidiaries taken as a whole; (iii) neither Premier nor any of
its Subsidiaries, as the case may be, has repudiated or waived any material
provision of any such Contract; and (iv) no other party to any such Contract is,
to the Knowledge of Premier, in Default in any respect, other than Defaults
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Premier, or has repudiated or waived any material
provision thereunder. Except for Federal Home Loan Bank advances, all of the
indebtedness of Premier and any of its Subsidiaries for money borrowed is
prepayable at any time by Premier or any of its Subsidiaries, as the case may
be, without penalty or premium.
5.15 Legal Proceedings. Except as disclosed in Section 5.15(a) of
the Disclosure Schedule, there is no Litigation instituted or pending, or, to
the Knowledge of Premier, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against Premier, or against any Asset, employee benefit
plan, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any Premier Company, that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Premier and its Subsidiaries taken as a whole. Section 5.15(b)
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of the Disclosure Schedule includes a summary report of all Litigation as of the
date of this Agreement to which any Premier Company is a party and which names a
Premier Company as a defendant or cross- defendant and where the estimated
maximum exposure to be $10,000 or more.
5.16 Reports. For the three years ended December 31, 1998, 1997 and
1996, and since January 1, 1999, or the date of organization if later, each
Premier Company has timely filed and to the extent permitted by Law has made
available for Riva Bancshares to review, all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with any Regulatory Authorities. As of their respective dates,
each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material respects with all
applicable Laws. As of its respective date, each such report and document did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
5.17 Statements True and Correct. None of the information supplied
or to be supplied by any Premier Company or any Affiliate thereof for inclusion
in the Registration Statement to be filed by Riva Bancshares with the SEC will,
when the Registration Statement becomes effective, be false or misleading, with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein not misleading. None of the information supplied by
any Premier Company for inclusion in the Proxy Statement to be mailed to
Premier's shareholders in connection with the Shareholders' Meeting, and any
other documents to be filed by a Premier Company with any Regulatory Authority
in connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the shareholders of Premier, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting. All documents that
Premier is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
5.18 Accounting, Tax and Regulatory Matters. To the Knowledge of
Premier, neither Premier nor any Affiliate thereof has taken or agreed to take
any action or has any Knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the transactions contemplated hereby, including the
Merger, from qualifying as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement or result in the imposition of a condition or restriction of the type
referred to in the last sentence of such Section.
5.19 Anti-Takeover Provisions. Each Premier Company has taken all
action so that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement do not and will
not result in any super-majority voting requirement or the grant of any rights
to any Person under its Articles of Incorporation, Bylaws, or any other
governing instruments.
5.20 Derivatives Contracts. Neither Premier nor any of its
Subsidiaries is a party to nor has it agreed to enter into an exchange-traded or
over-the-counter swap, forward, future, option, cap, floor, or collar financial
contract, or any other interest rate or foreign currency protection contract not
included on
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its balance sheet which is a financial derivative contract (including various
combinations thereof) (each a "Derivatives Contract").
5.21 Year 2000. All computer software and hardware necessary for the
conduct of business by any Premier Company (the "Software") is designed to be
used before, on, and after January 1, 2000 and the Software will operate during
each such time period without error relating to the year 2000, specifically
including any error relating to, or the product of, any date data representing
or referring to any particular date. As used in the preceding sentence,
"operate" further includes, but is not limited to, accepting input of dates
without ambiguity, outputting all dates without ambiguity, and performing
calculations, comparisons, extractions, sorting and any other processing or
taking actions or making decisions using dates or time periods without suffering
any abends, aborts, invalid or incorrect results or other interruptions, whether
before, on, or after January 1, 2000. Further, every Premier Company has
received all year 2000 examinations and certifications as required by applicable
Law and will, prior to the Effective Time, make available for Riva Bancshares'
review all such examinations and certifications.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF RIVA BANCSHARES
Riva Bancshares hereby represents and warrants to Premier as follows:
6.1 Organization, Standing, and Power. Riva Bancshares is a
corporation duly organized, validly existing, and in good standing under the
Laws of the State of Delaware, and has the corporate power and authority to
carry on its business as now conducted and to own, lease, and operate its
material Assets. Riva Bancshares is in good standing in Missouri and such other
states of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Riva Bancshares.
6.2 Authority; No Breach By Agreement.
(a) Riva Bancshares has the corporate power and authority
necessary to execute, deliver, and perform its obligations under this
Agreement and, subject to the approval and adoption of this Agreement
by the shareholders of Riva Bancshares, 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 Riva
Bancshares, subject to the approval of this Agreement by its
shareholders. Subject to such requisite shareholder approval (and
assuming due authorization, execution and delivery by Riva Bancshares
and Premier) and to such Consents of Regulatory Authorities as required
by applicable Law, this Agreement represents a legal, valid, and
binding obligation of Riva Bancshares, enforceable against Riva
Bancshares, in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement
of creditors' rights generally and except that the availability of the
equitable remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding may
be brought).
(b) Neither the execution and delivery of this Agreement by
Riva Bancshares nor the consummation by Riva Bancshares of the
transactions contemplated hereby, nor compliance by Riva
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Bancshares with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of the Certificate of Incorporation
or Bylaws of Riva Bancshares or (ii) constitute or result in a Default
under, or require any Consent pursuant to, or result in the creation of
any Lien on any Asset of Riva Bancshares under any Contract or Permit
of Riva Bancshares, where such Default or Lien, or any failure to
obtain such Consent, is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Riva Bancshares, or, (iii)
subject to receipt of the requisite Consents referred to in Section
9.1(b) of this Agreement, violate any Law or Order applicable to Riva
Bancshares or any of its respective material Assets.
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws,
and rules of NASDAQ, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, and other than Consents,
filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Riva Bancshares, no notice to, filing with, or
Consent of, any public body or authority is necessary for the
consummation by Riva Bancshares of the Merger and the other
transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of Riva Bancshares
consists of 21,000,000 shares of Riva Bancshares Common Stock, of which 10,000
shares will be issued and outstanding as of the Effective Time and (ii)
1,000,000 shares of Riva Bancshares Preferred Stock, of which 99,900 shares were
issued and outstanding as of the date of this Agreement. All of the issued and
outstanding shares of Riva Bancshares Capital Stock are authorized and validly
issued, and all of the Riva Bancshares Common Stock to be issued in exchange for
Premier Common Stock upon consummation of the Merger, will be authorized and
reserved for issuance prior to the Effective Time and, when issued in accordance
with the terms of this Agreement, will be, duly and validly issued and
outstanding and fully paid and nonassessable under the DGCL. Riva Bancshares has
reserved 500,000 shares of Riva Bancshares Common Stock for issuance under the
Riva Bancshares Stock Plans, pursuant to which options to purchase not more than
329,475 shares of Riva Bancshares Common Stock will be outstanding upon
completion of the Merger. Warrants to purchase not more than 215,798 shares of
Riva Bancshares Common Stock are outstanding and, upon completion of the Merger,
warrants to purchase not more than 565,798 shares of Riva Bancshares Common
Stock will be outstanding. None of the shares of Riva Bancshares Common Stock to
be issued under Riva Bancshares Stock Plan or to be issued pursuant to warrants
to purchase shares of Riva Bancshares Common Stock are subject to preemptive
rights of any current or past shareholders of Riva Bancshares. None of the
outstanding shares of Riva Bancshares Capital Stock has been, and none of the
shares of Riva Bancshares Common Stock to be issued in exchange for shares of
Premier Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights of the current or past shareholders of Riva
Bancshares. Riva Bancshares will issue no additional Common Stock or Preferred
Stock until the Effective Time.
6.4 Riva Bancshares Subsidiaries. Riva Bancshares has no active or
inactive Subsidiaries as of the date of this Agreement; provided, however, that
pursuant to the Merger and after the Effective Time, Riva Bancshares shall own
those Subsidiaries disclosed in Section 5.4 of the Disclosure Schedule.
6.5 Financial Statements. Riva Bancshares has delivered to Premier
prior to the execution of this Agreement copies of the Riva Bancshares Financial
Statements as of December 31, 1998. Riva Bancshares shall provide Premier with
its unaudited Financial Statements for the stub periods ending March 31, 1999
and June 30, 1999, as soon as practicable after the same become available. The
Riva Bancshares Financial Statements (as of the dates thereof): (i) are, or will
be, in accordance with the books and records of Riva Bancshares, which are
complete and accurate in all material respects and which have been maintained in
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accordance with good business practices, and (ii) present fairly the financial
position of Riva Bancshares as of December 31, 1998 in accordance with GAAP.
6.6 Absence of Certain Changes or Events. Since January 1, 1998,
except as disclosed in the Riva Bancshares Financial Statements delivered prior
to the date of this Agreement, (i) there have been no events, changes or
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Riva Bancshares, and (ii) Riva
Bancshares has not taken any action, or failed to take any action, prior to the
date of this Agreement, which action or failure, if taken after the date of this
Agreement, would represent or result in a material breach or violation of any of
the covenants and agreements of Riva Bancshares provided in Articles 7 or 8 of
this Agreement.
6.7 Tax Matters.
(a) As of the date of this Agreement, no federal, state, local
and foreign Tax Returns have been required to be filed by or on behalf
of Riva Bancshares. There is no audit examination, deficiency, or
refund Litigation with respect to any Taxes that is reasonably likely
to result in a determination that would have, individually or in the
aggregate, a Material Adverse Effect on Riva Bancshares, except as
reserved against in the Riva Bancshares Financial Statements delivered
prior to the date of this Agreement. All Taxes and other liabilities
due with respect to completed and settled examinations or concluded
Litigation have been paid.
(b) Adequate provision for any Taxes due or to become due for
Riva Bancshares for the period or periods through and including the
date of the respective Riva Bancshares Financial Statements has been
made and is reflected on such Riva Bancshares Financial Statements.
(c) Deferred Taxes of Riva Bancshares have been adequately
provided for in the Riva Bancshares Financial Statements.
(d) To the Knowledge of Riva Bancshares, Riva Bancshares is in
compliance with, and its records contain all information and documents
(including properly completed Internal Revenue Service Forms W-9)
necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and
such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code, except for
such instances of noncompliance and such omissions as are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Riva Bancshares.
6.8 Compliance With Laws. Prior to the consummation of the
transactions contemplated by this Agreement, Riva Bancshares will become duly
registered as a bank holding company under the BHC Act. Riva Bancshares has in
effect all Permits necessary for it to own, lease, or operate its material
Assets and to carry on its business as now conducted, except for those Permits
the absence of which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Riva Bancshares. Riva Bancshares is not
presently in Default under or in violation of any such Permit, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Riva Bancshares. Riva Bancshares:
(a) is not in violation of any Laws, Orders, or Permits
applicable to its business or employees conducting its business, except
for violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Riva Bancshares; and
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(b) has not received any notification or communication from any
agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that Riva
Bancshares is not in compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces, where
such noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Riva Bancshares, (ii)
threatening to revoke any Permits, the revocation of which is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Riva Bancshares, or (iii) requiring Riva Bancshares
to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment, or memorandum of
understanding, or to adopt any board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies,
its management or the payment of dividends.
6.9 Assets. Except as disclosed in Section 6.9(a) of the Disclosure
Schedule, Riva Bancshares has good and marketable title, free and clear of all
Liens (except for those Liens which are not likely to have a Material Adverse
Effect on Riva Bancshares), to all of its respective material Assets, reflected
in Riva Bancshares Financial Statements as being owned by Riva Bancshares as of
the date hereof. All material tangible properties used in the business of Riva
Bancshares are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with Riva Bancshares' past
practices. All Assets which are material to Riva Bancshares' business on a
consolidated basis, held under leases or subleases by Riva Bancshares, are held
under valid Contracts enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect. Riva Bancshares currently maintains
insurance in amounts, scope, and coverage as disclosed in Section 6.9(b) of the
Disclosure Schedule. Riva Bancshares has not received written notice from any
insurance carrier that (i) such insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. Except as disclosed
in Section 6.9(c) of the Disclosure Schedule, to the Knowledge of Riva
Bancshares there are presently no occurrences giving rise to a claim under such
policies of insurance and no notices have been given by Riva Bancshares under
such policies.
6.10 Legal Proceedings. There is no Litigation instituted or
pending, or, to the Knowledge of Riva Bancshares, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against Riva Bancshares, or
against any Asset, interest, or right of any of them, that is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Riva
Bancshares, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against Riva Bancshares,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Riva Bancshares.
6.11 Reports. Since its incorporation, Riva Bancshares has filed all
reports and statements, together with any amendments required to be made with
respect thereto, that it was required to file with Regulatory Authorities
(except, in the case of state securities authorities, failures to file which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Riva Bancshares). As of their respective dates, each of such
reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, each such report and document did not, in all
material respects, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
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6.12 Statements True and Correct. None of the information supplied
or to be supplied by Riva Bancshares for inclusion in the Registration Statement
to be filed by Riva Bancshares with the SEC, will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
Riva Bancshares for inclusion in the Proxy Statement to be mailed to Premier's
shareholders in connection with the Shareholders' Meeting, and any other
documents to be filed by Riva Bancshares or with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the shareholders of Premier, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or, in the case of the Proxy Statement or
any amendment thereof or supplement thereto, at the time of the Shareholders'
Meeting, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that Riva Bancshares is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
6.13 Accounting, Tax and Regulatory Matters. To the Knowledge of
Riva Bancshares neither Riva Bancshares nor any affiliate has taken or agreed to
take any action or has any Knowledge of any fact or circumstance that is
reasonably likely to (i) prevent the transactions contemplated hereby, including
the Merger, from qualifying as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, or (ii) materially impede or delay receipt
of any Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement or result in the imposition of a condition or restriction of the type
referred to in the last sentence of such Section.
6.14 Environmental Matters.
(a) To the Knowledge of Riva Bancshares, except as disclosed in
Section 6.14(a) of the Disclosure Schedule, Riva Bancshares, its
Participation Facilities, and its Loan Properties are, and have been,
in compliance with all Environmental Laws, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Riva Bancshares.
(b) Except as disclosed in Section 6.14(b) of the Disclosure
Schedule, there is no Litigation pending, or, to the Knowledge of Riva
Bancshares, threatened before any court, governmental agency, or
authority or other forum in which Riva Bancshares or any of its Loan
Properties or Participation Facilities has been or, with respect to
threatened Litigation, may be named as a defendant or potentially
responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release
into the environment of any Hazardous Material, whether or not
occurring at, on, under, or involving any of its Loan Properties or
Participation Facilities, except for such Litigation pending or
threatened that is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Riva Bancshares.
(c) To the Knowledge of Riva Bancshares, except as disclosed in
Section 6.14(c) of the Disclosure Schedule, there is no reasonable
basis for any Litigation of a type described above in
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Section 6.14(b), except such as is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Riva
Bancshares.
(d) To the Knowledge of Riva Bancshares, except as disclosed in
Section 6.14(d) of the Disclosure Schedule, during the period of (i)
Riva Bancshares' ownership or operation of any of their respective
properties, (ii) Riva Bancshares' participation in the management of
any Participation Facility, or (iii) Riva Bancshares' holding a
security interest in a Loan Property, to the Knowledge of Riva
Bancshares there have been no releases of Hazardous Material in, on,
under, or affecting any Participation Facility or Loan Property of Riva
Bancshares, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Riva
Bancshares.
6.15 Derivatives Contracts. Riva Bancshares is not a party to or has
agreed to enter into any Derivatives Contracts.
6.16 Outstanding Premier Common Stock. As of the date of this
Agreement, Riva Bancshares does not beneficially own any shares of Premier
Capital Stock. During the term of this Agreement, Riva Bancshares shall not
purchase or otherwise acquire beneficial ownership of any Premier Common Stock
except pursuant to the terms of this Agreement.
6.17 Material Contracts. Except as disclosed in Section 6.17 of the
Disclosure Schedule, Riva Bancshares is not a party to or subject to the
following: (i) any employment, severance, termination, consulting, or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $50,000, (ii) any Contract relating to the borrowing of money by Riva
Bancshares or the guarantee by Riva Bancshares of any such obligation exceeding
$50,000 (other than Contracts evidencing deposit liabilities, purchases of
federal funds, fully-secured repurchase agreements, and Federal Home Loan Bank
advances of depository institution Subsidiaries, trade payables, and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
and (iii) any other Contract or amendment thereto as of the date of this
Agreement not made in the ordinary course of business to which Riva Bancshares
is a party or by which it is bound (together with all Contracts referred to in
Sections 6.9 and 6.18 of this Agreement, the "Riva Bancshares Contracts"). With
respect to each Riva Bancshares Contract and except as disclosed in Section 6.17
of the Disclosure Schedule: (i) the Contract is in full force and effect; (ii)
Riva Bancshares is not in Default thereunder, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Riva Bancshares; (iii) Riva Bancshares has not repudiated or waived
any material provision of any such Contract; and (iv) no other party to any such
Contract is, to the Knowledge of Riva Bancshares, in Default in any respect,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Riva Bancshares, or has repudiated
or waived any material provision thereunder. Except for Federal Home Loan Bank
advances, all of the indebtedness of Riva Bancshares for money borrowed is
prepayable at any time by Riva Bancshares, without penalty or premium.
6.18 Employee Benefit Plans.
(a) Riva Bancshares has disclosed in Section 6.18(a) of the
Disclosure Schedule and has delivered or made available to Premier
prior to the execution of this Agreement, copies in each case of, all
pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus, or
other incentive plans, all other written employee
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programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including "employee benefit
plans" (as that term is defined in Section 3(3) of ERISA), currently
adopted, maintained by, sponsored in whole or in part by, or
contributed to by Riva Bancshares for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries and under which employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries are
eligible to participate (collectively, the "Riva Bancshares Benefit
Plans"). Any of the Riva Bancshares Benefit Plans which is an "employee
pension benefit plan" (as that term is defined in Section 3(2) of
ERISA), is referred to herein as a "Riva Bancshares ERISA Plan." No
Riva Bancshares Benefit Plan is or has been a multiemployer plan within
the meaning of Section 3(37) of ERISA.
(b) Except as disclosed in Section 6.18(b) of the Disclosure
Schedule, all Riva Bancshares Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
Riva Bancshares, and each Riva Bancshares ERISA Plan which is intended
to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue
Service, and Riva Bancshares is not aware of any circumstances likely
to result in revocation of any such favorable determination letter. To
the Knowledge of Riva Bancshares, it has not engaged in a transaction
with respect to any Riva Bancshares Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would
subject it to a Tax imposed by either Section 4975 of the Internal
Revenue Code or Section 502(i) of ERISA in amounts which are reasonably
likely to have, individually or in the aggregate, a Material Adverse
Effect on Riva Bancshares.
(c) Except as disclosed in Section 6.18(c) of the Disclosure
Schedule, no Riva Bancshares ERISA Plan has any "unfunded current
liability" (as that term is defined in Section 302(d)(8)(A) of ERISA)
and the fair market value of the assets of any such plan exceeds the
plan's "benefit liabilities," as that term is defined in Section
4001(a)(16) of ERISA, when determined under actuarial factors that
would apply if the plan terminated in accordance with all applicable
legal requirements. Except as disclosed in Section 6.18(c) of the
Disclosure Schedule, since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial
position of any Riva Bancshares ERISA Plan, (ii) no change in the
actuarial assumptions with respect to any Riva Bancshares ERISA Plan,
and (iii) no increase in benefits under any Riva Bancshares ERISA Plan
as a result of plan amendments or changes in applicable Law which is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Riva Bancshares or materially adversely affect the
funding status of any such plan. Neither any Riva Bancshares ERISA Plan
nor any "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by Riva
Bancshares, or the single-employer plan of any entity which is
considered one employer with Riva Bancshares under Section 4001 of
ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an
"accumulated funding deficiency" within the meaning of Section 412 of
the Internal Revenue Code or Section 302 of ERISA, which is reasonably
likely to have a Material Adverse Effect on Riva Bancshares. Riva
Bancshares has not provided, and is not required to provide, security
to an Riva Bancshares ERISA Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue
Code.
(d) Within the six-year period preceding the Effective Time, no
Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by Riva Bancshares with respect
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to any ongoing, frozen, or terminated single-employer plan or the
single-employer plan of any ERISA Affiliate, which Liability is
reasonably likely to have a Material Adverse Effect on Riva Bancshares.
Riva Bancshares has not incurred any withdrawal Liability with respect
to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate),
which Liability is reasonably likely to have a Material Adverse Effect
on Riva Bancshares. No notice of a "reportable event," within the
meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
Riva Bancshares ERISA Plan or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(e) Except as disclosed in Section 6.18(e) of the Disclosure
Schedule, Riva Bancshares has no Liability for retiree health and life
benefits under any of the Riva Bancshares Benefit Plans and there are
no restrictions on the rights of Riva Bancshares to amend or terminate
any such plan without incurring any Liability thereunder, which
Liability is reasonably likely to have a Material Adverse Effect on
Riva Bancshares.
(f) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation,
golden parachute, or otherwise) becoming due to any director or any
employee of Riva Bancshares, (ii) increase any benefits otherwise
payable under any Riva Bancshares Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit,
where such payment, increase, or acceleration is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
Riva Bancshares.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of
employees and former employees of Riva Bancshares and their respective
beneficiaries, other than entitlements accrued pursuant to funded
retirement plans subject to the provisions of Section 412 of the
Internal Revenue Code or Section 302 of ERISA, have been fully
reflected on the Riva Bancshares Financial Statements to the extent
required by and in accordance with GAAP.
6.19 Year 2000. All computer software and hardware necessary for the
conduct of business by Riva Bancshares (the "Software") is designed to be used
before, on, and after January 1, 2000 and the Software will operate during each
such time period without error relating to the year 2000, specifically including
any error relating to, or the product of, any date data representing or
referring to any particular date. As used in the preceding sentence, "operate"
further includes, but is not limited to, accepting input of dates without
ambiguity, outputting all dates without ambiguity, and performing calculations,
comparisons, extractions, sorting and any other processing or taking actions or
making decisions using dates or time periods without suffering any abends,
aborts, invalid or incorrect results or other interruptions, whether before, on,
or after January 1, 2000. Further, Riva Bancshares has received all year 2000
examinations and certifications as required by applicable Law and will, prior to
the Effective Time, make available for Riva Bancshares' review all such
examinations and certifications.
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ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Premier. Unless the prior written
consent of Riva Bancshares shall have been obtained which consent shall not be
unreasonably withheld, and except as otherwise expressly contemplated herein,
Premier shall and shall cause each of its Subsidiaries: (i) operate its business
only in the usual, regular, and ordinary course, (ii) use its reasonable best
efforts to preserve intact its business organization and Assets and maintain its
rights and franchises, (iii) use its reasonable best efforts to maintain its
current employee relationships, and (iv) take no action which would materially
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentence of Section 9.1(b) of
this Agreement, or materially adversely affect the ability of any Party to
perform its covenants and agreements under this Agreement.
7.2 Negative Covenants of Premier. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
Premier covenants and agrees that it will not do or agree or commit to do, any
of the following without the prior written consent of the chief executive
officer of Riva Bancshares:
(a) amend the Articles of Incorporation, Bylaws, or other
governing instruments of any Premier Company, except as expressly
contemplated by this Agreement; or
(b) incur any additional debt obligation or other obligation
for borrowed money in excess of an aggregate of $50,000 (for every
Premier Company on a consolidated basis) except in the ordinary course
of the business of Premier Subsidiaries consistent with past practices
(it being understood and agreed that the incurrence of indebtedness in
the ordinary course of business shall include, without limitation,
creation of deposit liabilities, purchases of federal funds, advances
from the Federal Reserve Bank or Federal Home Loan Bank, and entry into
repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any Asset of any
Premier Company of any Lien or permit any such Lien to exist which Lien
or Liens individually or in the aggregate secure an obligation not in
excess of $50,000 (other than in connection with deposits, repurchase
agreements, bankers acceptances, "treasury tax and loan" accounts
established in the ordinary course of business, the satisfaction of
legal requirements in the exercise of trust powers, and Liens in effect
as of the date hereof that are disclosed in the Disclosure Schedule)
provided, however, that nothing in this paragraph shall prohibit
Premier or any Premier Subsidiary from honoring any contractual
obligation in existence on the date of this Agreement; or
(c) repurchase, redeem, or otherwise acquire or exchange (other
than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into
any shares, of the capital stock of any Premier Company, or declare or
pay any dividend or make any other distribution in respect of Premier's
capital stock; or
(d) except for this Agreement, or pursuant to the exercise of
stock options outstanding as of the date hereof and pursuant to the
terms thereof in existence on the date hereof, or as disclosed in
Section 7.2(d) of the Disclosure Schedule, issue, sell, pledge,
encumber, authorize the issuance of, enter into any Contract to issue,
sell, pledge, encumber, or authorize the issuance of, or otherwise
permit to become outstanding, any additional shares of Premier Common
Stock, or any stock
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appreciation rights, or any option, warrant, conversion, or other right
to acquire any such stock, or any security convertible into any such
stock; or
(e) adjust, split, combine, reclassify or declare and pay any
dividend or other distribution on any capital stock of any Premier
Company or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of Premier Common Stock, or
sell, lease, mortgage, or otherwise dispose of or otherwise encumber
(x) any shares of capital stock of any Premier Subsidiary, or (y) any
Asset other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) except for purchases of United States Treasury securities
or United States Government agency securities, which in either case
have maturities of five years or less, purchase any securities or make
any material investment, either by purchase of stock or securities,
contributions to capital, Asset transfers, or purchase of any Assets,
in any Person other than a wholly owned Premier Subsidiary, or
otherwise acquire direct or indirect control over any Person, other
than in connection with (i) foreclosures in the ordinary course of
business, (ii) acquisitions of control by a depository institution
Subsidiary, in its fiduciary capacity, or (iii) the creation of new
wholly owned Subsidiaries organized to conduct or continue activities
otherwise permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the
officers or directors of any Premier Company (provided, however, that
Premier may increase the compensation of non-officer employees by not
more than 5% of such employees' annual compensation if such increase is
consistent with past practice); pay any severance or termination pay or
any bonus other than pursuant to written policies or written Contracts
in effect on the date of this Agreement and as disclosed in Section
7.2(g) of the Disclosure Schedule; enter into or amend any severance
agreements with officers of any Premier Company; or voluntarily
accelerate the vesting of any stock options or other stock-based
compensation or employee benefits; or
(h) enter into or amend any employment Contract between any
Premier Company and any Person (unless such amendment is required by
Law) which provides that such Premier Company does not have the
unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the
Effective Time; or
(i) adopt any new employee benefit plan of any Premier Company
or make any material change in or to any existing employee benefit
plans of any Premier Company other than any such change that is
required by Law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any plan; or
(j) make any significant change in any Tax or accounting
methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in Tax Laws or regulatory accounting
requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice or in the ordinary course of business or settle any Litigation
involving any Liability of Premier Company which may have a Material
Adverse Effect on Premier or result in the imposition of restrictions
upon the operations of any Premier Company which may have a Material
Adverse Effect on Premier without first consulting with Riva
Bancshares; or
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(l) except in the ordinary course of business, modify, amend,
or terminate any material Contract other than renewals without material
adverse change of terms, or waive, release, compromise, or assign any
material rights or claims; or
(m) make any investment in excess of $50,000 either by purchase
of stock or securities, contributions to capital, property transfers,
or purchase of any property or assets of any other individual,
corporation or other entity other than a wholly owned Subsidiary
thereof; or
(n) sell, transfer, mortgage, encumber or otherwise dispose of
any of its material properties or assets to any individual, corporation
or other entity other than a direct or indirect wholly owned
Subsidiary, or cancel, release or assign any indebtedness to any such
Person or any claims held by any such Person, except in the ordinary
course of business consistent with past practice or pursuant to
contracts or agreements in force at the date of this Agreement.
7.3 Covenants of Riva Bancshares. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
Riva Bancshares covenants and agrees that it shall (i) continue to conduct its
business and the business of its Subsidiaries in a manner designed in its
reasonable judgment, to enhance the long-term value of the Riva Bancshares
Common Stock and the business prospects of Riva Bancshares, and (ii) take no
action which would (a) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentence of Section 9.1(b) of this Agreement, or (b) materially adversely affect
the ability of any Party to perform its covenants and agreements under this
Agreement; provided, that the foregoing shall not prevent Riva Bancshares from
discontinuing or disposing of any of its Assets or business if such action is,
in the judgment of Riva Bancshares, desirable in the conduct of the business of
Riva Bancshares. Riva Bancshares further covenants and agrees that it will not,
without the prior written consent of the Chairman and Chief Executive Officer of
Premier, which consent shall not be unreasonably withheld, amend the Certificate
of Incorporation or Bylaws of Riva Bancshares, in each case in any manner
adverse to the holders of Premier Common Stock, issue additional Common Stock of
Riva Bancshares, or warrants or options to purchase Common Stock of Riva
Bancshares; or make an Acquisition Proposal to any individual or entity.
7.4 Adverse Changes In Condition. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it which (i) is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on it or (ii) would cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and to use its
reasonable best efforts to prevent or promptly to remedy the same.
7.5 Reports. Each Party and their respective Subsidiaries shall
file all reports required to be filed by each of them with Regulatory
Authorities between the date of this Agreement and the Effective Time and shall
deliver to each other copies of all such reports promptly after the same are
filed. If financial statements are contained in any such reports filed with the
SEC, such financial statements will fairly present the consolidated financial
position of the entity filing such statements as of the dates indicated and the
consolidated results of operations, changes in shareholders' equity, and cash
flows for the periods then ended in accordance with GAAP (subject in the case of
Riva Bancshares financial statements to normal recurring year-end adjustments
that are not material and except for the absence of certain footnote information
in the unaudited financial statements). As of their respective dates, such
reports filed with the SEC will comply in all material respects with the
Securities Laws and will 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. Any financial statements
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contained in any other reports to another Regulatory Authority shall be prepared
in accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval.
As soon as practicable after execution of this Agreement (in no event later than
May 31, 1999), Riva Bancshares shall file the Registration Statement related to
Riva Bancshares' proposed Initial Public Offering ("IPO") and Riva Bancshares
and Premier shall file the Registration Proxy Statement in connection with the
Merger with the SEC, and shall use their reasonable best efforts to cause the
Registration Statement and the Registration Proxy Statement to become effective
under the 1933 Act and take any action required to be taken under the applicable
state blue sky or securities Laws in connection with the issuance of the shares
of Riva Bancshares Common Stock upon consummation of the Merger. Premier shall
furnish all information concerning it and the holders of its capital stock as
Riva Bancshares may reasonably request in connection with such action. Premier
shall call a Shareholders' Meeting, to be held on a date that is determined by
the Parties to be a mutually desirable date, which date shall be as soon as
practicable after the Registration Statement is declared effective by the SEC,
for the purpose of voting upon approval of this Agreement and such other related
matters as it deems appropriate. In connection with the Shareholders' Meeting,
(i) Premier shall prepare a Proxy Statement relating to the Merger and mail such
Proxy Statement to its shareholders, (ii) the Parties shall furnish to each
other all information concerning them that they may reasonably request in
connection with the preparation of such Proxy Statement, (iii) the Board of
Directors of Premier shall recommend (subject to compliance with their fiduciary
duties under applicable law as advised by counsel) to its shareholders the
approval of this Agreement, and (iv) the Board of Directors and officers of
Premier shall (subject to compliance with their fiduciary duties under
applicable law as advised by counsel) use their reasonable best efforts to
obtain such shareholders' approval.
8.2 Share Purchases by and Option Grants to Premier Shareholders.
To induce Premier to enter into this Agreement, Premier Shareholders shall be
entitled to the following:
(i) In addition to any shares received in the Merger, Premier
shareholders shall not be limited in the number of shares which they
may purchase in Riva Bancshares' IPO at the initial public offering
price, subject to any required regulatory approvals for purchases that
result in a Premier shareholder owning more than ten percent (10%) of
the total outstanding shares of Riva Bancshares.
(ii) Upon completion of the IPO, Riva Bancshares will grant to
each Premier shareholder (other than Bruce W. Wiley) (collectively, the
"Premier Shareholders") a warrant to purchase shares of Riva Bancshares
at the initial public offering price for a period of ten (10) years
from the date of such grant. These warrants will be granted on the same
terms and conditions as the warrants referenced in Section 6.3 of this
Agreement. The number of shares granted under each Premier
Shareholder's warrant will be determined on a pro rata basis, whereby
each Premier Shareholder will receive a warrant to purchase 3.605
shares of Riva Bancshares Common Stock for each share of Premier owned
by such shareholder prior to the Merger. The aggregate number of shares
subject to these warrants shall not exceed 140,000. Riva Bancshares
shall not be required to issue fractional shares upon the exercise of
such warrants. The amount of shares issuable upon exercise of the
warrants shall be rounded to the nearest whole number.
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(iii) Upon completion of the IPO, Riva Bancshares will grant to
each Premier shareholder, including Bruce W. Wiley, a warrant to
purchase shares of Riva Bancshares at 120% of the initial public
offering price for a period of ten (10) years from the date of such
grant. With the exception of the exercise price, these warrants shall
be granted on the same terms and conditions as the warrants referenced
in Section 6.3 of this Agreement. The number of shares granted under
each of these warrants will be determined on a pro rata basis, whereby
each Premier shareholder will receive a warrant to purchase 5.020
shares of Riva Bancshares Common Stock for each share of Premier owned
by such shareholder prior to the Merger. The aggregate number of shares
subject to these warrants shall not exceed 210,000. Riva Bancshares
shall not be required to issue fractional shares upon the exercise of
such warrants. The amount of shares issuable upon exercise of the
warrants shall be rounded to the nearest whole number.
(iv) for a period of forty-eight (48) months after the closing
of the IPO, if any additional options are granted to any Premier
Shareholder who serves as an advisory director of a banking subsidiary
of Riva Bancshares or to any other non-employee Premier Shareholder;
then warrants will be granted to each Premier Shareholder on a pro rata
basis, whereby each Premier Shareholder will receive a warrant to
purchase additional shares in the same proportion as the amount of
option shares granted to each advisory director or non-employee Premier
Shareholder relative to the amount of shares owned by such advisory
director or non-employee shareholder at the Effective Time of the
Merger. For example, if an advisory director or any non-employee
Premier Shareholder owned 3,000 shares of Premier at the Effective Time
of the Merger and is thereafter granted options to purchase 1,000
shares, then each Premier Shareholder will a warrant for one-third
(i.e., 1,000 / 3,000) of the amount of shares owned by such shareholder
at the Effective Time of the Merger. Therefore, pursuant to the example
above, a Premier Shareholder who owns 1,000 shares of Premier would
receive warrants to purchase 333 shares of Riva Bancshares.
8.3 Restrictions on Transfer of Shares Held by Premier Directors,
Officers and Shareholders.
(a) Premier and its directors will agree that, for a period of
180 days after the effective date of the Company's Registration
Statement on Form S-1 related to the proposed IPO, they shall not
directly or indirectly sell, offer to sell, contract to sell, solicit
an offer to buy, grant any option, right or warrant for the purchase or
sale of, assign, pledge, distribute or otherwise transfer, dispose of,
encumber, (or make any announcement with respect to any of the
foregoing), any shares of common stock received pursuant to Section 3.1
of this Agreement, which such director or officer currently owns, has
the right to dispose of or hereafter acquire, either of record or
beneficially, nor will any director or officer request the registration
of the offer or sale of any of the foregoing.
(b) Premier Shareholders, except for any shareholder who serves
as a director (whose Riva Bancshares shares will be restricted as
described in Section 8.3(a) above) shall not directly or indirectly
sell, offer to sell, contract to sell, solicit an offer to buy, grant
any option, right or warrant for the purchase or sale of, assign,
pledge, distribute or otherwise transfer, dispose of, encumber, (or
make any announcement with respect to any of the foregoing), any shares
of common stock received pursuant to Section 3.1 of this Agreement,
which such shareholder owns, has the right to dispose of or hereafter
acquire, either of record or beneficially, except as permitted in the
schedule set forth below:
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<TABLE>
<CAPTION>
Aggregate Percentage of Shares Issued
to Such Person Pursuant to Section 3.1
TIME TABLE Permitted for Sale by Such Person
- ---------- --------------------------------------
<S> <C>
From the date of pricing of the IPO
through the date of closing of the IPO No sales are permitted
From 1 to 30 days after closing 10%
From 31 to 60 after closing 20%
From 61 to 90 days after closing 40%
From 91 to 120 days after closing 60%
From 121 days after closing and after 100%
</TABLE>
8.4 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including the use of their respective reasonable best efforts to
lift or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9 of this Agreement; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its reasonable
best efforts to obtain all Permits and Consents necessary or desirable for the
consummation of the transactions contemplated by this Agreement.
8.5 Applications. Riva Bancshares shall promptly prepare and file,
and Premier shall cooperate in the preparation and, where appropriate, filing
of, applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement and
thereafter use its reasonable best efforts to cause the Merger to be consummated
as expeditiously as possible.
8.6 Access to Information; Confidentiality. From the date hereof to
the Effective Time or termination pursuant to Article 10 of this Agreement, upon
reasonable notice and subject to applicable Laws, Riva Bancshares and Premier
shall afford each other, and each other's accountants, counsel, and other
representatives, during normal working hours for the period of time prior to the
Effective Time, reasonable access to all of its and its Subsidiaries'
properties, books, contracts, commitments, and records and, during such period,
each shall furnish promptly to the other party (i) a copy of each report,
schedule, and other document filed or received by it or any of its Subsidiaries
during such period pursuant to the requirements of the Securities Laws, (ii) a
copy of all filings made with any Regulatory Authorities or other governmental
entities in connection with the transactions contemplated by this Agreement and
all written communications received from such Regulatory Authorities and
governmental entities related thereto, and (iii) all other information
concerning its or its Subsidiaries' business, properties and personnel as such
other party may reasonably request, including reports of condition filed with
Regulatory Authorities. In this regard, without limiting the generality of the
foregoing, each of the parties hereto shall notify the other parties hereto
promptly upon the receipt by it of any comments from the SEC, or its staff, and
of any requests by the SEC for amendments or supplements to the Registration
Statement or the Proxy Statement or for additional information and will supply
the other parties hereto with copies of all correspondence between it and its
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representatives, on the one hand, and the SEC or the members of its staff or any
other government official, on the other hand, with respect to the Registration
Statement or the Proxy Statement. Each party hereto shall, and shall cause its
advisors and representatives to (x) conduct its investigation in such a manner
which will not unreasonably interfere with the normal operations, customers or
employee relations of the other and shall be in accordance with procedures
established by the parties having the due regard for the foregoing, and (y)
refrain from using for any purposes other than as set forth in this Agreement,
and shall treat as confidential, all information obtained by each hereunder or
in connection herewith and not otherwise known to them prior to the Effective
Time. Except as otherwise agreed to in writing, Riva Bancshares and Premier
shall be bound by and all information given or received pursuant to this Section
8.5 shall be subject to the terms and conditions of that certain confidentiality
agreement entered into between Riva Bancshares and Premier dated November 19,
1998, which shall survive the termination of this Agreement.
8.7 Current Information. During the period from the date of this
Agreement until the Effective Time or termination of this Agreement pursuant to
Article 10 hereof, each of Premier and Riva Bancshares shall, and shall cause
its representatives to, confer on a regular and frequent basis with
representatives of the other. Each of Premier and Riva Bancshares shall promptly
notify the other of (i) any material change in its business or operations, (ii)
any material complaints, investigations, or hearings (or communications
indicating that the same may be contemplated) of any Regulatory Authority, (iii)
the institution or threat of material Litigation involving such party, or (iv)
the occurrence or nonoccurrence, of an event or condition, the occurrence, or
nonoccurrence, of which would be reasonably expected to cause any of such
party's representations or warranties set forth herein to be false or untrue in
any respect as of the Effective Time; and in each case shall keep the other
fully informed with respect thereto.
8.8 Other Actions. No Party shall, or shall permit any of its
Subsidiaries, if any, to, take any action, except in every case as may be
required by applicable Law, that would or is intended to result in (i) any of
its representations and warranties set forth in this Agreement that are
qualified as to materiality being or becoming untrue, (ii) any of such
representations and warranties that are not so qualified become untrue in any
material manner having a Material Adverse Effect, (iii) any of the conditions
set forth in this Agreement not being satisfied or in a violation of any
provision of this Agreement, or (iv) adversely affecting the ability of any of
them to obtain any of the Consents or Permits from Regulatory Authorities
(unless such action is required by sound banking practice).
8.9 Press Releases. Prior to the Effective Time, Premier and Riva
Bancshares shall consult with each other as to the form and substance of any
press release or other public disclosure materially related to this Agreement or
any other transaction contemplated hereby; provided, that nothing in this
Section 8.9 shall be deemed to prohibit any Party from making any disclosure
which its counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.10 No Solicitation. Except with respect to this Agreement and the
transactions contemplated hereby, from the date of this Agreement until the
Effective Time or termination pursuant to Article 10, neither a Premier Company
nor any Affiliate thereof, shall directly or indirectly solicit any Acquisition
Proposal by any Person. Except to the extent necessary to comply with the
fiduciary duties of Premier's Board of Directors, determined after consultation
with counsel, neither a Premier Company nor any Affiliate thereof, or any
Representative thereof shall furnish any nonpublic information that it is not
legally obligated to furnish or negotiate with respect to, any Acquisition
Proposal, but Premier may communicate information about such an Acquisition
Proposal to its shareholders if and to the extent that it is required to do so
in order to comply with its legal obligations as advised by counsel. Premier
shall promptly notify Riva Bancshares orally and in writing in the event that it
receives any inquiry or proposal relating to any such transaction. Premier shall
(i) immediately cease and cause to be terminated any existing activities,
discussions, or
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<PAGE> 35
negotiations with any Persons conducted heretofore with respect to any of the
foregoing and (ii) direct and use its reasonable best efforts to cause of all
its Representatives not to engage in any of the foregoing.
8.11 Accounting and Tax Treatment. Each of the Parties undertakes
and agrees to use its reasonable best efforts to cause the Merger, and to take
no action which would cause the Merger not, to qualify for treatment as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code for federal income tax purposes.
8.12 Anti-Takeover Provisions. Each Premier Company shall take all
necessary action to ensure that the entering into of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby do not
and will not result in any super-majority voting requirements or the grant of
any rights to any Person under its Articles of Incorporation, Bylaws, or any
other governing instruments. In addition, each Premier Company shall take all
necessary steps to exempt the transactions contemplated by this Agreement from,
or if necessary challenge the validity or applicability of, ss. 351.459 RSMo of
the GBCL.
8.13 Agreement of Affiliates. Premier has disclosed in Section 8.13
of the Disclosure Schedule all Persons whom it reasonably believes are
"affiliates" of Premier for purposes of Rule 145 under the 1933 Act. Premier
shall use its reasonable best efforts to cause each such Person to deliver to
Riva Bancshares not later than 30 days prior to the Effective Time, a written
agreement, substantially in the form of Exhibit 2 attached hereto, providing
that such Person will not sell, pledge, transfer, or otherwise dispose of the
shares of Premier Common Stock held by such Person, except as contemplated by
such agreement or by this Agreement and will not sell, pledge, transfer, or
otherwise dispose of the shares of Riva Bancshares Common Stock to be received
by such Person upon consummation of the Merger except in compliance with
applicable provisions of the 1933 Act and the rules and regulations thereunder
(and Riva Bancshares shall be entitled to place restrictive legends upon
certificates for shares of Riva Bancshares Common Stock issued to affiliates of
Premier pursuant to this Agreement to enforce the provisions of this Section
8.13). Riva Bancshares shall not be required to maintain the effectiveness of
the Registration Statement under the 1933 Act for the purposes of resale of Riva
Bancshares Common Stock by such affiliates.
8.14 Employee Benefits and Contracts. Following the Effective Time,
Riva Bancshares shall provide generally to continuing officers and employees of
Premier Companies employee benefits under employee benefit plans (other than
stock option or other plans involving the potential issuance of Riva Bancshares
Common Stock), on terms and conditions which when taken as a whole are no less
favorable than those currently provided by Premier. For purposes of
participation and vesting (but not benefit accrual under any employee benefit
plans of Riva Bancshares other than the Premier Benefit Plans) under such
employee benefit plans, the service of the employees of Premier prior to the
Effective Time shall be treated as service with Riva Bancshares participating in
such employee benefit plans. Riva Bancshares shall honor in accordance with
their terms all employment, severance, consulting, and other compensation
Contracts disclosed in Section 8.13 of the Disclosure Schedule between Premier
and any current or former director, officer, or employee thereof, and all
provisions for vested benefits or other vested amounts earned or accrued through
the Effective Time under the Premier Benefit Plans.
8.15 Management Contracts. Riva Bancshares and Bruce W. Wiley have
entered into an employment agreement dated as of the date hereof which agreement
will become effective as of the Closing.
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<PAGE> 36
8.16 Indemnification and Directors' Liability Insurance.
(a) Riva Bancshares shall, and shall cause the Surviving
Corporation (and its successors and assigns) to, indemnify, defend, and
hold harmless the present and former directors, officers, employees,
and agents of Premier (each, an "Indemnified Party") against all costs,
fees or expenses (including reasonable attorneys' fees), judgments,
fines, penalties, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any Litigation arising out of actions
or omissions occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement) to the full extent
permitted under applicable Law and by Premier's Articles of
Incorporation and Bylaws as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of
any Litigation. Without limiting the foregoing, in any case in which
approval by Riva Bancshares is required to effectuate any
indemnification, Riva Bancshares shall direct, at the election of the
Indemnified Party, that the determination of any such approval shall be
made by independent counsel mutually agreed upon between Riva
Bancshares and the Indemnified Party.
(b) If Riva Bancshares or the Surviving Corporation or any of
their successors or assigns shall consolidate with or merge into any
other Person and shall not be the continuing or surviving corporation
of such consolidation or merger or shall transfer all or substantially
all of its assets to any Person, then and in each case, proper
provision shall be made so that the successors and assigns of Riva
Bancshares shall assume the obligations set forth in this Section 8.16.
(c) Prior to the Effective Time, Premier shall purchase for,
and on behalf of, its current and former officers and directors,
extended coverage under the current directors' and officers' liability
insurance policy maintained by Premier to provide for continued
coverage of such insurance for a period of five years following the
Effective Time with respect to matters occurring prior to the Effective
Time.
(d) The provisions of this Section 8.16 are intended to be for
the benefit of and shall be enforceable by, each Indemnified Party, his
or her heirs and representatives and shall survive the consummation of
the Merger and be binding on all successors and assigns of Riva
Bancshares and the Surviving Corporation.
8.17 Filings with State of Missouri. Upon the terms and subject to
the conditions of this Agreement, Premier and Riva Bancshares shall execute
articles of merger (the "Articles of Merger") and Riva Bancshares shall file the
Articles of Merger and a copy thereof with the office of the Secretary of State
of Missouri and Delaware in connection with the Closing. In addition, Riva
Bancshares shall execute and file, pursuant to ss. 351.458 RSMo of the GBCL, (i)
an agreement that Riva Bancshares will promptly pay to any Dissenting
Shareholder the amount, if any, to which such shareholder shall be entitled
under the Dissent Provisions, (ii) an agreement that Riva Bancshares may be
served with process in the State of Missouri and (iii) an irrevocable
appointment of the Secretary of State of Missouri as Riva Bancshares' agent to
accept service of process in any proceeding based upon any cause of action
against Premier arising prior to the Effective Time and any proceeding for the
enforcement of rights of any Dissenting Shareholder under the Dissent
Provisions.
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<PAGE> 37
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
11.7 of this Agreement:
(a) Shareholder Approval. The shareholders of Premier shall
have approved this Agreement and the consummation of the transactions
contemplated hereby, including the Merger, by the requisite 662/3% vote
pursuant to applicable provisions of the GBCL, and applicable Law. In
addition, the shareholders of Riva Bancshares shall have approved this
Agreement and the consummation of the transactions contemplated hereby,
including the Merger, by the requisite majority vote pursuant to
Section 251 of the DGCL, and applicable Law.
(b) Regulatory Approvals. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Merger shall have been obtained or
made and shall be in full force and effect and all waiting periods
required by Law shall have expired. No Consent obtained from any
Regulatory Authority which is necessary to consummate the transactions
contemplated hereby shall be conditioned or restricted in a manner
(including requirements relating to the raising of additional capital
or the disposition of Assets) which in the reasonable judgment of the
Board of Directors of either Party would so materially adversely impact
the economic or business benefits of the transactions contemplated by
this Agreement that, had such condition or requirement been known, such
Party would not, in its reasonable judgment, have entered into this
Agreement.
(c) Consents and Approvals. Other than filing the Articles of
Merger and receipt of the Certificate of Merger, each Party shall have
obtained any and all Consents required for consummation of the Merger
(other than those referred to in Section 9.1(b) of this Agreement or
listed in Section 9.1(c) of the Disclosure Schedule) or for the
preventing of any Default under any Contract or Permit of such Party
which, if not obtained or made, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on such
Party.
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of any of the transactions
contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall
have been declared effective under the 1933 Act, and no stop orders
suspending the effectiveness of the Registration Statement shall have
been issued, and no action, suit, proceeding, or investigation by the
SEC to suspend the effectiveness thereof shall have been initiated and
be continuing, and all necessary approvals under state securities Laws
or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of Riva Bancshares Common Stock issuable pursuant to the Merger
or the IPO shall have been received.
(f) Tax Matters. Each Party shall have received a written
opinion or opinions from Smith, Gambrell & Russell, LLP, and in a form
reasonably satisfactory to such Parties (the "Tax
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<PAGE> 38
Opinion"), to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code and (ii) the exchange in the Merger of Premier Common
Stock for Riva Bancshares Common Stock will not give rise to gain or
loss to the shareholders of Premier with respect to such exchange
(except to the extent of any cash received). In rendering such Tax
Opinion, such counsel shall be entitled to rely upon representations of
officers of Premier and Riva Bancshares reasonably satisfactory in form
and substance to such counsel.
(g) Public Offering. Riva Bancshares shall have executed a
definitive underwriting agreement with a reputable and financially
capable investment banking firm, chosen in the sole discretion of the
Board of Directors of Riva Bancshares, providing for the firm
commitment underwriting of shares of Riva Bancshares Common Stock
having an aggregate gross purchase price of at least $25 million and
such shares shall, upon issuance, be available for trading on a
registered stock exchange or the National Market of the Nasdaq Stock
Market.
9.2 Conditions to Obligations of Riva Bancshares. The obligations
of Riva Bancshares to perform this Agreement and consummate the Merger and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Riva Bancshares pursuant to Section
11.7(a) of this Agreement:
(a) Representations and Warranties. For purposes of this
Section 9.2(a), the accuracy of the representations and warranties of
Premier set forth in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as
of the Effective Time (provided that representations and warranties
which are confined to a specified date shall speak only as of such
date). The representations and warranties of Premier set forth in
Section 5.3 of this Agreement shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and
warranties of Premier set forth in Sections 5.17, 5.18, 5.19, and 5.20
of this Agreement shall be true and correct in all material respects.
There shall not exist inaccuracies in the representations and
warranties of Premier set forth in this Agreement (including the
representations and warranties set forth in Sections 5.3, 5.17, 5.18,
5.19, and 5.20) such that the aggregate effect of such inaccuracies
has, or is reasonably likely to have, a Material Adverse Effect on
Premier and its Subsidiaries taken as a whole; provided that, for
purposes of this sentence only, those representations and warranties
which are qualified by references to "material" or "Material Adverse
Effect" shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of Premier to be performed and complied
with pursuant to this Agreement and the other agreements contemplated
hereby prior to the Effective Time shall have been duly performed and
complied with in all respects.
(c) Certificates. Premier shall have delivered to Riva
Bancshares (i) a certificate, dated as of the Effective Time and signed
on its behalf by its chief executive officer and its chief financial
officer acting in their capacities as officers of Premier, to the
effect that the conditions of its obligations set forth in Section
9.2(a) and 9.2(b) of this Agreement have been satisfied, and (ii)
certified copies of resolutions duly adopted by Premier's Board of
Directors and shareholders evidencing the taking of all corporate
action necessary to authorize the execution, delivery, and performance
of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Riva Bancshares
and its counsel shall request.
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(d) Affiliates Agreements. Riva Bancshares shall have received
from each affiliate of Premier the affiliates agreements referred to in
Section 8.13 of this Agreement.
(e) Opinion of Counsel. Riva Bancshares shall have received a
written opinion of Suelthaus & Walsh, P.C., counsel to Premier, dated
as of the Effective Time, with respect to such matters and in such form
as shall be agreed upon between such firm and Riva Bancshares in
substantially the form that is attached as Exhibit 2.
9.3 Conditions to Obligations of Premier. The obligations of
Premier to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Premier pursuant to Section 11.7(b) of
this Agreement:
(a) Representations and Warranties. For purposes of this
Section 9.3(a), the accuracy of the representations and warranties of
Riva Bancshares set forth in this Agreement shall be assessed as of the
date of this Agreement and as of the Effective Time with the same
effect as though all such representations and warranties had been made
on and as of the Effective Time (provided that representations and
warranties which are confined to a specified date shall speak only as
of such date). The representations and warranties of Riva Bancshares
set forth in Section 6.3 of this Agreement shall be true and correct
(except for inaccuracies which are de minimus in amount). The
representations and warranties of Riva Bancshares set forth in Section
6.11 of this Agreement shall be true and correct in all material
respects. There shall not exist inaccuracies in the representations and
warranties of Riva Bancshares set forth in this Agreement (including
the representations and warranties set forth in Sections 6.3 and 6.11)
such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on Riva
Bancshares; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include
such qualifications.
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of Riva Bancshares to be performed and
complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Effective Time shall have been duly
performed and complied with in all material respects.
(c) Certificates. Riva Bancshares shall have delivered to
Premier (i) a certificate, dated as of the Effective Time and signed on
its behalf by its chief executive officer and its chief financial
officer, to the effect that the conditions of its obligations set forth
in Section 9.3(a) and 9.3(b) of this Agreement have been satisfied, and
(ii) certified copies of resolutions duly adopted by Riva Bancshares'
Board of Directors evidencing the taking of all corporate action
necessary to authorize the execution, delivery, and performance of this
Agreement, and the consummation of the transactions contemplated
hereby, all in such reasonable detail as Premier and its counsel shall
request.
(d) Fairness Opinion. Premier shall have received from GRA
Thompson White & Company, PC, a letter to the effect that, in the
opinion of such firm, the Exchange Ratio is fair, from a financial
point of view, to the holders of Premier Common Stock.
(e) Payment of Consideration. Riva Bancshares shall have
delivered to the Exchange Agent the consideration to be paid to holders
of the Premier Common Stock pursuant to Sections 3.1 and 3.4 of this
Agreement.
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(f) Opinion of Counsel. Premier shall have received a written
opinion of Smith, Gambrell & Russell, LLP, counsel to Riva Bancshares,
dated as of the Effective Time, with respect to such matters and in
such the form as shall be agreed upon between such firm and Premier in
substantially the form that is attached hereto as Exhibit 3.
(g) Underwriters to Perform. The underwriters in the IPO shall
have given their assurances that they are ready, willing, and able to
close on the IPO, and have the funds available to deliver the full
amount of the purchase price (less the underwriters' discount) for the
shares under the IPO, immediately following the consummation of the
Merger.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Riva Bancshares and Premier, this Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time:
(a) By mutual written consent of the Board of Directors of Riva
Bancshares and the Board of Directors of Premier; or
(b) By the Board of Directors of either Riva Bancshares or
Premier (provided that the terminating Party is not then in breach of
any representation or warranty contained in this Agreement under the
applicable standard set forth in Section 9.2(a) of this Agreement in
the case of Premier and Section 9.3(a) in the case of Riva Bancshares
or in material breach of any covenant or other agreement contained in
this Agreement) in the event of an inaccuracy of any representation or
warranty of the other Party contained in this Agreement which cannot be
or has not been cured within 30 days after the giving of written notice
to the breaching Party of such inaccuracy and which inaccuracy would
provide the terminating Party the ability to refuse to consummate the
Merger under the applicable standard set forth in Section 9.2(a) of
this Agreement in the case of Premier and Section 9.3(a) of this
Agreement in the case of Riva Bancshares; or
(c) By the Board of Directors of either Riva Bancshares or
Premier in the event of a material breach by the other Party of any
covenant, agreement, or obligation contained in this Agreement which
breach cannot be or has not been cured within 30 days after the giving
of written notice to the breaching Party of such breach; or
(d) By the Board of Directors of either Riva Bancshares or
Premier in the event (i) any Consent of any Regulatory Authority
required for consummation of the Merger and the other transactions
contemplated hereby shall have been denied by final nonappealable
action of such authority or if any action taken by such authority is
not appealed within the time limit for appeal; or (ii) the shareholders
of either Riva Bancshares or Premier fail to vote their approval of
this Agreement and the transactions contemplated hereby as required by
the DGCL and GBCL, respectively; or
(e) By the Board of Directors of either Riva Bancshares or
Premier in the event that the Merger shall not have been consummated by
September 30, 1999, if the failure to consummate
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<PAGE> 41
the transactions contemplated hereby on or before such date is not
caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By Riva Bancshares in the event appraisal rights are
claimed, pursuant to the Dissent Provisions, by persons owning in the
aggregate more than 10% of the issued and outstanding Premier Common
Stock; or
(g) By the Board of Directors of either Riva Bancshares or
Premier (provided that the terminating Party is not then in breach of
any representation or warranty contained in this Agreement under the
applicable standard set forth in Section 9.2(a) of this Agreement in
the case of Premier and Section 9.3(a) in the case of Riva Bancshares
or in material breach of any covenant or other agreement contained in
this Agreement) in the event that any of the conditions precedent to
the obligations of such Party to consummate the Merger cannot be
satisfied or fulfilled by the date specified in Section 10.1(e) of this
Agreement; or
(h) By Premier, if at any time prior to the Effective Time, the
fairness opinion of GRA Thompson White & Company, PC is withdrawn.
(i) By Premier if prior to the Effective Time, a corporation,
partnership, person, or other entity or group shall have made a bona
fide Acquisition Proposal that the Board of Directors of Premier
determines in its good faith judgment and in the exercise of its
fiduciary duties, with respect to legal matters on the written opinion
of legal counsel and as to financial matters on the written opinion of
GRA Thompson White & Company, PC, or another investment banking firm of
national reputation, is more favorable to the shareholders of Premier
and that the failure to terminate this Agreement and accept such
alternative Acquisition Proposal would be inconsistent with the proper
exercise of such fiduciary duties.
10.2 Effect of Termination.
(a) In the event of the termination and abandonment of this
Agreement pursuant to Section 10.1 of this Agreement, this Agreement
shall become void and have no effect, except that (i) the provisions of
this Section 10.2 and Sections 8.6 and 11.1 of this Agreement shall
survive any such termination and abandonment, and (ii) a termination
pursuant to Sections 10.1(b) or 10.1(c) or 10.1 (f), of this Agreement
shall not relieve the breaching Party from liability for an uncured
willful breach of a representation, warranty, covenant, or agreement
giving rise to such termination; provided, further, that in the event
of any termination of this Agreement following the occurrence of an
Initial Triggering Event (as defined below) other than termination due
to: (A) the failure of Riva Bancshares to satisfy a condition to
closing, (B) determination of Riva Bancshares pursuant to Section
9.2(a) not to perform this Agreement, (C) withdrawal of the fairness
opinion of GRA Thompson White & Company, PC (so long as such withdrawal
is not due to materially inaccurate or fraudulent information provided
by Premier to GRA Thompson White & Company, PC), or (D) the failure to
satisfy the conditions set forth in Section 9.1 paragraphs (b), (d),
(e), (f) and (g), Riva Bancshares shall be entitled to a cash payment
from Premier in an amount equal to $200,000 upon the occurrence of any
Subsequent Triggering Event (as defined below) within twelve (12)
months following the date of such termination. In the event this
Agreement is terminated as a result of Riva Bancshares' or Premier's
failure to satisfy any of its representations, warranties or covenants
set forth herein in addition to any other claims or rights, the
non-terminating party shall reimburse the terminating party for its
reasonable out-of-pocket expenses relating to the Merger in an amount
not to exceed $50,000.
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(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date of this
Agreement:
(i) Premier, without having received Riva Bancshares'
prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as hereinafter defined)
with any Person (the term "Person" for purposes of this
Section also having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the 1934 Act, and the rules and
regulations thereunder) other than Riva Bancshares or the
Board of Directors of Premier shall have recommended that the
shareholders of Premier approve or accept any Acquisition
Transaction other than as contemplated by this Agreement. For
purposes of this Agreement, "Acquisition Transaction" shall
mean (x) a merger or consolidation, or any similar
transaction, involving Premier, (y) a purchase, lease or other
acquisition of all or substantially all of the assets or
deposits of Premier, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 25% or more of the
voting power of Premier;
(ii) Any Person (excluding the officers, directors
and existing shareholders of Premier), other than Riva
Bancshares, acting in a fiduciary capacity, shall have
acquired beneficial ownership or the right to acquire
beneficial ownership of 15% or more of the outstanding Premier
Common Stock (the term "beneficial ownership" for purposes of
this Agreement having the meaning assigned thereto in Section
13(d) of the 1934 Act, and the rules and regulations
thereunder) and such Person does not vote such Premier Common
Stock in favor of this Agreement at the Shareholders' Meeting
or such meeting is not held or is canceled;
(iii) The Shareholders' Meeting shall not have been
held or shall have been canceled prior to termination of this
Agreement, or Premier, without having received Riva
Bancshares' prior written consent, shall have authorized,
recommended, proposed (or publicly announced its intention to
authorize, recommend or propose, or its interest in
authorizing, recommending or proposing) an agreement to engage
in an Acquisition Transaction, with any Person other than Riva
Bancshares;
(iv) Any Person other than Riva Bancshares shall have
made a bona fide proposal to any Premier Company or its
shareholders by public announcement or written communication
(a copy of which shall be provided to Riva Bancshares) to
engage in an Acquisition Transaction, which proposal has an
economic value to the shareholders of Premier equivalent to or
in excess of that of the Merger.
(v) After a proposal is made by a third party to any
Premier Company to engage in an Acquisition Transaction,
Premier shall have willfully and materially breached any
material covenant or obligation contained in this Agreement in
anticipation of engaging in an Acquisition Transaction, and
such breach would entitle Riva Bancshares to terminate this
Agreement and such breach is not cured; or
(vi) Any person other than Riva Bancshares, other
than in connection with a transaction to which Riva Bancshares
has given its prior written consent, shall have filed an
application or notice with the Board of Governors of the
Federal Reserve System or other
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federal or state bank regulatory authority, which application
or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of
the following events or transactions occurring after the date hereof:
(i) The acquisition by any person (excluding the
officers, directors and existing shareholders of Premier) of
beneficial ownership of 50% or more of the then outstanding
Premier Common Stock; or
(ii) The closing of the Acquisition Transaction
described in clause (i) of subsection (b) of this Section 10.2,
except that the percentage referred to in clause (z) shall be
50%.
(d) Premier shall notify Riva Bancshares promptly upon the
occurrence of any Initial Triggering Event or Subsequent Triggering
Event.
10.3 Non-Survival of Representations and Covenants. The respective
representations and warranties of the Parties shall not survive the Effective
Time. All agreements of the Parties to this Agreement which by their terms are
to be performed following the Effective Time shall survive the Effective Time
until performed in accordance with their terms.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms
set forth below shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Acquisition Proposal" with respect to a Party shall mean any
tender offer or exchange offer or any proposal for a merger,
acquisition of all of the stock or assets of, or other business
combination involving such Party or any of its Subsidiaries or any
proposal or offer to acquire in any manner a substantial equity
interest in, or a substantial portion of the assets of, such Party or
any of its material Subsidiaries (other than the transactions
contemplated or permitted by this Agreement).
"Affiliate" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such Person;
(ii) any officer, director, partner, employer, or direct or indirect
beneficial owner of any 10% or greater equity or voting interest of
such Person; or (iii) any other Person for which a Person described in
clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger,
including the Exhibits delivered pursuant hereto and incorporated
herein by reference.
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"Assets" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character,
and description, whether real, personal, or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized
in such Person's business, directly or indirectly, in whole or in part,
whether or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate of
such Person and wherever located.
"BHC Act" shall mean the Bank Holding Company Act of 1956, as
amended.
"Closing" shall have the meaning set forth in Section 1.2 of
this Agreement.
"Certificate of Merger" shall have the meaning set forth in
Section 1.3 of this Agreement.
"Consent" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person
pursuant to any Contract, Law, Order, or Permit.
"Contract" shall mean any written agreement, commitment,
contract, note, bond, mortgage, indenture, instrument, lease,
obligation, license, or plan of any kind or character, or other
document to which any Person is a party or that is binding on any
Person or its capital stock or Assets.
"Default" shall mean (i) any breach or violation of or default
under any Contract, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, or (iii) any
occurrence of any event that with or without the passage of time or the
giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate,
increase, or impose any liability under, any Contract where, in any
such event, such default is reasonably likely to have a Material
Adverse Effect on a Party.
"Derivatives Contract" shall have the meaning set forth in
Section 5.20 of this Agreement.
"DGCL" shall have the meaning set forth in Section 1.1 of this
Agreement.
"Dissent Provisions" shall have the meaning set forth in
Section 3.1(d) of this Agreement.
"Dissenting Premier Shares" shall have the meaning set forth in
Section 3.1(d) of this Agreement.
"Dissenting Shareholders" shall have the meaning set forth in
Section 3.1(d) of this Agreement.
"Effective Time" shall have the meaning set forth in Section
1.3 of this Agreement.
"Environmental Laws" shall mean all Laws relating to pollution
or protection of human health or the environment (including ambient
air, surface water, ground water, land surface, or subsurface strata)
and which are administered, interpreted, or enforced by the United
States Environmental Protection Agency and state and local agencies
with jurisdiction over, and including common law in respect of,
pollution or protection of the environment, including the Comprehensive
Environmental Response Compensation and Liability Act, as amended, 42
U.S.C. 9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. 6901 et seq., and other Laws
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relating to emissions, discharges, releases, or threatened releases of
any Hazardous Material, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of any Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall have the meaning set forth in Section
5.13(c) of this Agreement.
"Exchange Agent" shall have the meaning set forth in Section
4.1 of this Agreement.
"Exchange Ratio" shall have the meaning set forth in Section
3.1(c) of this Agreement.
"Exhibits" 1, 2, and 3 shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are
hereby incorporated by reference herein and made a part hereof, and may
be referred to in this Agreement and any other related instrument or
document without being attached hereto.
"GAAP" shall mean generally accepted accounting principles in
the United States, consistently applied during the periods involved
applicable to banks or bank holding companies, as the case may be.
"GBCL" shall have the meaning set forth in Section 1.1 of this
Agreement.
"Hazardous Material" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic
substance (as those terms are defined by any applicable Environmental
Laws) and (ii) any chemicals, pollutants, contaminants, petroleum,
petroleum products, or oil (and specifically shall include asbestos
requiring abatement, removal, or encapsulation pursuant to the
requirements of governmental authorities and any polychlorinated
biphenyls).
"Indemnified Party" shall have the meaning set forth in Section
8.16 of this Agreement.
"Initial Public Offering" shall have the meaning set forth in
Section 8.1 of the Agreement.
"Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a Person (including
references to such Person being aware of a particular matter) shall
mean the personal knowledge of the chairman, president, chief financial
officer, chief accounting officer, chief credit officer, general
counsel, any assistant or deputy general counsel, or any senior or
executive vice president of such Person and the knowledge of any such
persons obtained or which would have been obtained from a reasonable
investigation, except as otherwise stated in this Agreement.
"Law" shall mean any code, law, ordinance, regulation,
reporting or licensing requirement, rule, or statute applicable to a
Person or its Assets, Liabilities, or business, including those
promulgated, interpreted, or enforced by any Regulatory Authority.
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"Lien" with respect to any Asset, shall mean any conditional
sale agreement, default of title, easement, encroachment, encumbrance,
hypothecation, infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention, or other security
arrangement, or any adverse right or interest, charge, or claim of any
nature whatsoever of, on, or with respect to any property or property
interest, other than (i) Liens for current property Taxes not yet due
and payable, (ii) for depository institution Subsidiaries of a Party,
pledges to secure deposits, and (iii) other Liens incurred in the
ordinary course of the banking business.
"Litigation" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution, demand letter,
governmental or other examination or investigation, hearing, inquiry,
administrative or other proceeding, or notice by any Person alleging
potential liability.
"Loan Property" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in
which such Party or its Subsidiary holds a security or other interest
(including an interest in a fiduciary capacity), and, where required by
the context, includes the owner or operator of such property, but only
with respect to such property.
"Material Adverse Effect" on a Party shall mean an event,
change, or occurrence which, individually or together with any other
event, change, or occurrence, (i) would in the aggregate result in an
adverse impact of $125,000 or more on the financial position or results
of operations of such Party, or (ii) would impair the ability of such
Party to perform its obligations under this Agreement or to consummate
the Merger or the other transactions contemplated by this Agreement,
provided that "Material Adverse Effect" shall not be deemed to include
the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental
authorities, (b) changes in GAAP or regulatory accounting principles
generally applicable to banks and their holding companies, (c) actions
and omissions of a Party (or any of its Subsidiaries) taken with the
prior informed consent of the other Party in contemplation of the
transactions contemplated hereby, and (d) the Merger and compliance
with the provisions of this Agreement on the operating performance of
the Parties, (e) changes in the general economic conditions, (f)
changes in the securities markets, or (g) changes generally affecting
the financial institution industry in general, or the banking industry
in Missouri or in the Jefferson City of Columbia, Missouri areas
specifically. When used with respect to Premier, a Material Adverse
Effect shall exist only if it exists with respect to Premier and its
subsidiaries taken as a whole.
"Merger" shall have the meaning set forth in the Preamble of
this Agreement.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NASDAQ" shall mean the Nasdaq Stock Market, Inc.
"Order" shall mean any decree, injunction, judgment, order,
decision or award, ruling, or writ of any federal, state, local, or
foreign or other court, arbitrator, mediator, tribunal, administrative
agency, or Regulatory Authority.
"Participation Facility" shall mean any facility or property in
which the Party in question or any of its Subsidiaries participates in
the management and, where required by the context, said term means the
owner or operator of such facility or property, but only with respect
to such facility or property.
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"Party" shall mean either Riva Bancshares or Premier, and
"Parties" shall mean collectively, Riva Bancshares and Premier.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a
party or that is or may be binding upon or inure to the benefit of any
Person.
"Person" shall mean a natural person or any legal, commercial,
or governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited
liability company, trust, business association, group acting in
concert, or any person acting in a representative capacity.
"Premier" shall have the meaning set forth in the first
paragraph of this Agreement.
"Premier Benefits Plans" shall have the meaning set forth in
Section 5.13(a) of this Agreement.
"Premier Capital Stock" shall mean, collectively, Premier
Common Stock and any other class or series of capital stock of Premier.
"Premier Common Stock" shall mean the $1.00 par value common
stock of Premier.
"Premier Companies" shall mean, collectively, Premier and all
Premier Subsidiaries.
"Premier Contracts" shall have the meaning set forth in Section
5.14 of this Agreement.
"Premier ERISA Plan" shall have the meaning set forth in
Section 5.13(a) of this Agreement.
"Premier Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of
Premier as of March 31, 1999, and as of December 31, 1998, 1997 and
1996, and the related statements of income, changes in shareholders'
equity, and cash flows (including related notes and schedules, if any)
for the three months ended March 31, 1999, and for each of the three
fiscal years ended December 31, 1998, 1997, and 1996, as filed by
Premier with the Board of Governors of the Federal Reserve System and
(ii) the consolidated balance sheets of Premier (including related
notes and schedules, if any) and related statements of income, changes
in shareholders' equity, and cash flows (including related notes and
schedules, if any) included in Premier's financial statements filed and
published in accordance with applicable federal regulations with
respect to periods ended subsequent to December 31, 1998.
"Proxy Statement" shall mean the proxy statement used by
Premier to solicit the approval of its shareholders of the transactions
contemplated by this Agreement, which shall include the prospectus of
Riva Bancshares relating to the issuance of Riva Bancshares Common
Stock to holders of Premier Common Stock.
"Registration Statement" shall mean the Registration Statement
on Form S-1, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by
Riva Bancshares under the 1933 Act with respect to the shares of Riva
Bancshares Common Stock to be issued to the shareholders of Premier in
connection with the transactions contemplated by this Agreement and
with respect to the IPO.
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"Regulatory Authorities" shall mean, collectively, the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the SEC, the Missouri Division of Finance, the NASD,
NASDAQ and all state regulatory agencies having jurisdiction over the
Parties and their respective Subsidiaries.
"Rights" shall mean all arrangements, calls, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or
other binding obligations of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of
the capital stock of a Person or any Contract, commitments or other
arrangements by which a Person is or may be bound to issue additional
shares of its capital stock or options, warrants, rights to purchase or
acquire any additional shares of its capital stock, or other Rights.
"Riva Bancshares" shall have the meaning set forth in the first
paragraph of this Agreement.
"Riva Bancshares Capital Stock" shall mean, collectively, Riva
Bancshares Common Stock, Riva Bancshares Preferred Stock, and any other
class or series of capital stock of Riva Bancshares.
"Riva Bancshares Common Stock" shall mean the $.01 par value
per share common stock of Riva Bancshares.
"Riva Bancshares Financial Statements" shall mean the (i)
audited consolidated balance sheets (including related notes and
schedules, if any) of Riva Bancshares as of December 31, 1998, and the
related audited statements of income, changes in stockholders' equity,
and cash flows (including related notes and schedules, if any) for the
fiscal year then ended, and (ii) the unaudited consolidated balance
sheets (including related notes and schedules, if any) of Riva
Bancshares as of March 31, 1999, and the related unaudited statements
of income, changes in stockholders' equity, and cash flows (including
related notes and schedules, if any) for the portion of the fiscal year
then ended.
"Riva Bancshares Preferred Stock" shall mean the $.01 par value
per share preferred stock of Riva Bancshares.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements,
registration statements, reports, schedules, and other documents filed,
or required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act
of 1940, as amended, the Trust Indenture Act of 1939, as amended, and
the rules and regulations of any Regulatory Authority promulgated
thereunder.
"Shareholders' Meeting" shall mean the meeting of the
shareholders of Premier to be held pursuant to Section 8.1 of this
Agreement, including any adjournment or adjournments thereof.
"Subsidiaries" shall mean all corporations, banks,
associations, or other entities of which the entity in question owns or
controls 50% or more of the outstanding equity securities, either
directly
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or through an unbroken chain of entities as to each of which 50% or
more of the outstanding equity securities is owned directly or
indirectly by its parent; provided, however, there shall not be
included in this definition any such entity acquired through
foreclosure or any such entity the equity securities of which are owned
or controlled in a fiduciary capacity.
"Surviving Corporation" shall mean the surviving corporation
resulting from the Merger.
"Tax" or "Taxes" shall mean all federal, state, local, and
foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income, gross receipts, excise, employment,
sales, use, transfer, license, payroll, franchise, severance, stamp,
occupation, windfall profits, environmental, federal highway use,
commercial rent, customs duties, capital stock, paid-up capital,
profits, withholding, Social Security, single business and
unemployment, disability, real property, personal property,
registration, ad valorem, value added, alternative or add-on minimum,
estimated, or other tax or governmental fee of any kind whatsoever,
imposed or required to be withheld by the United States or any state,
local, foreign government or subdivision or agency thereof, including
any interest, penalties or additions thereto.
"Tax Opinion" shall have the meaning set forth in Section
9.1(f) of this Agreement.
"Taxable Period" shall mean any period prescribed by any
governmental authority, including the United States or any state,
local, foreign government or subdivision or agency thereof for which a
Tax Return is required to be filed or Tax is required to be paid.
"Tax Return" shall mean any report, return, information return,
or other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or
combined or unitary group that includes a Party or its Subsidiaries.
(b) Any singular term in this Agreement shall be deemed to
include the plural, and any plural term the singular. Whenever the
words "include," "includes," or "including" are used in this Agreement,
they shall be deemed followed by the words "without limitation."
11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2 and in
Section 10.2, each of Riva Bancshares and Premier shall bear and pay
all direct costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including
filing, registration, and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel.
(b) Nothing contained in this Section 11.2 shall constitute or
shall be deemed to constitute liquidated damages for the willful breach
by a Party of the terms of this Agreement or otherwise limit the rights
of the nonbreaching Party.
11.3 Brokers and Finders. Each of the Parties represents and
warrants that neither it nor any of its officers, directors, employees, or
Affiliates has employed any broker or finder in connection with this Agreement
or the transactions contemplated hereby. In the event of a claim by any broker
or finder based upon his or its representing or being retained by or allegedly
representing or being retained by Riva Bancshares or Premier, each of Riva
Bancshares and Premier, as the case may be, agrees to indemnify and hold the
other Party harmless of and from any Liability in respect of any such claim.
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11.4 Entire Agreement. Except for the Confidentiality Agreement and
except as otherwise expressly provided herein, this Agreement constitutes the
entire agreement between the Parties with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or understandings
with respect thereto, written or oral.
11.5 Amendments. To the extent permitted by Law, this Agreement may
be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties, whether before or
after shareholder approval of this Agreement has been obtained; provided, that
after any such approval by the shareholders of either Riva Bancshares or
Premier, there shall be made no amendment that reduces or modifies in any
material respect the consideration to be received by holders of Premier Common
Stock, without the further approval of such shareholders.
11.6 Obligations of Riva Bancshares. Whenever this Agreement
requires Riva Bancshares (including the Surviving Corporation) to take any
action, such requirement shall be deemed to include an undertaking by Riva
Bancshares to cause any future Riva Bancshares Subsidiaries to take such action.
11.7 Waivers.
(a) Prior to or at the Effective Time, Riva Bancshares, acting
through its Board of Directors, chief executive officer, president or
other authorized officer, shall have the right to waive any default in
the performance of any term of this Agreement by Premier, to waive or
extend the time for the compliance or fulfillment by Premier of any and
all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of Riva Bancshares under
this Agreement, except any condition which, if not satisfied, would
result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of Riva
Bancshares.
(b) Prior to or at the Effective Time, Premier, acting through
its Board of Directors, chief executive officer, president or other
authorized officer, shall have the right to waive any default in the
performance of any term of this Agreement by Riva Bancshares, to waive
or extend the time for the compliance or fulfillment by Riva Bancshares
of any and all of its obligations under this Agreement, and to waive
any or all of the conditions precedent to the obligations of Premier
under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of
Premier.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right
of such Party at a later time to enforce the same or any other
provision of this Agreement. No waiver of any condition or of the
breach of any term contained in this Agreement in one or more instances
shall be deemed to be or construed as a further or continuing waiver of
such condition or breach or a waiver of any other condition or of the
breach of any other term of this Agreement.
11.8 Assignment. Except as expressly contemplated hereby, neither
this Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. 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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11.9 Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre-paid, or
by courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
Premier: Premier Bancshares, Inc.
815 West Stadium Boulevard
Jefferson City, Missouri 65110
Telephone Number: (573) 893-6000
Telecopy Number: (573) 893-6200
Attention: Charles R. Willibrand, Chairman
and Bruce W. Wiley, President and
Chief Executive Officer
Copy to Counsel: Suelthaus & Walsh, P.C.
7733 Forsyth Boulevard, Twelfth Floor
St. Louis, Missouri 63105
Telephone Number: (314) 727-7676
Telecopy Number: (314) 727-7166
Attention: Kenneth H. Suelthaus, Esq.
Riva Bancshares: Riva Bancshares, Inc.
13004 Starbuck Road
St. Louis, Missouri 63141
Telephone Number: (314) 514-8491
Telecopy Number: (314) 453-0981
Attention: Richard C. Jensen, President and
Chief Executive Officer
Copy to Counsel: Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street
Atlanta, Georgia 30309-3592
Telephone Number: (404) 815-3758
Telecopy Number: (404) 685-7058
Attention: Robert C. Schwartz, Esq.
Copies to Counsel shall not constitute notice.
11.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Missouri, without regard
to any applicable principals of conflicts of laws, except to the extent that the
Laws of the United States govern the consummation of the Merger.
11.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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11.12 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
11.13 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
11.14 Enforcement of Agreement. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and attested by officers thereunto as of the day and year
first above written.
RIVA BANCSHARES, INC.
By: /s/ Richard C. Jensen
-------------------------------------
Name: Richard C. Jensen
Title: President and Chief Executive Officer
PREMIER BANCSHARES, INC.
By: /s/ Charles R. Willibrand
-------------------------------------
Name: Charles R. Willibrand
Title: Chairman of the Board
48
<PAGE> 1
EXHIBIT 3.1.4
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RIVA BANCSHARES, INC.
(ORIGINALLY INCORPORATED ON MAY 1, 1998
UNDER THE NAME OF
MISSOURI HOLDINGS, INC.)
Riva Bancshares, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify as follows:
FIRST: That the Board of Directors of the Corporation adopted a
resolution proposing and declaring advisable the amendments to the Certificate
of Incorporation of the Corporation, and the restatement of the Corporation's
Certificate of Incorporation, in each case, as set forth below.
SECOND: That, pursuant to a vote taken at a special meeting of the
Corporation's stockholders held on June __, 1999 in accordance with the
provisions of Section 211 of the General Corporation Law of the State of
Delaware, the holders of a majority of the issued and outstanding shares of the
capital stock of the Corporation approved the amendments and this restatement.
THIRD: That the amendments were duly adopted in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware.
RESOLVED, that the Corporation's Certificate of Incorporation be
amended and restated by deleting the text therein in its entirety and adding the
following in lieu thereof.
ARTICLE I
The name of the corporation is "Riva Bancshares, Inc."
ARTICLE II
The Corporation is organized for the purpose of engaging in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware, and the Corporation shall be authorized to exercise
and enjoy all powers, rights and privileges conferred upon corporations by the
laws of the State of Delaware as in force from time to time, including, without
<PAGE> 2
limitation, all powers necessary or appropriate to carry out all those acts and
activities in which it may lawfully be engaged.
ARTICLE III
The Corporation shall have authority to issue 21,000,000 shares of
capital stock, which shall be divided into two classes with the following
designations, preferences, limitations and relative rights:
(A) Common Stock. One class shall consist of 20,000,000
shares of common stock having a par value of $.01 per share, designated
"Common Stock."
(B) Preferred Stock. One class shall consist of 1,000,000
shares of preferred stock having a par value of $.01 per share,
designated "Preferred Stock." The board of directors is authorized,
subject to any limitations prescribed by law, to provide for the
issuance of the shares of Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each
such series, and to fix the designation, powers, preferences, and
rights of the shares of each such series and any qualifications,
limitations or restrictions thereof. The number of authorized shares of
Preferred Stock may be increased or decreased (but not below the number
of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the Common Stock, without a vote of the
holders of the Preferred Stock, or of any series thereof, unless a vote
of any such holders is required pursuant to the certificate or
certificates establishing the series of Preferred Stock.
ARTICLE IV
The address of the Corporation's registered office in the State of
Delaware is c/o The Corporation Trust Company, 1209 Orange Street, in the City
of Wilmington, County of New Castle, Delaware 19801. The name of the
Corporation's registered agent at such address is The Corporation Trust Company.
ARTICLE V
A. The number of directors of the Corporation shall be fixed from
time to time by resolution of the board of directors; provided, however that the
number of directors fixed by the board of directors shall not be less than two
(2) or more than twenty-five (25).
B. Concurrent with the adoption of the Certificate of
Incorporation, the board of directors, other than those who may be elected by
the holders of preferred stock or any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation or any
resolution or resolutions providing for the issue of such class or series of
stock adopted by the board, shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible: (i) one class ("Class I") of directors to be originally elected for
a term expiring at the annual meeting of stockholders to be held in 2000, (ii)
another class of directors ("Class II") to be originally elected for a term
expiring at the annual meeting of stockholders to be held in
2
<PAGE> 3
2001, and (iii) another class of directors ("Class III") to be originally
elected for a term expiring at the annual meeting of stockholders to be held in
2002, with each member of each class to hold office, until his successors are
elected and qualified. At each annual meeting of the stockholders of the
Corporation, the date of which shall be fixed by or pursuant to the bylaws of
the Corporation, the successors of the class of directors whose terms expire at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election.
C. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, if any vacancy shall occur in the membership
of the board by reason of newly created directorships or resulting from the
resignation, disqualification, retirement or death of a director, the remaining
directors shall continue to act, and such vacancies may be filled by the
affirmative vote of the majority of the directors then in office, although less
than a quorum of the board, and if not therefore filled by action of the
directors, may be filled by the shareholders at any meeting held during the
existence of such vacancy. If any vacancy shall occur among the directors by
reason of the removal from office of a director, such vacancy shall be filled by
the vote of a majority of the outstanding shares of each class of stock
entitled to vote in elections of directors. A director elected to fill a vacancy
shall be elected for a term of office to expire at the next election of the
class for which such director shall have been chosen. No decrease in the number
of directors constituting the board shall shorten the term of any incumbent
director. Any increase or decrease in the number of directors shall be so
apportioned among the classes of directors as to make all classes as nearly
equal in number as possible.
D. Notwithstanding the foregoing provisions of this Article V,
any director whose term of office has expired shall continue to hold office
until his successor shall be elected and qualify.
ARTICLE VI
Elections of directors need not be by written ballot unless the bylaws
of the Corporation shall so provide.
ARTICLE VII
A. The board of directors, pursuant to the terms of this Article
VII, may amend or repeal any provision of the bylaws of the Corporation or adopt
any new bylaw, unless the stockholders have adopted, amended or repealed a
particular bylaw provision and, in doing so, have expressly reserved to the
stockholders the right of amendment or repeal therefor. The board of directors
may adopt, amend, alter or repeal the bylaws of the Corporation only by the vote
of a majority of the entire board.
B. The stockholders of the Corporation have the right, in
accordance with the voting requirement set forth in this Article VII(B), to
amend or repeal any provision of the bylaws of the Corporation, or to adopt new
bylaw provisions, even though such provisions may also be adopted, amended or
repealed by the board. Except as may otherwise specifically be required by law,
the affirmative vote of the holders of not less than seventy-five percent (75%)
of the total number of votes entitled to be cast by the holders of all of the
outstanding shares of capital stock of the Corporation
3
<PAGE> 4
then entitled to vote generally in the election of directors shall be required
for the stockholders to adopt, amend, alter or repeal any provisions of the
bylaws of the Corporation.
ARTICLE VIII
Stockholders of the Corporation shall take action only by annual or
special meetings duly held in accordance with Section 211 of the Delaware
General Corporation Law and the bylaws of the Corporation. Stockholders may not
take any action by written consent in lieu of a meeting.
ARTICLE IX
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that this Article IX shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law (as in
effect and as hereafter amended) or (iv) for any transaction from which the
director derived an improper personal benefit. If the Delaware General
Corporation Law is hereafter amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of each director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Neither the amendment nor repeal of this Article IX, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article
IX, shall eliminate or reduce the effect of this Article IX in respect of any
acts or omissions occurring prior to such amendment, repeal or adoption of any
inconsistent provision.
ARTICLE X
Notwithstanding any other provisions of this Certificate or the bylaws
of the Corporation (and notwithstanding the fact that some lesser percentage may
be specified by law, this Certificate or the bylaws of the Corporation), the
affirmative vote of the holders of at least seventy-five percent (75%) of the
total number of votes entitled to be cast by the holders of all of the shares of
capital stock of the Corporation then entitled to vote generally in the election
of directors shall be required to amend, alter, change or repeal, or to adopt
any provision as part of this Certificate inconsistent with, the provisions set
forth in Articles V, VI, VII, VIII, IX, and this Article X.
4
<PAGE> 5
IN WITNESS WHEREOF, the undersigned has executed this Amended and
Restated Certificate of Incorporation on this ____ day of July, 1999.
RIVA BANCSHARES, INC.
By:
-----------------------------------
Richard C. Jensen
President
ATTEST:
- ----------------------------------
Secretary
[CORPORATE SEAL]
5
<PAGE> 1
EXHIBIT 3.2.1
AMENDED AND RESTATED
BYLAWS
OF
RIVA BANCSHARES, INC.
ARTICLE I
STOCKHOLDERS
1.01 Place of Meetings. Annual and special meetings of the
stockholders shall be held at such place, either within or without of the State
of Delaware, as may be designated by the Board of Directors. In the absence of
such designation, such meeting shall be held at the principal office of the
Corporation located within the State of Missouri.
1.02 Annual Meeting. The annual meeting of the stockholders for the
election of directors and the transaction of such other business as may properly
come before the meeting shall be held on such date as may be determined by
resolution of the Board of Directors.
1.03 Special Meeting. Unless otherwise prescribed by statute,
special meetings of the stockholders, for any purpose or purposes, may be called
by the President of the Corporation, a majority of the Board of Directors, or
the holders of not less than one-fifth (20%) of the outstanding shares of each
class of stock entitled to vote in elections. No business other than that
specified in the notice of special meeting shall be transacted at any such
special meeting.
1.04 Notice of Meetings. Written or printed notice stating the
place, day and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary or the Board of Directors or officer calling the meeting, to each
stockholder of record in the manner above provided. The notice of special
meeting may be waived by submitting a signed waiver or by attendance at the
meeting.
1.05 Closing of Transfer Books and Fixing Record Date. For the
purposes of determining stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or stockholders entitled to
receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period not to exceed
in any case sixty (60) days immediately preceding such meeting. In lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of stockholders, such date in
any case to be not more than sixty (60) days, and in case of a meeting of
stockholders, not less than ten (10) days, prior to the date on which the
particular action requiring such determination of stockholders is to be taken,
and in no event may the record date precede the date upon which the Directors
adopt a resolution fixing the record date. If the stock transfer books are not
closed and no record date is fixed for the determination of stockholders
entitled to notice of or
<PAGE> 2
to vote at a meeting of stockholders, or stockholders entitled to receive
payment of a dividend, or a determination of stockholders for any other proper
purpose, the date on which notice of the meeting is given (as defined in Article
IX hereof) or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of the stockholders. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as provided in
this Section 1.05, such determination shall apply to any adjournment thereof,
unless the Board of Directors fixes a new record date for the adjournment.
1.06 Voting List. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make, at least ten (10) days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten (10) days prior to such meeting, shall be kept
on file at the principal office of the Corporation and shall be subject to
inspection by any stockholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any stockholder during the whole time of
the meeting. The original stock transfer books shall be prima facie evidence as
to who are the stockholders entitled to examine such list or transfer books or
to vote at any meeting of stockholders.
1.07 Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum for the transaction of business at such meeting. If a quorum
is present, the affirmative vote of the majority of the shares represented at
the meeting entitled to vote on the subject matter shall be the act of the
stockholders, unless the vote of a greater number of shares on the matter being
voted on is required by the Certificate of Incorporation of the Corporation,
these Bylaws or applicable law. Directors shall be elected by a plurality of the
shares represented at the meeting and entitled to vote in the election of
Directors.
1.08 Adjournment of Stockholder Meeting. Any meeting of
stockholders may be adjourned at any time, whether or not there is a quorum, by
the chairman of such meeting or the vote of the majority of shares represented
at such meeting. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
1.09 Proxies. At all meetings of stockholders, a stockholder may
vote by proxy, executed in writing by the stockholder or by his duly authorized
attorney in fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
three (3) years from the date of its execution, unless otherwise provided in the
proxy.
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<PAGE> 3
1.10 Voting of Shares. Each outstanding share shall be entitled to
one vote and each fractional share shall be entitled to a corresponding
fractional vote on each matter submitted to vote at a meeting of stockholders.
1.11 Voting by Voice, Hand or Ballot. All voting at meetings of the
stockholders, including voting for the election of directors but excepting where
otherwise required by law, shall be by a voice or hand vote; provided, however,
that upon demand therefor by a stockholder entitled to vote or by his or her
proxy, a vote by written ballot shall be taken. Every written ballot shall state
the name of the stockholder or proxy voting and such other information as may be
required under the procedure established for the meeting.
1.12 Voting of Shares by Certain Holders. The rights of persons in
whose names shares stand on the stock records of the Corporation to vote is
subject to the following provisions:
(a) Neither treasury shares, nor shares of its own stock
held by the Corporation in a fiduciary capacity, nor shares held by another
Corporation if the majority of the shares entitled to vote for the election of
directors of such other Corporation is held by the Corporation, shall be voted
at any meeting or counted in determining the total number of outstanding shares
at any given time.
(b) Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent, or proxy as the bylaws
of such corporation may prescribe, or, in the absence of such provision, as the
board of directors of such Corporation may determine.
(c) Shares held by an administrator, executor, personal
representative, guardian, or conservator may be voted by him, either in person
or by proxy, without a transfer of such shares into his name.
(d) Shares standing in the name of a trustee may be voted
by him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name.
(e) Shares standing in the name of a receiver may be
voted by such receiver, and shares held by or under the control of a receiver
may be voted by such receiver without the transfer thereof into his name if
authority to do so be contained in an appropriate order of the court by which
such receiver was appointed.
(f) A stockholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
1.13 Conduct of Stockholder Meetings. Meetings of the stockholders
shall be presided over by the Chairman of the Board or, in his absence, the
President of the Corporation, or, if no such
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<PAGE> 4
person is present, a person designated by the Chairman of the Board or, in his
absence, the President of the Corporation. The Secretary of the Corporation or,
in his absence, an Assistant Secretary, or, if no such person is present, a
person designated by the chairman of the meeting, shall act as secretary of the
meeting. The precedence of and procedure on motions and other procedural matters
at a meeting shall be as determined by the chairman of such meeting, in his sole
discretion, provided that such chairman acts in a manner which is not
inconsistent with the Certificate of Incorporation of the Corporation, these
Bylaws and applicable law.
1.14 Notification of Stockholder Business.
(a) All business properly brought before an annual
meeting of the stockholders shall be transacted at such meeting. Business shall
be deemed properly brought before an annual meeting of stockholders only if it
is (i) specified in the notice of meeting (or any supplement thereto) given by
or at the request of the Board of Directors, (ii) otherwise properly brought
before the meeting by or at the direction of the Board of Directors or (iii)
brought before the meeting by a stockholder of record entitled to vote at such
meeting if written notice of such stockholder's intent to bring such business
before such meeting is delivered to the Secretary of the Corporation at the
principal executive offices of the Corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the ninetieth (90th) day
prior to the first anniversary of the preceding year's annual meeting of
stockholders; provided, however, that in the event that the date of such meeting
is more than thirty (30) days before or more than sixty (60) days after such
anniversary date, written notice by the stockholder must be delivered not
earlier than the close of business on the ninetieth (90th) day prior to such
meeting and not later than the close of business on the later of the sixtieth
(60th) day prior to such meeting or the tenth (10th) day following issuance by
the Corporation of a press release announcing the date of such meeting. In no
event shall any press release announcing an adjournment of an annual meeting
commence a new time period for the giving of written notice by a stockholder
described above.
(b) Each written notice by a stockholder described above shall set
forth, at a minimum, the following: (i) as to the stockholder giving the notice
and, if applicable, the beneficial owner or the person on whose behalf such
proposal is being made (A) the name and address of such person as such
information appears on the books of the Corporation, (B) the class and number of
such shares of the Corporation which are owned beneficially and of record by
such person; (ii) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting;
(iii) a representation that the stockholder is a holder of record of shares of
the Corporation entitled to vote at such meeting and intends to appear in person
or in proxy at such meeting to propose such business; (iv) any material interest
of the stockholder in such business.
(c) The chairman of the meeting may refuse to transact any
business at any meeting presented without compliance with the procedures set
forth in this Section 1.14.
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<PAGE> 5
ARTICLE II
BOARD OF DIRECTORS
2.01 General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors, except as otherwise provided in the
Certificate of Incorporation or by applicable law.
2.02 Number; Qualifications. The Corporation's Board of Directors
shall consist of not fewer than two (2) and not more than twenty-five (25)
Directors, as such number may be designated from time to time by the Board of
Directors. Directors need not be stockholders of the Corporation or residents of
the State of Delaware or the State of Missouri.
2.03 Election; Term of Office. Unless otherwise provided in the
Certificate of Incorporation, Directors shall be elected at each annual meeting
of the stockholders. Each Director shall hold office until the next annual
meeting of stockholders and thereafter until his or her successor shall have
been elected and qualified. Directors shall be elected by plurality vote of the
stockholders. No reduction in the number of Directors shall have the effect of
removing any director before such Director's term of office shall expire.
2.04 Removal of Directors. Any Director may be removed only in the
manner provided in the Corporation's Certificate of Incorporation, as amended.
If no such provision appears therein, any Director may be removed either with or
without cause, at any time, by vote of the stockholders holding a majority of
the shares then entitled to vote for the election of Directors, present at any
special meeting called for that purpose. In case any vacancy so created shall
not be filled by the stockholders at such meeting, such vacancy may be filled by
the Board of Directors as provided in Section 2.06 hereof.
2.05 Resignation. Any Director may resign at any time by giving
written notice to the President or to the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein; and unless
otherwise specified therein, the acceptance of such resignation by the
Corporation shall not be necessary to make it effective.
2.06 Vacancies. Any vacancy occurring in the Board of Directors,
whether by resignation of a Director or an increase in the number of Directors,
may be filled by the affirmative vote of a majority of the remaining Directors,
though less than a quorum, or by a sole remaining Director. A Director elected
by the remaining Directors or the stockholders to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. Any directorship to
be filled by reason of an increase in the number of Directors shall be filled by
the affirmative vote of a majority of the Directors then in office or by
election at an annual meeting or a special meeting of stockholders called for
that purpose.
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<PAGE> 6
2.07 Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after and at the
same place as the annual meeting of the stockholders. The Board of Directors may
provide by resolution the time and place, either within or without the State of
Delaware, for the holding of additional regular meetings without other notice
than such resolution.
2.08 Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President, the Chairman of the Board
or a majority of the Directors. The person or persons authorized to call special
meetings of the Board of Directors may fix any place, either within or without
the State of Delaware, as the place for holding any special meeting of the Board
of Directors called by them.
2.09 Telephonic Meetings. Members of the Board of Directors or any
committee designated by the Board of Directors may participate in a meeting of
the Board of Directors or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear one another at the same time. Such participation shall constitute presence
in person at the meeting. All participants in any meeting of Directors, by
virtue of their participation and without further action on their part, shall be
deemed to have consented to the recording of such meeting by electronic device
or otherwise, and to the making of a written transcript thereof, in order that
minutes thereof shall be available for the Corporation's records.
2.10 Notice. Notice of any special meeting shall be given at least
four (4) days previous thereto by written notice mailed to each Director at his
business address, or by notice given at least two (2) days prior to the meeting,
in person or by any means specified in Section 9.01(b) or (c). Any Director may
waive notice of any meeting. The attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where a Director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
2.11 Quorum. A majority of the number of Directors fixed in
accordance with these Bylaws shall constitute a quorum for the transaction of
business. 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 of Directors.
2.12 Compensation. The amount, if any, which each Director shall be
entitled to receive as compensation for his services as a Director shall be
fixed from time to time by resolution of the Board of Directors. If any director
shall serve as a member of any committee of the Board of Directors or perform
special services at the instance of the Board of Directors, such may be paid
additional compensation as the Board of Directors may determine. Each Director
shall be entitled to reimbursement for traveling expenses incurred by him in
attending any meeting of the Board of Directors or of a committee. Such
compensation shall be payable even though a meeting may be adjourned because of
a lack of a quorum.
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<PAGE> 7
2.13 Action by Directors Without Meeting. Any action required to be
taken at a meeting of the Directors of the Corporation or any action which may
be taken at such a meeting, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
Directors entitled to vote with respect to the subject matter thereof. A consent
shall be sufficient for this Section 2.13 if it is executed in counterparts, in
which event all of such counterparts, when taken together, shall constitute one
and the same consent.
2.14 Designation of Committees. The Board of Directors may by
resolution or resolutions passed by a majority of the whole Board of Directors
designate one or more committees, each committee to consist of two or more of
the directors of the Corporation, which to the extent provided in the resolution
or resolutions shall have and may exercise the powers of the Board of Directors
in the management of the business and affairs of the Corporation, and may have
power to authorize the seal of the Corporation to be affixed to all papers which
may require it; provided, however, that no such committee shall have any power
or authority in reference to those matters prohibited by Section 141(c) of the
Delaware General Corporation Law. Such committee or committees shall have such
name or names as may be determined from time to time by resolution or
resolutions adopted by the Board of Directors. If provisions be made for any
such committee or committees, the members thereof shall be appointed by the
Board of Directors and shall serve during the pleasure of the Board of
Directors. A majority of the members of a committee shall constitute a quorum
for the transaction of business. The Board of Directors may designate one or
more directors of the Corporation as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee and
who, in such event, shall be counted in determining the presence of a quorum.
Vacancies in such committees shall be filled by the Board of Directors;
provided, however, that in the absence or disqualification of any member of such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board of
Directors may at its pleasure discontinue any such committee or committees.
ARTICLE III
OFFICERS
3.01 Generally. The Board of Directors at its first meeting and at
each annual meeting thereafter shall elect, at a minimum, the following
officers: a President, a Secretary and a Treasurer. The Board of Directors at
any time and from time to time may elect or appoint such other officers as it
shall deem necessary, including, but not limited to, a Chairman of the Board of
Directors, one or more Vice Presidents, one or more Assistant Vice Presidents,
one or more Assistant Treasurers, and one or more Assistant Secretaries, who
shall hold their offices for such terms as shall be determined by the Board of
Directors and shall exercise such powers and perform such duties as are
specified by these Bylaws, or as shall be determined from time to time by the
Board of Directors. Any person may hold two or more offices, except that no
person may hold the office of President and Secretary. No officer need be a
shareholder of the Corporation.
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<PAGE> 8
3.02 Compensation. The salaries of the officers of the corporation
shall be fixed by the Board of Directors, except that the Board of Directors may
delegate to any committee or officer or officers the power to fix the
compensation of any other officer.
3.03 Tenure. Each officer of the corporation shall hold office for
the term for which he is elected or appointed, and until his successor has been
duly elected or appointed and has qualified, or until his earlier resignation,
removal from office or death. Any officer may be removed by the Board of
Directors whenever in its judgment the best interest of the corporation will be
served thereby.
3.04 Vacancies. A vacancy in any office, because of resignation,
removal or death may be filled by the Board of Directors for the unexpired
portion of the term.
3.05 Chairman of the Board. The Chairman of the Board shall preside
at all meetings of stockholders and of the Board of Directors. He shall be the
chief executive officer and the head of the corporation and, subject to the
Board of Directors, shall have the general control and management of the
business and affairs of the corporation. He shall vote any shares of stock or
other voting securities owned by the corporation. He may sign, with the
Secretary or any other proper officer of the corporation thereunto authorized by
the Board of Directors, certificates for shares of the corporation, any deeds,
mortgages, bonds, policies of insurance, contracts, investment certificates or
other instruments which the Board of Directors has authorized to be executed. In
general, he shall perform all duties incident to the office of the Chairman of
the Board and such other duties as may from time to time be assigned to him by
the Board.
3.06 President. The President shall be the chief operating officer
of the corporation and, subject to the control of the Board of Directors, shall
in general manage, supervise and control the day to day business and affairs of
the corporation. He shall, when present, preside at meetings of all of the
stockholders in the absence of the Chairman of the Board or if no Chairman of
the Board has been elected. He may sign, with the Secretary or any other proper
officer of the corporation thereunto authorized by the Board of Directors,
certificates for shares of the corporation, any deeds, mortgages, bonds,
policies of insurance, contracts, investment certificates, or other instruments
which the Board of Directors has authorized to be executed, except in cases
where signing the execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed; and in general
shall perform all duties incident to the office of the President and such other
duties as may be prescribed by the Board of Directors from time to time.
3.07 Vice Presidents. In the absence of the President or in the
event of his death or inability or refusal to act, the Vice President (or in the
event there may be more than one Vice President, the Vice Presidents in the
order designated at the time of their election, or in the absence of any
designation, then in order of election) shall perform the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. Any Vice President may sign, with the
Secretary or an Assistant Secretary, certificates for shares of the
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<PAGE> 9
corporation and shall perform such other duties as shall from time to time be
assigned to him by the President or by the Board of Directors. All Vice
Presidents shall have such other duties as prescribed by the Board of Directors
from time to time.
3.08 Secretary. The Secretary shall: (a) attend and keep the
minutes of the stockholders' meetings and of the Board of Directors' meetings in
one or more books provided by that purpose; (b) see that all notices are duly
given in accordance with the provisions of these Bylaws as required by law; (c)
be custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents, the execution of
which on behalf of the corporation under its seal is duly authorized; (d) keep a
register of the post office address of each stockholder which shall be furnished
to the Secretary by such stockholder; (e) sign with the President or a Vice
President certificates for shares of the corporation, the issuance of which
shall have been authorized by resolution of the Board of Directors; (f) have
general charge of the stock transfer books of the corporation; (g) in general
perform all duties incident to the office of the Secretary and such other duties
as from time to time may be assigned to him by the President or the Board of
Directors.
3.09 Treasurer. The Treasurer, unless otherwise determined by the
Board of Directors, shall: (a) have charge and custody of and be responsible for
all funds and securities of the corporation; (b) receive and give receipts for
monies due and payable to the corporation from any source whatsoever, and
deposit all such monies in the name of the corporation in such banks, trust
companies or other depositories as shall be selected by the Board of Directors;
and (c) in general perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned by the Board of
Directors.
3.10 Assistant Officers. The Assistant Secretaries, when authorized
by the Board of Directors, may sign with the President or a Vice President
certificates for shares of the corporation the issuance of which shall have been
authorized by a resolution of the Board of Directors. The Assistant Vice
Presidents, Secretaries and Treasurers, in general, shall perform such duties as
shall be assigned by the Vice President(s), Secretary or Treasurer,
respectively, or by the President or by the Board of Directors.
ARTICLE IV
INDEMNIFICATION
4.01 Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter, a "proceeding"), by reason of the fact that he or
she is or was a director or an officer of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan (herein
after an "indemnitee"), whether the basis of such proceeding is alleged action
in an official capacity
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<PAGE> 10
as a director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise tax or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section 4.03 hereof with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
4.02 Right to Advancement of Expenses. The right to indemnification
conferred in Section 4.01 of this Article IV shall include the right to be paid
by the Corporation the expenses (including attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition (hereinafter,
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter, an "undertaking"),
by or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is not
further right to appeal (hereinafter, a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 4.02 or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Section 4.01 and 4.02 of this Article IV shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
4.03 Right of Indemnitee to Bring Suit. If a claim under Section
4.01 or 4.02 of this Article IV is not paid in full by the Corporation within
sixty (60) days after a written claim therefor has been received by the
Corporation (except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty (20) days) the indemnitee may
at any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the indemnitee shall be entitled to be paid also
to the expense of prosecuting or defending such suit. In (a) any suit brought by
the indemnitee to enforce a right to indemnification hereunder (but not in a
suit brought by the indemnitee to enforce a right to an advancement of expenses)
it shall be a defense that and (b) in any suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of
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<PAGE> 11
Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the indemnitee
has not met such applicable standard of conduct shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article IV or otherwise, shall be on the
Corporation.
4.04 Non-Exclusivity of Rights. The right to indemnification and to
the advancement of expenses conferred in this Article IV shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, the Certificate of Incorporation of the Corporation, these Bylaws, any
agreement or vote of stockholder or disinterested directors or otherwise.
4.05 Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
4.06 Indemnification of Employees and Agents. The Corporation may,
to the extent authorized from time to time by the Board of Directors, grant
rights to indemnification and to the advancement of expenses to any employee or
agent of the Corporation to the fullest extent of the provisions of this Article
IV with respect to the indemnification and advancement of expenses of directors
and officers of the Corporation.
ARTICLE V
EXECUTION OF INSTRUMENTS AND DEPOSIT OF FUNDS
5.01. Contracts and Other Documents. Contracts and other instruments
or documents may be signed in the name of the Corporation by the President or by
any other officer authorized to sign such contract, instrument, or document by
the Board of Directors, and such authority may be general or confined to
specific instances.
5.02. Interested Directors; Quorum. No contract or transaction
between the Corporation and one (1) or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association, or
other organization in which one (1) or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for
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<PAGE> 12
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if (i) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
5.03 Dividends. Subject to the laws of the State of Delaware, the
Board of Directors may, from time to time, declare and the Corporation may pay
dividends on its outstanding shares in cash, property, or its own shares, except
when the Corporation is insolvent or when the declaration or payment thereof
would e contrary to any restrictions contained in the Certificate of
Incorporation.
5.04 Bank Accounts and Deposits. All funds of the Corporation shall
be deposited from time to time to the credit of the Corporation with such banks,
bankers, trust companies or other depositories as the Board of Directors may
select or as may be selected by any officer or officers, agent or agents of the
Corporation to whom such power may be delegated from time to time by the Board
of Directors.
5.05. Signing of Checks and Drafts. Except as otherwise provided in
these Bylaws, all checks, drafts, or other order or payment of money, notes, or
other evidences of indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or persons and in such
manner as shall be determined from time to time by resolution of the Board of
Directors.
5.06. Loans. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized so to do by the Board of Directors, any officer or
agent of the Corporation may effect loans and advances for the Corporation from
any bank, trust company or other institution or from any firm, corporation or
individual, and for such loans and advances may make, execute and deliver
promissory notes, bonds or other evidences of indebtedness of the Corporation.
When authorized so to do by the Board of Directors, any officer or agent of the
Corporation may pledge, hypothecate or transfer, as security for the payment of
any and all loans, advances, indebtedness and liabilities of the Corporation,
any and all stocks, securities and other personal property at any time held by
the Corporation, and, to that end, may endorse, assign and deliver the same.
Such authority may be general or confined to specific instances.
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<PAGE> 13
ARTICLE VI
ISSUANCE AND TRANSFER OF SHARES
6.01. Issuance of Certificates. Each stockholder of the Corporation
shall be entitled to a certificate or certificates, in such form as shall be
approved by the Board of Directors and required by law, certifying the number of
shares of the Corporation owned by such stockholder.
6.02. Signature on Stock Certificates. The shares of the Corporation
shall be represented by certificates signed by the President or a Vice President
and the Secretary, and may be sealed with the seal of the Corporation or a
facsimile thereof. The signature of any of these officers upon a certificate may
be a facsimile. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon such certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer at the date of its issue.
6.03. Stock Transfer Books. A record of all certificates for shares
issued by the Corporation shall be the Secretary or by any transfer agent or
registrar appointed pursuant to Section 6.04 below at the principal office of
the Corporation or at the office of such transfer agent or registrar. Such
record shall show the name and address of the person, firm or corporation in
which certificates for shares are registered, the number and classes of shares
represented by each such certificate, the date of each such certificate, and in
case of certificates which have been canceled, the dates of cancellation
thereof.
6.04 Transfer Agents and Registrars. The Board of Directors may
appoint one (1) or more transfer agents, registrars of other agents for the
purpose of registering transfer of shares of the Corporation, issuing new
certificates of shares of the Corporation and canceling certificates surrendered
to the Corporation. Such agents and registrars shall be appointed at such times
and places as the requirements of the Corporation may necessitate and the Board
of Directors may designate. Any such transfer agent, registrar or other agent
shall be under a duty to the Corporation to exercise good faith and due
diligence in performing his functions. Such transfer agent, registrar or other
agent shall have, with regard to the particular functions he performs, the same
obligation to the holder or owner of shares of the Corporation and shall have
the same rights and privileges as the Corporation has in regard to those
functions. Notice to a transfer such agent, registrar or other such agent is
notice to the Corporation with respect to the functions performed by the agent.
6.05. Replacement of Lost, Destroyed and Stolen Certificates. Where
a certificate for shares of the Corporation has been lost, destroyed or stolen,
the Corporation shall issue a new certificate in place of the original
certificate if the owner (a) files with the Corporation a sufficient indemnity
bond, and (b) satisfies any other reasonable requirements imposed by the Board
of Directors of the Corporation.
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<PAGE> 14
6.06. Transfer of Shares. Shares of the capital stock of the
Corporation shall be transferred on the books of the Corporation by the holder
thereof in person or by his attorney duly authorized in writing, upon surrender
and cancellation of certificates for the number of shares to be transferred,
except as provided in the preceding section. Books for the transfer of shares of
the capital stock shall be kept by the Corporation or by one or more transfer
agents appointed by it.
6.07. Regulations. The Board of Directors shall have power and
authority to make such rules and regulations as-it may deem expedient concerning
the issue, transfer and registration of certificates for shares of the capital
stock of the Corporation.
ARTICLE VII
CORPORATE RECORDS, REPORTS, AND SEAL
7.01. Minutes of Corporate Meetings. The Corporation shall keep at
its principal place of business, or at such other place as may be directed by
the Board of Directors, a book of minutes of all proceedings of its stockholders
and Board of Directors, with the time and place of holding of all meetings,
whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at directors meetings, the number of shares or
members present or represented at stockholders meetings, and the proceedings
thereof.
7.02. Inspection of Records and Properties by Directors. Every
Director shall have the absolute right at any reasonable time to inspect all
books, records, documents of every kind, and the physical properties of the
Corporation, and also of its subsidiary corporations. Such inspection by a
Director may be made in person or by agent or attorney, and the right of
inspection includes the right to make extracts.
7.03. Fiscal Year. The fiscal year of the Corporation shall begin on
the first day of January, and terminate on the last day of December of each
succeeding year; unless the Board of Directors shall adopt a different fiscal
year.
7.04. Corporate Seal. The seal of the Corporation shall be circular
in form and shall have engraved upon it the words, "Riva Bancshares, Inc." The
seal shall be used by causing it to be affixed or impressed or a facsimile
thereof may be reproduced or otherwise used in such manner as the Board of
Directors shall determine.
ARTICLE VIII
ADOPTION, AMENDMENT, AND REPEAL OF BY LAWS
8.01. Power of Directors to Amend. The Board of Directors shall have
the power to alter, amend or repeal the Bylaws of the Corporation or adopt new
Bylaws for the Corporation as provided in the Certificate of Incorporation of
the Corporation; provided, however, that the Board of Directors
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<PAGE> 15
may not alter, amend, or repeal any provision of the Bylaws which was adopted by
the stockholders pursuant to the Certificate of Incorporation and which
specifically provides that it cannot be altered, amended or repealed by the
Board of Directors.
8.02. Power of Stockholders to Amend. The stockholders shall have
the power to alter, amend or repeal the Bylaws of the Corporation or adopt new
Bylaws of the Corporation at any regular or special meeting of the stockholders
if notice of such alteration, amendment, repeal or adoption of new Bylaws be
contained in the notice of such special meeting.
ARTICLE IX
NOTICES
9.01 Giving of Notice. Except as otherwise provided by the General
Corporation Law of Delaware, these Bylaws, the Corporation's Certificate of
Incorporation, or resolution of the Board of Directors, every meeting notice or
other notice, demand, bill, statement or other communication (collectively,
"Notice") to or from the Corporation from or to a Director, Officer or
stockholder shall be duly given if it is written or printed and is (a) sent by
first class mail or by overnight service of the U.S. Postal Service, postage
prepaid, (b) sent by any established overnight air courier service, such as
Federal Express, Emery, Airborne or UPS, (c) sent by telegraph, tested telex or
other tested facsimile transmission, (d) delivered by any commercial messenger
service which regularly retains its receipts, or (e) personally delivered,
provided a receipt is obtained reflecting the date of delivery. Notice shall not
be duly given unless all delivery or postage charges are pre-paid. Notice shall
be given to an addressee's most recent address as it appears on the
Corporation's records. A Notice shall be deemed "given" when dispatched for
delivery, or if mailed, on the date postmarked. This Section shall not have the
effect of shortening any notice period provided for in these Bylaws.
9.02 Waiver of Notice. Any Notice required by the General
Corporation Law of Delaware, the Certificate of Incorporation or these Bylaws
may be waived in writing at any time by the person entitled to the Notice, and
such waiver shall be equivalent to the giving of notice. Notice of any meeting
shall be waived by attendance (if a stockholders' meeting, in person or by
proxy) at the meeting. A waiver of Notice of a special meeting of stockholders
shall state the purpose for which the meeting was called or the business to be
transacted thereat.
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<PAGE> 1
EXHIBIT 4.1
NUMBER SHARES
FB
RIVA BANCSHARES, INC.
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 768018 103
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $0.01 PER
SHARE, OF
RIVA BANCSHARES, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
[SEAL]
/S/ DANIEL R. SILLS /S/ RICHARD C. JENSEN
SECRETARY AND TREASURER PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED
UMB BANK, KANSAS CITY, MISSOURI
TRANSFER AGENT
AND REGISTRAR
BY:
AUTHORIZED SIGNATURE
<PAGE> 2
RIVA BANCSHARES, INC.
THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND
WITHOUT CHARGE A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS,
AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZED TO BE
ISSUED, THE VARIATIONS IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE
SHARES OF EACH SUCH CLASS AND SERIES SO FAR AS THE SAME HAVE BEEN FIXED AND
DETERMINE, AND THE AUTHORITY OF THE DIRECTORS TO FIX AND DETERMINE THE
RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES AND SERIES. ANY SUCH
REQUEST SHALL BE ADDRESSED TO THE SECRETARY OF THE CORPORATION.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT- Custodian
TEN ENT -as tenants by the entireties ---------- ----------
JT TEN -as joint tenants with right (Cust) (Minor)
of survivorship and not as tenants under Uniform Gifts to Minors
in common Act
--------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
---------------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
shares
- -----------------------------------------------------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
Attorney
- ----------------------------------------------------------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with full power of substitution in the
premises.
Date
------------------------
--------------------------------------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
-----------------------------------------------------------------------------------
THE SIGNATURES(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
</TABLE>
<PAGE> 1
EXHIBIT 10.3
RIVA BANCSHARES, INC.
1999 STOCK OPTION PLAN
EFFECTIVE AS OF APRIL 29, 1999
1. PURPOSE
The primary purpose of the Riva Bancshares, Inc. 1999 Stock Option Plan
(the "Plan") is to encourage and enable eligible directors, officers, key
employees and certain consultants and advisors of Riva Bancshares, Inc. (the
"Company") and its subsidiaries to acquire proprietary interests in the Company
through the ownership of Common Stock of the Company. The Company believes that
directors, officers and key employees who participate in the Plan will have a
closer identification with the Company by virtue of their ability as
shareholders to participate in the Company's growth and earnings. The Plan also
is designed to provide motivation for participating directors, officers and key
employees to remain in the employ of and to give greater effort on behalf of the
Company. It is the intention of the Company that the Plan provide for the award
of "incentive stock options" qualified under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") and the regulations promulgated
thereunder, as well as the award of non-qualified stock options. Accordingly,
the provisions of the Plan related to incentive stock options shall be construed
so as to extend and limit participation in a manner consistent with the
requirements of Section 422 of the Code.
2. DEFINITIONS
The following words or terms shall have the following meanings:
(a) "Agreement" shall mean a stock option agreement between the
Company and an Eligible Employee or Eligible Participant pursuant to the terms
of this Plan.
(b) "Board of Directors" shall mean the Board of Directors of the
Company.
(c) "Committee" shall mean the committee appointed by the Board of
Directors to administer the Plan, if any, as set forth in Section 5 of the Plan.
(d) "Company" shall mean Riva Bancshares, Inc., a Delaware
corporation.
(e) "Eligible Employee(s)" shall mean key employees regularly
employed by the Company or a Subsidiary (including officers, whether or not they
are directors) as the Board of Directors or the Committee shall select from time
to time.
(f) "Eligible Participant(s)" shall mean directors, officers, key
employees of the Company and its Subsidiaries, consultants, advisors and other
persons who may not otherwise be eligible to receive Qualified Incentive Options
pursuant to Section 8 of the Plan.
<PAGE> 2
(g) "Market Price" shall mean the closing price of the Company's
Common Stock on the date in question, as quoted by the Nasdaq National Market or
the Nasdaq SmallCap Market (or other nationally recognized quotation service).
If the Company's Common Stock is not traded on the Nasdaq Stock Market but is
registered on a national securities exchange, "Market Price" shall mean the
closing sales price of the Company's Common Stock on such national securities
exchange. If the Company's shares of Common Stock are not traded on a national
securities exchange or through any other nationally recognized quotation
service, then "Market Price" shall mean the fair market value of the Company's
Common Stock as determined by the Board of Directors or the Committee, acting in
good faith, under any method consistent with the Code, or Treasury Regulations
thereunder, as the Board of Directors or the Committee shall in its discretion
select and apply at the time of the grant of the option concerned. Subject to
the foregoing, the Board of Directors or the Committee, in fixing the market
price, shall have full authority and discretion and be fully protected in doing
so.
(h) "Optionee" shall mean an Eligible Employee or Eligible
Participant having a right to purchase Common Stock under an Agreement.
(i) "Option(s)" shall mean the right or rights granted to Eligible
Employees or Eligible Participants to purchase Common Stock under the Plan.
(j) "Plan" shall mean this First Premier Financial Corporation
1999 Stock Option Plan.
(k) "Shares," "Stock," or "Common Stock" shall mean shares of the
$.01 par value common stock of the Company.
(l) "Subsidiary" or "Subsidiaries" shall mean any corporation(s),
if the Company owns or controls, directly or indirectly, more than a majority of
the voting stock of such corporation(s).
(m) "Ten Percent Owner" shall mean an individual who, at the time
an Option is granted, owns directly or indirectly more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or a
Subsidiary.
3. EFFECTIVE DATE
The effective date of the Plan (the "Effective Date") shall be the date
the Plan is adopted by the Board of Directors, or the date the Plan is approved
by the shareholders of the Company, whichever is earliest. The Plan must be
approved by the affirmative vote of not less than a majority of the shares
present and voting at a meeting at which a quorum is present, which shareholder
vote must be taken within twelve (12) months after the date the Plan is adopted
by the Board of Directors. Such shareholder vote shall not alter the Effective
Date of the Plan. In the event shareholder approval of the adoption of the Plan
is not obtained within the aforesaid twelve (12) month period, then any Options
granted in the intervening period shall be void.
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4. SHARES RESERVED FOR PLAN
The shares of the Company's Common Stock to be sold to Eligible
Employees and Eligible Participants under the Plan may at the election of the
Board of Directors be either treasury shares or Shares originally issued for
such purpose. The maximum number of Shares which shall be reserved and made
available for sale under the Plan shall be five hundred thousand (500,000);
provided, however, that such Shares shall be subject to the adjustments provided
in Section 8(h). Any Shares subject to an Option which for any reason expires or
is terminated unexercised may again be subject to an Option under the Plan.
5. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors or the
Committee. The Committee shall be comprised of not less than two (2) members
appointed by the Board of Directors of the Company from among its members, each
of whom qualifies as a "Non-Employee Director" as such term is defined in Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor regulation.
Within the limitations described herein, the Board of Directors of the
Company or the Committee shall administer the Plan, select the Eligible
Employees and Eligible Participants to whom Options will be granted, determine
the number of shares to be optioned to each Eligible Employee and Eligible
Participant and interpret, construe and implement the provisions of the Plan.
The Board of Directors or the Committee shall also determine the price to be
paid for the Shares upon exercise of each Option, the period within which each
Option may be exercised, and the terms and conditions of each Option granted
pursuant to the Plan. The Board of Directors and Committee members shall be
reimbursed for out-of-pocket expenses reasonably incurred in the administration
of the Plan.
If the Plan is administered by the Board of Directors, a majority of
the members of the Board of Directors shall constitute a quorum, and the act of
a majority of the members of the Board of Directors present at any meeting at
which a quorum is present, or acts approved in writing by all members of the
Board of Directors shall be the acts of the Board of Directors. If the Plan is
administered by the Committee, a majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by all of the
members of the Committee shall be the acts of the Committee.
6. ELIGIBILITY
Options granted pursuant to Section 8 shall be granted only to Eligible
Employees. Options granted pursuant to Section 9 may be granted to Eligible
Employees and to Eligible Participants.
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7. DURATION OF THE PLAN
The Plan shall remain in effect until all Shares subject to or which
may become subject to the Plan shall have been purchased pursuant to Options
granted under the Plan; provided that Options under the Plan must be granted
within ten (10) years from the Effective Date. The Plan shall expire on the
tenth anniversary of the Effective Date.
8. QUALIFIED INCENTIVE OPTIONS
It is intended that Options granted under this Section 8 shall be
qualified incentive stock options under the provisions of Section 422 of the
Code and the regulations thereunder or corresponding provisions of subsequent
revenue laws and regulations in effect at the time such Options are granted.
Such Options shall be evidenced by stock option agreements in such form and not
inconsistent with this Plan as the Committee or the Board of Directors shall
approve from time to time, which Agreements shall contain in substance the
following terms and conditions:
(a) Price. The purchase price for shares purchased upon exercise
shall be not less than 100% of the Market Price on the day the Option is
granted; provided that the purchase price of stock deliverable upon the exercise
of a qualified incentive stock option granted to a Ten Percent Owner under this
Section 8 shall be not less than one hundred ten percent (110%) of the Market
Price on the day the Option is granted, as determined by the Board of Directors
or the Committee, but in no case less than the par value of such stock.
(b) Number of Shares. The Agreement shall specify the number of
Shares which the Optionee may purchase under such Option, as determined by the
Board of Directors or the Committee.
(c) Exercise of Options. The shares subject to the Option may be
purchased in whole or in part by the Optionee in accordance with the terms of
the Agreement from time to time after shareholder approval of the Plan, as
determined by the Board of Directors or the Committee, but in no event later
than ten (10) years from the date of grant of the Option. Notwithstanding the
foregoing, Shares subject to an Option which is a qualified incentive stock
option granted to a Ten Percent Owner under this Section 8 may be purchased from
time to time but in no event later than five (5) years from the date of grant of
the Option.
(d) Medium and Time of Payment. Stock purchased pursuant to an
Agreement shall be paid for in full at the time of purchase. Payment of the
purchase price shall be in cash or, in lieu of payment of all or part of the
purchase price in cash, the Optionee may surrender to the Company shares of the
common stock of the Company valued at the Market Price on the date of exercise
of the Option in accordance with the terms of the Agreement. Upon receipt of
payment, the Company shall, without transfer or issue tax, deliver to the
Optionee (or other person entitled to exercise the Option) a certificate or
certificates for such Shares.
(e) Rights as a Shareholder. An Optionee shall have no rights as a
shareholder with respect to any Shares covered by an Option until the date of
issuance of the stock certificate to the
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Optionee for such Shares. Except as otherwise expressly provided in the Plan, no
adjustments shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued.
(f) Nonassignability of Option. No Option shall be assignable or
transferable by the Optionee except by will or by the laws of descent and
distribution. During the lifetime of the Optionee, the Option shall be
exercisable only by him or her.
(g) Effect of Termination of Employment or Death. In the event
that an Optionee during his or her lifetime ceases to be an employee of the
Company or of any Subsidiary of the Company for any reason (including
retirement) other than death or permanent and total disability, any Option or
unexercised portion thereof which was otherwise exercisable on the date of
termination of employment shall expire unless exercised within a period of three
(3) months from the date on which the Optionee ceased to be an employee, but in
no event after the term provided in the Optionee's Agreement. In the event that
an Optionee ceases to be an employee of the Company or of any Subsidiary of the
Company for any reason (including retirement) other than death or permanent and
total disability prior to the time that an Option or portion thereof becomes
exercisable, such Option or portion thereof which is not then exercisable shall
terminate and be null and void. Whether authorized leave of absence for military
or government service shall constitute termination of employment for the purpose
of this Plan shall be determined by the Board of Directors or the Committee,
which determination shall be final and conclusive.
In the event that an Optionee during his or her lifetime ceases to be
an employee of the Company or any Subsidiary of the Company by reason of death
or permanent and total disability, any Option or unexercised portion thereof
which was otherwise exercisable on the date such Optionee ceased employment
shall expire unless exercised within a period of one (1) year from the date on
which the Optionee ceased to be an employee, but in no event after the term
provided in the Optionee's Agreement. In the event that an Optionee during his
or her lifetime ceases to be an employee of the Company or any Subsidiary of the
Company by reason of death or permanent and total disability, any Option or
portion thereof which was not exercisable on the date such Optionee ceased
employment may, in the discretion of the Board of Directors or the Committee, be
accelerated and become immediately exercisable for a period of one (1) year from
the date on which the Optionee ceased to be an employee, but in no event shall
the exercise period extend past the term provided in the Optionee's Agreement.
"Permanent and total disability" as used in this Plan shall be as
defined in Section 22(e)(3) of the Code.
In the event of the death of an Optionee, the Option shall be
exercisable by his or her personal representatives, heirs or legatees, as
provided herein.
(h) Recapitalization. In the event that dividends are payable in Common
Stock of the Company or in the event there are splits, subdivisions or
combinations of shares of Common Stock of the Company, the number of Shares
available under the Plan shall be increased or decreased
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proportionately, as the case may be, and the number and Option exercise price of
Shares deliverable upon the exercise thereafter of any Option theretofore
granted shall be increased or decreased proportionately, as the case may be, as
determined to be proper and appropriate by the Board of Directors or the
Committee.
(i) Reorganization. In case the Company is merged or consolidated
with another corporation and the Company is not the surviving corporation, or in
case the property or stock of the Company is acquired by another corporation, or
in case of a separation, reorganization, recapitalization or liquidation of the
Company, the Board of Directors of the Company, or the Board of Directors of any
corporation assuming the obligations of the Company hereunder, shall either (i)
make appropriate provision for the protection of any outstanding Options by the
substitution on an equitable basis of appropriate stock of the Company, or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect to the shares of Common Stock of the Company, provided only
that the excess of the aggregate fair market value of the Shares subject to
option immediately after such substitution over the purchase price thereof is
not more than the excess of the aggregate fair market value of the Shares
subject to option immediately before such substitution over the purchase price
thereof, or (ii) upon written notice to the Optionee provide that the Option
must be exercised within sixty (60) days of the date of such notice or it will
be terminated. If any adjustment under this Section 8(i) would create a
fractional share of Stock or a right to acquire a fractional share, such shall
be disregarded and the number of shares of Stock available under the Plan and
the number of Shares covered under any Options previously granted pursuant to
the Plan shall be the next lower number of shares of Stock, rounding all
fractions downward. An adjustment made under this Section 8(i) by the Board of
Directors shall be conclusive and binding on all affected persons.
Except as otherwise expressly provided in this Plan, the Optionee shall
have no rights by reason of any subdivision or consolidation of shares of stock
of any class, or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class, or by reason of any
dissolution, liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation; and any issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or prices of shares of Common Stock subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
(j) Annual Limitation. The aggregate fair market value (determined
at the time the Option is granted) of the shares with respect to which incentive
stock options are exercisable for the first time by an Optionee during any
calendar year (under all incentive stock option plans of the Company and its
Subsidiaries) shall not exceed $100,000. Any excess over such amount shall be
deemed to be related to and part of a non-qualified stock option granted
pursuant to Section 9.
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(k) General Restriction. Each Option shall be subject to the
requirement that if at any time the Board of Directors shall determine, in its
reasonable discretion, that the listing, registration or qualification of the
Shares subject to such Option upon any securities exchange or under any state or
federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Option or the issue or purchase of Shares thereunder, such Option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors. Alternatively, such
Options shall be issued and exercisable only upon such terms and conditions and
with such restrictions as shall be necessary or appropriate to effect exemption
from such listing, registration, or other qualification requirement.
9. NON-QUALIFIED OPTIONS
The Board of Directors or the Committee may grant to Eligible Employees
or Eligible Participants Options under the Plan which are not qualified
incentive stock options under the provisions of Section 422 of the Code. Such
non-qualified options shall be evidenced by Agreements in such form and not
inconsistent with this Plan as the Board of Directors or the Committee shall
approve from time to time, which Agreements shall contain in substance the same
terms and conditions as set forth in Section 8 hereof with respect to qualified
incentive stock options; provided, however, that:
(i) the limitations set forth in Sections 8(a) and 8(c)
with respect to Ten Percent Owners shall not be applicable to non-qualified
options granted to any Ten Percent Owner;
(ii) the limitations set forth in Section 8(g) with
respect to termination of employment or death shall not be applicable to
non-qualified option grants, and any such limitations shall be determined on a
case by case basis by the Board of Directors or the Committee at the time of the
non-qualified option grant;
(iii) the limitation set forth in Section 8(j) with respect
to the annual limitation of incentive stock options shall not be applicable to
non-qualified option grants; and
(iv) non-qualified options may be granted at a purchase
price equal to not less than 75% of the Market Price on the day the Option is
granted.
10. AMENDMENT OF THE PLAN
The Plan may at any time or from time to time be terminated, modified
or amended by the affirmative vote of not less than a majority of the shares
present and voting thereon by the Company's shareholders at a meeting of the
shareholders at which a quorum is present. The Board of Directors may at any
time and from time to time modify or amend the Plan in any respect, except that
without shareholder approval the Board of Directors may not (1) increase the
maximum number of Shares for which Options may be granted under the Plan (other
than increases due to changes in capitalization as referred to in Section 8(h)
hereof), or (2) change the class of persons eligible for qualified incentive
options. The termination or any modification or amendment of the Plan shall not,
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without the written consent of an Optionee, affect his or her rights under an
Option or right previously granted to him or her. With the written consent of
the Optionee affected, the Board of Directors or the Committee may amend
outstanding option agreements in a manner not inconsistent with the Plan.
Without employee consent, the Board of Directors may at any time and from time
to time modify or amend outstanding option agreements in such respects as it
shall deem necessary in order that incentive options granted hereunder shall
comply with the appropriate provisions of the Code and regulations thereunder
which are in effect from time to time respecting "Qualified Incentive Options."
The Company's Board of Directors may also suspend the granting of Options
pursuant to the Plan at any time and may terminate the Plan at any time;
provided, however, no such suspension or termination shall modify or amend any
Option granted before such suspension or termination unless (1) the affected
participant consents in writing to such modification or amendment or (2) there
is a dissolution or liquidation of the Company.
11. BINDING EFFECT
All decisions of the Board of Directors or the Committee involving the
implementation, administration or operation of the Plan or any offering under
the Plan shall be binding on the Company and on all persons eligible or who
become eligible to participate in the Plan.
12. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock
pursuant to Options exercised hereunder will be used for general corporate
purposes.
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EXHIBIT 23.2a
Independent Auditors' Consent
The Board of Directors
Riva Bancshares, Inc.:
We consent to the use of our report included herein and to the reference to our
firm under the heading, "Summary Selected Consolidated Financial Data,"
"Selected Consolidated Financial Data", and "Experts" in the prospectus.
/s/ KPMG LLP
St. Louis, Missouri
July 29, 1999
<PAGE> 1
EXHIBIT 23.2b
Independent Auditors' Consent
The Board of Directors
Premier Bancshares, Inc.:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Summary Selected Consolidated Financial Data,"
"Selected Consolidated Financial Data" and "Experts" in the prospectus.
/s/ KPMG LLP
St. Louis, Missouri
July 29, 1999
<PAGE> 1
CONSENT
WHEREAS, Riva Bancshares, Inc., a Delaware corporation (the "Company"),
has filed with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), Registration Statement on
Form S-1, including a Prospectus, and intends to file an amendment to said
Registration Statement, and any and all amendments thereto, as prescribed by the
Commission pursuant to the Act and the rules and regulations of the Commission
promulgated thereunder, together with any and all exhibits and other documents
relating to said Registration Statement, all in connection with the Company's
registration of up to 3,000,000 shares of Common Stock of the Company, $.01 par
value per share, and all upon the terms and in the manner to be set forth in
said Registration Statement, including the Prospectus, referred to above;
NOW, THEREFORE, the undersigned does hereby acknowledge that the
undersigned is to be named in said Registration Statement as becoming a director
of the Company and does hereby consent to all references to the undersigned in
such context appearing in said Registration Statement and any and all amendments
and post-effective amendments thereto and supplements to the Prospectus
contained therein.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the 22nd day of July, 1999.
/s/ Charles R. Willibrand
------------------------------------
Charles R. Willibrand
------------------------------------
(Print Name)
