As filed with the Securities and Exchange Commission on December 23, 1999.
Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NORTH VALLEY BANCORP
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
California 6022 94-2751350
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
----------------
880 East Cypress Avenue, Redding, California
96002, (530) 221-8400 (Address, including zip
code, and telephone number, including
area code, of registrant's principal executive offices)
----------------
MICHAEL J. CUSHMAN
President and Chief Executive Officer
North Valley Bancorp
880 East Cypress Avenue
Redding, California 96002
(530) 221-8400
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
----------------
Copies to:
JOSEPH G. MASON, ESQ. JAMES M. ROCKETT, ESQ.
GLENN T. DODD, ESQ. VENRICE R. PALMER, ESQ.
RICK J. GEORGE, ESQ. KEITH D. UNGLES, ESQ.
Coudert Brothers McCutchen, Doyle, Brown & Enersen, LLP
303 Almaden Boulevard, 5th Floor Three Embarcadero Center
San Jose, California 95110-2721 San Francisco, California 94111
(408) 297-9982 (415) 393-2000
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. | |
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration 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. | |
----------------
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CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of Each Class of Amount to Maximum Offering Maximum Aggregate Amount of
Securities to Be Registered Be Registered(1) Price Per Share Offering Price Registration Fee(2)
- ----------------------------------------------------------------------------------------------------------------
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Common Stock, no par value per share 1,644,238 shares $13.4375 $22,094,448 $6,142.26
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement relates to securities of the Registrant
issuable to holders of common stock of Six Rivers National Bank, a
national banking association ("SRNB"), in the proposed merger of SRNB
with the Registrant. Represents the approximate number of shares of
common stock of the Registrant to be issued upon the consummation of
the merger, based upon the number of shares of SRNB common stock
outstanding on December 21, 1999 (including shares issuable upon the
exercise of options pursuant to SRNB's stock option plan), all as
provided in the Agreement and Plan of Reorganization and Merger dated
October 3, 1999, attached as Annex A to the attached joint proxy
statement/prospectus.
(2) Pursuant to Rule 457(f), the registration fee was computed on the basis
of $13.4375, the market value of the common stock of SRNB to be
exchanged in the merger, computed in accordance with Rule 457(c) on the
basis of the average of the high and low price per share of such stock
as quoted on the Nasdaq National Market on December 21, 1999, and
1,644,238, the maximum number of shares of SRNB which may be received
by the Registrant and cancelled upon consummation of the plan of
reorganization and merger described above.
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.
<PAGE>
PRELIMINARY PROXY STATEMENT - SUBJECT TO COMPLETION
NORTH VALLEY BANCORP
880 EAST CYPRESS AVENUE
REDDING, CALIFORNIA 96002
_______________, 2000
Dear Shareholder:
You are cordially invited to attend a special meeting of the
shareholders of North Valley Bancorp ("NVBancorp") to be held at [LOCATION],
Redding, California at ___:__ _.m., local time, on ___________, 2000.
At the special meeting, you will be asked to consider and vote on a
proposal to approve the principal terms of the Agreement and Plan of
Reorganization and Merger dated as of October 3, 1999 by and among NVBancorp,
Six Rivers National Bank ("SRNB") and NVB Interim National Bank, including the
merger of SRNB into NVB Interim National Bank, with the resulting national
banking association continuing under the name and national bank charter of SRNB.
You will also be asked to consider and vote on a proposal for the classification
of the NVBancorp board of directors. These proposals are more fully described in
the accompanying joint proxy statement/prospectus. The plan of reorganization is
attached to this document as Annex A. No other business will be transacted at
the special meeting other than matters incidental to the conduct of the special
meeting.
As a result of the merger, each share of SRNB common stock outstanding
at the effective time of the merger (other than shares with respect to which
dissenters' rights are perfected) will be converted into a certain number of
shares of NVBancorp common stock according to a conversion ratio based on the
average trading price of NVBancorp common stock prior to the closing, subject to
certain potential adjustments described in the plan of reorganization and the
accompanying joint proxy statement/prospectus. No fractional shares of NVBancorp
common stock will be issued to holders of shares of SRNB common stock. In lieu
of such fractional shares, cash will be paid to SRNB shareholders in accordance
with the terms of the plan of reorganization.
Under the California General Corporation Law, the approval of the plan
of reorganization and the merger requires the affirmative vote of the holders of
a majority of the outstanding shares of NVBancorp common stock. The consummation
of the merger also requires that certain regulatory approvals be received and
that the conditions contained in the plan of reorganization be satisfied.
THE NVBANCORP BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PLAN OF
REORGANIZATION AND THE TRANSACTIONS CONTEMPLATED BY THE PLAN OF REORGANIZATION
INCLUDING THE MERGER, AND RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE PLAN OF REORGANIZATION AND THE TRANSACTIONS CONTEMPLATED BY THE PLAN OF
REORGANIZATION, INCLUDING THE MERGER, AND "FOR" THE PROPOSAL FOR THE
CLASSIFICATION OF THE NVBANCORP BOARD OF DIRECTORS, AT THE SPECIAL MEETING.
The accompanying notice and joint proxy statement/prospectus describe
the matters to be acted upon at the special meeting. Shareholders are urged to
review carefully the attached document, including its annexes. Such documents
contain a detailed description of the merger, its terms and conditions and the
transactions which are proposed.
<PAGE>
Your continuing interest in the business of NVBancorp and North Valley
Bank is appreciated, and we hope you will attend the special meeting in person.
It is important that your shares be represented at the special meeting.
Accordingly, whether or not you plan to attend the special meeting, please
either sign, date and return the enclosed proxy card promptly in the
postage-paid envelope that has been provided to you for your convenience or vote
by telephone by calling the toll-free number indicated on the proxy card. IF YOU
VOTE BY TELEPHONE, YOU DO NOT NEED TO RETURN THE ENCLOSED PROXY CARD. Please
refer to the joint proxy statement/prospectus for a complete description of the
telephone voting procedures.
Sincerely,
/s/ MICHAEL J. CUSHMAN
-----------------------------------------
Michael J. Cushman
President and Chief Executive Officer
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
regulators have approved this transaction or the shares of NVBancorp common
stock to be issued under this joint proxy statement/prospectus or determined if
this joint proxy statement/prospectus is accurate or adequate. Any
representation to the contrary is a criminal offense.
The shares of NVBancorp common stock offered by this joint proxy
statement/prospectus are not savings accounts, deposits or
other obligations of North Valley Bank or Six Rivers National Bank or any
subsidiary of any of the parties and are not insured by the Federal Deposit
Insurance Corporation or any other governmental agency.
- --------------------------------------------------------------------------------
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS _________, 2000,
AND IS FIRST BEING MAILED TO NVBANCORP SHAREHOLDERS ON OR ABOUT _________, 2000.
<PAGE>
NORTH VALLEY BANCORP
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _____________, 2000
To the shareholders of North Valley Bancorp:
Notice is hereby given that a special meeting of shareholders of North
Valley Bancorp will be held on ____________, 2000, __:__ _.m., local time, at
[location], Redding, California for the following purposes:
1. To consider and vote on a proposal to approve the Agreement
and Plan of Reorganization and Merger, dated as of October 3,
1999, among North Valley Bancorp, Six Rivers National Bank and
NVB Interim National Bank and the transactions contemplated by
the plan of reorganization, including the resulting issuance
of shares of North Valley Bancorp common stock in connection
with the merger of Six Rivers National Bank into NVB Interim
National Bank. The terms and conditions of the transaction are
more fully described in the accompanying joint proxy
statement/prospectus.
2. To approve amendments to the North Valley Bancorp articles of
incorporation and bylaws to provide for the classification of
the board of directors.
3. To transact such other business as may properly be brought
before the special meeting or any adjournments or
postponements of the special meeting.
The board of directors of North Valley Bancorp has unanimously approved
the transactions described above and unanimously recommends that you vote in
favor of the proposals at the special meeting.
Shareholders of record at the close of business on ______________,
2000, are entitled to notice of the special meeting and to vote at the special
meeting or any adjournments or postponements of the special meeting.
By Order Of The Board Of Directors,
/s/ J.M. "MIKE" WELLS, JR.
--------------------------
J.M. "Mike" Wells, Jr.
Secretary
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
EITHER COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE OR VOTE BY TELEPHONE AS INDICATED ON THE PROXY CARD. NO POSTAGE IS
REQUIRED IF YOU MAIL THE PROXY CARD IN THE UNITED STATES. IF YOU ATTEND THE
SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD OR VOTED BY TELEPHONE.
- --------------------------------------------------------------------------------
<PAGE>
[SRNB LOGO]
SIX RIVERS NATIONAL BANK
402 "F" STREET
EUREKA, CALIFORNIA 95501
_______________, 2000
Dear Shareholder:
You are cordially invited to attend a special meeting of the
shareholders of Six Rivers National Bank ("SRNB") to be held at [location],
Eureka, California at ___:__. _m., local time, on _________, 2000.
At the special meeting, SRNB shareholders will be asked to consider and
vote on a proposal to approve the principal terms of the Agreement and Plan of
Reorganization and Merger, dated as of October 3, 1999, by and among North
Valley Bancorp ("NVBancorp"), SRNB and NVB Interim National Bank, including the
merger of SRNB into NVB Interim National Bank, with the resulting national
banking association continuing under the name and national bank charter of SRNB,
as more fully described in the accompanying joint proxy statement/prospectus.
The plan of reorganization is attached to this document as Annex A. No other
business will be transacted at the special meeting other than matters incidental
to the conduct of the special meeting.
As a result of the merger, each share of SRNB common stock outstanding
at the effective time of the merger (other than shares with respect to which
dissenters' rights are perfected) will be converted into a certain number of
shares of NVBancorp common stock according to a conversion ratio based on the
average trading price of NVBancorp common stock prior to the closing, subject to
certain potential adjustments described in the plan of reorganization and the
accompanying joint proxy statement/prospectus. No fractional shares of NVBancorp
common stock will be issued to holders of shares of SRNB common stock. In lieu
of such fractional shares, cash will be paid to SRNB shareholders in accordance
with the terms of the plan of reorganization.
Under the rules and regulations of the Office of the Comptroller of the
Currency, the approval of the plan of reorganization and the merger requires the
affirmative vote of the holders of sixty-six and two-thirds percent (66 2/3%) of
the outstanding shares of SRNB common stock. The consummation of the proposed
merger also requires that certain regulatory approvals be received and that the
conditions contained in the plan of reorganization be satisfied.
THE SRNB BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PLAN OF
REORGANIZATION AND THE TRANSACTIONS CONTEMPLATED BY THE PLAN OF REORGANIZATION,
INCLUDING THE MERGER, AND RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE PLAN OF REORGANIZATION AND THE TRANSACTIONS CONTEMPLATED BY THE PLAN OF
REORGANIZATION, INCLUDING THE MERGER, AT THE SPECIAL MEETING.
The accompanying notice and joint proxy statement/prospectus describe
the matters to be acted upon at the special meeting. Shareholders are urged to
review carefully the attached document, including its annexes. Such documents
contain a detailed description of the merger, its terms and conditions and the
transactions which are proposed.
<PAGE>
Your continuing interest in the business of SRNB is appreciated, and we
hope you will attend the special meeting in person. It is important that your
shares be represented at the special meeting. Accordingly, whether or not you
plan to attend the special meeting, please either sign, date and return the
enclosed proxy card promptly in the postage-paid envelope that has been provided
to you for your convenience or vote by telephone by calling the toll-free number
indicated on the proxy card. IF YOU VOTE BY TELEPHONE, YOU DO NOT NEED TO RETURN
THE ENCLOSED PROXY CARD. Please refer to the joint proxy statement/prospectus
for a complete description of the telephone voting procedures.
Sincerely,
/s/ MICHAEL W. MARTINEZ
-----------------------------------------
Michael W. Martinez
President and Chief Executive Officer
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
regulators have approved this transaction or the shares of North Valley Bancorp
common stock to be issued under this joint proxy statement/prospectus or
determined if this joint proxy statement/prospectus is accurate or adequate.
Any representation to the contrary is a criminal offense.
The shares of NVBancorp common stock offered by this joint proxy
statement/prospectus are not savings accounts, deposits or
other obligations of North Valley Bank or Six Rivers National Bank or any
subsidiary of any of the parties and are not insured by the Federal Deposit
Insurance Corporation or any other governmental agency.
- --------------------------------------------------------------------------------
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS _________, 2000,
AND IS FIRST BEING MAILED TO SRNB SHAREHOLDERS ON OR ABOUT _________, 2000.
<PAGE>
[SRNB LOGO]
SIX RIVERS NATIONAL BANK
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _____________, 2000
To the shareholders of Six Rivers National Bank:
Notice is hereby given that a special meeting of shareholders of Six
Rivers National Bank will be held on _____________, 2000, __:__ _.m., local
time, at [location], Eureka, California for the following purposes:
1. To consider and vote on a proposal to approve the Agreement
and Plan of Reorganization and Merger, dated as of October 3,
1999, among North Valley Bancorp, Six Rivers National Bank and
NVB Interim National Bank, and the transactions contemplated
by the plan of reorganization, including the merger of Six
Rivers National Bank into NVB Interim National Bank. The terms
and conditions of the transaction are more fully described in
the accompanying joint proxy statement/prospectus.
2. To transact such other business as may properly be brought
before the special meeting or any adjournments or
postponements of the special meeting.
The board of directors of Six Rivers National Bank has unanimously
approved the transaction described above and unanimously recommends that you
vote in favor of the proposal at the special meeting.
Shareholders of record at the close of business on _______________,
2000, are entitled to notice of the special meeting and to vote at the special
meeting or any adjournments or postponements of the special meeting.
By Order Of The Board Of Directors,
/s/ MARGIE L. PLUM
-----------------------
Margie L. Plum
Corporate Secretary
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
EITHER COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE OR VOTE BY TELEPHONE AS INDICATED ON THE PROXY CARD. NO POSTAGE IS
REQUIRED IF YOU MAIL THE PROXY CARD IN THE UNITED STATES. IF YOU ATTEND THE
SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD OR VOTED BY TELEPHONE.
- --------------------------------------------------------------------------------
<PAGE>
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TABLE OF CONTENTS
PAGE
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QUESTIONS AND ANSWERS ABOUT THE PLAN OF REORGANIZATION.........................................................1
SUMMARY........................................................................................................5
Information About NVBancorp and SRNB.....................................................................5
Purchase Price and Potential Adjustments.................................................................6
The Special Meetings.....................................................................................7
Conditions to Completion of the Merger...................................................................8
Termination of the Plan of Reorganization................................................................8
Termination Fees........................................................................................10
Fees and Expenses of the Merger.........................................................................10
Reasons for the Merger; Recommendations of the Boards of Directors......................................10
Recommendations to Shareholders.........................................................................11
Opinion of SRNB's Financial Advisor.....................................................................11
Opinion of NVBancorp's Financial Advisor................................................................11
Accounting Treatment....................................................................................11
Certain Federal Income Tax Consequences.................................................................11
Interests of Certain Persons in the Merger..............................................................12
Dissenters'Rights.......................................................................................12
Comparative Per Share Market Price and Dividend Information.............................................12
Comparison of Shareholder Rights........................................................................13
Forward-Looking Statements..............................................................................13
Selected Historical and Pro Forma Financial Data........................................................13
Risk Factors ...........................................................................................19
The Price of NVBancorp Common Stock May Decline.........................................................19
Customers of SRNB May Not Be Retained and NVBancorp May Not Be Able to Realize
Anticipated Operating Cost Savings.................................................................19
Additional Shares of NVBancorp Common Stock Could Be Issued Which Could Result
in a Decline in the Market Price of The Stock......................................................19
The Year 2000 Problem May Adversely Affect NVBancorp, SRNB or the Resulting Bank........................20
The Restrictions Of The Office of the Comptroller of the Currency Consent Order
Entered Into By SRNB May Hinder Plans..............................................................20
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS..............................................................22
INTRODUCTION..................................................................................................22
The Special Meetings: Dates, Times and Places..........................................................24
Matters to be Considered at the Special Meetings........................................................24
Record Date; Stock Entitled to Vote; Quorum.............................................................24
Votes Required..........................................................................................24
Share Ownership of Management...........................................................................25
Voting of Proxies.......................................................................................29
INFORMATION ABOUT NVBANCORP AND NORTH VALLEY BANK.............................................................31
INFORMATION ABOUT SRNB........................................................................................31
PROPOSAL TO APPROVE THE PLAN OF REORGANIZATION AND MERGER ....................................................33
Background of the Plan of Reorganization and Merger.....................................................33
Reasons for the Plan of Reorganization and Merger; Recommendations of the Boards of Directors...........35
Opinion of SRNB's Financial Advisor.....................................................................39
Opinion of NVBancorp's Financial Advisor................................................................44
Effective Date and Time of the Merger...................................................................49
Purchase Price and Potential Adjustments................................................................49
Conversion of Shares of SRNB Common Stock...............................................................50
Exchange of SRNB Stock Certificates; Fractional Interests...............................................51
</TABLE>
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TABLE OF CONTENTS
PAGE
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Treatment of Stock Options..............................................................................52
Conduct of Business Pending the Merger..................................................................53
Additional Agreements...................................................................................56
Representations and Warranties..........................................................................57
Conditions to the Completion of the Merger..............................................................58
Termination of the Plan of Reorganization...............................................................61
Termination Fees........................................................................................63
Fees and Expenses of the Merger.........................................................................63
Amendment...............................................................................................64
Extension; Waiver.......................................................................................64
Management and Operations Following the Merger..........................................................64
Required Regulatory Approvals...........................................................................64
Certain Federal Income Tax Consequences.................................................................67
Accounting Treatment....................................................................................68
Trading Markets for Stock...............................................................................68
Resales of NVBancorp Common Stock.......................................................................69
DISSENTERS'RIGHTS.............................................................................................69
Dissenters'Rights of NVBancorp Shareholders.............................................................69
Dissenters'Rights of SRNB Shareholders..................................................................70
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION..................................................72
MARKET PRICE AND DIVIDEND INFORMATION ........................................................................80
Market Quotations.......................................................................................80
Dividends and Dividend Policy...........................................................................80
COMPARISON OF SHAREHOLDER RIGHTS..............................................................................83
General.................................................................................................83
Certain Anti-Takeover Measures..........................................................................83
Quorum Requirements.....................................................................................83
Indemnification of Directors and Executive Officers.....................................................83
Shareholder Meetings and Action by Written Consent......................................................88
Cumulative Voting.......................................................................................88
Amendment of Articles and Bylaws........................................................................88
Filling Vacancies on the Board of Directors.............................................................89
Call of Annual or Special Meeting of Shareholders and Action by Shareholders Without a Meeting..........89
Shareholder Rights Agreement ...........................................................................89
Classified Board Provisions.............................................................................91
DESCRIPTION OF NVBANCORP CAPITAL STOCK .......................................................................92
Common Stock............................................................................................92
Preferred Stock.........................................................................................92
DESCRIPTION OF SRNB CAPITAL STOCK ............................................................................92
Common Stock............................................................................................96
EXPERTS.......................................................................................................96
LEGAL MATTERS.................................................................................................96
SOLICITATION OF PROXIES.......................................................................................96
WHERE YOU CAN FIND MORE INFORMATION...........................................................................97
</TABLE>
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TABLE OF CONTENTS
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ANNEX A Agreement and Plan of Reorganization and Merger A-1
ANNEX B Hoefer & Arnett Incorporated Fairness Opinion B-1
ANNEX C Alex Sheshunoff & Co. Investment Banking, L.P. Fairness Opinion C-1
ANNEX D Chapter 13 Dissenters' Rights D-1
ANNEX E Title 12, United States Code, Section 215a (b), (c) and (d) E-1
ANNEX F Amendment to Restated Articles of Incorporation and Bylaws
Concerning the Classification of the Board of Directors F-1
</TABLE>
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<PAGE>
QUESTIONS AND ANSWERS ABOUT THE PLAN OF REORGANIZATION
Q: WHY IS THIS PLAN OF REORGANIZATION AND MERGER PROPOSED?
A: NVBancorp and SRNB are proposing this transaction because the boards
of directors have concluded that a combination of the two organizations is in
the best interests of shareholders of NVBancorp and SRNB and that the combined
companies can offer customers of NVBancorp, North Valley Bank and SRNB a broader
array of services and products than each could offer on its own.
Q: WHAT WILL I RECEIVE IN THIS TRANSACTION?
A: Under the plan of reorganization, SRNB shareholders will have the
right to receive a certain number of shares of NVBancorp common stock for each
share of SRNB common stock that they own according to a conversion ratio based
on the average trading price of NVBancorp common stock prior to the closing. The
conversion ratio will be equal to the average of the daily average of bid and
ask prices for NVBancorp shares on the Nasdaq National Market for the twenty
consecutive trading days ending on the third trading day immediately preceding
the effective time of the merger. Any fractional shares will be paid in cash.
NVBancorp shareholders will continue to own their existing shares.
Q: WHAT HAPPENS AS THE MARKET PRICE OF NVBANCORP SHARES FLUCTUATE?
A: The average closing price will determine the conversion ratio. For
instance, if the average closing price is not less than $10.00 and is not more
than $12.06, each SRNB share will be converted to 1.450 NVBancorp shares; if the
average closing price is not less than $12.07 and not more than $12.50, the
conversion ratio will be determined by dividing $17.50 by the average closing
price; and if the average closing price is more than $12.50 but is not more than
$15.00, the conversion ratio will be 1.400. If the average closing price is
greater than $15.00, then the conversion ratio will be determined in accordance
with a stated formula. If the average closing price is less than $10.00, then
the board of directors of SRNB may elect to terminate the plan of
reorganization; otherwise, the conversion ratio will be 1.450. See "Proposal to
Approve the Plan of Reorganization and Merger -Purchase Price and Potential
Adjustments" on page 49.
Q: WHAT WILL HAPPEN TO SIX RIVERS NATIONAL BANK IN THIS PLAN OF
REORGANIZATION AND MERGER?
A: SRNB will be merged into NVB Interim National Bank, an interim
national banking association formed by NVBancorp. The national banking
association resulting from this merger will continue under the name and national
bank charter of SRNB and will be a subsidiary of NVBancorp. NVBancorp will then
have two bank subsidiaries: North Valley Bank and Six Rivers National Bank.
Q: WILL THE PLAN OF REORGANIZATION AND MERGER BE TAX FREE TO ME?
A: The merger is intended to be a tax-free reorganization for federal
income tax purposes for the companies and their shareholders. In general, SRNB
shareholders will not recognize gain or loss on the exchange of their stock,
other than on account of cash received for fractional shares or dissenting
shares. NVBancorp shareholders will not recognize any gain or loss in connection
with the merger. To review the tax consequences to NVBancorp and SRNB
shareholders in greater detail, see "The Merger--Certain Federal Income Tax
Consequences" on page 67.
Q: WHAT RISKS SHOULD I CONSIDER?
A: You should carefully read the information set forth in this joint
proxy statement/prospectus and also consider certain other risk factors. See
"Risk Factors" on page 19.
-1-
<PAGE>
Q: HOW DO I VOTE?
A: Simply indicate on your proxy card how you want to vote and then
sign and mail your proxy card in the enclosed return envelope as soon as
possible so that your shares may be represented at your special meeting. You may
choose to vote by telephone instead of by proxy card by calling the toll-free
telephone number indicated on the proxy card. See, "Introduction -- Voting of
Proxies -- SUBMITTING PROXIES" on page 29.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will not vote your shares for you unless you provide
instructions to your broker on how to vote. It is important that you follow the
directions provided by your broker regarding how to instruct your broker to vote
your shares. Your failure to instruct your broker on how to vote your shares
will have the same effect as a vote against any proposal, including the plan of
reorganization and merger. Broker non-votes and abstentions will not have the
effect of establishing dissenters' rights of NV Bancorp or SRNB shareholders.
See "Introduction - Voting of Proxies - ABSTENTIONS AND BROKER NON-VOTES" on
page 30.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD OR
VOTED BY TELEPHONE?
A: Yes. If you vote by returning a proxy card, you may change your vote
at any time before your proxy is voted at the special meeting. If your shares
are held in your name, you may do this in one of three ways. First, you may send
a written notice stating that you would like to revoke your proxy. Second, you
may complete and submit a new proxy card. If you choose either of these two
methods, you must submit your notice of revocation or your new proxy card to the
address at the top of the notice of the special meeting for SRNB or NVBancorp
(as appropriate) and it must be received prior to the vote at the special
meeting. Third, you may attend the special meeting and vote in person if you
tell the Secretary that you want to cancel your proxy and vote in person. Simply
attending the special meeting, however, will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow directions received
from your broker to change your vote or to vote in person at the special
meeting. If you vote by telephone, you may change your vote at any time before
5:00 p.m., Eastern Standard Time on the day before the special meeting, by
calling the toll-free number indicated on the proxy card, or you may change your
vote by following any of the three alternatives described above. See,
"Introduction -- Voting of Proxies -- REVOKING PROXIES" on page 29.
Q: SHOULD I SEND IN MY SRNB STOCK CERTIFICATES NOW?
A: No. After the merger is completed, the exchange agent appointed by
NVBancorp will send you written instructions for exchanging your SRNB stock
certificates.
Q: WHEN DO YOU EXPECT THE PLAN OF REORGANIZATION AND MERGER TO BE
COMPLETED?
A: We are working toward completing this merger as quickly as possible.
We currently expect to complete this merger in March 2000.
Q: WHY HAVE YOU SENT ME THIS DOCUMENT?
A: This joint proxy statement/prospectus contains important information
regarding the proposed plan of reorganization and the merger, as well as
information about NVBancorp and SRNB. It also contains important information
about what the SRNB and NVBancorp boards of directors and management considered
in evaluating this proposed merger. We urge you to read this document carefully,
including its exhibits and attachments. You may also want to review the
documents listed under "Where You Can Find More Information" on page 97.
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Q: WHOM SHOULD I CONTACT WITH QUESTIONS OR TO OBTAIN ADDITIONAL COPIES
OF THIS JOINT PROXY STATEMENT/PROSPECTUS?
A: You may contact either:
North Valley Bancorp
880 East Cypress Avenue
Redding, California 96002
Attention: Michael J. Cushman,
President
(530) 221-8400
or
Six Rivers National Bank
402 "F" Street
Eureka, California 95501
Attention: Michael W. Martinez,
President
(707) 443-8400
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- --------------------------------------------------------------------------------
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE
IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT NVBANCORP AND SRNB THAT IS
NOT INCLUDED IN OR DELIVERED WITH THIS DOCUMENT. THE INFORMATION INCORPORATED
BY REFERENCE IS AVAILABLE WITHOUT CHARGE TO SHAREHOLDERS UPON WRITTEN OR ORAL
REQUEST TO THE PERSONS IDENTIFIED ABOVE.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE INFORMATION INCORPORATED BY
REFERENCE, SHAREHOLDER REQUESTS SHOULD BE RECEIVED BY ____________, 2000.
- --------------------------------------------------------------------------------
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SUMMARY
THIS SUMMARY HIGHLIGHTS CERTAIN INFORMATION IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE PROPOSED PLAN OF REORGANIZATION AND THE
MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE TERMS OF THE PROPOSED
PLAN OF REORGANIZATION AND THE MERGER, YOU SHOULD CAREFULLY READ THIS ENTIRE
DOCUMENT AND THE OTHER DOCUMENTS TO WHICH WE HAVE REFERRED YOU. SEE "WHERE YOU
CAN FIND MORE INFORMATION" ON PAGE 97. THE PLAN OF REORGANIZATION IS ATTACHED AS
ANNEX A TO THIS DOCUMENT. WE ENCOURAGE YOU TO READ THE PLAN OF REORGANIZATION.
IT IS THE LEGAL DOCUMENT THAT GOVERNS THE PROPOSED TRANSACTION.
INFORMATION ABOUT NVBANCORP AND SRNB (pages 31 and 32)
North Valley Bancorp
880 East Cypress Avenue
Redding, California 96002
(530) 221-8400
NVBancorp is a bank holding company incorporated under the laws of the
State of California and registered under the Bank Holding Company Act of 1956,
as amended. NVBancorp's banking subsidiary, North Valley Bank, is a California
banking corporation which presently operates 12 banking offices in Shasta and
Trinity Counties.
North Valley Bank accepts checking and savings deposits, offers money
market deposit accounts and certificates of deposit, makes secured and unsecured
commercial and other installment and term loans and offers other customary
banking services. North Valley Bank offers banking services generally, but it
places primary emphasis on lending for real estate purposes and specialized
lending to businesses and professionals. Loans for real estate purposes include
term financing for commercial facilities and real estate construction loans
mainly for residential and commercial properties. Loans to businesses and
professionals include commercial loans, SBA loans, deposit services and letters
of credit. North Valley Bank's consumer financial services include residential
real estate loans, retail deposit services, mutual fund products and consumer
finance. As a bank holding company, NVBancorp is authorized to engage in the
activities permitted under the Bank Holding Act of 1956, as amended, and
regulations thereunder.
Six Rivers National Bank
402 "F" Street
Eureka, California 95501
(707) 443-8400
SRNB is a national banking association, and a full service commercial
bank formed in 1989 and headquartered in Eureka, California, approximately 250
miles north of San Francisco. SRNB conducts a community banking business through
eight full-service offices in Eureka (2), Crescent City, Ferndale, Garberville,
McKinleyville, Weaverville and Willits. It concentrates on obtaining low-cost
core deposits from local customers and making primarily commercial, consumer and
real estate loans to local borrowers.
SRNB is chartered under the laws of the United States and is governed
by the National Bank Act and the regulations promulgated thereunder. SRNB is a
member of the Federal Deposit Insurance Corporation, which currently insures the
deposits of each member bank to a maximum of $100,000 per depositor. For this
protection, SRNB pays a semi-annual assessment (currently set at a nominal
amount) and is subject to the rules and regulations of the Federal Deposit
Insurance Corporation pertaining to deposit insurance and other matters.
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<PAGE>
National banks are subject to regulation, supervision and regular examination by
the Office of the Comptroller of the Currency. The regulations of the Federal
Deposit Insurance Corporation and the Office of the Comptroller of the Currency
govern many aspects of SRNB's business and activities, including investments,
loans, borrowings, branching, mergers and acquisitions, reporting and numerous
other areas. All national banks are members of the Federal Reserve System. SRNB
is also subject to applicable provisions of California law to the extent those
provisions are not in conflict with or preempted by federal banking law.
The geographic area served by SRNB is a rural market along California's
north coast and southern Oregon. SRNB's promotional activities stress its
specialized services and responsiveness to unique local needs.
SRNB accepts checking and savings deposits, offers money market deposit
accounts and certificates of deposit, makes secured and unsecured commercial and
other installment and term loans, and offers other customary banking services.
SRNB also makes real estate loans that consist primarily of term and
construction financing for both businesses and individuals. Included in the
bank's commercial product line are loans to businesses and professionals for
accounts receivable financing, equipment financing, letters of credit and loans
that are partially guaranteed by the U.S. Government.
PURCHASE PRICE AND POTENTIAL ADJUSTMENTS (page 49)
When the transactions contemplated by the plan of reorganization,
including the merger, are completed, it is expected that SRNB shareholders will
receive a number of NVBancorp shares of common stock for each share of SRNB
common stock held calculated in accordance with a conversion ratio. The
conversion ratio will be determined based on the average of the daily average of
bid and ask prices for NVBancorp shares on the Nasdaq National Market for the
twenty (20) consecutive trading days ending at the end of the third trading day
immediately preceding the effective time of the merger, rounded to four decimal
places (whether or not trades occurred on those days). If the average closing
price is not less than $10.00 and is not more than $12.06, the conversion ratio
will be 1.450; if the average closing price is not less than $12.07 and is not
more than $12.50, the conversion ratio will be determined by dividing $17.50 by
the average closing price; if the average closing price is more than $12.50 but
is not more than $15.00, the conversion ratio will be 1.400. If the average
closing price is less than $10.00, then the board of directors of SRNB may elect
to terminate the plan of reorganization; provided, however, that if SRNB does
not give NVBancorp timely notice of termination, then the conversion ratio will
be 1.450 and the merger closing will go forward. If the average closing price is
greater than $15.00, then the conversion ratio will be determined in accordance
with a formula calculated as follows: the conversion ratio will equal $21.00
PLUS 0.56 times the number equal to the average closing price MINUS $15.00, with
the sum DIVIDED by the average closing price. See "Proposal to Approve the Plan
of Reorganization and Merger--Purchase Price and Potential Adjustments" on page
49.
No fractional shares of NVBancorp common stock will be issued to
holders of SRNB common stock. Instead, each holder entitled to a fraction of a
share will receive, at the time of surrender of the certificate or certificates
representing the holder's shares, an amount in cash equal to the market value
per share of the fractional shares. The market price will be based on the
closing price of NVBancorp shares on the Nasdaq National Market on the trading
day immediately preceding the effective time of the merger.
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<PAGE>
THE SPECIAL MEETINGS (page 24)
NVBANCORP SHAREHOLDERS. You can vote at the special meeting of
NVBancorp shareholders if you owned NVBancorp common stock at the close of
business on ____________, 2000. You can cast one vote for each share of
NVBancorp common stock that you owned at that time. In order to approve the
merger of SRNB with and into NVB Interim National Bank and the issuance of
NVBancorp common stock to SRNB's shareholders, the holders of a majority of the
shares of NVBancorp common stock outstanding on the record date must vote in its
favor. You can vote your shares by attending the NVBancorp special meeting and
voting in person, or you can mark the enclosed proxy card with your vote, sign
it and mail it in the enclosed return envelope, or you can vote by telephone.
You can revoke your proxy prior to the voting at the special meeting by
submitting a written revocation, sending in a new proxy or by attending the
special meeting and voting in person. If you vote by telephone, you may change
your vote at any time before 5:00 p.m. Eastern Standard Time on the day before
the special meeting by calling the toll-free number indicated on the proxy card.
You may also change your vote by following any of the procedures for revoking
proxies described above.
SRNB SHAREHOLDERS. You can vote at the special meeting of SRNB
shareholders if you owned SRNB common stock at the close of business on
____________, 2000. You can cast one vote for each share of SRNB common stock
that you owned at that time. In order to approve the merger of SRNB with and
into NVB Interim National Bank, the holders of at least two-thirds (2/3) equal
to sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of SRNB
common stock outstanding on the record date must vote in its favor. You can vote
your shares by attending the SRNB special meeting and voting in person, or you
can mark the enclosed proxy card with your vote, sign it and mail it in the
enclosed return envelope. You can revoke your proxy as late as prior to the
voting at the special meeting by submitting a written revocation, sending in a
new proxy or by attending the special meeting and voting in person. If you vote
by telephone, you may change your vote at any time before 5:00 p.m. Eastern
Standard Time on the day before the special meeting by calling the toll-free
number indicated on the proxy card. You may also change your vote by following
any of the procedures for revoking proxies described above.
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<PAGE>
CONDITIONS TO COMPLETION OF THE MERGER (page 58)
We will not complete the merger unless a number of conditions are
satisfied. These include:
o approval of the merger by both NVBancorp and SRNB shareholders;
o receipt of all required governmental approvals;
o absence of any governmental proceeding that would prohibit the
merger;
o receipt of tax opinions to the effect that the merger will be
treated as a tax-free reorganization under the Internal Revenue
Code;
o absence of any orders suspending the effectiveness of the
registration statement filed by NVBancorp to register the shares
to be issued to SRNB shareholders and receipt of all required
state securities law approvals;
o receipt of a letter from NVBancorp's independent accountants that
no conditions exist that would preclude accounting for the merger
as a pooling-of-interests and receipt of a letter from SRNB's
independent accountants to the effect that no conditions exist
that would preclude SRNB from being a party to a business
combination to be accounted for as a pooling-of-interests;
o receipt of a written fairness opinion dated as of the date of this
joint proxy statement/ prospectus from SRNB's and NVBancorp's
financial advisors; and
o other customary conditions.
NVBancorp or SRNB could decide to complete the merger even though one
or more of these conditions has not been met. It is not certain when or if the
conditions to the merger will be satisfied or waived, or if the merger will be
completed.
TERMINATION OF THE PLAN OF REORGANIZATION (page 61)
We can terminate the plan of reorganization at any time before the
merger is completed, even if the shareholders of SRNB or NVBancorp have approved
the plan of reorganization. The plan of reorganization can be terminated either
by our mutual agreement or by one of us if certain events occur.
Either SRNB or NVBancorp can terminate the plan of reorganization if:
o The merger is not completed by March 31, 2000, unless this date is
extended under certain circumstances;
o Any governmental agency denies or refuses to grant a required
approval of the merger, unless we agree to appeal the denial or
refusal or we agree to file an amended application for the
governmental approval; or
o The shareholders of SRNB or NVBancorp fail to approve the merger.
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<PAGE>
NVBancorp can terminate the plan of reorganization if:
o Any of the conditions to NVBancorp's obligations under the plan of
reorganization are not satisfied or waived by March 31, 2000
unless this date is extended under certain circumstances;
o A material adverse change has occurred in the business, financial
condition, results of operations or assets of SRNB;
o SRNB or any of its affiliates enters into an agreement by which
SRNB or its subsidiaries would be acquired by another entity;
o SRNB breaches any covenant in the plan of reorganization which
materially impairs the benefit of the merger to NVBancorp, unless
SRNB cures the breach within 45 days after written notice from
NVBancorp; or
o SRNB fails to deliver to NVBancorp certain documents required for
the merger.
SRNB can terminate the plan of reorganization if:
o Any of the conditions to SRNB's obligations under the plan of
reorganization are not satisfied or waived by March 31, 2000,
unless this date is extended under certain circumstances;
o A material adverse change has occurred in the business, financial
condition, results of operations or assets of NVBancorp;
o NVBancorp solicits or accepts an offer from a third party to
acquire NVBancorp or North Valley Bank and the offer does not
require NVBancorp or the third party to comply with the plan of
reorganization;
o NVBancorp breaches any covenant in the plan of reorganization
which materially impairs the benefit of the merger to SRNB unless
NVBancorp cures the breach within 45 days after receipt of written
notice from SRNB; or
o NVBancorp fails to deliver to SRNB certain documents required for
the merger.
SRNB also has the option to terminate the plan of reorganization within
two business days after the determination date, if the average closing price of
NVBancorp common stock for the 20 trading days ending on the determination date
is less than $10.00. The determination date is the last day of the 20 trading
day period ending on the third business day prior to the closing date.
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<PAGE>
TERMINATION FEES (page 63)
SRNB is required to pay NVBancorp $2.0 million in liquidated damages if
NVBancorp terminates the plan of reorganization for any of the following
reasons:
o If SRNB or its affiliates enters into an agreement by which SRNB
or its subsidiaries would be acquired by another entity;
o If SRNB breaches any covenant in the plan of reorganization which
materially impairs the benefit of the merger to NVBancorp, unless
SRNB cures the breach within 45 days after written notice from
NVBancorp; or
o If SRNB willfully or deliberately refuses to deliver to NVBancorp
certain closing documents required by the plan of reorganization.
NVBancorp is required to pay SRNB $2.0 million in liquidated damages if
SRNB terminates the plan of reorganization for any of the following reasons:
o If NVBancorp solicits or accepts an offer from a third party to
acquire NVBancorp or North Valley Bank and the offer does not
require NVBancorp or the third party to comply with the plan of
reorganization;
o If NVBancorp breaches any covenant in the plan of reorganization
which materially impairs the benefit of the merger to SRNB, unless
NVBancorp cures the breach within 45 days after written notice
from SRNB; or
o If NVBancorp willfully or deliberately refuses to deliver to SRNB
certain closing documents required by the plan of reorganization.
FEES AND EXPENSES OF THE MERGER (page 63)
Other than in the situations described in "--Termination Fees" above
and for certain expenses which we have agreed to share equally, whether or not
the merger is completed in accordance with the plan of reorganization, all costs
and expenses incurred in connection with the plan of reorganization and the
transactions covered by the plan of reorganization will be paid by the party
incurring those expenses.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS (page 35)
The boards of directors of NVBancorp and SRNB believe that the merger
is in the best interests of their respective institutions, shareholders,
communities and banking customers. Each board expects that NVBancorp, as a
larger organization in multiple and diverse markets, will be stronger in terms
of growth opportunities and profitability than is either institution at present.
NVBancorp will also have the advantage of consolidation and centralization of
certain management and operations functions and certain economies of scale.
Furthermore, it is believed that NVBancorp, as a stronger independent financial
institution with a primary market area covering a greater geographic area, will
be better able to compete with major banks in the communities now served by each
company.
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RECOMMENDATIONS TO SHAREHOLDERS (page 35)
NVBANCORP SHAREHOLDERS. The board of directors of NVBancorp believes
that the merger is fair to you and in your best interests and unanimously
recommends that you vote "FOR" the proposal to approve the plan of
reorganization and the merger and the issuance of shares of NVBancorp common
stock in connection with the merger. The board of directors also unanimously
recommends that you vote "FOR" the proposal for the classification of the
NVBancorp board of directors.
SRNB SHAREHOLDERS. The board of directors of SRNB believes that the
merger is fair to you and in your best interests and unanimously recommends that
you vote "FOR" the proposal to approve the plan of reorganization and the
merger.
In evaluating the recommendations of the boards of directors summarized
above, shareholders should carefully consider the matters described under "Risk
Factors" and "The Merger-Background of the Merger" and "Proposal to Approve the
Plan of Reorganization and Merger-Reasons for the Plan of Reorganization and
Merger; Recommendations of the Boards of Directors."
OPINION OF SRNB'S FINANCIAL ADVISOR (page 39)
Hoefer & Arnett Incorporated has rendered an opinion, dated October 1,
1999 and updated to _____________, 2000, to the SRNB board of directors that the
plan of reorganization and merger is fair, from a financial point of view, to
the shareholders of SRNB, as of the date of the opinion. The Hoefer fairness
opinion, which sets forth certain assumptions made, matters considered and
limits of review undertaken, by Hoefer & Arnett Incorporated, is attached to
this joint proxy statement/prospectus as Annex B. SRNB shareholders are urged to
read the Hoefer fairness opinion in its entirety. See "Proposal to Approve the
Plan of Reorganization and Merger--Opinion of SRNB's Financial Advisor" on page
39, which also contains a discussion of the fees to be paid to Hoefer & Arnett
Incorporated. Certain of the fees to be paid to Hoefer & Arnett Incorporated are
contingent upon consummation of the merger. If Hoefer & Arnett Incorporated does
not render an updated fairness opinion dated the date of this joint proxy
statement/prospectus, the plan of reorganization can be terminated.
OPINION OF NVBANCORP'S FINANCIAL ADVISOR (page 44)
Alex Sheshunoff & Co. Investment Banking, L.P. has rendered an opinion,
dated September 23, 1999 and updated to _____________, 2000, to NVBancorp's
board of directors that the plan of reorganization and merger is fair, from a
financial point of view, to the holders of NVBancorp common stock. The opinion
of Alex Sheshunoff & Co. Investment Banking L.P. is attached to this joint
proxy/prospectus as Annex C.
ACCOUNTING TREATMENT (page 68)
NVBancorp expects to account for the merger as a "pooling of
interests." Under the pooling of interests accounting method, NVBancorp will
carry forward on its books the assets and liabilities of SRNB at their
historical recorded values.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (page 67)
The plan of reorganization and merger has been structured so that, in
general, NVBancorp and SRNB and the shareholders of NVBancorp and SRNB will not
recognize gain or loss for federal income tax purposes in the merger, except for
taxes payable because of cash received by SRNB shareholders instead of
fractional shares or because of dissenting shares. It is a condition, at the
closing of the merger, that NVBancorp and SRNB receive an opinion from tax
counsel to the effect, among other matters, that the merger should qualify as a
tax-free reorganization.
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TAX MATTERS ARE VERY COMPLICATED. THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. WE URGE YOU TO CONSULT YOUR
OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING
THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (page 52)
Some of SRNB's directors and officers may have interests in the merger
that are different from, or in addition to, yours. As a result, these directors
and officers may be more likely to vote to approve the plan of reorganization
and the merger than shareholders of SRNB generally. The members of our boards of
directors knew about these additional interests, and considered them, when they
approved the transactions contemplated by the plan of reorganization, including
the merger. See "Introduction-Share Ownership of Management" and "Proposal to
Approve the Plan of Reorganization and Merger--Interests of SRNB Officers and
Directors in the Merge" on page 52.
DISSENTERS' RIGHTS (page 69)
NVBANCORP. No holder of NVBancorp common stock will be entitled to
dissenters' rights unless the holders of at least 5% of the outstanding shares
of NVBancorp common stock have perfected their dissenters' rights in accordance
with Chapter 13 of the California General Corporation Law.
SRNB. No holder of SRNB common stock will be entitled to dissenters'
rights unless the holder has perfected his or her dissenter's rights in
accordance with applicable provisions of the National Bank Act.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION (page 80)
NVBancorp common stock is listed and traded on the Nasdaq National
Market under the symbol "NOVB." SRNB common stock is quoted on the Nasdaq
National Market under the symbol "SIXR." On October 1, 1999, the last trading
date prior to the public announcement of the proposed merger, NVBancorp common
stock closed at $11.063 per share and SRNB common stock closed at $13.50 per
share, or a pro forma equivalent per share of NVBancorp common stock (based on
an conversion ratio of ____) of $_____. On __________, 2000, the latest
practicable trading date prior to the printing of this joint proxy
statement/prospectus, NVBancorp common stock closed at $________ per share and
SRNB common stock closed at $________ per share, or a pro forma equivalent per
share of NVBancorp common stock (based on an conversion ratio of ___) of
$________. Following the merger, no shares of SRNB common stock will be
outstanding and NVBancorp common stock will continue to be traded on the Nasdaq
National Market.
NVBancorp has paid cash dividends to its shareholders on a semi-annual
basis from 1993 through 1997 and on a quarterly basis commencing with the first
quarter of 1998. NVBancorp paid cash dividends totaling $.35 per share in 1997,
$.375 per share in 1998 and $.30 per share through September 30, 1999. It is the
intention of NVBancorp to pay cash dividends, subject to certain regulatory
restrictions and depending upon the level of earnings, management's assessment
of future capital needs and other factors considered by the NVBancorp board of
directors. SRNB has not paid cash dividends in 1997, 1998 or 1999. SRNB does not
intend to pay cash dividends prior to the closing of the transactions
contemplated by the plan of reorganization.
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COMPARISON OF SHAREHOLDER RIGHTS (page 83)
Your rights as a shareholder of SRNB are currently governed by the
National Bank Act, California law and the articles of association and bylaws of
SRNB. If the merger is completed, your rights as a NVBancorp shareholder will be
governed by California law but will also be determined by NVBancorp's articles
of incorporation and bylaws, which differ in certain respects from SRNB's
articles of association and bylaws.
FORWARD-LOOKING STATEMENTS (page 22)
Statements in this document and in the documents incorporated here by
this reference are or may be forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those expressed in the
statements, depending on a variety of factors. You should carefully review all
information, including the financial statements and the notes to the financial
statements, included or incorporated here by this reference.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA (page 72)
We are providing the following information to aid you in your analysis
of the financial effects of the merger. The following tables show financial
results actually achieved by each of NVBancorp and SRNB (the "historical"
figures). The tables also show results as if the companies had been combined for
the periods presented (the "pro forma combined" figures). Pro forma combined
figures are simply arithmetical combinations of NVBancorp's and SRNB's separate
financial results; you should not assume that NVBancorp and SRNB would have
achieved the pro forma combined results if they had actually been combined
during the periods presented. These pro forma presentations treat our companies
as if they had always been combined for accounting and financial reporting
purposes, a method known as pooling of interests accounting, which is how we
plan to account for the merger. When you read this information, you should also
read the information under the heading "Unaudited Pro Forma Condensed Combined
Financial Information" on page 72. For purposes of illustration, the pro forma
combined figures have been calculated using the conversion ratio of 1.450. The
actual conversion ratio could be adjusted as described under the heading
"Proposal to Approve the Plan of Reorganization and Merger-Purchase Price and
Potential Adjustments" on page 49.
The financial information as of and for the nine months ended September
30, 1999 and 1998 has been derived from the unaudited consolidated financial
statements of NVBancorp and the unaudited financial statements of SRNB. In the
opinion of management of NVBancorp and SRNB, respectively, all adjustments
(consisting of normal recurring accruals) considered necessary for the fair
presentation of the results for the periods presented have been included. Annual
historical figures are derived from the consolidated financial statements of
NVBancorp and the financial statements of SRNB as of December 31, 1998 and 1997
and for the three years then ended audited by Deloitte & Touche LLP, independent
auditors of NVBancorp and SRNB. The historical figures for the other years
presented have been derived from the audited consolidated financial statements
of NVBancorp and the audited financial statements of SRNB. The annual historical
information presented below should be read together with the consolidated
audited financial statements of NVBancorp, incorporated here by this reference,
and the audited financial statements of SRNB, incorporated here by this
reference. To find this information, see "Where You Can Find More Information"
on page 97.
We expect to incur merger and other non-recurring expenses as a result
of combining our companies. We also anticipate that the merger will provide the
combined company with financial benefits such as reduced operating expenses and
the opportunity to earn additional revenue. However, none of these anticipated
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expenses or benefits has been factored into the pro forma combined income
statement information. For that reason, the pro forma combined information,
while helpful in illustrating the financial attributes of the combined company
under one set of assumptions, does not attempt to predict or suggest future
results.
The following tables present selected historical and pro forma combined
consolidated financial information for NVBancorp and SRNB. The following
financial data should be read in conjunction with the historical consolidated
financial statements of NVBancorp, the historical consolidated financial
statements of SRNB, and the unaudited pro forma combined consolidated financial
information and the notes to such information, certain of which are included
elsewhere in this joint proxy statement/prospectus. The unaudited pro forma
combined consolidated financial information presents selected financial
information based on the historical financial statements of the parties, giving
effect to the proposed merger under the pooling of interests method of
accounting and the assumptions and adjustments described in the notes thereto.
The unaudited pro forma combined consolidated financial information does not
indicate the results or financial position that would have occurred if the plan
of reorganization and merger had been in effect for the periods or on the dates
indicated or that may occur in the future.
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<TABLE>
<CAPTION>
NORTH VALLEY BANCORP
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
AS OF AND FOR THE:
NINE MONTHS ENDED SEPT 30, YEARS ENDED DECEMBER 31,
-------------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net interest income $ 9,770 $ 8,677 $ 11,885 $ 11,089 $ 10,564 $ 9,910 $ 8,718
Provision for loan or lease losses 835 1,160 1,430 770 720 375 240
Other income 2,866 3,009 4,095 4,138 2,581 2,630 2,477
Other expenses 7,220 6,473 8,886 8,312 6,786 6,412 6,404
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes 4,581 4,053 5,664 6,145 5,639 5,753 4,551
Income taxes 1,226 1,135 1,579 1,000 1,532 1,670 1,339
--------- --------- --------- --------- --------- --------- ---------
Net income $ 3,355 $ 2,918 $ 4,085 $ 5,145 $ 4,107 $ 4,083 $ 3,212
========= ========= ========= ========= ========= ========= =========
PER SHARE DATA:
Earnings per share - basic $ 0.91 $ 0.79 $ 1.11 $ 1.41 $ 1.11 $ 1.11 $ 0.88
Earnings per share - diluted 0.90 0.78 1.10 1.39 1.10 1.10 0.87
Cash dividends per share 0.30 0.18 0.38 0.35 0.35 0.32 0.35
Book value per share 8.75 8.10 8.18 7.63 6.55 5.70 4.90
Tangible book value per share 8.62 8.05 8.05 7.58 6.49 5.69 4.87
BALANCE SHEET DATA:
Balance sheet totals-end of period:
Assets $ 304,355 $ 281,791 $ 296,362 $ 270,757 $ 256,877 $ 235,072 $ 213,956
Loans and leases, net 209,519 179,222 197,434 167,507 166,983 147,808 125,463
Deposits 266,371 247,383 259,881 238,522 229,228 211,075 193,541
Shareholders' equity 32,426 29,891 30,180 28,066 23,900 20,973 17,926
Average balance sheet amounts:
Assets $ 299,263 $ 274,707 $ 279,669 $ 266,875 $ 247,362 $ 228,588 $ 208,571
Loans and leases 200,656 171,375 175,556 167,496 157,644 137,613 114,577
Earning assets 273,721 251,257 256,195 244,379 228,124 211,013 191,469
Deposits 263,332 242,604 246,532 237,304 221,736 205,814 189,406
Shareholders' equity 31,485 29,456 29,757 26,162 22,698 19,974 16,879
SELECTED RATIOS:(1)
Return on average equity 14.25% 13.24% 13.73% 19.67% 18.09% 20.44% 19.03%
Return on average tangible equity 14.46% 13.33% 13.94% 19.80% 18.28% 20.47% 19.16%
Return on average assets 1.50% 1.42% 1.46% 1.93% 1.66% 1.79% 1.54%
Efficiency ratio (net interest income and
noninterest income to noninterest expense) 57.14% 55.39% 55.61% 54.59% 51.62% 51.13% 57.20%
Average equity to average assets 10.52% 10.72% 10.64% 9.80% 9.18% 8.74% 8.09%
Leveraged capital ratio 10.52% 10.52% 10.18% 9.94% 8.98% 8.87% 8.49%
Nonperforming loans and leases to total loans
and leases 0.73% 1.59% 1.34% 0.46% 0.71% 0.20% 0.35%
Nonperforming assets to total assets 0.95% 1.14% 1.10% 0.37% 0.50% 0.16% 0.21%
Net chargeoffs to average loans and leases 0.31% 0.68% 0.70% 0.19% 0.50% 0.14% 0.14%
Allowance for loan or lease losses to total
loans and leases 1.00% 0.94% 0.95% 1.00% 0.74% 0.88% 0.90%
Allowance for loan or lease losses to
nonperforming loans and leases 136.60% 59.34% 71.21% 218.21% 104.15% 446.13% 258.24%
(1) Selected ratios for the nine months ended September 30, 1999 and 1998 have been annualized.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SIX RIVERS NATIONAL BANK
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
AS OF AND FOR THE:
NINE MONTHS ENDED SEPT 30, YEARS ENDED DECEMBER 31,
-------------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net interest income $ 6,412 $ 6,550 $ 8,847 $ 6,071 $ 4,957 $ 4,054 $ 3,380
Provision for loan or lease losses 220 2,504 3,904 2,241 276 225 229
Other income 1,272 1,187 1,595 1,225 955 886 734
Other expenses 5,854 5,950 8,414 4,912 4,254 3,734 3,680
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes 1,610 (717) (1,876) 144 1,382 981 205
Income taxes 672 (287) (751) 26 580 412 --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) $ 938 $ (430) $ (1,125) $ 118 $ 802 $ 569 $ 205
========= ========= ========= ========= ========= ========= =========
PER SHARE DATA:
Earnings (losses) per share - basic $ 0.64 $ (0.30) $ (0.77) $ 0.17 $ 1.42 $ 1.01 $ 0.37
Earnings (losses) per share - diluted 0.64 (0.30) (0.77) 0.16 1.35 1.00 0.32
Cash dividends per share -- -- -- -- -- -- --
Book value per share 12.92 13.26 12.67 13.45 10.18 8.92 7.59
Tangible book value per share 9.76 9.86 9.32 9.82 10.18 8.92 7.59
BALANCE SHEET DATA:
Balance sheet totals-end of period:
Assets $ 206,187 $ 208,822 $ 203,236 $ 193,807 $ 100,019 $ 87,189 $ 72,196
Loans and leases, net 106,745 103,221 104,151 84,621 72,654 54,664 42,991
Deposits 177,006 187,480 182,932 172,733 91,986 79,888 66,949
Shareholders' equity 19,077 19,380 18,520 19,236 5,754 5,037 4,206
Average balance sheet amounts:
Assets $ 203,423 $ 200,397 $ 201,323 $ 118,685 $ 92,606 $ 78,215 $ 66,818
Loans and leases 108,157 101,765 102,481 79,366 65,245 49,306 40,098
Earning assets 186,368 180,561 182,132 108,298 83,925 70,312 59,765
Deposits 175,165 177,425 178,802 107,746 83,417 71,840 61,511
Shareholders' equity 18,752 19,971 19,567 6,444 5,597 4,810 4,302
SELECTED RATIOS: (1)
Return on average equity 6.67% (2.87%) (5.75%) 1.24% 14.33% 11.83% 4.77%
Return on average tangible equity 8.96% (3.85%) (7.75%) 1.95% 14.33% 11.83% 4.77%
Return on average assets 0.61% (0.29%) (0.56%) 0.10% 0.87% 0.73% 0.31%
Efficiency ratio (net interest income and
noninterest income to noninterest expense) 76.18% 76.90% 80.57% 67.93% 72.50% 75.57% 89.73%
Efficiency ratio excluding the amortization of
intangibles and goodwill 73.20% 73.88% 77.53% 66.81% 71.96% 75.57% 89.45%
Average equity to average assets 9.22% 9.97% 9.72% 5.43% 6.04% 6.15% 6.44%
Leveraged capital ratio 7.48% 6.87% 6.73% 8.69% 5.91% 5.98% 6.19%
Nonperforming loans and leases to total loans
and leases 2.91% 1.89% 2.94% 3.48% 2.41% 1.29% 2.43%
Nonperforming assets to total assets 1.64% 1.13% 1.72% 1.74% 2.03% 1.23% 1.48%
Net chargeoffs (recoveries) to average loans
and leases (0.02%) 2.00% 2.21% 2.38% 0.25% 0.12% 0.22%
Allowance for loan or lease losses to total
loans and leases 2.78% 1.56% 2.62% 1.35% 1.10% 1.25% 1.21%
Allowance for loan or lease losses to
nonperforming loans and leases 97.91% 82.55% 89.18% 38.76% 45.46% 97.34% 49.67%
(1) Selected ratios for the nine months ended September 30, 1999 and 1998 have been annualized.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NORTH VALLEY BANCORP AND SIX RIVERS NATIONAL BANK
COMBINED
SELECTED UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
AS OF AND FOR THE:
NINE MONTHS ENDED SEPT 30, YEARS ENDED DECEMBER 31,
-------------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net interest income $ 16,182 $ 15,227 $ 20,732 $ 17,161 $ 15,522 $ 13,964 $ 12,098
Provision for loan or lease losses 1,055 3,664 5,334 3,011 996 600 469
Other income 4,138 4,196 5,690 5,363 3,536 3,516 3,211
Other expenses 13,074 12,423 17,300 13,224 11,041 10,146 10,084
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes 6,191 3,336 3,788 6,289 7,021 6,734 4,756
Income taxes 1,898 848 828 1,026 2,112 2,082 1,339
--------- --------- --------- --------- --------- --------- ---------
Net income $ 4,293 $ 2,488 $ 2,960 $ 5,263 $ 4,909 $ 4,652 $ 3,417
========= ========= ========= ========= ========= ========= =========
PER SHARE DATA:
Earnings per share - basic 0.74 0.43 0.51 1.12 1.09 1.04 0.77
Earnings per share - diluted 0.73 0.43 0.51 1.10 1.07 1.02 0.74
Cash dividends per share 0.30 0.18 0.38 0.35 0.35 0.32 0.35
Book value per share 8.81 8.48 8.38 8.22 6.64 5.78 4.96
Tangible book value per share 7.93 7.60 7.46 7.29 6.59 5.77 4.94
BALANCE SHEET DATA:
Balance sheet totals-end of period:
Assets $ 510,542 $ 490,613 $ 499,598 $ 464,564 $ 356,896 $ 322,261 $ 286,152
Loans and leases, net 316,264 282,443 301,585 252,128 239,637 202,472 168,454
Deposits 443,377 434,863 442,813 411,255 321,214 290,963 260,490
Shareholders' equity 51,503 49,271 48,700 47,302 29,654 26,010 22,132
Average balance sheet amounts:
Assets $ 502,686 $ 475,104 $ 480,992 $ 385,560 $ 339,968 $ 306,803 $ 275,389
Loans and leases 308,813 273,140 278,037 246,862 222,889 186,919 154,675
Earning assets 460,089 431,818 438,327 352,677 312,049 281,325 251,234
Deposits 438,497 420,029 425,334 345,050 305,153 277,654 250,917
Shareholders' equity
50,237 49,427 49,324 32,606 28,295 24,784 21,181
SELECTED RATIOS: (1)
Return on average equity 11.43% 6.73% 6.00% 16.14% 17.35% 18.77% 16.13%
Return on average tangible equity 12.76% 7.53% 6.76% 17.64% 17.49% 18.80% 16.23%
Return on average assets 1.14% 0.70% 0.62% 1.37% 1.44% 1.52% 1.24%
Efficiency ratio (net interest income and
noninterest income to noninterest expense) 64.34% 63.96% 65.48% 58.71% 57.93% 58.04% 65.87%
Efficiency ratio excluding the amortization
of intangibles and goodwill 63.22% 62.79% 64.35% 58.55% 57.93% 58.04% 65.87%
Average equity to average assets 9.99% 10.40% 10.25% 8.46% 8.32% 8.08% 7.69%
Leveraged capital ratio 9.30% 9.00% 8.75% 9.47% 8.12% 8.10% 7.91%
Nonperforming loans and leases to total loans
and leases 1.45% 1.70% 1.90% 1.47% 1.23% 0.49% 0.88%
Nonperforming assets to total assets 1.23% 1.14% 1.35% 0.94% 0.93% 0.45% 0.53%
Net chargeoffs to average loans and leases 0.19% 1.17% 1.26% 0.90% 0.43% 0.14% 0.16%
Allowance for loan or lease losses to total
loans and leases 1.61% 1.17% 1.53% 1.12% 0.85% 0.98% 0.98%
Allowance for loan or lease losses to
nonperforming loans and leases 110.79% 68.83% 80.89% 75.89% 69.27% 199.18% 111.08%
(1) Selected ratios for the nine months ended September 30, 1999 and 1998 have been annualized.
</TABLE>
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<PAGE>
HISTORICAL AND PRO FORMA PER SHARE DATA FOR NVBANCORP AND SRNB
We have summarized below the per share information for our respective
companies on a historical, pro forma combined and equivalent basis.
We have calculated the pro forma combined per share data for net income
using the weighted average number of shares of NVBancorp's common stock
outstanding for the periods presented, increased by the weighted average number
of shares of SRNB common stock outstanding for the periods presented multiplied
by an assumed conversion ratio of 1.450 shares of NVBancorp's common stock for
each share of SRNB common stock, as if these shares were outstanding for each
period presented. The pro forma combined per share data for dividends declared
represents the historical dividends for NVBancorp common stock. The pro forma
combined book value per share has been calculated using shares of outstanding
NVBancorp common stock increased by the shares of outstanding SRNB common stock
multiplied by an assumed conversion ratio of 1.450 for each share of SRNB common
stock as if these shares were outstanding as of the dates presented.
The equivalent pro forma SRNB share information has been calculated by
multiplying the pro forma combined per share information by an assumed
conversion ratio of 1.450.
<TABLE>
<CAPTION>
NVBANCORP SRNB
COMMON STOCK COMMON STOCK
-------------------- ---------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL EQUIVALENT
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Book value per share:
September 30, 1999 $ 8.75 8.81 $ 12.92 12.77
December 31, 1998 8.18 8.38 12.67 12.15
Tangible book value per share:
September 30, 1999 $ 8.62 7.93 $ 9.76 11.50
December 31, 1998 8.05 7.46 9.32 10.82
Dividends declared:
Nine months ended September 30, 1999 $ 0.30 $ 0.30 $ 0 0.44
Year ended December 31, 1998 0.38 0.38 0 0.55
Year ended December 31, 1997 0.35 0.35 0 0.51
Year ended December 31, 1996 0.35 0.35 0 0.51
Earnings (loss) per share:
Basic:
Nine months ended September 30, 1999 $ 0.91 $ 0.74 $ 0.64 $ 1.07
Year ended December 31, 1998 1.11 0.51 (0.77) 0.74
Year ended December 31, 1997 1.41 1.12 0.17 1.62
Year ended December 31, 1996 1.11 1.09 1.42 1.58
Diluted:
Nine months ended September 30, 1999 $ 0.90 $ 0.73 $ 0.64 $ 1.06
Year ended December 31, 1998 1.10 0.51 (0.77) 0.74
Year ended December 31, 1997 1.39 1.10 0.16 1.60
Year ended December 31, 1996 1.10 1.07 1.35 1.55
</TABLE>
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RISK FACTORS
In deciding whether to vote in favor of the merger, shareholders of
SRNB and NVBancorp should consider the following factors, in addition to the
other matters set forth or incorporated here by this reference:
THE PRICE OF NVBANCORP COMMON STOCK MAY DECLINE
The conversion ratio may be affected by potential changes in the market
price of NVBancorp common stock. This means that at the time of the special
meetings, the SRNB shareholders will not know the exact conversion ratio and
value of the NVBancorp common stock that they will receive when the merger is
completed. The market price of NVBancorp common stock when the merger takes
place may vary from the price at the date of this document and at the date of
the special meetings. Variations in the market price of NVBancorp common stock
may result from changes in the business, operations or prospects of NVBancorp,
SRNB or the combined company, market assessments of the likelihood that the
merger will be consummgated and the timing thereof, regulatory considerations,
general market and economic conditions and other factors. We urge you to obtain
current market quotations for NVBancorp common stock. See "Proposal to Approve
the Plan of Reorganization and Merger--Purchase Price and Potential Adjustments"
on page 49. Changes in the market price of SRNB common stock will not affect
the conversion ratio.
CUSTOMERS OF SRNB MAY NOT BE RETAINED AND NVBANCORP MAY NOT BE ABLE TO REALIZE
ANTICIPATED OPERATING COST SAVINGS
Upon the consummation of the merger, SRNB will be merged with and into
NVB Interim National Bank, and the resulting national banking association will
continue as a subsidiary of NVBancorp with the national bank charter number and
name of Six Rivers National Bank. NVBancorp anticipates that, after the
effective time of the merger, a significant percentage of SRNB's existing
employees and customers will be retained. There are no assurances that SRNB
customers will not move their banking relationships to other financial
institutions and that a greater than anticipated number of SRNB employees will
not remain employed by SRNB after the merger. In addition, while NVBancorp
expects to achieve operating cost savings through the elimination of duplicative
corporate and administrative expenses and the consolidation of certain banking
operations, there can be no assurance that NVBancorp will be able to realize
those cost savings.
ADDITIONAL SHARES OF NVBANCORP COMMON STOCK COULD BE ISSUED WHICH COULD RESULT
IN A DECLINE IN THE MARKET PRICE OF THE STOCK
Shares of NVBancorp common stock eligible for future sale could have a
dilutive effect on the market for NVBancorp common stock and could adversely
affect the market price. The articles of incorporation of NVBancorp authorize
the issuance of 20,000,000 shares of common stock, of which _________ shares
were outstanding at ______________, 2000 and 5,000,000 shares of preferred
stock, of which no shares were outstanding at ______________, 2000. Pursuant to
its stock option plan, at ______________, 2000, NVBancorp had outstanding
options to purchase an aggregate of __________ shares of NVBancorp common stock.
As of ______________, 2000, _________ shares of NVBancorp common stock remained
available for option grants under NVBancorp's stock option plans. The plan of
reorganization does not restrict NVBancorp's ability to grant additional options
under NVBancorp's stock option plan or with respect to a takeover proposal to
which NVBancorp is a party. See "The Merger--Purchase Price and Potential
Adjustments" on page 49. Sales of substantial amounts of NVBancorp common stock
in the public market following the merger could adversely affect the market
price of NVBancorp common stock. There are no restrictions in the plan of
reorganization preventing NVBancorp from issuing additional shares of NVBancorp
common stock after the merger.
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<PAGE>
There can be no assurance given as to the market value of NVBancorp
common stock after the merger based on future acquisitions, if any, or other
factors, including but not limited to, general economic conditions or
fluctuating interest rates.
THE YEAR 2000 PROBLEM MAY ADVERSELY AFFECT NVBANCORP, SRNB OR THE RESULTING BANK
The "Year 2000 issue" relates to the fact that many computer programs
and other technology utilizing microprocessors use only two digits to represent
a year, such as "98" to represent "1998." In the year 2000 ("Y2K"), those
programs/processors could incorrectly treat the year 2000 as the year 1900. This
issue has grown in importance as the use of computers and microprocessors has
become more pervasive throughout the economy, and interdependencies between
systems has multiplied. The business of NVBancorp and SRNB is dependent on
technology and data processing. NVBancorp and SRNB could be affected either
directly or indirectly by the Year 2000 issue. This could happen if any of their
respective critical computer systems or equipment containing embedded logic
fail, if the local infrastructure (electric power, communications or water
system) fails, if their respective significant vendors are adversely impacted,
or if their respective borrowers or depositors are significantly impacted by
their internal systems or those of their customers or suppliers.
The business of NVBancorp and SRNB also involves non-information
technology ("IT") products and services, some of which have embedded technology
which might not be Year 2000 compliant. Some non-IT products and services
involve various infrastructure issues, such as power, communications and water,
as well as elevators, ventilation and air conditioning equipment.
Failure to successfully complete renovation, validation and
implementation of mission-critical IT systems could have a material adverse
effect on the operations and financial performance of NVBancorp or SRNB.
Moreover, Year 2000 problems experienced by significant vendors or customers of
NVBancorp or SRNB or power or communications systems could negatively impact the
business and operations of NVBancorp and SRNB even if their own critical IT
systems are capable of functioning satisfactorily.
Due to the numerous issues and problems which might arise and the lack
of guarantees concerning Year 2000 readiness from non-IT service providers, such
as power and communication systems vendors, NVBancorp and SRNB cannot quantify
the potential cost of problems if their respective renovation and implementation
efforts or the efforts of significant vendors or customers are not successful.
As a result, Year 2000 problems experienced by NVBancorp or SRNB or their
respective vendors or customers may adversely affect the business, financial
condition or results of operations of NVBancorp, SRNB or the resulting bank.
THE RESTRICTIONS OF THE OFFICE OF THE COMPTROLLER OF THE CURRENCY CONSENT ORDER
ENTERED INTO BY SRNB MAY HINDER PLANS
On April 12, 1999 the Office of the Comptroller of the Currency
required SRNB to enter into a Consent Order. The language of the Order requires
that SRNB formulate and implement a plan to strengthen its policies and
procedures relative to its loan administration, credit and collateral
exceptions, classified assets, allowances for loan losses and violations of law
related to lending limits. The SNRB board of directors agreed to execute the
Order and is following an action plan that details the steps necessary to comply
with the Order. In summary, the Order required SRNB to modify certain aspects of
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<PAGE>
its business to address problems identified by the Office of the Comptroller of
the Currency, such as:
o loan administration (to establish procedures to ensure compliance
with credit quality guidelines, govern board of directors review
and approval of exceptions to lending policies, require periodic
board of directors review of adherence to lending policies and
ensure accuracy of information systems and other operational
programs);
o credit and collateral exceptions (to update background information
on each loan);
o criticized assets (to address issues raised by the Office of the
Comptroller of the Currency during the evaluation and analysis of
SRNB's asset quality and provide ongoing board of directors review
of each issue and the adequacy and progress of SRNB's ongoing
monitoring of asset quality);
o allowance for loan and lease losses (to establish a program to
maintain adequate allowances providing for scheduled reviews by
the board of directors);
o legal lending limits (to take prompt action to reduce overlimit
loans and establish compliance procedures regarding the
maintenance of appropriate loan limits); and
o quarterly progress reports (to submit quarterly progress reports
to the Office of the Comptroller of the Currency outlining recent
actions taken to implement the Order).
The Order's restrictions could have an adverse impact on SRNB's expansion.
Additional regulatory restrictions could be placed on SRNB in the event that the
Office of the Comptroller of the Currency is not satisfied with SRNB's progress
towards implementing all facets of the Order. There can be no assurance as to
the impact on SRNB or NVBancorp if banking regulators impose additional
regulatory restrictions on SRNB.
No assurance can be provided as to when, if ever, the Order will be
removed by the Comptroller of the Currency, whether as a result of the merger or
otherwise. Likewise, no assurance can be provided regarding the impact of the
Order on the regulatory approvals required for the merger. See "Proposal to
Approve the Plan of Reorganization and Merger --Required Regulatory Approvals"
on page 64.
This summary description of the Order's provisions does not state all
the requirements of the Order and is qualified in its entirety by reference to
the text of the Order. A copy of the Order will be made available (free of
charge) to any shareholder of NVBancorp or SRNB upon request to Michael W.
Martinez, President and Chief Executive Officer of SRNB. See "Where You Can Find
More Information." on page 97.
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<PAGE>
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus contains forward-looking
statements regarding each of NVBancorp and SRNB and the combined company
following the merger, including statements relating to:
o the financial condition, results of operations and business of
NVBancorp following completion of the merger,
o cost savings, enhanced revenues and accretion to reported earnings
that are expected to be realized from the merger, and
o the restructuring charges expected to be incurred in connection
with the merger.
These forward-looking statements involve certain risks and
uncertainties. Factors that may cause actual results to differ materially from
those contemplated by the forward-looking statements include, among others, the
following possibilities:
o expected cost savings from the merger cannot be fully realized or
realized within the expected time frame;
o revenues following the merger are lower than expected or deposit
withdrawals, operating costs or customer loss and business
disruption following the merger may be greater than expected;
o competitive pressures among depository and other financial
services companies increase significantly;
o costs or difficulties related to the integration of the businesses
of NVBancorp and SRNB are greater than expected;
o changes in the interest rate environment reduce interest margins,
cause an increase in the prepayment rate on mortgages and other
loans or reduce the demand for new loans;
o general economic or business conditions, either internationally,
nationally or in the states in which the combined company will be
doing business, are less favorable than expected, resulting in,
among other things, a deterioration in credit quality or a reduced
demand for credit;
o legislation or regulatory requirements or changes adversely affect
the businesses in which the combined company would be engaged;
o technology-related changes, including "Year 2000" data systems
compliance issues, may be harder to make or more expensive than
expected;
o changes in the securities market; and
o timing of completion of the merger may be delayed, due to
regulatory requirements or other factors which may delay, restrict
or prohibit new operations.
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<PAGE>
With respect to estimated cost savings, NVBancorp has made certain
assumptions regarding, among other things, the extent of operational overlap
between NVBancorp, North Valley Bank and SRNB, the amount of general and
administrative expense consolidation, costs relating to converting SRNB bank
operations and data processing to NVBancorp systems, the size of anticipated
reductions in fixed labor costs, the amount of severance expenses, the extent of
the charges that may be necessary to align the companies' respective accounting
reserve policies and the costs related to the merger. The realization of the
expected cost savings are subject to the risk that the foregoing assumptions are
inaccurate.
Management of NVBancorp believes these forward-looking statements are
reasonable; however, undue reliance should not be placed on the forward-looking
statements, which are based on current expectations.
Forward-looking statements are not guarantees of performance. They
involve risks, uncertainties and assumptions. The future results and shareholder
values of NVBancorp following completion of the merger may differ materially
from those expressed in these forward-looking statements. Many of the factors
that will determine these results and values are beyond NVBancorp's and SRNB's
ability to control or predict. For those statements, NVBancorp and SRNB claim
the protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995.
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<PAGE>
INTRODUCTION
THE SPECIAL MEETINGS: DATES, TIMES AND PLACES
NVBANCORP. NVBancorp's special meeting will be held at [location],
Redding, California at __:__ _.m., local time, on _______________, 2000.
SRNB. SRNB's special meeting will be held at [location], Eureka,
California at __:__ _.m., local time, on ______________, 2000.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
NVBANCORP. At NVBancorp's special meeting, holders of NVBancorp common
stock are being asked to approve the plan of reorganization, including the
merger and issuance of NVBancorp common stock to SRNB's shareholders as provided
under the terms of the plan of reorganization. NVBancorp shareholders will also
be asked to consider and vote on a proposal to classify the NVBancorp board of
directors. See "Proposal to Approve the Plan of Reorganization and Merger" on
page 33 and "Proposal to Classify Board of Directors" on page 93.
SRNB. At SRNB's special meeting, holders of SRNB common stock are being
asked to approve the plan of reorganization and the merger. See "Proposal to
Approve the Reorganization and Merger" on page 33.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
NVBANCORP. Only holders of record of NVBancorp common stock at the
close of business on ______________, 2000, the record date for NVBancorp's
special meeting, are entitled to receive notice of and to vote at NVBancorp's
special meeting. On the record date, approximately ____________ shares of
NVBancorp common stock were issued and outstanding and held by approximately
__________ holders of record. A majority of the shares of NVBancorp common stock
issued and outstanding and entitled to vote on the record date must be
represented in person or by proxy at NVBancorp's special meeting in order for a
quorum to be present for purposes of transacting business at NVBancorp's special
meeting. In the event that a quorum is not present at NVBancorp's special
meeting, it is expected that the special meeting will be adjourned or postponed
to solicit additional proxies. Holders of record of NVBancorp common stock on
the record date are each entitled to one vote per share on each matter to be
considered at NVBancorp's special meeting.
SRNB. Only holders of record of SRNB common stock at the close of
business on ______________, 2000, the record date for SRNB's special meeting,
are entitled to receive notice of and to vote at SRNB's special meeting. On the
record date, approximately _____________ shares of SRNB common stock were issued
and outstanding and held by approximately ________ holders of record. A majority
of the shares of SRNB common stock issued and outstanding and entitled to vote
on the record date must be represented in person or by proxy at SRNB's special
meeting in order for a quorum to be present for purposes of transacting business
at SRNB's special meeting. In the event that a quorum is not present at SRNB's
special meeting, it is expected that the special meeting will be adjourned or
postponed to solicit additional proxies. Holders of record of SRNB common stock
on the record date are each entitled to one vote per share on each matter to be
considered at SRNB's special meeting.
VOTES REQUIRED
NVBANCORP. Approval of the plan of reorganization, the merger and the
issuance of the shares of NVBancorp common stock to SRNB's shareholders, and the
proposal to classify NVBancorp's board of directors require the affirmative vote
of the holders of record of at least a majority of the shares of NVBancorp
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<PAGE>
common stock outstanding on the record date for NVBancorp's special meeting. An
abstention or a broker non-vote will not count as a vote cast at NVBancorp's
special meeting, but will count only for purposes of determining whether or not
a quorum is present. See "--Voting of Proxies--ABSTENTIONS AND BROKER NON-VOTES"
on page 30.
SRNB. The approval of the plan of reorganization and the merger
requires the affirmative vote of the holders of record of at least two-thirds of
the shares of SRNB common stock outstanding on the record date for SRNB's
special meeting. An abstention or a broker non-vote will not count as a vote
cast at SRNB's special meeting, but will count only for purposes of determining
whether or not a quorum is present. See "--Voting of Proxies--ABSTENTIONS AND
BROKER NON-VOTES" on page 30.
SHARE OWNERSHIP OF MANAGEMENT
NVBANCORP. At the close of business on the record date, directors and
executive officers of NVBancorp and their affiliates beneficially owned and were
entitled to vote approximately ______shares of NVBancorp common stock, which
represented approximately ______% of the shares of NVBancorp common stock
outstanding on that date. Each of those directors and executive officers has
agreed to vote, or cause to be voted, the NVBancorp common stock owned by him or
her "FOR" approval of the plan of reorganization, the merger and the resulting
issuance of NVBancorp common stock to SRNB's shareholders under the terms of the
plan of reorganization and "FOR" approval of the proposal to classify
NVBancorp's board of directors at NVBancorp's special meeting.
As of the record date, the directors and executive officers of
NVBancorp beneficially owned shares of NVBancorp common stock as described in
the following table. Unless otherwise indicated, each director and executive
officer listed below possesses sole voting power and sole investment power. All
of the shares shown in the following table are owned both of record and
beneficially except as indicated in the notes to the table. The address for
beneficial owners, all of whom are incumbent directors and officers of NVBancorp
and North Valley Bank, is the address of NVBancorp, 880 East Cypress Avenue,
Redding, California 96002.
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<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Position Beneficial Ownership(1) Class(2)
- ------------------- -------- ----------------------- ----------
<S> <C> <C> <C>
Rudy V. Balma Chairman of the Board 273,605(3)(4) 7.4
Sharon L. Benson Senior Vice President and
Chief Financial Officer 7,434 *
William W. Cox Director 9,096 *
Michael J. Cushman President and Chief Executive
Officer 220,919(3) 5.9
Royce L. Friesen Director 14,810 *
Dan W. Ghidinelli Director 38,312(5) 1.0
Thomas J. Ludden Director 27,508 *
Jack R. Richter Senior Vice President and
Chief Operating Officer 12,400 *
Douglas M. Treadway Director 8,520 *
J.M. ("Mike") Wells, Jr. Director, General Counsel and
Secretary 272,627(3)(6) 7.3
Eric J. Woodstrom Senior Vice President and 4,000 *
Chief Credit Officer
All directors and
executive officers as a group 497,823(8) 13.2(9)
(11 persons) (7)
- ---------------------
</TABLE>
(1) Includes shares beneficially owned, directly and indirectly, together with
associates. Subject to applicable community property laws and shared
voting and investment power with a spouse, sole investment and voting
power is held by the beneficial owner of all shares unless noted
otherwise. Includes stock options granted under the North Valley Bancorp
1989 Director Stock Option Plan, the North Valley Bancorp 1998 Employee
Stock Incentive Plan and the North Valley Bancorp 1999 Director Stock
Option Plan with: 6,000 shares exercisable within 60 days of the record
date by Director Balma; 4,000 shares exercisable within 60 days of the
record date by Mrs. Benson; 6,800 shares exercisable within 60 days of the
record date by Director Cox; 14,500 shares exercisable within 60 days of
the record date by Mr. Cushman; 15,800 shares exercisable within 60 days
of the record date by Director Ghidinelli; 7,398 shares exercisable within
60 days of the record date by Director Ludden; 10,000 shares exercisable
within 60 days of the record date by Mr. Richter; 7,000 shares exercisable
within 60 days of the record date by Director Treadway; 22,696 shares
exercisable within 60 days of the record date by Director Wells; and 2,000
shares exercisable within 60 days of the record date by Mr. Woodstrom.
(2) Includes stock options outstanding to purchase common stock exercisable
within 60 days of the record date. An "*" indicates less than one percent.
(3) Includes 195,829 ESOP shares. Messrs. Balma, Cushman and Wells constitute
the Administrative Committee (ESOP) and have authority to instruct the
ESOP Trustee with regard to voting of these shares. Messrs. Balma, Cushman
and Wells, as members of the Administrative Committee (ESOP), disclaim
beneficial ownership with respect to all those shares. Mr. Cushman, Mrs.
Benson, Mr. Richter and Mr. Woodstrom are participants in the ESOP.
(4) Includes 71,776 shares held by The Balma Family Trust, of which Mr. Balma
is trustee.
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<PAGE>
(5) Includes 18,312 shares held by the Balma Grandchildren Trust, of which Mr.
Ghidinelli is a trustee and as to which Mr. Ghidinelli disclaims
beneficial ownership.
(6) Includes 53,102 shares held by the Wells Family Trust, of which Mr. Wells
is trustee. Includes 1,000 shares held by Mr. Wells' spouse and as to
which Mr. Wells' disclaims beneficial ownership.
(7) This group includes all current executive officers and Directors.
(8) See footnotes 3 through 6. Includes 29,694 shares subject to options
exercisable within 60 days of the record date by the Directors under the
1989 Director Stock Option Plan; 36,000 shares subject to options
exercised within 60 days of the record date by the Directors under the
1999 Director Stock Option Plan; and 30,500 shares subject to options
exercisable within 60 days of the record date by Mrs. Benson and Messrs.
Cushman, Richter and Woodstrom under the 1998 Employee Stock Incentive
Plan.
(9) In calculating the percentage of ownership, all shares which the
identified person or persons have the right to acquire by exercise of
options are deemed to be outstanding for the purpose of computing the
percentage of the class owned by the person, but are not deemed to be
outstanding for the purpose of computing the percentage of the class owned
by any other person.
SRNB. At the close of business on the record date, directors and
executive officers of SRNB and their affiliates beneficially owned and were
entitled to vote approximately ______________ shares of SRNB common stock, which
represented approximately ___% of the shares of SRNB common stock outstanding on
that date. Each of those directors and executive officers has agreed to vote, or
cause to be voted, the SRNB common stock owned by him or her "FOR" approval of
the plan of reorganization and the merger at SRNB's special meeting. See
"Certain Considerations--Interests of SRNB Officers and Directors in the Merger"
on page 52.
As of the record date, the directors and executive officers of SRNB
beneficially owned shares of SRNB common stock as described in the following
table. Unless otherwise indicated, each director and executive officer listed
below possesses sole voting power and sole investment power. All of the shares
shown in the following table are owned both of record and beneficially except as
indicated in the notes to the table. The address for beneficial owners, all of
whom are incumbent directors and officers of SRNB, is the address of SRNB, 402
"F"Street, Eureka, California 95501.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Position Beneficial Ownership(2) Class(3)
- ------------------- -------- ----------------------- ----------
<S> <C> <C> <C>
Shelton J. Francis Executive Vice President and 2,000(5) *
Chief Credit Officer
Kevin D. Hartwick Director 8,441(6) *
William T. Kay, Jr. Chairman of the Board 30,596(4)(7) 1.9
J. Michael McGowan Director 46,300(8) 2.9
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Position Beneficial Ownership(2) Class(3)
- ------------------- -------- ----------------------- ----------
<S> <C> <C> <C>
Michael W. Martinez President, Chief Executive 19,941(4)(9) 1.3
Officer and Chief Financial
Officer
Warren L. Murphy Director 92,202(10) 5.9
Margie L. Plum Executive Vice President, Branch 19,628(11) 1.3
Administrator and Secretary
Dolores M. Vellutini Director 26,977(12) 1.7
All directors and
executive officers as a group 238,579(13) 15.1
(8 persons)
- -----------------------
</TABLE>
(1) The address for all persons is c/o Six Rivers National Bank, 402 F Street,
Eureka, California, 95501.
(2) Except as otherwise noted, may include shares held by or with the person's
spouse (except where legally separated) and minor children; shares held by
any other relative of the person who has the same home; shares held by a
family trust as to which the person is a beneficiary and trustee with sole
vesting and investment power (or shared with a spouse); or shares held in
an individual retirement account or pension plan of which the person is the
sole beneficiary, and as to which shares the person has pass-through voting
rights and investment power.
(3) Includes stock options outstanding to purchase common stock exercisable
within 60 days of the record date. The shares "beneficially owned" are
determined under Securities and Exchange Commission Rules, and do not
necessarily indicate ownership for any other purpose. In general,
beneficial ownership includes shares over which a person has sole or shared
voting or investment power and shares which the person has the right to
acquire within 60 days. An * indicates less than one percent.
(4) Includes 7,506 ESOP shares. Messrs. Kay and Martinez constitute the ESOP
trustees and have authority to vote these shares. Messrs. Kay and Martinez,
as ESOP trustees, disclaim beneficial ownership with respect to all those
shares. Mr.Francis, Mrs. Plum and Mr. Martinez are participants in the
ESOP.
(5) Includes 2,000 shares which Mr. Francis has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(6) Includes 4,191 shares which Mr. Hartwick has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(7) Includes 11,714 shares which Mr. Kay has the right to acquire upon the
exercise of stock options within 60 days of the record date.
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<PAGE>
(8) Mr. McGowan is also the record and beneficial owner of 10,000 shares of
NVBancorp common stock.
(9) Includes 9,796 shares which Mr. Martinez has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(10) Includes 10,676 shares which Mr. Murphy has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(11) Includes 14,518 shares which Mrs. Plum has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(12) Includes 11,311 shares which Mrs. Vellutini has the right to acquire upon
the exercise of stock options within 60 days of the record date.
(13) Includes 63,976 shares which the Directors and Officers have the right to
acquire upon the exercise of stock options within 60 days of the record
date.
VOTING OF PROXIES
SUBMITTING PROXIES. NVBancorp and SRNB shareholders may vote their
shares in person by attending their respective special meeting or vote their
shares by proxy by completing the enclosed proxy card, signing and dating it and
mailing it in the enclosed postage pre-paid envelope, or by telephone, by
calling the toll-free number (at no cost to the shareholder) indicated on the
proxy card. Telephone voting is available 24 hours per day. Easy to follow voice
prompts allow a shareholder to vote shares and to confirm that instructions have
been properly recorded. The telephone voting procedures are designed to
authenticate the identity of shareholders by utilizing individual control
numbers. IF A SHAREHOLDER VOTES BY TELEPHONE, THERE IS NO NEED TO RETURN THE
PROXY CARD.
If a written proxy card is signed by a shareholder and returned without
instructions, the shares represented by the proxy will be voted "FOR" the
proposals presented at NVBancorp's special meeting or "FOR" the proposal
presented at SRNB's special meeting, as applicable. NVBancorp and SRNB
shareholders whose shares are held in "street name" (i.e., in the name of a
broker, bank or other record holder) must either direct the record holder of
their shares as to how to vote their shares or obtain a proxy from the record
holder to vote at their respective special meeting.
REVOKING PROXIES. NVBancorp and SRNB shareholders of record may revoke
their proxies at any time before the time their proxies are voted at NVBancorp's
special meeting or SRNB's special meeting, respectively. Proxies may be revoked
by written notice, including by telegram or telecopy, to the Corporate Secretary
of NVBancorp or SRNB, as applicable, by a later-dated proxy signed and returned
by mail or by attending NVBancorp's special meeting or SRNB's special meeting,
as applicable, and voting in person. Attendance at NVBancorp's special meeting
or SRNB's special meeting will not in and of itself constitute a revocation of a
proxy. The shareholder must inform the secretary at the special meeting, prior
to the vote, that he or she wants to revoke his or her proxy and vote in person.
Any written notice of a revocation of a proxy must be sent so as to be received
before the taking of the vote at the applicable special meeting as follows:
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<PAGE>
For NVBancorp Shareholders, to: For SRNB Shareholders, to:
North Valley Bancorp Six Rivers National Bank
880 East Cypress Avenue 402 "F" Street
Redding, California 96002 Eureka, California 95501
If you vote by telephone, you may change your vote at any time before 5:00 p.m.
Eastern Standard Time on the day before the special meeting by calling the
toll-free number indicated on the proxy card. You may also change your vote by
following any of the procedures for revoking proxies described above. In all
cases, the latest dated proxy revokes an earlier dated proxy regardless of
whether mail or telephone is used to give or revoke a proxy, or whether mail and
telephone are used to give and revoke a proxy.
ABSTENTIONS AND BROKER NON-VOTES. The presence, in person or by
properly executed proxy, of the holders of a majority of the outstanding shares
is necessary to constitute a quorum at each of NVBancorp's special meeting and
SRNB's special meeting. Abstentions and broker non-votes (as described below)
will be counted solely for the purpose of determining whether a quorum is
present. Under the applicable rules of the National Association of Securities
Dealers, Inc., brokers or members who hold shares in street name for customers
who are the beneficial owners of the shares are prohibited from giving a proxy
to vote those shares with respect to the approval of the transactions
contemplated by the plan of reorganization including the merger in the absence
of specific instructions from the customers. We refer to these as "broker
non-votes". Abstentions and broker non-votes will not be counted as a vote "FOR"
or "AGAINST" any proposal at either the NVBancorp special meeting or the SRNB
special meeting but will have the same effect as a vote "AGAINST" any proposal.
Abstentions and broker non-votes will not have the effect of establishing
dissenters' rights of NVBancorp or SRNB shareholders. See "Dissenters' Rights"
on page 69.
If any other matters are properly presented for consideration at
NVBancorp's special meeting, in the case of the NVBancorp shareholders, or at
SRNB's special meeting, in the case of the SRNB shareholders, the persons named
in the enclosed form of proxy will have discretion to vote or not vote on those
matters in accordance with their best judgment, unless authorization to use that
discretion is withheld. If a proposal to adjourn NVBancorp's special meeting or
SRNB's special meeting is properly presented, however, the persons named in the
enclosed form of proxy will not have discretion to vote in favor of the
adjournment proposal any shares which have been voted against the proposal(s) to
be presented at the respective special meetings.
Neither NVBancorp nor SRNB is aware of any matters expected to be
presented at their respective special meeting other than as described in their
respective notice of special meetings. The cost of solicitation of proxies will
be paid by NVBancorp and SRNB, as applicable. In addition to solicitation by
mail, the directors, officers and employees of NVBancorp and SRNB may also
solicit proxies from shareholders by telephone, facsimile, telegram or in
person. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries to send the proxy materials to beneficial
owners; and NVBancorp or SRNB, as the case may be, will, upon request, reimburse
those brokerage houses and custodians for their reasonable expenses in so doing.
SRNB has retained Skinner & Co. of San Francisco, California, to aid in the
solicitation of proxies and to verify certain records related to the
solicitations. Skinner & Co. will receive $5,000 as compensation for its
services and up to $5,000 as reimbursement for its related out-of-pocket
expenses. NVBancorp does not intend to retain a proxy solicitor.
Shareholders who submit proxy cards should not send in any stock
certificates with their proxy cards. Instructions for the surrender of
certificates representing shares of SRNB common stock will be mailed by
NVBancorp to former SRNB shareholders shortly after the merger is completed. See
"The Merger--Exchange of SRNB Stock Certificates; Fractional Interests" on page
51.
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<PAGE>
RECOMMENDATION OF THE NVBANCORP BOARD OF DIRECTORS AND SRNB BOARD OF
DIRECTORS. Each of the NVBancorp board of directors and SRNB board of directors
has unanimously approved the merger described above and unanimously recommends
that their respective shareholders vote "FOR" the plan of reorganization and the
merger at their respective special meetings. The NVBancorp board of directors
also unanimously recommends that their shareholders vote "FOR" the proposal to
classify NVBancorp's board of directors.
INFORMATION ABOUT NVBANCORP AND NORTH VALLEY BANK
NVBancorp is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended. NVBancorp was incorporated under the laws of
the State of California in 1980. Its principal office is located at 880 East
Cypress Avenue, Redding, California 96002 and its telephone number is (530)
221-8400.
NVBancorp owns 100% of the issued and outstanding common shares of
North Valley Bank. North Valley Bank was incorporated in 1972 and commenced
business in Redding, California, in 1973. North Valley Bank accepts checking and
savings deposits, offers money market deposit accounts and certificates of
deposit, makes secured and unsecured commercial and other installment and term
loans and offers other customary banking services. North Valley Bank offers
banking services generally, but it places primary emphasis on lending for real
estate purposes and specialized lending to businesses and professionals. Loans
for real estate purposes include term financing for commercial facilities and
real estate construction loans mainly for residential and commercial properties.
Loans to businesses and professionals include commercial loans, SBA loans,
deposit services and letters of credit. North Valley Bank's consumer financial
services include residential real estate loans, retail deposit services, mutual
fund products and consumer finance. As a bank holding company, NVBancorp is
authorized to engage in the activities permitted under the Bank Holding Company
Act of 1956, as amended, and regulations thereunder.
North Valley Bank owns 100% of North Valley Basic Securities, an
inactive company formed to hold premises under Section 752 of the California
Financial Code. North Valley operates 12 banking offices in Shasta and Trinity
Counties. North Valley Bank's deposits are insured by the Federal Deposit
Insurance Corporation up to the legal limits thereupon. North Valley Bank does
not offer trust services or international banking services and does not plan to
do so in the near future.
NVBancorp owns 100% of two additional subsidiaries, North Valley
Trading Company, an inactive company formed to explore trading opportunities in
the Pacific Basin, and Bank Processing, Inc., formed to provide data processing
services to other financial institutions in addition to North Valley Bank.
As a bank holding company, NVBancorp is authorized to engage in the
activities permitted under the Bank Holding Company Act of 1956, as amended, and
regulations thereunder.
INFORMATION ABOUT SRNB
SRNB is a national banking association and a full service commercial
bank formed in 1989 and headquartered in Eureka, California, approximately 250
miles north of San Francisco. SRNB conducts a community banking business through
eight full-service offices in Eureka (2), Crescent City, Ferndale, Garberville,
McKinleyville, Weaverville and Willits. It concentrates on obtaining low-cost
core deposits from local customers and making primarily commercial, consumer and
real estate loans to local borrowers.
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<PAGE>
SRNB is chartered under the laws of the United States and is governed
by the National Bank Act and the regulations promulgated thereunder. SRNB is a
member of the Federal Deposit Insurance Corporation, which currently insures the
deposits of each member bank to a maximum of $100,000 per depositor. For this
protection, SRNB pays a semi-annual assessment (currently set at a nominal
amount) and is subject to the rules and regulations of the Federal Deposit
Insurance Corporation pertaining to deposit insurance and other matters.
National banks are subject to regulation, supervision and regular examination by
the Office of the Comptroller of the Currency. The regulations of the Federal
Deposit Insurance Corporation and the Office of the Comptroller of the Currency
govern many aspects of SRNB's business and activities, including investments,
loans, borrowings, branching, mergers and acquisitions, reporting and numerous
other areas. All national banks are members of the Federal Reserve System. SRNB
is also subject to applicable provisions of California law to the extent the
provisions are not in conflict with or preempted by federal banking law.
On November 6, 1997, SRNB completed the purchase and conversion of four
branches of Bank of America. The acquisition of the four branches increased
SRNB's size from four locations to eight and increased its presence outside of
Humboldt and Del Norte counties to Trinity County to the northeast and Mendocino
County to the south. In order to finance the purchase of the branches SRNB
completed a secondary stock offering in the fourth quarter of 1997, netting
approximately $13.2 million on the sale of 862,500 shares of SRNB's common
stock.
At December 31, 1998, SRNB had total assets of $203.2 million, total
net loans of $104.2 million, deposits of $182.9 million and shareholders' equity
of $18.5 million. SRNB competes with approximately 13 other banking or savings
institutions in its service areas. SRNB's market share of Federal Deposit
Insurance Corporation-insured deposits in the four-county service area of
Humboldt, Del Norte, Mendocino and Trinity counties is approximately 8.3% at
December 31, 1998 (based upon information made available by the Federal Deposit
Insurance Corporation through June 30, 1998).
The geographic area served by SRNB is a rural market along California's
north coast and southern Oregon. SRNB's promotional activities stress its
specialized services and responsiveness to unique local needs.
SRNB accepts checking and savings deposits, offers money market deposit
accounts and certificates of deposit, makes secured and unsecured commercial and
other installment and term loans, and offers other customary banking services.
SRNB also makes real estate loans that consist primarily of term and
construction financing for both businesses and individuals. Included in the
bank's commercial product line are loans to businesses and professionals for
accounts receivable financing, equipment financing, letters of credit and loans
that are partially guaranteed by the U.S. Government.
On April 12, 1999 the Office of the Comptroller of the Currency
required SRNB to enter into a Consent Order ("Order"). The language of the Order
requires that SRNB formulate and implement a plan to strengthen its policies and
procedures relative to its loan administration, credit and collateral
exceptions, classified assets, allowances for loan losses and violations of law
related to lending limits. The SRNB board of directors has agreed to execute
this Order and is following an action plan that details the steps necessary to
comply with the Order. See "Risk Factors -- The Restrictions of the Office of
the Comptroller of the Currency Consent Order Entered Into by SRNB May Hinder
Plans" and "Proposal to Approve the Plan of Reorganization and Merger --
Required Regulatory Approvals" on page 64.
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<PAGE>
PROPOSAL TO APPROVE THE PLAN OF REORGANIZATION AND MERGER
BACKGROUND OF THE PLAN OF REORGANIZATION AND MERGER
The following is a brief description of the events that resulted in the
execution of the Agreement and Plan of Reorganization and Merger dated as of
October 3, 1999 among NVBancorp, NVB Interim National Bank and SRNB.
During 1998, the board of directors of SRNB focused its efforts on
attempting to resolve certain regulatory issues, primarily related to credit
quality and management, that were plaguing SRNB. Given the nature of the
problems and the time and effort the board was devoting to them, the board did
not consider it feasible to pursue a sale of SRNB. In December 1998, Humboldt
Bancorp initiated a series of communications to SRNB expressing interest in a
merger. Initially, SRNB responded to Humboldt through its representatives that
merger discussions were currently inadvisable because SRNB's board and
management were focusing on resolving operating problems.
On January 11, 1999, Humboldt wrote to William Kay, Jr., Chairman of
the SRNB board of directors, indicating Humboldt's interest in pursuing a
possible transaction with SRNB. SRNB's board discussed this proposal at its
January meeting, but continued to believe that the timing was not appropriate to
pursue a transaction either with Humboldt or with any other institution. In
early February, Humboldt requested a meeting to discuss its interest. The board
considered the request at its February meeting and agreed to the meeting. The
board also considered a valuation review conducted by its financial adviser
which informed the board concerning the elements that affect stock value,
valuation methodologies and the ranges of values which could be achieved by
SRNB. The meeting between SRNB and Humboldt representatives occurred on March 3,
1999. The SRNB representatives again expressed the view that it would be
inappropriate to pursue a merger at that time.
In spite of the stated position of the SRNB representatives, Humboldt
followed with a letter that was considered by SRNB at its March meeting. SRNB's
board reviewed the March 9, 1999 letter from Humboldt which outlined the terms
of Humboldt's proposal. The proposal by Humboldt contained a number of
unacceptable conditions that raised questions as to whether or not the proposal
actually constituted an offer. These and other questions regarding the valuation
of Humboldt's common stock led SRNB to respond that it would continue to pursue
shareholder value through the continuing focus by the board and management on
implementing SRNB's own independent business plan.
Thereafter, an exchange of correspondence occurred between Humboldt and
SRNB which culminated in Humboldt publishing an open letter in the Eureka press
on May 12, 1999, the day of SRNB's annual meeting of shareholders, publicizing
its previously confidential offer.
Following SRNB's annual meeting, the board appointed a strategic
planning committee to investigate SRNB's strategic options, including the
Humboldt proposal. The committee met frequently commencing on May 17, 1999 and
conferred regularly with SRNB's financial and legal advisers. The committee
directed SRNB's financial adviser to contact other institutions that may have an
interest in a business combination with SRNB to explore their level of interest.
The committee monitored the progress of those contacts.
In the course of initial discussions with a broad range of
institutions, numbering in excess of 15 banks and holding companies, SRNB's
investment adviser identified two institutions, including NVBancorp, that
expressed very serious interest in exploring the possibility of a business
combination. Members of the strategic planning committee met with board and
management representatives of these parties. In mid-June, 1999, SRNB entered
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<PAGE>
into confidentiality agreements with these parties (including NVBancorp) and
disclosed to them non-public information concerning SRNB to assist them in their
evaluation of a possible transaction. At its June meeting, legal counsel gave
detailed advice to the SRNB board concerning the board's fiduciary
responsibilities in light of the Humboldt proposal and the interest of other
parties. After the meeting, SRNB formally engaged Hoefer & Arnett Incorporated
as its investment bank to evaluate the merits of remaining independent compared
with the opportunities for a business combination.
On July 8, 1999 Humboldt again sent a letter communicating its desire
to negotiate a business combination with SRNB. After considering this letter,
the SRNB board responded by asking for answers to various significant business
concerns about the practices and strategies of Humboldt. Humboldt refused to
provide any responses to these questions unless SRNB executed a confidentiality
agreement granting special rights to Humboldt that SRNB believed would have
significantly reduced the effectiveness of such agreements and could have led to
the compromise of information that is proprietary to SRNB and its operations. In
response, SRNB proposed a standard confidentiality and standstill agreement,
similar to those that had been signed by other institutions, however this was
rejected by Humboldt. On August 20, 1999, Humboldt revoked its expression of
interest, stating that its board thought it was not feasible to attempt a merger
at that time.
On July 21, 1999, SRNB received a detailed proposal from NVBancorp. The
board discussed the proposal at its meeting on July 27, 1999. At that meeting
Hoefer & Arnett Incorporated presented to the board a financial review of the
proposal, contrasting it to the Humboldt proposal which, at that time, had not
yet been revoked. The SRNB representatives reviewed such factors as the value of
the stock prices relative to each other and to a specified peer group, the
nature and inherent risk in the operations of the organizations, and the
similarities and differences in the culture and operating philosophies of the
organizations. Having completed its review the board determined that the
NVBancorp proposal was more advantageous to SRNB and its shareholders, and
unanimously directed the strategic planning committee to pursue the NVBancorp
proposal.
In early August, 1999, a third financial institution contacted SRNB to
express interest in a business combination. After obtaining a confidentiality
agreement, the SRNB strategic planning committee met with representatives of
this institution. The institution submitted a written expression of interest to
SRNB on August 25, 1999 which was supplemented on September 8, 1999. However,
the SRNB board found that the terms of this expression of interest were less
favorable than those of NVBancorp and decided not to pursue further discussions.
Commencing August 16, 1999, NVBancorp conducted its due diligence and
thoroughly reviewed the credit portfolio of SRNB. On September 1, 1999, SRNB and
NVBancorp and their respective counsel began negotiating the terms of the plan
of reorganization.
On September 3, 1999, Humboldt again expressed interest in a merger
proposal. While the SRNB strategic planning committee stated its willingness to
hold a meeting with Humboldt representatives, a meeting was scheduled but never
held.
At its board meeting on September 20, 1999, SRNB's legal counsel
presented to the board a detailed review of the terms of the proposed plan of
reorganization. Hoefer & Arnett Incorporated then presented a detailed analysis
of the financial terms of the transaction and delivered its draft opinion to the
effect that the proposed transaction was fair to SRNB and its shareholders from
a financial perspective. The board then established parameters for future
negotiations with NVBancorp and directed management to conduct a due diligence
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review of NVBancorp. The SRNB board held special meetings on September 22 and
September 28, 1999 to review the due diligence findings and the status of the
negotiations. On October 1, 1999, the SRNB board approved the plan of
reorganization as being in the best interests of SRNB and its shareholders.
On October 3, 1999 SRNB and NVBancorp executed the plan of
reorganization. Prior to the opening of the market on October 4, 1999, the
parties issued a joint press release publicly announcing the merger.
Annex A to the joint proxy statement/prospectus contains a copy of the
plan of reorganization which is incorporated here by this reference.
See "--Reasons for the Merger; Recommendations of the Boards of
Directors" and "--Opinion of SRNB's Financial Advisor" below.
REASONS FOR THE PLAN OF REORGANIZATION AND MERGER; RECOMMENDATIONS OF THE BOARDS
OF DIRECTORS
NVBANCORP. The strategy of the board of directors of NVBancorp for
enhancing long-term value for NVBancorp shareholders recognizes that further
consolidation will occur in the banking and financial services industry in the
United States and that NVBancorp must be in a position to take advantage of this
change. Under this strategy, management of NVBancorp, at the direction of the
board of directors of NVBancorp, continually explores and evaluates acquisition
opportunities, such as the acquisition of SRNB as a continuing subsidiary of
NVBancorp, through the merger of SRNB into NVB Interim National Bank.
In reaching the conclusion that the merger of SRNB into NVB Interim
National Bank is fair to and in the best interests of the shareholders of
NVBancorp, the board of directors of NVBancorp considered numerous factors,
including the following:
(1) The board of directors' familiarity with and review of SRNB's
business, results of operations, prospects and financial
condition and the willingness of the board of directors of
SRNB to consider a merger with NVB Interim National Bank;
(2) The opinion of Alex Sheshunoff & Co. Investment Banking, L.P.
that the terms of the merger are fair, from a financial point
of view, to NVBancorp shareholders;
(3) Economic conditions and prospects for the markets in which
NVBancorp and SRNB operate, and competitive pressures in the
financial services industry in general and the banking
industry in particular;
(4) The enhancement of NVBancorp's competitiveness and its ability
to serve its customers, depositors, creditors, other
constituents and the communities in which it operates as a
result of the merger;
(5) Information concerning the business, results of operations,
asset quality and financial condition of NVBancorp and SRNB on
a stand-alone and combined basis, and the future growth
prospects of NVBancorp and SRNB following the merger. In this
regard, the board of directors of NVBancorp gave consideration
to the results of the initial review conducted by NVBancorp's
management with respect to SRNB's business and operations,
including, in particular, its asset quality and certain
related conditions in the plan of reorganization. That review
included an assessment of the opportunities to achieve
increased market penetration in its existing market and to
expand into SRNB's market area in California;
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(6) The cost savings and operational synergies which the
management of NVBancorp believes may be achieved as a result
of the merger through the elimination of duplicative efforts;
(7) An assessment that, in the current economic environment,
expansion through acquisition of another financial institution
is most economically advantageous to NVBancorp's shareholders
when compared to other alternatives such as de novo branch
openings or branch acquisitions;
(8) The geographic and business fit of NVBancorp and SRNB and the
complementary nature of their respective businesses including
the compatibility of their existing branch structures;
(9) Information with respect to historical trading ranges and
multiples for NVBancorp common stock and SRNB common stock,
and possible trading ranges and multiples for each on a
stand-alone basis and for the two companies on a combined
basis and the evaluation by the board of directors of
NVBancorp of the financial terms of the merger and their
effect on the shareholders of NVBancorp and the belief of the
NVBancorp board of directors that those terms are fair to
NVBancorp and its shareholders;
(10) The expectation that for federal income tax purposes the
merger will constitute a tax-free reorganization to NVBancorp
and its subsidiaries;
(11) The expectation that the merger will be accounted for under
the pooling of interests method of accounting;
(12) The terms and conditions of the plan of reorganization and the
related agreements;
(13) The likelihood of the merger being approved by the appropriate
regulatory authorities; and
(14) The structure of the merger and the resulting corporate
entities.
The board of directors of NVBancorp did not assign any relative or
specific weights to the factors considered and individual directors may have
assigned different weights to the above factors.
The board of directors of NVBancorp unanimously recommends that the
plan of reorganization, the related agreements, the transactions contemplated by
the plan of reorganization, including the merger and the issuance of NVBancorp
common stock in connection with the merger, and the proposal to classify the
NVBancorp board of directors, be approved by the NVBancorp shareholders.
SRNB. The board of directors of SRNB believes that the merger is fair
to and in the best interests of the shareholders of SRNB. In reaching their
conclusion to approve the merger, the board of directors of SRNB considered
numerous factors, including the following:
HISTORICAL AND RECENT MARKET PRICES OF SRNB SHARES COMPARED TO
NVBANCORP SHARES TO BE RECEIVED. The SRNB board of directors reviewed the
historical and recent trading prices for SRNB stock. The SRNB board of directors
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considered as favorable the fact that SRNB shareholders would receive shares of
NVBancorp common stock that had a market value of $16.04 per share, representing
a premium of 19% over the closing sales price for SRNB shares of $13.50, on
October 1, 1999, the last full day of trading before the merger was publicly
announced. The SRNB board of directors also considered that after the trading
price of SRNB's common stock fell during 1998, it did not recover to the same
extent as many of the bank stocks in its peer group. The SRNB board of directors
also compared NVBancorp's stock price to book value ratio and the NVBancorp
price to earnings ratio not only with those of other potential acquirers, but
also to a specified peer group. Using the information as of June 30, 1999, this
comparison indicated that NVBancorp's common stock was trading at a substantial
discount as compared to the peer group. The price to last twelve month earnings
of the NVBancorp common stock was 10.0 times, while the median peer group
multiple was shown to be at 15.9 times. In the price to book value comparison,
NVBancorp was shown to be trading at 123.4% of book value while the peer group
median was at 221.3% of book value. The SRNB board of directors found favorable
the fact that NVBancorp's stock price to book value ratio was relatively low,
suggesting that, in this respect, the NVBancorp shares that SRNB shareholders
will receive in the merger may represent a greater value than SRNB shareholders
would receive in an identically priced or even a greater priced transaction with
a different acquirer. Lastly, using a fundamental valuation methodology known as
the discounted cash flow, the NVBancorp common stock was determined to be
trading at prices substantially below a high and low fundamental valuation range
of $16.09 to $19.57 per share. This further supports the suggestion that the
NVBancorp shares show considerable potential for appreciation.
THE LIKELIHOOD THAT "POOLING OF INTERESTS" ACCOUNTING WILL NO LONGER BE
AVAILABLE FOLLOWING DECEMBER 31, 2000. The SRNB board of directors considered
the impact of the Financial Standards Accounting Board draft by which so-called
"pooling of interests" accounting will be eliminated by December 31, 2000. The
result of this accounting change will be that all mergers consummated after
December 31, 2000 will be accounted for as "purchase" transactions, resulting in
the amortization of goodwill in any merger where the purchase price exceeds the
asset value of the acquired company. The goodwill amortization will reduce
future reported income of the merged companies. Additionally, in bank mergers,
the goodwill in a purchase accounting transaction will not be included in the
calculation of regulatory capital requirements. Therefore, it is the belief of
the management and directors of SRNB, and it is the view of Hoefer & Arnett
Incorporated, that future bank mergers will result in lower premiums for the
seller. The SRNB board of directors believes that by combining with NVBancorp at
this time, it can take advantage of the "pooling of interests" accounting rules.
The SRNB board also believes that should the SRNB shareholders fail to approve
the NVBancorp proposal, it would be extremely unlikely that an alternative
transaction can be completed that would be eligible for "pooling of interests"
accounting treatment. Therefore, the NVBancorp transaction is most likely the
last opportunity that SRNB will have to engage in a "pooling of interests"
merger.
SRNB'S BUSINESS, CONDITIONS AND GEOGRAPHIC PROSPECTS. The SRNB board of
directors considered information with respect to the financial condition,
results of operations and business risks of SRNB on both an historical and
prospective basis and current industry, economic and market conditions. Among
other things, the SRNB board considered the negative impact of continuing the
operations of SRNB exclusively in the confined geographic area in which SRNB
currently operates. SRNB's current marketplace has demonstrated slow growth
making internal growth of SRNB difficult to attain. The NVBancorp merger will
significantly expand the geographic base of the combined companies and will give
SRNB a greater market for the products and services of SRNB. The combination
with NVBancorp will also increase the legal lending limit of the combined
institutions giving greater flexibility to SRNB in meeting the credit needs of
its borrowers. The SRNB board of directors believes that this will greatly
enhance the long-term prospects for stock value.
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NVBANCORP'S BUSINESS, CONDITIONS AND PROSPECTS. The SRNB board of
directors considered information with respect to the financial condition,
financial performance, business operations, capital levels, asset quality, loan
portfolio breakdown and prospects of NVBancorp on both an historical and
prospective basis. The SRNB board of directors also considered information
regarding current industry, economic and market conditions in the financial
services industry. SRNB's financial advisers, Hoefer & Arnett Incorporated, made
presentations to and provided the SRNB board of directors with information
regarding NVBancorp's financial condition and prospects after conducting
business and financial due diligence. Officers of SRNB also made presentations
to the SRNB board of directors regarding NVBancorp's financial condition,
business and prospects after conducting business and financial due diligence.
These officers expressed their views that the corporate culture and operating
philosophies of NVBancorp were very compatible to those of SRNB. The SRNB board
viewed these observations as favorable for the future prospects of the combined
entity and the creation of further shareholder value. In evaluating NVBancorp's
prospects, the SRNB board of directors considered, among other things,
NVBancorp's financial performance, the geographic areas in which NVBancorp
conducts business compared to those in which SRNB conducts business, the state
of the economy in Northern California, the market conditions in the primary
areas in which NVBancorp conducts its business, and the effect those economies
may have on NVBancorp's performance. The SRNB board of directors also considered
and found favorable the fact that the NVBancorp's stock when combined with
SRNB's stock will have greater market capitalization and liquidity compared to
SRNB's current stock liquidity.
OPINION OF HOEFER & ARNETT INCORPORATED. At its September 20 meeting,
the SRNB board of directors considered as favorable to its determination, Hoefer
& Arnett Incorporated's oral opinion delivered to the SRNB board of directors at
that meeting (which Hoefer & Arnett Incorporated subsequently confirmed in a
written legal opinion of that same date) that the consideration to be received
by SRNB shareholders in the merger was, as of that date, fair to SRNB's
shareholders, from a financial point of view.
THE NEED OF SRNB TO OBTAIN 2/3 SHAREHOLDER VOTE FOR APPROVAL OF THE
PROPOSED MERGER. The articles of association of SRNB require that two-thirds
(2/3) equal to sixty-six and two-thirds percent (66 2/3%) of all of the
outstanding shares of SRNB be voted in favor of a merger. This means that for a
merger proposal to be successful it must meet the expectations of a broad
cross-section of the shareholders of SRNB. A merger proposal that does not meet
the expectations of all shareholder constituencies is likely to fail. For this
reason, in evaluating the options that were available to SRNB, the board of
directors believed that the NVBancorp transaction would yield the greatest
support of the SRNB shareholders. The board of directors believes that not only
do the transactions contemplated by the plan of reorganization, including the
merger, offer the best financial prospects for SRNB shareholders but it also
avoids the controversies and impact on the communities served by SRNB that have
in the past caused local shareholders to resist other merger overtures. The SRNB
board of directors believed that obtaining two-thirds approval of the
shareholders would be difficult, if not impossible, with any proposal that posed
problems within the communities served by SRNB.
TERMS OF THE MERGER. The SRNB board of directors considered the terms,
conditions, covenants and representations contained in the plan of
reorganization and that the number and value of shares of NVBancorp common stock
to be issued in exchange for each outstanding share of SRNB common stock
represented the most favorable terms offered to SRNB in writing.
THE TAX-FREE NATURE OF THE MERGER. The SRNB board of directors
considered and found favorable the fact that the merger is structured to be tax
free for federal income tax purposes. SRNB shareholders will recognize no gain
for federal income tax purposes in connection with the exchange of SRNB common
stock for NVBancorp common stock (except with respect to cash received in lieu
of shares of NVBancorp common stock).
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IMPACT ON COMMUNITIES, DEPOSITORS, CUSTOMERS AND EMPLOYEES. As is
required by its articles of association, the SRNB board of directors considered
the impact of the merger upon SRNB's communities, depositors, customers,
employees, the overall compatibility of SRNB's office and branch structure
compared to those of NVBancorp's. The ability of SRNB to continue as an on-going
bank under the NVBancorp holding company was viewed favorably for being least
disruptive of the communities served by SRNB, its depositors, customers and
employees. The SRNB board of directors believes that all of these constituencies
will be in favor of the merger.
The SRNB board of directors did not assign any relative or specific
value to any of the factors.
The board of directors of SRNB unanimously recommends that the plan of
reorganization, the related agreements and the transactions contemplated by
those agreements, including the merger of SRNB into NVB Interim National Bank,
be approved by the SRNB shareholders.
OPINION OF SRNB'S FINANCIAL ADVISOR
GENERAL. SRNB engaged Hoefer & Arnett Incorporated on June 15, 1999, to
act as financial advisor to SRNB in connection with a merger. Hoefer & Arnett
agreed to assist SRNB in analyzing, structuring, negotiating, and effecting a
transaction with a potential acquiror, which after discussions with multiple
parties, was NVBancorp. As part of its engagement, Hoefer & Arnett agreed to
render to SRNB's board of directors an opinion with respect to the fairness from
a financial point of view of the consideration to be received by SRNB
shareholders in a potential sale of SRNB. Hoefer & Arnett is a nationally
recognized investment banking firm and, as part of its investment banking
activities, is regularly engaged in the valuation of businesses and their
securities in connection with merger transactions and other types of
acquisitions, negotiated underwritings, private placements and valuations for
corporate and other purposes. SRNB selected Hoefer & Arnett to render the
opinion on the basis of its experience and expertise and its reputation in the
banking and investment communities.
At the request of SRNB's board of directors, representatives of Hoefer
& Arnett participated in the September 20, 1999 meeting at which SRNB's board of
directors considered the merger and in the October 1, 1999 meeting at which
SRNB's board of directors approved the plan of reorganization. At the September
20, 1999 meeting, Hoefer & Arnett delivered to SRNB's board of directors its
oral opinion, subsequently confirmed in writing as of October 1, 1999, that as
of that date, the consideration to be received by the holders of SRNB's common
stock in the merger was fair to the shareholders from a financial point of view.
Hoefer & Arnett has also delivered to SRNB's board of directors a written
opinion dated the date of this joint proxy statement/prospectus which is
substantially identical to the October 1, 1999 opinion.
THE FULL TEXT OF HOEFER & ARNETT'S WRITTEN OPINION TO SRNB'S BOARD OF
DIRECTORS, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED, AND
LIMITATIONS OF THE REVIEW BY HOEFER & ARNETT IS ATTACHED AS ANNEX B TO THIS
JOINT PROXY STATEMENT/PROSPECTUS. YOU SHOULD READ THE HOEFER & ARNETT OPINION
CAREFULLY AND IN ITS ENTIRETY. THE SUMMARY OF HOEFER & ARNETT'S OPINION INCLUDED
IN THIS DOCUMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
HOEFER & ARNETT'S OPINION. IN FURNISHING THE OPINION, HOEFER & ARNETT DOES NOT
ADMIT THAT IT IS AN EXPERT WITH RESPECT TO THE REGISTRATION STATEMENT OF WHICH
THIS JOINT PROXY STATEMENT/PROSPECTUS IS A PART WITHIN THE MEANING OF THE TERM
"EXPERT" AS USED IN THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND
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REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION, NOR DOES IT ADMIT THAT
ITS OPINION CONSTITUTES A REPORT OR VALUATION WITHIN THE MEANING OF SECTION 11
OF THE SECURITIES ACT OF 1933, AS AMENDED. HOEFER & ARNETT'S OPINION IS DIRECTED
TO SRNB'S BOARD, COVERS ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE
CONSIDERATION TO BE RECEIVED BY SRNB SHAREHOLDERS AS OF THE DATE OF THE OPINION
AND DOES NOT CONSTITUTE A RECOMMENDATION TO SRNB SHAREHOLDERS AS TO HOW SRNB
SHAREHOLDERS SHOULD VOTE AT SRNB'S SPECIAL MEETING.
In connection with its October 1, 1999 opinion, Hoefer & Arnett, among
other things:
o reviewed certain publicly available financial and other data with
respect to SRNB and NVBancorp, including the consolidated
financial statements for recent years and interim periods to June
30, 1999, and certain other relevant financial and operating data
relating to SRNB and NVBancorp made available to Hoefer & Arnett
from published sources and from the internal records of SRNB and
NVBancorp;
o reviewed the September 24, 1999 draft of the plan of
reorganization;
o reviewed certain publicly available information concerning the
trading of, and market for, SRNB common stock and NVBancorp common
stock;
o compared certain financial data of SRNB and NVBancorp with those
of certain other companies in the banking industry which Hoefer &
Arnett deemed to be relevant;
o considered the financial terms, to the extent publicly available,
of selected recent business combinations of companies in the
banking industry which Hoefer & Arnett deemed to be comparable, in
whole or in part, to the merger;
o conducted discussions with representatives of the senior
management of SRNB and NVBancorp concerning their respective
businesses and prospects;
o reviewed certain information, including financial forecasts and
related assumptions furnished to Hoefer & Arnett by SRNB and
NVBancorp, respectively; and
o performed such other analyses and examinations as Hoefer & Arnett
deemed appropriate.
In connection with Hoefer & Arnett's review, Hoefer & Arnett did not
assume any obligation independently to verify the information listed above and
relied on its accuracy and completeness in all material respects. With respect
to the financial forecasts for SRNB and NVBancorp provided to Hoefer & Arnett by
their respective managements, upon their advice and with SRNB's consent, Hoefer
& Arnett assumed for purposes of its opinion that the forecasts were reasonably
prepared on bases reflecting the best available estimates and judgments of their
respective managements at the time of preparation as to the future financial
performance of SRNB and NVBancorp and that they provided a reasonable basis upon
which Hoefer & Arnett could form its opinion. Hoefer & Arnett assumed that there
were no material changes in SRNB's or NVBancorp's assets, financial condition,
results of operations, business or prospects since the respective dates of their
last financial statements made available to Hoefer & Arnett. Hoefer & Arnett
relied on advice of counsel to SRNB as to all legal matters with respect to
SRNB, the merger and the plan of reorganization. Hoefer & Arnett assumed that
the merger will be completed in a manner that complies in all respects with the
applicable provisions of the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, and all other applicable federal and state
statutes, rules and regulations. In addition, Hoefer & Arnett did not assume
responsibility for reviewing any individual credit files, or making an
independent evaluation, appraisal or physical inspections of any of the assets
or liabilities (contingent or otherwise) of SRNB or NVBancorp, nor was Hoefer &
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Arnett furnished with any appraisals. Hoefer & Arnett is not an expert in the
evaluation of loan portfolios for purposes of assessing the adequacy of the
allowances for losses with respect thereto and assumed, with SRNB's consent,
that the allowances for each of SRNB and NVBancorp were in the aggregate
adequate to cover the losses. SRNB informed Hoefer & Arnett, and Hoefer & Arnett
assumed, that the merger will be recorded as a pooling of interests under
generally accepted accounting principles. Finally, Hoefer & Arnett's opinion was
based on economic, monetary and market and other conditions as in effect on, and
the information made available to Hoefer & Arnett as of, the date of the
opinion.
Set forth below is a brief summary of the information presented by
Hoefer & Arnett to SRNB's board of directors on September 20, 1999, in
connection with its opinion.
DISCOUNTED DIVIDEND ANALYSIS. In performing the discounted dividend
analysis, Hoefer & Arnett used SRNB's management estimates of earnings per share
and dividend payments over a five-year period. The estimated earnings per share
in the year 2003 was multiplied by an estimated price to earnings multiple
ranging from 10.0x to 12.0x. This product was then added to the cumulative
estimated dividends for the prior five years and the sum of these two numbers
was discounted to the present using discount rates ranging from 12.5% to 15.0%.
This analysis indicated that the present value of SRNB's future stock price plus
dividends ranged form $10.53 to $13.80 per share. The $15.23 per share offer
from NVBancorp, based on a closing price for NVBancorp common stock of $10.50 on
September 15, 1999 exceeded the range of values implied by this analysis.
COMPARABLE PUBLIC COMPANY ANALYSIS. Hoefer & Arnett analyzed the
financial performance and trading multiples of a comparison group of 15 publicly
traded California banks. SRNB's historical financial performance is below the
average performance of the selected California comparison group. The multiples
that were analyzed were price to tangible book value, price to latest twelve
months ("LTM") earnings and price to 1999 estimated earnings, excluding
institutions with price to LTM earnings greater than 18.0x. The low and mean
values of these multiples were then applied to SRNB's current values. This
analysis indicated a reference range for SRNB's current common stock price from
$7.46 to $9.88 with a mean value of $8.67, based on SRNB's 1999 estimated
earnings. Based on SRNB's tangible book value a reference range for SRNB's
current common stock price from $11.71 to $18.99 with a mean value of $15.35.
The mean of the two above methods indicates a reference price for SRNB's current
common stock of $12.01, as compared to NVBancorp's offer of $15.23 per share,
and SRNB's current price of $13.25 on September 15, 1999.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Hoefer & Arnett reviewed the
consideration paid in selected categories of bank transactions for which the
relevant information was publicly available. Specifically, Hoefer & Arnett
reviewed selected bank transactions, involving mergers in California from
January 1, 1997 to September 15, 1999 with transaction values below $50 million
and return on average assets less than 1.0%. The multiples paid to SRNB in this
transaction are in line with multiples paid in transactions in each of the above
categories. For each transaction, Hoefer & Arnett analyzed data illustrating,
among other things, purchase price to tangible book value, one-month market
price premium paid and purchase price to LTM earnings.
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A summary of the low and mean multiples in the analysis is as follows:
<TABLE>
<CAPTION>
Price-to- Price-to- Premium-to-
Tangible LTM Price
Book Value EPS 1 Month Prior
---------- --------- -------------
TRANSACTION CRITERIA:
1997 to 1999 Year-to-Date Bank Mergers in California
with Transaction Values Below $50 Million and
ROAA less than 1.0%.
<S> <C> <C> <C>
- MEAN 1.8X 27.1X 30.0%
- LOW 1.2X 17.0X 9.1%
</TABLE>
A summary of the results of Hoefer & Arnett's analysis of the multiples
to be paid in the merger with NVBancorp is as follows:
<TABLE>
<CAPTION>
Price-to- Price-to- Premium-to-
Tangible LTM Price
Book Value EPS 1 Month Prior
---------- --------- -------------
<S> <C> <C> <C>
Transaction Summary: 1.6x NM 4.6%
</TABLE>
CONTRIBUTION ANALYSIS. Hoefer & Arnett analyzed the contribution of
each of SRNB and NVBancorp to, among other things, assets, loans, deposits, and
equity of the pro forma combined company for the period ending June 30, 1999,
and projected net income for the calendar year ending December 31, 1999 and
December 31, 2000. This analysis showed, among other things, that based on pro
forma combined balance sheets for SRNB and NVBancorp at June 30, 1999, SRNB
would have contributed approximately 40.2% of the assets, 34.8% of the gross
loans, 39.7% of the deposits, and 37.1% of the equity. The pro forma projected
income statement showed that SRNB would contribute approximately 21.8% of the
net income in 1999, and 26.8% of the net income in 2000. Based on an exchange
ratio of 1.450 of a share of NVBancorp common stock for each share of SRNB's
common stock, holders of SRNB's common stock would own approximately 36.4% of
the combined company based on common shares outstanding at June 30, 1999, in
line with its mean contribution.
PRO FORMA EARNINGS DILUTION ANALYSIS. Using earnings estimates and
projected growth rates for SRNB and NVBancorp provided by their respective
managements, Hoefer & Arnett compared management's estimated earnings per share
("Estimated EPS") of SRNB's common stock on a stand-alone basis to the Estimated
EPS of the common stock for the pro forma combined company for the calendar year
ending December 31, 2000. Hoefer & Arnett noted that the merger would result in
an accretion of 35.1% to SRNB's Estimated EPS for the year ending December 31,
2000. These estimates were used for purposes of this analysis only and are not
necessarily indicative of expected results or plans of NVBancorp, SRNB or the
combined institution. Additionally, this analysis did not incorporate any
anticipated cost savings or revenue enhancements.
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PICKUP ANALYSIS. This analysis attempts to illustrate the increase in
per share values to SRNB shareholders as if the merger had been completed on
January 1, 1999. As shown below, the analysis shows an increase to SRNB
shareholders in dividends, fully-diluted tangible book value and earnings per
share. In performing the pickup analysis, Hoefer & Arnett applied the exchange
ratio of 1.450 of a share of NVBancorp common stock for each share of SRNB
common stock and applied it to the pro forma per share values for NVBancorp. The
results of this analysis were:
<TABLE>
<CAPTION>
Current Pro Forma Estimated
SRNB SRNB Increase from
Value Value (1) Current Value
<S> <C> <C> <C>
Annualized Dividend Per Share $ 0.00 $ 0.50 NM
Estimated 1999 EPS 0.86 1.42 65.0%
Estimated 2000 EPS 1.25 1.68 35.1%
Fully-Diluted Tangible Book Value per Share 9.49 11.12 17.0%
</TABLE>
(1) Adjusted for exchange of 1.450 of a share of NVBancorp common
stock for each share of SRNB common stock.
The summary set forth above is not a complete description of the
presentation by Hoefer & Arnett to SRNB's board of directors or of the analyses
performed by Hoefer & Arnett. The preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Hoefer &
Arnett believes that its analyses and the summary set forth above must be
considered as a whole and that selecting a portion of its analyses and factors,
without considering all analyses set forth in its presentation to SRNB's board
of directors. In addition, Hoefer & Arnett may have given various analyses more
or less weight than other analyses, and may have deemed various assumptions more
or less probable than other assumptions, so that the ranges of valuations
resulting from any particular analysis described above should not be taken to be
Hoefer & Arnett's view of the actual value of SRNB or the combined company. The
fact that any specific analysis has been referred to in the summary above is not
meant to indicate that the analysis was given greater weight than any other
analysis.
In performing its analyses, Hoefer & Arnett made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of SRNB or NVBancorp.
The analyses performed by Hoefer & Arnett are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by the analyses. The analyses were prepared solely as
part of Hoefer & Arnett's analysis of the fairness of the consideration to be
received by SRNB shareholders in the merger and were provided to SRNB's board of
directors in connection with the delivery of Hoefer & Arnett's opinion. The
analyses are not appraisals and do not reflect the prices at which a company
might actually be sold or the prices at which any securities may trade at the
present time or any time in the future. The forecasts used by Hoefer & Arnett in
certain of its analyses are based on numerous variables and assumptions, which
are inherently unpredictable and must be considered not certain of occurrence as
projected. Accordingly, actual results could vary significantly from those
contemplated in the forecasts.
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As described above under "Proposal to Approve the Plan of
Reorganization and Merger ? Reasons for the Plan of Reorganization and Merger;
Recommendations of the Boards of Directors," Hoefer & Arnett's opinion and
presentation to SRNB's board of directors were among the many factors taken into
consideration by SRNB's board of directors in making its determination to
approve the plan of reorganization and the merger.
SRNB and Hoefer & Arnett have entered into an agreement relating to the
services to be provided by Hoefer & Arnett in connection with the merger. SRNB
has agreed to pay Hoefer & Arnett, at the time of closing, a cash fee equal to
1.25% of market value of the aggregate consideration offered in exchange for the
outstanding shares of SRNB common stock in the merger. SRNB has also agreed to
reimburse Hoefer & Arnett for its reasonable out-of-pocket expenses, including
reasonable fees and disbursements for Hoefer & Arnett's legal counsel and other
experts retained by Hoefer & Arnett. SRNB has agreed to indemnify Hoefer &
Arnett's affiliates, and their respective partners, directors, officers, agents,
consultants, employees and controlling persons against certain liabilities,
including liabilities under the federal securities laws.
The full text of Hoefer & Arnett's written opinion dated the date of
this joint proxy statement/prospectus is attached as Annex B to this joint proxy
statement/prospectus and is incorporated here by this reference.
SRNB shareholders are urged to read the opinion in its entirety for a
description of the procedures followed, assumptions made, matters considered,
and qualifications and limitations on the review undertaken by Hoefer & Arnett
Incorporated.
OPINION OF NVBANCORP'S FINANCIAL ADVISOR
Alex Sheshunoff & Co. Investment Banking, L.P. was retained by
NVBancorp on September 15, 1999 to act as NVBancorp's financial advisor in
connection with the merger. Representatives of Sheshunoff participated in the
telephonic meeting of the NVBancorp board of directors held on September 23,
1999, at which the NVBancorp board of directors approved the plan of
reorganization. At that meeting, Sheshunoff rendered its preliminary oral
opinion to the effect that, as of the date thereof, the conversion ratio was
fair to NVBancorp from a financial point of view. Sheshunoff has reconfirmed its
oral opinion of September 23, 1999 by delivering a written opinion to the
NVBancorp board of directors, dated the date of this joint proxy
statement/prospectus to the effect that, as of the date thereof, the conversion
ratio was fair to the holders of NVBancorp common stock from a financial point
of view.
THE FULL TEXT OF THE SHESHUNOFF OPINION, DATED THE DATE OF THIS JOINT
PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS
ANNEX C TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HERE BY
THIS REFERENCE. THE SHESHUNOFF OPINION WAS PROVIDED TO THE NVBANCORP BOARD OF
DIRECTORS FOR ITS INFORMATION, IS DIRECTED ONLY TO THE FAIRNESS OF THE
CONVERSION RATIO FROM A FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY NVBANCORP SHAREHOLDER AS TO HOW THE SHAREHOLDER SHOULD
VOTE AT THE NVBANCORP MEETING WITH RESPECT TO THE MERGER OR ANY OTHER RELATED
MATTER. THE DESCRIPTION OF THE SHESHUNOFF OPINION SET FORTH ABOVE IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO ANNEX C. NVBANCORP SHAREHOLDERS ARE URGED TO
READ THE SHESHUNOFF OPINION IN ITS entirety.
In connection with rendering the Sheshunoff opinion, Sheshunoff, among
other things: (i) reviewed the plan of reorganization; (ii) reviewed annual
reports to shareholders and annual reports on Form 10-K of NVBancorp and SRNB,
as well as certain quarterly reports on Form 10-Q of NVBancorp and SRNB; (iii)
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reviewed certain internal financial analyses and forecasts, including forecasts
of certain cost savings expected by NVBancorp to be achieved as a result of the
merger ("Synergies"); (iv) discussed with members of the senior management of
NVBancorp the past and current business operations, regulatory relationships,
financial conditions and future prospects of NVBancorp; (v) reviewed with
members of senior management of NVBancorp the results of NVBancorp's due
diligence examination of SRNB and the strategic benefits expected to be derived
from the merger; (vi) reviewed the reported price and trading activity for
NVBancorp common stock and SRNB common stock; (vii) compared certain financial
and stock market information for NVBancorp and SRNB with similar information for
certain other companies, the securities of which are publicly traded; (viii)
reviewed the financial terms of certain recent business combinations in the
commercial banking industry; and (ix) performed other studies and analyses as it
considered appropriate. NVBancorp did not request or retain Sheshunoff to assist
in NVBancorp's due diligence review of SRNB. Sheshunoff did not independently
review any of NVBancorp's or SRNB's assets or liabilities and did not visit
either NVBancorp or SRNB.
As set forth in the Sheshunoff opinion, Sheshunoff relied upon the
accuracy and completeness of all of the financial and other information reviewed
by it and assumed the accuracy and completeness for purposes of the Sheshunoff
opinion. In that regard, Sheshunoff assumed, with NVBancorp's consent, that the
financial forecasts, including, without limitation, the Synergies and
projections regarding under-performing and non-performing assets and net
charge-offs had been reasonably prepared on a basis reflecting the best then
available judgments and estimates of NVBancorp and SRNB and that these forecasts
will be realized in the amounts and at the times contemplated. Sheshunoff makes
no representations or warranty that the financial forecasts and projections
prepared by NVBancorp will be realized in the amounts and at the times
forecasted and projected. The fairness of the conversion ratio is based upon
recognizing the financial forecasts and projections without negative deviations
from the forecasted and projected results. The value of the combined company
following the merger is significantly affected by the cost savings estimate and
the projections regarding the under-performing and non-performing assets and net
charge-offs.
Sheshunoff is not an expert in the evaluation of loan and lease
portfolios for purposes of assessing the adequacy of the allowance for losses
with respect thereto and assumed, with NVBancorp's consent, that the allowances
for each of NVBancorp and SRNB are in the aggregate adequate to cover all
losses. In addition, Sheshunoff did not review individual credit files nor did
it make an independent evaluation or appraisal of the assets and liabilities of
NVBancorp or SRNB or any of their respective subsidiaries and had not been
furnished with any evaluation or appraisal. Sheshunoff also assumed, with
NVBancorp's consent, that the merger will be accounted for as a
pooling-of-interests under generally accepted accounting principles and that
obtaining any necessary regulatory approvals and third party consents for the
merger or otherwise will not have an adverse effect on NVBancorp, SRNB or the
combined company resulting from the merger.
The advisory services and the Sheshunoff opinion provided by Sheshunoff
were for the information and assistance of the NVBancorp board of directors in
connection with its consideration of the merger and do not constitute a
recommendation as to how any NVBancorp shareholder should vote with respect to
the merger.
The following is a summary of the material financial analyses
considered by Sheshunoff in arriving at its opinion and is not a complete
description of the analyses performed by Sheshunoff.
SUMMARY OF TERMS OF PROPOSED TRANSACTION. Sheshunoff reviewed the terms
of the proposed merger, including the expected method of accounting, the
conversion ratio, the share price of NVBancorp as of September 22, 1999, the
resulting indicated value per share of SRNB common stock (the "Indicated Value")
of the merger and the resulting indicated aggregate consideration (the
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"Indicated Aggregate Consideration") to be paid in the merger. The proposed
method of accounting for the merger was a pooling-of-interests in a tax-free
exchange. The Indicated Value was $15.38 per share of SRNB common stock,
determined by multiplying the conversion ratio by the closing price on the
Nasdaq National Market of NVBancorp common stock on September 22, 1999. The
Indicated Aggregate Consideration to be paid in the merger was $24.112 million
based on 1.568 million fully diluted shares outstanding (utilizing the treasury
stock method at the Indicated Value).
The analysis noted that the Indicated Value constituted: (i) a multiple
of 20.7x SRNB's annualized earnings for the six months ended June 30, 1999, (ii)
a multiple of 20.1x the Institutional Broker Estimate System ("IBES") median
estimates of SRNB's 1999 earnings, and (iii) a multiple of 17.1x the IBES median
estimates of SRNB's 2000 earnings. The Indicated Value also reflected a multiple
of 1.29x SRNB's stated book value and a multiple of 1.74x SRNB's tangible book
value based on a June 30, 1999 book value of $18.626 million and tangible book
value of $13.887 million. The Indicated Aggregate Value represented a deposit
premium of 14.1%. In performing these analyses, Sheshunoff used estimates based
upon the most recent median earnings estimates published by the IBES as of
September 22, 1999. IBES is a data service that monitors and publishes
compilations of earnings estimates by selected research analysts regarding
companies of interest to institutional investors.
COMPARISON OF SELECTED COMPARABLE COMPANIES - SRNB. Based on publicly
available information and IBES earnings estimates, Sheshunoff reviewed and
compared actual and estimated selected financial, operating and stock market
information and financial ratios of SRNB and a group of 13 additional banking
organizations which Sheshunoff deemed to be relevant. The group consisted of the
Bank of Hemet, BYL Bancorp, California Independent Bancorp, Coast Bancorp,
Community West Bancshares, Desert Community Bank, Foothill Independent Bancorp,
National Mercantile Bancorp, North County Bancorp, NVBancorp Bancorp,
Professional Bancorp, Inc., Redwood Empire Bancorp, and Wilshire State Bank (the
"SRNB Selected Banks"). This comparison showed, among other things, that for the
three months ended June 30, 1999 (i) SRNB's ratio of non-interest expense to
average assets was 3.9% compared to a median of 5.2% for the SRNB Selected
Banks, (ii) SRNB's ratio of non-interest income to average assets was 0.84%
compared to a median of 1.38% for the SRNB Selected Banks, (iii) SRNB's net
interest margin was 4.49% compared to a median of 5.92% for the SRNB Selected
Banks, (iv) SRNB's efficiency ratio (defined as non-interest expenses divided by
the sum of noninterest income and net interest income before provision for loan
losses) was 76.1% compared to a median of 68.6% for the SRNB Selected Banks, (v)
SRNB's return on average assets was 0.52% compared to a median of 1.10% for the
SRNB Selected Banks, and (vi) SRNB's return on average common equity was 5.52%
compared to a median of 12.16% for the SRNB Selected Banks. This comparison also
indicated that as of September 22, 1999, (A) the ratio of SRNB's market price to
estimated earnings for the twelve month period ending December 31, 2000 was
16.8x compared to a median of 10.6x for the SRNB Selected Banks, (B) the ratio
of SRNB's market price to stated book value per share at June 30, 1999 was 1.08x
compared to a median of 1.40x for the SRNB Selected Banks, (C) the ratio of
SRNB's market price to tangible book value per share at June 30, 1999 was 1.45x
compared to a median of 1.71x for the SRNB Selected Banks, (D) SRNB's dividend
yield was 0.0% compared to a median of 1.2% for the SRNB Selected Banks, and
(E), SRNB had a market capitalization of $19.8 million.
COMPARISON OF SELECTED COMPARABLE COMPANIES - NVBANCORP. Based on
publicly available information and IBES earnings estimates, Sheshunoff reviewed
and compared actual and estimated selected financial, operating and stock market
information and financial ratios of NVBancorp and a group of 13 additional
banking organizations which Sheshunoff deemed to be relevant. The group
consisted of the Bank of Hemet, BYL Bancorp, California Independent Bancorp,
Coast Bancorp, Community West Bancshares, Desert Community Bank, Foothill
Independent Bancorp, National Mercantile Bancorp, North County Bancorp, SRNB,
Professional Bancorp, Inc., Redwood Empire Bancorp, and Wilshire State Bank (the
"NVBancorp Selected Banks"). This comparison showed, among other things, that
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for the three months ended June 30, 1999 (i) NVBancorp's ratio of non-interest
expense to average assets was 3.3% compared to a median of 5.2% for the
NVBancorp Selected Banks, (ii) NVBancorp's ratio of non-interest income to
average assets was 1.11% compared to a median of 1.38% for the NVBancorp
Selected Banks, (iii) NVBancorp's net interest margin was 5.14% compared to a
median of 5.92% for the NVBancorp Selected Banks, (iv) NVBancorp's efficiency
ratio (defined as non-interest expenses divided by the sum of non-interest
income and net interest income before provision for loan losses) was 56.0%
compared to a median of 68.6% for the NVBancorp Selected Banks, (v) NVBancorp's
return on average assets was 1.27% compared to a median of 1.10% for the
NVBancorp Selected Banks, and (vi) NVBancorp's return on average common equity
was 12.11% compared to a median of 12.16% for the NVBancorp Selected Banks. This
comparison also indicated that as of September 22, 1999, the ratio of
NVBancorp's market price to estimated earnings for the twelve month period
ending December 31, 2000 was 8.9x compared to a median of 10.6x for the
NVBancorp Selected Banks, the ratio of NVBancorp's market price to stated book
value per share at June 30, 1999 was 1.23x compared to a median of 1.40x for the
NVBancorp Selected Banks, the ratio of NVBancorp's market price to tangible book
value per share at June 30, 1999 was 1.23x compared to a median of 1.71x for the
NVBancorp Selected Banks, (D) NVBancorp's dividend yield was 3.6% compared to a
median of 1.2% for the NVBancorp Selected Banks, and (E), NVBancorp had a market
capitalization of $38.9 million.
SELECTED TRANSACTION ANALYSIS. Sheshunoff reviewed certain information
relating to six announced or completed bank mergers since January, 1998 in which
the seller reported a non-performing asset ratio above 1% (the "Selected Bank
Mergers") and which it deemed to be relevant. The Selected Bank Mergers were
(identified by acquiror/acquiree): Belvedere Capital Partners/Bank of Orange
County, First Coastal Bancshares/American Independent Bank NA, OffRoad Capital
Corporation/Sequoia National Bank, Summitt Bank Corporation/California Security
Bank, and Washington Mutual, Inc./Industrial Bank.
The analysis indicated that the NVBancorp/SRNB Merger had: (i) a price
to annualized six months net income multiple of 20.7x as compared with a median
price to last twelve months net income of 29.8x for the Selected Bank Mergers,
(ii) a price to book multiple of 1.29x as compared with a median price to book
multiple of 2.00x for the Selected Bank Mergers, (iii) a price to tangible book
multiple of 1.74x as compared with a median price to tangible book multiple of
2.01x for the Selected Bank Mergers, (iv) a price to assets ratio of 12.1% as
compared with a median price to assets ratio of 16.2% for the Selected Bank
Mergers, and (v) a price to deposits ratio of 14.1% as compared with a median
price to deposits ratio of 19.2% for the Selected Bank Mergers.
PRO FORMA ANALYSIS. Based on projections provided by NVBancorp,
Sheshunoff analyzed the pro forma per share impact of the merger on a variety of
measures including, among other things, earnings per share, cash earnings per
share, tangible book value per share and various profitability measures. Share
prices for NVBancorp common stock and SRNB common stock were based upon closing
prices on September 22, 1999. The analysis was based on the assumption that the
combined companies would realize projected cost savings assumptions in the
amounts and within time periods assumed by Sheshunoff. FOR THE PURPOSE OF THIS
ANALYSIS, SHESHUNOFF UTILIZED THE SAME COST SAVINGS PROVIDED NVBANCORP
MANAGEMENT, BUT ASSUMED THAT THOSE SAVINGS WOULD BE ACHIEVED LESS QUICKLY THAN
NVBANCORP MANAGEMENT PROJECTED. The analysis assumed net pre-tax cost savings of
$2.2 million which represented 29.2% of SRNB's projected 1999 non-interest
expense base of $7.7 million. It was assumed that NVBancorp would realize 25% of
the cost savings in 2000, 50% in 2001, 75% in 2002 and 100% of the cost savings
in 2003. The analysis also assumed a $900 thousand after-tax restructuring
charge to be taken by NVBancorp by the end of 2000. The earnings dilution
experienced in 2000 includes the impact of $900 thousand in merger related
transaction costs that are one-time expenses.
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The analysis performed indicated that on a per share basis, the
transaction would be dilutive to NVBancorp's estimated earnings per share by 13%
in 2000 and accretive to NVBancorp's estimated earnings per share by 8% in 2001
and 16% in 2002. The analysis also indicated that the transaction would be
dilutive to NVBancorp's estimated cash earnings per share by 9% in 2000 and
would be accretive to NVBancorp's estimated cash earnings per share by 12% in
2001 and 19% in 2002.
DISCOUNTED DIVIDEND STREAM ANALYSIS. Using a discounted dividend stream
analysis, Sheshunoff estimated the present value of the future streams of
after-tax cash flows that SRNB could produce and distribute to shareholders. The
analysis assumed net pre-tax cost savings of $2.2 million which represented
29.2% of SRNB's projected 1999 non-interest expense base of $7.7 million. It was
assumed that NVBancorp would realize 25% of the cost savings in 2000, 50% in
2001, 75% in 2002 and 100% of the cost savings in 2003. The analysis also
assumed a $900 thousand after-tax restructuring charge to be taken by NVBancorp
by the end of 2000. Sheshunoff assumed that SRNB would generate 6% asset and
earnings growth and that SRNB's tangible common equity to tangible asset ratio
would be maintained at an 8% level. Sheshunoff estimated the terminal values for
the SRNB common stock at 10.0x and 15.0x SRNB's 2004 estimated operating income
(defined as net income before intangible amortization). The dividendable cash
flow streams and terminal values were then discounted to present values using
discount rates (ranging from 14% to 16%) chosen to reflect different assumptions
regarding required rates of return of holders or prospective buyers of SRNB's
common stock. This discounted dividend stream analysis indicated a reference
range of $11.87 to $18.02 per share for SRNB's common stock.
The summary set forth above describes the material analyses that
Sheshunoff performed in rendering the Sheshunoff's opinion and is not a complete
description of those analyses. The preparation of a fairness opinion is a
complex process. Sheshunoff believes that its analyses must be considered as a
whole and that selecting portions of its analyses without considering all
factors and analyses creates an incomplete view of the analyses and processes
underlying its opinion. In its analyses, Sheshunoff relied upon numerous
assumptions made by NVBancorp and Six Rivers regarding their future operation as
independent and combined companies with respect to industry performance, general
business and economic conditions, and other matters, many of which are beyond
the control of NVBancorp or SRNB. Analyses based upon forecasts of future
results are not necessarily indicative of actual values, which may be
significantly more or less favorable than suggested by the analyses. No company
or transaction used as a comparison in the analyses is identical to NVBancorp or
SRNB or to the merger. Additionally, estimates of the value of businesses are
not appraisals or necessarily reflective of the prices at which businesses
actually may be sold. Because estimates are inherently subject to uncertainty,
none of the NVBancorp board of directors, Sheshunoff, nor any other person
assumes responsibility for the accuracy of estimates. Sheshunoff prepared the
analyses solely for purposes of rendering the Sheshunoff opinion regarding the
fairness of the conversion ratio to NVBancorp from a financial point of view.
The analyses are not appraisals or necessarily and may not reflect the prices at
which SRNB common stock may actually be sold.
For its services as financial advisor to NVBancorp, NVBancorp has
agreed to pay Sheshunoff a cash fee of $7,500 which was paid upon execution by
NVBancorp of an engagement letter with Sheshunoff on September 15, 1999, and an
additional cash fee of $7,500 which was paid upon delivery of Shehunoff's
opinion. Sheshunoff was engaged solely for the purposes of determining whether
the conversion ratio is fair from a financial point of view to the common
shareholders of NVBancorp. NVBancorp also agreed to indemnify and hold harmless
Sheshunoff and its officers and employees against certain liabilities in
connection with its services under the engagement letter, except for liabilities
resulting from the negligence of Sheshunoff.
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The full text of Alex Sheshunoff & Co. Investment Banking, L.P.'s
written opinion dated the date of this joint proxy statement/prospectus is
attached as Annex C and is incorporated here by this reference.
NVBancorp shareholders are urged to read the opinion in its entirety
for a description of the procedures followed, assumptions made, matters
considered, and qualifications and limitations on the review undertaken by Alex
Sheshunoff & Co. Investment Banking, L.P.
EFFECTIVE DATE AND TIME OF THE MERGER
The plan of reorganization provides that the merger will be effective
on the date and at the time selected by the parties after the merger has been
certified by the Office of the Comptroller of the Currency, an executed copy of
the bank plan of reorganization and merger has been filed with and accepted by
the Office of the Comptroller of the Currency, all government approvals have
been received and satisfied and all other conditions to the merger have been
satisfied. The date and time on which the merger is effective as specified in
the plan of reorganization is referred to in this document as the effective date
and effective time, respectively. Although the parties have not adopted any
formal timetable, it is presently anticipated that the merger will be
consummated during March 2000, assuming all of the conditions set forth in the
plan of reorganization are satisfied or waived.
PURCHASE PRICE AND POTENTIAL ADJUSTMENTS
Each share of SRNB common stock issued and outstanding prior to the
effective time of the merger, other than shares as to which dissenters' rights
have been perfected, will be converted into the right to receive a number of
NVBancorp shares of common stock, plus cash in lieu of fractional shares,
according to a conversion ratio based on the average of the daily average of bid
and ask prices for NVBancorp shares on the Nasdaq National Market for the twenty
(20) consecutive trading days ending at the end of the third trading day
immediately preceding the effective time of the merger, rounded to four decimal
places (whether or not trades occurred on those days).
If the average closing price is not less than $10.00 and is not more
than $12.06, the conversion ratio will be 1.450; if the average closing price is
not less than $12.07 and is not more than $12.50, the conversion ratio will be
determined by dividing $17.50 by the average closing price; if the average
closing price is more than $12.50 but is not more than $15.00, the conversion
ratio will be 1.400.
If the average closing price is less than $10.00, then the board of
directors of SRNB may elect to terminate the plan of reorganization; provided,
however, that if SRNB does not give NVBancorp timely notice of termination, then
the conversion ratio will be 1.450 and the merger closing will go forward. See
"The Merger-Termination of the Plan of Reorganization" on page 61.
If the average closing price is greater than $15.00, then the
conversion ratio will be determined in accordance with a formula calculated as
follows: the conversion ratio will equal $21.00 PLUS 0.56 times the number equal
to the average closing price MINUS $15.00, with the sum DIVIDED by the average
closing price.
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The following table summarizes the conversion ratio variables set forth
above:
average closing price conversion ratio
--------------------- ----------------
under $10.00 1.450 (unless merger terminated)
$10.00 to $12.06 1.450
$12.07 to $12.50 $17.50 divided by the average closing price
$12.51 to $15.00 1.400
over $15.00 according to formula
The obligation of NVBancorp to consummate the transactions contemplated
by the plan of reorganization, including the merger, is subject to the condition
that, among other matters, as of the effective time of the merger SRNB will have
total shareholders' equity and leverage, tier 1 and total risk-based capital
ratios, respectively, in amounts required to comply with the "well capitalized"
category of applicable federal banking regulations and total reserves for losses
on outstanding loans in compliance with the SRNB loan loss policy and procedures
and at a level which, in the reasonable determination of NVBancorp, are adequate
for regulatory purposes and for purposes of generally accepted accounting
principles. See "Proposal to Approve the Plan of Reorganization and
Merger--Conduct of Business Pending the Merger" on page 53 and "Conditions to
the Completion of the Merger" on page 58. If the shareholders' equity of SRNB
as of the third business day prior to the closing date is less than $19,000,000,
then the conversion ratio will be re-calculated by NVBancorp and SRNB by
reducing the conversion ratio by 0.010 for each whole $100,000 amount of
shortfall then existing in the shareholders' equity of SRNB. For instance, if
the average closing price is $12.50, and the shareholders' equity of SRNB is
$18,899,000, then the conversion ratio will be 1.390. For this purpose,
shareholders' equity of SRNB is the sum of common stock par value, plus
additional paid in capital, plus retained earnings (or accumulated deficit), as
reflected on the books of SRNB. As of September 30, 1999, shareholders' equity
of SRNB was $19,641,000.
No fractional shares of NVBancorp shares of common stock will be issued
to holders of SRNB common stock. Instead, each holder entitled to a fraction of
a share will receive, at the time of surrender of the certificate or
certificates representing the holder's shares, an amount in cash equal to the
market value per share of the fractional shares. The market price will be based
on the closing price of NVBancorp shares on the Nasdaq National Market on the
trading day immediately preceding the effective time of the merger. No SRNB
shareholder will be entitled to dividends, voting rights, interest on the value
of, or any other rights in respect of a fractional share of NVBancorp common
stock.
CONVERSION OF SHARES OF SRNB COMMON STOCK
At the effective time, by virtue of the merger and without any action
on the part of the holders of SRNB common stock, each issued and outstanding
share of SRNB common stock (other than dissenting and fractional shares) will be
converted into the right to receive the per share consideration of NVBancorp
common stock as discussed above. See "--Purchase Price and Potential
Adjustments" on page 49. All shares of SRNB common stock will no longer be
outstanding and will automatically be canceled and retired and will cease to
exist, and each certificate previously representing any SRNB shares will
thereafter represent the shares of NVBancorp common stock into which such shares
of SRNB common stock have been converted. Certificates previously representing
shares of SRNB common stock will be exchanged for certificates representing
whole shares of NVBancorp common stock issued in consideration therefor upon the
surrender of those certificates. Cash will be paid in lieu of any fractional
share of NVBancorp common stock. See "--Exchange of SRNB Stock Certificates;
Fractional Interests" on page 51. From and after the effective date, the
holders of certificates formerly representing shares of SRNB common stock will
cease to have any rights with respect to those shares.
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EXCHANGE OF SRNB STOCK CERTIFICATES; FRACTIONAL INTERESTS
Prior to the effective date, NVBancorp has agreed to appoint Chase
Mellon Shareholder Services, LLC, or its successor as exchange agent (the
"Exchange Agent") for the purpose of exchanging certificates representing shares
of NVBancorp common stock, and at and after the effective date, NVBancorp will
issue and deliver to the Exchange Agent certificates representing the shares of
NVBancorp common stock to be delivered to holders of shares of SRNB common
stock. As soon as practicable after the effective date, each holder of shares of
SRNB common stock, upon surrender to the exchange agent of one or more
certificates for the shares of SRNB common stock for cancellation, will be
entitled to receive a certificate representing the number of shares of NVBancorp
common stock into which the number of shares of SRNB common stock will have been
converted and a payment in cash with respect to fractional shares, if any.
No dividends or other distributions of any kind which are declared
payable to shareholders of record of the shares of NVBancorp common stock after
the effective date will be paid to persons entitled to receive the certificates
for shares of NVBancorp common stock until those persons surrender their
certificates representing shares of SRNB common stock. Upon surrender of
certificates representing shares of SRNB common stock, the holder thereof will
be paid, without interest, any dividends or other distributions with respect to
the shares of NVBancorp common stock as to which the record date and payment
date occurred on or after the effective date and on or before the date of
surrender.
If any certificate for shares of NVBancorp common stock is to be issued
in a name other than that in which the certificate for shares of SRNB common
stock surrendered in exchange therefor is registered, it will be a condition of
the exchange that the person requesting the exchange will pay to the Exchange
Agent any transfer costs or other expenses (except taxes) required by reason of
the issuance of certificates for the shares of NVBancorp common stock in a name
other than the registered holder of the certificate surrendered.
All dividends or distributions, and any cash to be paid in lieu of
fractional shares, if held by the Exchange Agent for payment or delivery to the
holders of unsurrendered certificates representing shares of SRNB common stock
and unclaimed at the end of one year from the effective date, will (together
with any interest earned thereon) at that time be paid or redelivered by the
Exchange Agent to NVBancorp, and after that time any holder of a certificate
representing shares of SRNB common stock who has not surrendered the certificate
to the Exchange Agent will, subject to applicable law, look as a general
creditor only to NVBancorp for payment or delivery of the shares of NVBancorp
common stock and dividends or distributions or cash, as the case may be.
No fractional shares of NVBancorp common stock will be issued to
holders of shares of SRNB common stock. In lieu thereof, each holder entitled to
a fraction of a share of NVBancorp common stock will receive, at the time of
surrender of the certificate or certificates representing the holder's shares of
SRNB common stock, an amount in cash equal to the market value per share of
NVBancorp common stock multiplied by the fraction of a share of NVBancorp common
stock to which the holder otherwise would be entitled. The market value of
NVBancorp common stock is calculated using the closing price of the NVBancorp
common stock on the Nasdaq National Market on the trading day immediately
preceding the effective time. No holder will be entitled to dividends, voting
rights, interest on the value of, or any other rights in respect of, a
fractional share.
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TREATMENT OF STOCK OPTIONS
At the effective time, the obligations under the SRNB stock option plan
will be assumed by NVBancorp. At the effective time, options to purchase shares
of SRNB common stock issued under SRNB's stock option plan that are outstanding
will be converted, without any action on the part of the holders thereof, into
substitute options to acquire the number of shares of NVBancorp common stock the
option holder would have received in the merger if he or she had exercised all
of his or her options immediately prior to the effective date. The option
exercise price will be adjusted to equal the exercise price per share for the
options immediately prior to the merger divided by the conversion ratio, as the
conversion ratio may be adjusted. Except as noted above, each SRNB stock option
will otherwise continue on terms and conditions that are consistent with those
that were applicable on the effective date.
INTERESTS OF SRNB OFFICERS AND DIRECTORS IN THE MERGER
SRNB directors and executive officers have interests in the merger in
addition to their interests as SRNB shareholders. The SRNB board of directors
was aware of these interests and considered them, among other matters, in
approving the plan of reorganization. See "Introduction -Share Ownership of
Management" on page 25.
As of the record date, the directors and executive officers of SRNB
owned an aggregate of _____________ shares of SRNB common stock (including
_______ shares subject to options exercisable currently or within 60 days of the
record date) which, if owned by them at the effective date of the merger, will
be converted into shares of NVBancorp common stock with an approximate aggregate
market value of $___________ (based on the $________ per share closing price of
NVBancorp common stock on the Nasdaq National Market on the trading day
immediately preceding the date the registration statement was filed. Under the
plan of reorganization, NVBancorp has agreed to appoint two current directors of
SRNB to the NVBancorp board of directors who will be entitled to receive the
directors' fees and benefits which NVBancorp extends to its directors.
Additionally, all of the current SRNB directors will continue to serve on the
board of directors of SRNB and two of NVBancorp's current directors will become
members of the board of directors of SRNB and become entitled to receive the
directors' fees and benefits which SRNB extends to its directors.
Mr. Martinez, President and Chief Executive Officer of SRNB, Shelton
Francis, Executive Vice President and Chief Credit Officer of SRNB, Margie Plum,
Executive Vice President and Secretary of SRNB (the "SRNB executive officers" )
are parties to transition agreements that provide for severance benefits upon
the occurrence of a change of control such as the merger. These agreements
provide that, for a period of two years following a change of control, any SRNB
executive officer has the sole discretion to terminate employment and receive a
lump sum payment or periodic monthly payments equal to 35 months of then current
base salary, plus bonuses paid for the prior two years. Under these provisions
Mr. Martinez, Mr. Francis, and Mrs. Plum would be entitled to $400,000,
$306,000, and $226,000, respectively. Nine other SRNB officers also have
transition agreements. These agreements provide that, for two years following a
change of control, the officer has the sole discretion to terminate employment
and receive a lump sum payment or periodic monthly payments equal to 12 months
of then current base salary. If all nine officers were to elect payment, the
total would be $552,000.
The SRNB executive officers also have three-year employment agreements
dated April 1, 1999 with SRNB. The agreements provide severance of 18 months
base salary or the remaining base salary due under the contract, whichever is
less, in the event of termination without cause.
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Mr. Martinez and Mrs. Plum are each covered by a supplemental executive
retirement agreement under which benefits vest 100% in the case of a change of
control. Due to the merger, Mr. Martinez and Mrs. Plum are entitled to,
respectively, an annual retirement benefit of $215,136 and $78,115 for a period
of 15 years. Payment begins at age 65 or at termination of employment, whichever
is later.
In addition, the plan of reorganization provides SRNB directors and
officers with certain rights to indemnification by NVBancorp. See "Comparison Of
Shareholder Rights--Indemnification of Directors and Executive Officers" on page
83.
CONDUCT OF BUSINESS PENDING THE MERGER
Under the plan of reorganization, NVBancorp and SRNB have each agreed
that, during the period from the date of the plan of reorganization to the
effective time of the merger, it and each of its respective subsidiaries will:
o carry on its business in the ordinary course conducted prior to
the execution of the plan of reorganization and in compliance with
safe and sound banking practices and applicable law;
o preserve its business and business organizations intact, and
preserve the goodwill of its customers and others having business
relations with it;
o maintain its properties in customary repair, working order and
condition;
o comply with all applicable laws, regulations, decrees and
regulatory requirements; promptly forward to each party all
communications received from any regulatory agency that are not
prohibited by the regulatory agency from being disclosed; and
inform each party of any material restrictions imposed by any
regulatory agency on its business;
o use its best efforts to keep in force at not less than its present
limits all insurance policies (including deposit insurance of the
Federal Deposit Insurance Corporation) to the extent reasonably
practicable;
o use its reasonable best commercial efforts to keep available the
services of its present officers and employees;
o timely file all reports, tax returns and other documents required
to be filed with federal, state, local and other authorities;
o prior to foreclosure on any property concerning which it has
knowledge, or should have knowledge, that any hazardous material
was or is present, manufactured, recycled, reclaimed, released,
stored, treated, or disposed of at or from the property, conduct
an environmental audit and provide the results of the audit to and
consult with each party regarding the significance of the audit;
o not sell, lease, pledge, assign, encumber or otherwise dispose of
any of its assets except in the ordinary course of its business,
for adequate value, without recourse and consistent with its
customary practice;
o not take any action with respect to its investments or risk
management arrangements which are inconsistent with the policies
established by its board of directors;
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o not take any action to create, locate or terminate the operations
of any banking office or branch, or to form any new subsidiary or
affiliated entity;
o not settle or otherwise take any action to release or reduce any
of its rights with respect to any litigation involving a claim of
more than twenty-five thousand dollars ($25,000) in which it is a
party;
o not amend its articles of incorporation or association or bylaws
or the articles of incorporation or bylaws of its subsidiary; make
any change in its authorized, issued or outstanding capital stock
or any other equity security; issue, grant, sell, pledge, assign
or otherwise encumber or dispose of, or purchase, redeem, retire
or otherwise acquire (other than in a fiduciary capacity), shares
of or securities convertible into, capital stock or other equity
securities of their respective companies, or enter into any
agreement, call or commitment of any character so to do; grant or
issue any stock option relating to or right to acquire shares of
its capital stock or other equity security; or agree to do any of
the foregoing, except as expressly provided in the plan of
reorganization; except for issuance of shares upon exercise of
options granted under the NVBancorp 1989 Director Stock Option
Plan, the NVBancorp 1998 Employee Stock Incentive Plan or the
NVBancorp 1999 Director Stock Option Plan or the SRNB Stock Option
Plan and outstanding at the time the plan of reorganization was
executed; and
o not declare, set aside or pay any dividend or other distribution
in respect of its common stock other than regular quarterly or
semi-annual cash dividends on its common stock in amounts
substantially equivalent to cash dividends paid in the two years
prior to the date of the plan of reorganization.
In addition, SRNB has agreed that it will:
o take all necessary action to terminate the SRNB stock option plan
at the effective time of the merger and the exercise or surrender
(in exchange for substitute options) of SRNB options outstanding
thereunder;
o not make, approve, or grant to any of its directors, officers,
employees or agents with annual salaries in excess of $75,000 (1)
any increase in the compensation payable or to become payable by
it (including but not limited to compensation through any profit
sharing, pension, retirement, severance, incentive or other
employee benefit program or arrangement other than compensation
related to a SRNB employee stock ownership plan contribution for
1999 which is consistent with the amount contributed for 1998);
(2) any bonus payment or any agreement to make a bonus payment;
(3) any stock option, warrant or other right to acquire capital
stock (except as provided in the plan of reorganization); (4) any
employment or consulting agreement, unless NVBancorp has given its
prior written consent, and except for payments to officers and
employees of SRNB of regular salary increases, consistent with
past practices in connection with regular salary reviews or
bonuses consistent with past practices, as disclosed to NVBancorp;
o not cause, allow or suffer its officers or agents to commit to any
loan or renewal which does not comply in all material respects
with its credit policies in effect and as disclosed to NVBancorp
prior to the date of the plan of reorganization, provided,
however, that all new stand-alone extensions of credit over
$200,000, except for conforming FHLMC and FNMA loans, will be
subject to NVBancorp's prior written consent. The prior written
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consent of NVBancorp will be deemed waived for any new stand-alone
extension of credit that is below $200,000 and where the new
stand-alone extension of credit is either in compliance with SRNB
credit policy and the approving officer has the requisite lending
authority or has (have) been approved by the SRNB loan committee
or equivalent committee of the SRNB board of directors performing
that function;
o notify NVBancorp promptly in writing upon the occurrence of: (1)
the classification of any loan as "Non-Accrual," "Watch," "Other
Assets Specially Mentioned," "Substandard," "Doubtful" or "Loss";
or (2) the filing or commencement of any legal action or other
proceeding or investigation against SRNB; and will provide to
NVBancorp on request reports on certain loans as described in the
plan of reorganization; and
o subject to certain exceptions, incur or commit to any capital
expenditures for more than $50,000 in the aggregate.
Additionally, NVBancorp has agreed that it will:
o amend the articles of association and bylaws of NVB Interim
National Bank, subject to obtaining requisite shareholder and
governmental approvals, to change the name of the resulting bank
to SRNB National Bank and to provide to a board of directors
consisting of five to eleven members with the exact number of
directors set at eight or another number agreed by the parties;
o take action to offer substitute stock options, exercisable for an
equivalent number of shares of NVBancorp common stock, to all
holders of SRNB stock options;
o take all necessary corporate action, including any required
approval of the shareholders of NVBancorp, to amend its 1998
Employee Stock Incentive Plan or establish a new stock option plan
and cause to be filed and become effective under the Securities
Act of 1933, as amended, a registration statement with respect to
the options to be granted and shares to be issued thereunder to
fulfill the obligations to grant substitute options to holders of
SRNB options under to the plan of reorganization; and
o take all necessary action to list NVBancorp's common stock with
the Nasdaq Stock Market for trading on the Nasdaq National Market,
to be effective as soon as practicable following the effective
time of the merger.
Under the plan of reorganization, NVBancorp further agreed:
o to amend, subject to shareholder approval, its articles of
incorporation and bylaws to classify its board of directors, and
to appoint two of the existing directors of SRNB (to be designated
by NVBancorp) to the classified NVBancorp board of directors; if
the proposal to classify the NVBancorp board of directors is
approved by its shareholders, then one appointed director will be
a class II director and the other appointed director will be a
class III director, under the classified board structure described
in "Proposal to Classify Board of Directors;" and
o until the effective time of the merger, not to solicit or accept a
takeover proposal from a third party unless the proposal is
expressly conditioned upon the performance by NVBancorp or the
successor in interest of NVBancorp of its obligations under the
plan of reorganization.
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ADDITIONAL AGREEMENTS
SPECIAL SHAREHOLDERS' MEETINGS. In the plan of reorganization, each of
NVBancorp and SRNB has agreed to call a special meeting of its shareholders to
be held as promptly as practicable for the purpose of voting on the merger. Each
of NVBancorp and SRNB is required through its board of directors to recommend to
its shareholders approval of the plan of reorganization unless its board of
directors determines in good faith, based upon the written advice of outside
counsel, that making the recommendation, or failing to withdraw, modify or amend
any previously made recommendation, would constitute a breach of fiduciary duty
by its board of directors under applicable law.
NO SOLICITATIONS. Subject to the fiduciary duty of SRNB board of
directors, prior to the effective time of the merger, SRNB has agreed not to
enter into a transaction or series of transactions with one or more third
persons or groups providing for the acquisition of all or a substantial part of
SRNB or its subsidiaries, whether by way of merger, exchange of stock, sale of
assets, or otherwise ("Business Combination") or directly or indirectly. SRNB
also agreed not to acquire or agree to acquire any of its own capital stock or
the capital stock or asset (except in a fiduciary capacity or in the ordinary
course of business) of any other entity, or commence any proceedings for winding
up and dissolution affecting either of them, solicit or encourage any inquiries,
discussions or proposals for any Business Combination with any third party; or
disclose, directly or indirectly, any nonpublic information to any group
concerning SRNB's business, properties, books or records or otherwise encourage
any person, having any actual or prospective role with respect to any Business
Combination. However, in the event the SRNB board receives a bona fide
unsolicited offer for a Business Combination of SRNB with another entity, and
reasonably determines, upon advice of counsel, that as a result of the offer,
any duty to act or to refrain from doing any act under the plan of
reorganization is inconsistent with the continuing fiduciary duties of the board
to its shareholders, subject to the provisions of the plan of reorganization,
including payment of a termination fee to NVBancorp, a violation of SRNB's
covenants described above will be excused and the violation will constitute the
failure of any condition or a breach of the plan of reorganization. If the
merger is terminated because SRNB breaches the agreement against entering into a
Business Combination, SRNB is required to pay to NVBancorp a termination fee.
See "--Termination Fees" on page 63.
FILINGS AND OTHER ACTIONS. In the plan of reorganization, NVBancorp and
SRNB have each agreed to use all reasonable efforts:
o to take all actions necessary to comply promptly with all legal
requirements which may be imposed on each party or its
subsidiaries with respect to the transactions contemplated by the
plan of reorganization; and
o to obtain (and to cooperate with the other party to obtain) any
governmental or private consent, authorization, order, exemption
or approval which is required to be obtained or made by each party
or any of its subsidiaries in connection with the merger and the
other transactions contemplated by the plan of reorganization. In
addition, each of SRNB and NVBancorp has agreed to use its best
efforts to take all actions necessary and proper or advisable to
complete, as soon as practicable, the transactions contemplated by
the plan of reorganization.
EMPLOYEE BENEFIT PLANS. Under the plan of reorganization, SRNB's
employee benefits plans will be terminated, frozen, modified or merged into
NVBancorp's employee benefit plans as determined by the agreement of the parties
and in accordance with applicable law. Additionally, SRNB employees who become
employees of NVBancorp or North Valley Bank will be entitled to participate in
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NVBancorp's employee benefits plans and will receive credit for his or her years
of employment by SRNB. For a period of one year after the closing date, each
SRNB employee who continues his or her employment with SRNB, NVBancorp or North
Valley Bank after the closing date will continue to be entitled to the benefit
of the SRNB severance policy.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Under the plan of
reorganization, from and after the effective date, NVBancorp will indemnify and
hold harmless each present or former officer or director of SRNB (determined as
of the effective time) against all losses, claims, damages, liabilities, costs,
expenses or judgments or amounts that are paid in the settlement of or in
connection with any claim, action, suit, proceeding or investigation based on or
arising out of (1) the fact that the person is or was a director or officer of
SRNB and (2) the plan of reorganization or the transactions contemplated by the
plan of reorganization, in each case to the full extent permitted by law.
Additionally, from and after the effective date, NVBancorp will include
in its director and officer insurance policy persons who served as directors and
officers of SRNB or obtain extended coverage under SRNB's director and officer
insurance policy to cover claims made for a period of three years after the
effective date of the merger regarding acts or omissions of SRNB's directors or
officers prior to the effective date of the merger. However, NVBancorp will not
be obligated to make annual premium payments for the insurance to the extent the
premiums exceed 150% of the premiums paid by SRNB for the insurance, as
previously disclosed to NVBancorp. If the premiums for the insurance would at
any time exceed 150% of the premiums paid by SRNB for the insurance, then
NVBancorp will maintain policies of insurance which, in NVBancorp's good faith
determination, provide a maximum coverage available at an annual premium equal
to 150% of the premiums paid by SRNB in respect of the insurance. See
"Comparison of Shareholder Rights--Indemnification of Directors and Executive
Officers" on page 83.
REPRESENTATIONS AND WARRANTIES
The plan of reorganization contains customary mutual representations by
each of NVBancorp and SRNB relating to, among other things (1) corporate
organization, existence and power to enter into the plan of reorganization and
consummate the merger, (2) capitalization, (3) due authorization, execution,
delivery, performance and enforceability of the plan of reorganization, (4)
required governmental and third party consents and approvals and that neither
the plan of reorganization nor the transactions contemplated by the plan of
reorganization violate either party's organizational documents, applicable law
and certain material agreements, (5) financial statements, (6)compensation of
officers and employees, (7) the accuracy of the information provided by each of
NVBancorp and SRNB for inclusion in this joint proxy statement/prospectus, (8)
compliance with applicable laws and possession of requisite governmental permits
and licenses, (9) filing of tax returns, payment of taxes and related matters,
(10) certain material contracts, (11) employee benefit plans and agreements,
(12) title to properties, (13) transactions with affiliates, (14) the absence of
material litigation, (15) insurance, (16) certain bank regulatory matters, (17)
the absence of certain material changes or events since June 30, 1999, (18) the
absence of undisclosed liabilities, (19) brokers' and finders' fees, (20)
ownership of intellectual property, (21)adequacy of loan reserves, (22)
compliance with the Community Reinvestment Act, (23) Year 2000 readiness, (24)
validity and enforceability of all loans, other extensions of credit,
commitments or other interest-bearing assets and investments of SRNB, (25)
absence of restrictions on ability to dispose of certain investments, (26)
absence of collective bargaining agreements, (27) validity and prudence of risk
management instruments,(28) accuracy of information in governmental filings to
be made in connection with the merger, and (29) accuracy of representations and
warranties as of the closing date.
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The representations and warranties of NVBancorp and SRNB terminate as
of the effective time of the merger.
CONDITIONS TO THE COMPLETION OF THE MERGER
The merger will occur only if certain conditions are satisfied, unless
we agree to waive any condition that is not satisfied. It is not certain when or
if the conditions to the merger will be satisfied or waived, or if the merger
will be consummated.
Each party's obligation to complete the merger is subject to various
conditions which include the following, in addition to other customary closing
conditions:
o The plan of reorganization and the terms of the merger must be
approved by the affirmative vote or consent of shareholders
holding at least a majority of the outstanding shares of NVBancorp
common stock and at least two-thirds of the outstanding shares of
SRNB common stock.
o All necessary governmental filings must have been made and all
necessary governmental approvals must have been obtained and be in
effect. In addition, no governmental approval must require either
of us to divest or cease any of our present businesses or
operations or impose any other condition or requirement which we,
in our reasonable judgment, consider to be materially burdensome.
o No legal, administrative, arbitration, investigatory or other
proceeding by any governmental or regulatory authority which seeks
to restrain or prohibit the merger must have been commenced or be
threatened.
o The registration statement must have been declared effective and
must not be subject to a stop order of the SEC, and no proceedings
for that purpose must have been initiated or threatened by the
SEC. In addition, the shares of NVBancorp common stock included in
the registration statement must have received all permits or
approvals required under all applicable state securities laws.
o Each of us must have received a tax opinion from McCutchen, Doyle,
Brown & Enersen, LLP, legal counsel to SRNB, based on customary
assumptions and exceptions and factual statements and
representations provided by the parties, substantially to the
effect that, under federal income tax law and California income
and franchise tax law: (a) the merger will not result in any
recognized gain or loss to NVBancorp or SRNB; (b) except for cash
received in lieu of any fractional share, no gain or loss will be
recognized by holders of SRNB common stock who receive shares of
NVBancorp common stock in exchange for the shares of SRNB common
stock they hold; (c) the holding period for the shares of
NVBancorp common stock issued in exchange for the shares of SRNB
common stock in the merger will include the holding period of the
shares of the SRNB common stock for which they are exchanged,
assuming that the shares of SRNB common stock are capital assets
in the hands of the SRNB shareholder at the effective date of the
merger; (d) the basis of the shares of NVBancorp common stock
received by the SRNB shareholders in the merger will be the same
as the basis of the shares of SRNB common stock for which they are
exchanged, less any basis attributable to fractional shares for
which cash is received, and (e) any SRNB shareholder who dissents
to the merger and receives cash for his or her shares of SRNB
common stock will be treated as having received a distribution in
redemption of his or her shares of SRNB common stock, subject to
the provisions and limitations of section 302 of the Internal
Revenue Code.
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o NVBancorp must receive a letter from NVBancorp's independent
accountants that no conditions exist that would preclude
accounting for the merger as a pooling-of-interests and SRNB must
receive a letter from SRNB's independent accountants to the effect
that no conditions exist that would preclude SRNB from being a
party to a business combination to be accounted for as a
pooling-of-interests. In addition, no determination by any court,
governmental or regulatory agency must have been made that the
merger fails or will fail to qualify for pooling-of-interests
accounting treatment.
o Each party must have received an opinion from its financial
advisor, dated within three days prior to the date this joint
proxy statement/prospectus is mailed to you, to the effect that
the conversion ratio is fair, from a financial point of view, to
that party and its shareholders, and the opinion must not have
been withdrawn prior to the effective time of the merger. Alex
Sheshunoff & Co. Investment Banking, L.P. is the financial advisor
to NVBancorp and Hoefer & Arnett Incorporated is the financial
advisor to SRNB.
o The representations and warranties that each of us have made in
the plan of reorganization must remain true and correct in all
material respects as of the closing date and effective time of the
merger; and each of us must have performed and complied, in all
material respects, with all of the agreements we made in the plan
of reorganization at or prior to the effective time of the merger.
o Each party must have received a certificate signed by the other
party's president and chief financial officer to the effect that
the representations and warranties of each party set forth in the
plan of reorganization, subject to the disclosure schedules
delivered by each party to the other party on or prior to the
closing date, are true and correct in all material respects as of
the closing date.
o Holders of not more than ten percent (10%) of the outstanding
shares of SRNB common stock and NVBancorp common stock must have
perfected their dissenter's rights in the manner required by the
National Bank Act and the rules and regulations of the Office of
the Comptroller of the Currency, and under Chapter 13 of the
California General Corporation Law, as applicable.
o Each party must have received from the other party the
certificates and other closing documents that their counsel
reasonably requires in order to close the merger.
o We must have received signed affiliate agreements on or before the
date this joint proxy statement/prospectus is mailed to you, from
each person who, in our opinion, might be deemed to be an
affiliate of SRNB or NVBancorp under Rule 144 or Rule 145 of the
Securities Act of 1933, as amended. The affiliate agreements
include provisions restricting certain actions by the affiliates
of NVBancorp and SRNB, including the purchase, sale or other
transfer of shares of NVBancorp common stock or SRNB common stock
in a manner that could prevent the merger from qualifying for
pooling-of-interest accounting treatment.
o Our boards of directors and executive officers must have delivered
to us signed shareholder agreements, before this joint proxy
statement/prospectus is mailed, under which they agree to vote
their shares of NVBancorp common stock and SRNB common stock,
respectively, in favor of the merger under the plan of
reorganization, and to recommend to shareholders that they also
vote in favor of the merger.
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The obligation of NVBancorp to consummate the merger is subject to the
following additional conditions:
o No material adverse change must have occurred since June 30, 1999,
in the business, financial condition, results of operations or
assets of SRNB, and SRNB must not have become a party to or
threatened with any litigation or governmental proceeding that was
not previously disclosed to NVBancorp.
o NVBancorp must have received a legal opinion from McCutchen,
Doyle, Brown & Enersen LLP, counsel to SRNB, dated the effective
date of the merger and in form and substance reasonably acceptable
to NVBancorp and its counsel.
o NVBancorp must have received, on or before the effective date of
the registration statement, a review report on SRNB financial
information as of September 30, 1999, and for the three and nine
month periods then ended from SRNB's independent public
accountants, prepared in accordance with Statement of Accounting
Standards No. 71, Interim Financial Information, and in form and
substance satisfactory to NVBancorp and its counsel.
o Not later than five business days prior to the effective date,
SRNB will have furnished to NVBancorp a copy of its most recently
prepared unaudited month-end consolidated financial statements for
the month ended at least 10 business days prior to the effective
date of the merger.
o SRNB must have received, or NVBancorp must be satisfied that SRNB
will receive, all consents from third parties as may be required
to close the merger, and the consents must remain in effect at the
closing date.
o As of the determination date, the closing date and the effective
date, SRNB must have (a) total shareholders' equity and leverage,
tier 1 and total risk-based capital ratios, respectively, in
amounts required to comply with the "well-capitalized" category of
applicable federal banking regulations, and (b) total reserves for
losses on outstanding loans in compliance with the SRNB loan loss
policy and procedures described in the plan of reorganization and
at a level which is adequate for both regulatory and financial
accounting purposes.
o SRNB must be in substantial compliance with its obligations under
the consent order dated April 12, 1999 between SRNB and the Office
of the Comptroller of the Currency.
The obligation of SRNB to consummate the merger is subject to the
following additional conditions:
o No material adverse change must have occurred since June 30, 1999,
in the business, financial condition, results of operations or
assets of NVBancorp and North Valley Bank, taken together, and
NVBancorp must not have become a party to or threatened with any
litigation or governmental proceeding which, in SRNB's reasonable
judgment, could have a material adverse effect on the business,
financial condition, results of operations or assets of NVBancorp
and North Valley Bank taken together.
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o SRNB must have received a legal opinion from Coudert Brothers,
counsel to NVBancorp, dated the effective date of the merger and
in form and substance reasonably acceptable to SRNB and its
counsel.
o SRNB must have received, on or before the effective date of the
registration statement, a review report on NVBancorp financial
information as of September 30, 1999, and for the three and nine
month periods then ended from NVBancorp's independent public
accountants, prepared in accordance with Statement of Accounting
Standards No. 71, Interim Financial Information, and in form and
substance satisfactory to SRNB and its counsel.
o Not later than five business days prior to the effective date,
NVBancorp will have furnished to SRNB a copy of its most recently
prepared unaudited month-end consolidated financial statements for
the month ended at least 10 business days prior to the effective
date of the merger.
o NVBancorp must have received, or SRNB must be satisfied that
NVBancorp will receive, all consents from third parties as may be
required to close the merger, and the consents must remain in
effect at the closing date.
TERMINATION OF THE PLAN OF REORGANIZATION
We can agree at any time to terminate the plan of reorganization
without completing the merger, even if the shareholders of both NVBancorp and
SRNB have approved it. Also, the plan of reorganization can be terminated either
by our mutual agreement or by one of us if certain events occur. If the plan of
reorganization is terminated, the merger will not occur.
Either NVBancorp or SRNB can terminate the plan of reorganization if
any of the following events occurs:
o If the merger is not completed by March 31, 2000 or another date
that we approve; provided, however, that if the only conditions to
the closing that remain unsatisfied at March 31, 2000 (or other
date that we approve) are the receipt of any requisite
governmental approvals or the expiration of any legally required
waiting periods, then the closing will be automatically extended
to May 31, 2000 or other date we approve.
o Thirty days after any governmental agency denies or refuses to
grant an approval, consent or qualification that is required for
the merger, unless we agree, during the 30 day period, to appeal
the denial or refusal or we agree to file an amended application
for the governmental approval, consent or qualification.
o The shareholders of either NVBancorp or SRNB fail to approve the
plan of reorganization and related transactions, including the
merger, by the required vote.
NVBancorp can elect to terminate the plan of reorganization if any of
the following events occur:
o Any of the conditions to NVBancorp's obligations to complete the
merger under the plan of reorganization have not been satisfied or
waived by March 31, 2000 (or other date that we may approve).
o A material adverse change has occurred since June 30, 1999 in the
business, financial condition, results of operations or assets of
SRNB.
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o SRNB or any of its affiliates enters into a transaction or series
of transactions with one or more third persons providing for the
acquisition of all or a substantial part of SRNB or its
subsidiaries, whether by way of merger, exchange or stock, sale of
assets, or otherwise.
o SRNB breaches or fails to satisfy any of its agreements in the
plan of reorganization which would materially impair the benefits
reasonably expected to be derived by NVBancorp and North Valley
Bank from the merger, unless the breach or failure is waived by
NVBancorp or cured by SRNB within 45 days after NVBancorp gives
SRNB written notice of the breach or failure.
o SRNB fails to deliver to NVBancorp the shareholder agreements,
affiliates agreements, officer's certificate or opinion of SRNB's
legal counsel which are required by the plan of reorganization or
if those documents are not in a form that is reasonably acceptable
to NVBancorp.
SRNB can elect to terminate the plan of reorganization if any of the
following events occur:
o Any of the conditions to SRNB's obligations to complete the merger
under the plan of reorganization have not been satisfied or waived
by March 31, 2000 (or other date that we may approve).
o A material adverse change has occurred since June 30, 1999 in the
business, financial condition, results of operations or assets of
NVBancorp.
o NVBancorp solicits or accepts any offer from any third party
providing for the acquisition of all or a substantial part of
NVBancorp or North Valley Bank, whether by way of merger, exchange
or stock, sale of assets, or otherwise, unless the offer is
expressly conditioned on the performance by NVBancorp or its
successor of NVBancorp's obligations under the plan of
reorganization.
o NVBancorp breaches or fails to satisfy any of its agreements in
the plan of reorganization which would materially impair the
benefits reasonably expected to be derived by SRNB from the
merger, unless the breach or failure is waived by SRNB or cured by
NVBancorp within 45 days after SRNB gives NVBancorp written notice
of the breach or failure.
o NVBancorp fails to deliver to SRNB the shareholder agreements,
affiliates agreements, officer's certificate or opinion of
NVBancorp's legal counsel which are required by the plan of
reorganization or if those documents are not in a form that is
reasonably acceptable to SRNB.
SRNB also has the option to terminate the plan of reorganization within
two business days after the "determination date" if the average closing price of
NVBancorp common stock for the 20 trading days ending on the determination date
is less than $10.00. The "determination date" is the last day of the 20 trading
day period ending on the their business day prior to the closing date.
Any termination described above must be made by written notice from the
party seeking termination to the other party. In the event the plan of
reorganization is terminated, it will become void and have no effect, except
that the termination will not affect the provisions regarding payment of
expenses, confidentiality, payment of any termination fees if applicable or any
relevant general provisions of the plan of reorganization. Also, if the plan of
reorganization is terminated due to a party's breach, the termination will not
relieve the breaching party from its liability and the non-breaching party will
retain all of its legal rights and remedies against the breaching party for its
breach.
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TERMINATION FEES
SRNB is required to pay NVBancorp $2.0 million in liquidated damages if
NVBancorp terminates the plan of reorganization for any of the following
reasons:
o if SRNB or its affiliates enters into an agreement by which SRNB
or its subsidiaries would be acquired by another entity;
o if SRNB breaches any covenant in the plan of reorganization which
materially impairs the benefit of the merger to NVBancorp, unless
SRNB cures the breach within 45 days after written notice from
NVBancorp; or
o if SRNB willfully or deliberately refuses to deliver to NVBancorp
certain closing documents required by the plan of reorganization.
NVBancorp is required to pay SRNB $2.0 million in liquidated damages if
SRNB terminates the plan of reorganization for any of the following reasons:
o if NVBancorp solicits or accepts an offer from a third party to
acquire NVBancorp or North Valley Bank and the offer does not
require NVBancorp or the third party to comply with the plan of
reorganization;
o if NVBancorp breaches any covenant in the plan of reorganization
which materially impairs the benefit of the merger to SRNB, unless
NVBancorp cures the breach within 45 days after written notice
from SRNB; or
o if NVBancorp willfully or deliberately refuses to deliver to SRNB
certain closing documents required by the plan of reorganization.
FEES AND EXPENSES OF THE MERGER
Other than in the situations described above and in the following
paragraphs, whether or not the merger is completed in accordance with the plan
of reorganization, all costs and expenses incurred in connection with the plan
of reorganization and the transactions covered by the plan of reorganization
will be paid by the party incurring those expenses.
NVBancorp and SRNB will each bear the costs of distributing this joint
proxy statement/ prospectus and other proxy materials and information relating
to the plan of reorganization to its shareholders and of conducting a meeting of
its shareholders, but each party will pay one-half of the printing costs, the
fees and costs related to obtaining a tax opinion and the fees and costs related
to obtaining a letter from their independent auditors regarding
pooling-of-interests accounting treatment.
If the plan of reorganization is terminated by NVBancorp or SRNB
because holders of more than 10 percent of the outstanding shares of NVBancorp
common stock and SRNB common stock have dissented from the plan of
reorganization and merger and have perfected their dissenters' rights, then each
party will pay one-half of (1) all fees and costs payable under state "blue sky"
securities laws, (2) the fee required to be paid to the Securities and Exchange
Commission to register the shares of NVBancorp common stock, (3) the fees and
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costs related to any amendments to the NVBancorp 1998 Employee Stock Incentive
Plan or for the preparation of a new NVBancorp stock option plan for the SRNB
optionees, and (4) the fees related to preparation and filing of applications to
governmental agencies for approval of the plan of reorganization and merger, in
addition to the three categories of expenses described in the immediately
preceding paragraph.
The fees and costs related to the listing of the shares of NVBancorp
common stock with the Nasdaq National Market will be paid by NVBancorp.
AMENDMENT
The plan of reorganization may be amended by the parties at any time
before or after approval of the plan of reorganization by the shareholders of
NVBancorp and SRNB. However, after the approval by the shareholders of NVBancorp
and SRNB, no amendment will be made which by law requires further approval by
those shareholders without that further approval. The plan of reorganization may
not be amended except by an instrument in writing signed on behalf of each of
the parties.
EXTENSION; WAIVER
At any time prior to the closing of the merger, the parties, by action
taken or authorized by their respective board of directors, may, to the extent
legally allowed, (1) extend the time for the performance of any of the
obligations or other acts of the other parties, (2) waive any inaccuracies in
the representations and warranties contained in the plan of reorganization or in
any document delivered under it, and (3) waive compliance with any of the
agreements or conditions contained in the plan of reorganization. To "waive"
means to give up rights.
Any agreement on the part of a party to the plan of reorganization to
any extension or waiver will be valid only if set forth in a written instrument
signed on behalf of the party.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Upon the consummation of the merger, the separate corporate existence
of SRNB will cease and SRNB will be merged with and into NVB Interim National
Bank. All rights, franchises and interests of SRNB will be assumed by and vested
in NVB Interim National Bank and the resulting bank will continue as a
subsidiary of NVBancorp with the national bank charter number and name of Six
Rivers National Bank. The directors and executive officers of SRNB prior to the
effective date will be the directors and executive officers of SRNB following
the merger except that two of the existing directors of NVBancorp will become
directors of the resulting bank. In addition, (1) two SRNB directors will be
added to the boards of directors of NVBancorp and (2)Michael W. Martinez,
President and Chief Executive Officer of SRNB, will be appointed to serve on the
executive management committee of NVBancorp.
REQUIRED REGULATORY APPROVALS
The merger must be approved by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") under the provisions of the Bank
Holding Company Act of 1956, as amended. In conducting a review of any
application for a merger, the Federal Reserve Board is required to consider the
financial and managerial resources and future prospects of the banks concerned
and the convenience and needs of the community to be served. The Federal Reserve
Board has the authority to deny an application if it concludes that the
requirements of the Community Reinvestment Act of 1977, as amended, are not
satisfied.
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NVBancorp filed an application for approval with the Federal Reserve
Board on ______________, 2000. A transaction approved by the Federal Reserve
Board may not be consummated for at least 30 days (in some circumstances a
15-day waiting period is allowed) after the approval. During that period, the
Department of Justice may commence a legal action challenging the transaction
under federal antitrust laws. If the Department of Justice does not commence a
legal action during the 30-day period (in some circumstances a 15-day waiting
period is allowed), it may not thereafter challenge the transaction except in an
action commenced under the antimonopoly provisions of Section 2 of the Sherman
Antitrust Act.
The Bank Holding Company Act of 1956. as amended, provides for the
publication of notice and the opportunity for administrative hearings relating
to an application for approval under the Act and authorizes the Federal Reserve
Board to permit interested parties to intervene in the proceedings. If an
interested party is permitted to intervene, the intervention could substantially
delay the regulatory approval required for consummation of the merger.
The merger of SRNB and NVB Interim National Bank is subject to the
prior approval of the Office of the Comptroller of the Currency under Section
18(c) of the Federal Deposit Insurance Act, as amended (the "Bank Merger Act")
and Section 215a of the National Bank Act, as amended. NVBancorp filed an
application for approval of the merger with the Office of the Comptroller of the
Currency on ______________, 2000.
The application filed with the Office of the Comptroller of the
Currency includes an application for approval to organize an interim national
bank, named NVB Interim National Bank. Interim national banks are federally
chartered banks established to facilitate interim bank mergers and they do not
operate as banks in their own right. Nonetheless, they must comply with
chartering and organization requirements. The directors of NVBancorp are the
organizers of NVB Interim National Bank and they will serve as its board of
directors. Upon receipt of preliminary approval to organize, the organizers of
NVB Interim National Bank will file articles of association with the Office of
the Comptroller of the Currency and will comply with the other conditions stated
in the preliminary approval. Once organized, NVB Interim National Bank will
become a party to the plan of reorganization by entering into an addendum with
NVBancorp and SRNB.
The Bank Merger Act requires the Office of the Comptroller of the
Currency, when approving a transaction like the merger, to take into
consideration the financial and managerial resources (including the competence,
experience and integrity of the officers, directors and principal shareholders)
and future prospects of the existing and proposed institutions and the
convenience and needs of the communities to be served. In considering financial
resources and future prospects, the Office of the Comptroller of the Currency
will, among other things, evaluate the adequacy of the capital levels of the
parties to a proposed transaction and of the resulting institutions.
On April 12, 1999 the Office of the Comptroller of the Currency
required SRNB to enter into a Consent Order. The language of the Order requires
that SRNB formulate and implement a plan to strengthen its policies and
procedures relative to its loan administration, credit and collateral
exceptions, classified assets, allowances for loan losses and violations of law
related to lending limits. The SNRB board of directors agreed to execute the
Order and is following an action plan that details the steps necessary to comply
with the Order. In summary, the Order required SRNB to modify certain aspects of
its business to address problems identified by the Office of the Comptroller of
the Currency, such as:
o loan administration (to establish procedures to ensure compliance
with credit quality guidelines, govern board of directors review
and approval of exceptions to lending policies, require periodic
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board of directors review of adherence to lending policies and
ensure accuracy of information systems and other operational
programs);
o credit and collateral exceptions (to update background information
on each loan);
o criticized assets (to address issues raised by the Office of the
Comptroller of the Currency during the evaluation and analysis of
SRNB's asset quality and provide ongoing board of directors review
of each issue and the adequacy and progress of SRNB's ongoing
monitoring of asset quality);
o allowance for loan and lease losses (to establish a program to
maintain adequate allowances providing for scheduled reviews by
the board of directors);
o legal lending limits (to take prompt action to reduce overlimit
loans and establish compliance procedures regarding the
maintenance of appropriate loan limits); and
o quarterly progress reports (to submit quarterly progress reports
to the Office of the Comptroller of the Currency outlining recent
actions taken to implement the Order).
The Order's restrictions could have an adverse impact on SRNB's expansion.
Additional regulatory restrictions could be placed on SRNB in the event that the
Office of the Comptroller of the Currency is not satisfied with SRNB's progress
towards implementing all facets of the Order. There can be no assurance as to
the impact on SRNB or NVBancorp if banking regulators impose additional
regulatory restrictions on SRNB.
This summary description of the Order's provisions does not state all
the requirements of the Order and is qualified in its entirety by reference to
the text of the Order. A copy of the Order will be made available (free of
charge) to any shareholder of NVBancorp or SRNB upon request to Michael W.
Martinez, President and Chief Executive Officer of SRNB. See "Where You Can Find
More Information" on page 97.
The Bank Merger Act prohibits the Office of the Comptroller of the
Currency from approving a merger if it would result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States, or if its
effect in any section of the country would be substantially to lessen
competition or to tend to create a monopoly, or if it would in any other manner
result in a restraint of trade, unless the Office of the Comptroller of the
Currency finds that the anti-competitive effects of the merger are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. In addition,
under the Community Reinvestment Act of 1977, as amended, the Office of the
Comptroller of the Currency must take into account the record of performance of
the existing institutions in meeting the credit needs of the entire community,
including low- and moderate-income neighborhoods, served by those institutions.
The Office of the Comptroller of the Currency will furnish notice and a
copy of the application for approval of the merger to the Federal Reserve Board,
the Federal Deposit Insurance Corporation and the United States Department of
Justice. These agencies have 30 days to submit their views and recommendations
to the Office of the Comptroller of the Currency. The Bank Merger Act also
provides for the publication of notice and public comment on applications filed
with the Office of the Comptroller of the Currency and authorizes the agency to
permit interested parties to intervene in the proceedings. If an interested
party is permitted to intervene, the intervention could delay the regulatory
approvals required for completion of the merger.
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SRNB and NVBancorp do not believe that the merger will raise
substantial antitrust or other significant regulatory concerns and that they
will be able to obtain all requisite regulatory approvals on a timely basis
without the imposition of any condition that would have a material adverse
effect.
Under the plan of reorganization, prior to the merger, all governmental
approvals required for the merger will be in effect, and all conditions or
requirements prescribed by law or any governmental approval will be satisfied.
However, no governmental approval will be deemed to have been received if it
will require the divestiture or cessation of any of the present businesses or
operating conducted by the parties or imposes any condition or requirement
which, in the reasonable opinion of the board of directors of NVBancorp is
deemed to be materially burdensome.
Based on current precedents, the respective managements of NVBancorp
and SRNB believe that the merger and other consents and approvals will be
approved by the Federal Reserve Board and the Office of the Comptroller of the
Currency and the merger will not be subject to challenge by the Department of
Justice under federal antitrust laws. However, no assurance can be provided that
the Federal Reserve Board, the Office of the Comptroller of the Currency or the
Department of Justice will concur in this assessment or that, in connection with
the grant of any approval by the Federal Reserve Board or the Office of the
Comptroller of the Currency, action taken, or statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the merger or transactions
contemplated thereby, will not contain conditions or requirements which are
materially burdensome as further described in the plan of reorganization. If any
materially burdensome condition or requirement is imposed in connection with a
governmental approval, a condition to NVBancorp's obligation to consummate the
merger will be deemed not to have occurred and NVBancorp will have the right to
terminate the plan of reorganization.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States federal
income tax consequences of the merger. The discussion does not address all
aspects of United States federal taxation that may be relevant to you, and it
may not be applicable to SRNB shareholders who, for United States federal income
tax purposes, are nonresident alien individuals, foreign corporations, foreign
partnerships, foreign trusts or foreign estates, or who acquired their SRNB
common stock by the exercise of SRNB stock options or otherwise as compensation.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF
THE MERGER TO YOU.
This discussion is based on the Internal Revenue Code of 1986, as
amended, regulations thereunder, current administrative rulings and practice,
and judicial precedent, all of which are subject to change. Any change, which
may or may not be retroactive, could alter the tax consequences to you as
discussed in this joint proxy statement/prospectus. This discussion assumes that
you hold your SRNB common stock as a capital asset within the meaning of section
1221 of the Internal Revenue Code.
NVBancorp's and SRNB's obligation to complete the merger is conditioned
upon NVBancorp and SRNB receiving an opinion of McCutchen, Doyle, Brown &
Enersen, LLP, based upon certain customary assumptions, exceptions and
representations made by NVBancorp and SRNB, to the effect that under federal
income tax law and California income and franchise tax law:
o the merger will not result in any recognized gain or loss to
NVBancorp or SRNB;
o except for any cash received in lieu of any fractional share, no
gain or loss will be recognized by the holders of SRNB common
stock who receive NVBancorp common stock in exchange for the SRNB
common stock which they hold;
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o the holding period of the NVBancorp common stock exchanged for
SRNB common stock (including any fractional share prior to its
conversion to cash) will include the holding period of the SRNB
common stock for which it is exchanged, assuming the shares of
SRNB common stock are capital assets in the hands of the holder
thereof at the effective date;
o the basis of the NVBancorp common stock received in the exchange
(including any fractional share prior to its conversion to cash)
will be the same as the basis of the SRNB common stock for which
it was exchanged, less any basis attributable to fractional shares
for which cash is received; and
o an SRNB shareholder who dissents to the merger and receives cash
for his or her SRNB common stock will be treated as having
received a distribution in redemption of his or her SRNB common
stock, subject to the provisions and limitations of Section 302 of
the Internal Revenue Code.
McCutchen, Doyle, Brown & Enersen, LLP has indicated that it expects to
be able to deliver its tax opinion. Opinions of counsel are not binding on the
Internal Revenue Service or the courts and no ruling has been or will be
obtained from the Internal Revenue Service in connection with the merger.
THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND IS INCLUDED FOR GENERAL
INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE
PARTICULAR FACTS AND CIRCUMSTANCES OF YOUR STATUS AND ATTRIBUTES. AS A RESULT,
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES ADDRESSED IN THE FOREGOING
DISCUSSION MAY NOT APPLY TO YOU. IN VIEW OF THE INDIVIDUAL NATURE OF INCOME TAX
CONSEQUENCES, YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO YOU, INCLUDING THE APPLICATION AND
EFFECT OF UNITED STATES FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
For accounting and financial reporting purposes, the merger is expected
to qualify as a pooling of interests of SRNB by NVBancorp under generally
accepted accounting principles. Under the pooling of interests accounting
method, NVBancorp will carry forward on its books the assets and liabilities of
SRNB at their historical recorded values, subject to any adjustments required to
conform the accounting policies and financial statement classification of the
two companies. Income of the combined NVBancorp will include income of NVBancorp
and SRNB for the entire fiscal year in which the combination occurs and the
reported income, assets, liabilities and shareholders' equity of the separate
companies for previous periods will be combined and restated as income, assets,
liabilities and shareholders' equity of NVBancorp. The unaudited pro forma
combined financial information contained in this joint proxy
statement/prospectus have been prepared using the pooling of interests method of
accounting to account for the merger. See "Summary--Selected Historical and Pro
Forma Financial Data" and "Unaudited Pro Forma Condensed Combined Financial
Information" on page 72.
TRADING MARKETS FOR STOCK
The NVBancorp common stock is listed on the Nasdaq National Market.
NVBancorp intends to cause the shares of NVBancorp common stock to be issued in
the merger and the shares of NVBancorp common stock to be reserved for issuance
upon the exercise of existing SRNB stock options to be approved for listing on
the Nasdaq National Market, subject to official notice of issuance, prior to the
effective date.
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The SRNB common stock is currently listed on the Nasdaq National
Market. If the merger is consummated, NVBancorp will take action to cause the
SRNB shares to cease to be listed on the Nasdaq National Market and public
trading of the SRNB shares will cease.
RESALES OF NVBANCORP COMMON STOCK
The NVBancorp common stock issued in the merger will be freely
transferable under the Securities Act of 1933, as amended, except for shares
issued to any SRNB shareholder who may be deemed to be an "affiliate" of
NVBancorp or SRNB for purposes of Rule 145 under the Securities Act of 1933, as
amended. Each director and executive officer of SRNB is deemed to be an
affiliate. Each SRNB director and each other person deemed to be an affiliate
has entered into an agreement with NVBancorp providing that the person will not
transfer any shares of NVBancorp common stock received in the merger, except in
compliance with the Securities Act of 1933, as amended, and applicable rules
thereunder.
DISSENTERS' RIGHTS
DISSENTERS' RIGHTS OF NVBANCORP SHAREHOLDERS
Dissenters' rights will be available to the shareholders of NVBancorp
only if the holders of five percent (5%) or more of NVBancorp common stock make
a written demand upon NVBancorp for the purchase of dissenting shares in
accordance with Chapter 13 of the California General Corporation Law ("Chapter
13"). If this condition is satisfied and the merger is consummated, shareholders
of NVBancorp who dissent from the merger by complying with the procedures set
forth in Chapter 13 would be entitled to receive an amount equal to the fair
market value of their shares as of October 1, 1999, the last business day before
the public announcement of the merger. The high, low and closing sales prices
for NVBancorp common stock on October 1, 1999 were $11.063, $10.563 and $11.063,
respectively. A copy of Chapter 13 of the California General Corporation Law is
attached as Annex D to this joint proxy statement/prospectus and should be read
for more complete information concerning dissenters' rights. THE REQUIRED
PROCEDURE SET FORTH IN CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW MUST
BE FOLLOWED EXACTLY OR ANY DISSENTERS' RIGHTS MAY BE LOST. The information set
forth below is a general summary of dissenters' rights as they apply to
NVBancorp shareholders and is qualified in its entirety by reference to Annex D.
In order to be entitled to exercise dissenters' rights, a shareholder
of NVBancorp must vote "AGAINST" the merger. Thus, any NVBancorp shareholder who
wishes to dissent and executes and returns a proxy in the accompanying form must
specify that his or her shares are to be voted "AGAINST" the merger. If the
shareholder returns a proxy without voting instructions or with instructions to
vote "FOR" the merger, his or her shares will automatically be voted in favor of
the merger and the shareholder will lose any dissenters' rights. In addition, if
the shareholder abstains from voting or in the event of a broker non-vote of his
or her shares, the shareholder will lose any dissenters' rights.
Furthermore, in order to preserve his or her dissenters' rights, an
NVBancorp shareholder must make a written demand upon NVBancorp for the purchase
of dissenting shares and payment to the shareholder of their fair market value,
specifying the number of shares held of record by the shareholder and a
statement of what the shareholder claims to be the fair market value of those
shares as of October 1, 1999. The demand must be addressed to NVBancorp, 880
East Cypress Avenue, Redding, California 96002; Attention: Corporate Secretary,
and must be received by NVBancorp not later than the date of NVBancorp's special
meeting. A vote "AGAINST" the merger does not constitute the written demand.
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If the holders of five percent (5%) or more of the outstanding shares
of NVBancorp common stock have submitted a written demand for NVBancorp to
purchase their shares, these demands are received by NVBancorp on or before the
date of the special meeting and the merger is approved by the shareholders,
NVBancorp will have 10 days after the approval to send to those shareholders who
have voted against the approval of the merger written notice of the approval
accompanied by a copy of Chapter 13, a statement of the price determined by
NVBancorp to represent the fair market value of the dissenting shares as of
October 1, 1999, and a brief description of the procedure to be followed if a
shareholder desires to exercise dissenters' rights. Within 30 days after the
date on which the notice of the approval of the merger is mailed, the dissenting
shareholder must surrender to NVBancorp, at the office designated in the notice
of approval, the certificates representing the dissenting shares to be stamped
or endorsed with a statement that they are dissenting shares or to be exchanged
for certificates of appropriate denomination so stamped or endorsed. Any shares
of NVBancorp common stock that are transferred prior to their submission for
endorsement lose their status as dissenting shares.
If NVBancorp and the dissenting shareholder agree that the surrendered
shares are dissenting shares and agree upon the price of the shares, the
dissenting shareholder will be entitled to the agreed price with interest
thereon at the legal rate on judgments from the date of the agreement. Payment
of the fair market value of the dissenting shares will be made within 30 days
after the amount thereof has been agreed upon or 30 days after any statutory or
contractual conditions to the merger have been satisfied, whichever is later,
subject to the surrender of the certificates therefor, unless provided otherwise
by agreement.
If NVBancorp denies that the shares surrendered are dissenting shares,
or NVBancorp and the dissenting shareholder fail to agree upon a fair market
value of the shares of NVBancorp common stock, then the dissenting shareholder
of NVBancorp must, within six months after the notice of approval is mailed,
file a complaint at the Superior Court of the proper county requesting the court
to make the determinations or intervene in any pending action brought by any
other dissenting shareholder. If the complaint is not filed or intervention in a
pending action is not made within the specified six-month period, the
dissenters' rights are lost. If the fair market value of the dissenting shares
is at issue, the court will determine, or will appoint one or more impartial
appraisers to determine, the fair market value.
A dissenting shareholder may not withdraw his or her dissent or demand
for payment unless NVBancorp consents to the withdrawal.
DISSENTERS' RIGHTS OF SRNB SHAREHOLDERS
If the plan of reorganization is approved by the required vote of SRNB
shareholders, and is not abandoned or terminated, shareholders of SRNB who did
not vote "FOR" the merger or who give notice in writing at or prior to the
special meeting that the shareholder dissents, may be entitled to certain
dissenters' rights under Section 215a(b),(c) and (d) of Title 12 of the United
States Code. A copy of Section 215a(b), (c) and (d) and Office of the
Comptroller of the Currency Banking Circular 259 are attached as Annex E to this
joint proxy statement/prospectus and should be read for more complete
information concerning dissenters' rights. Banking Circular 259 describes the
specific requirements of the appraisal process conducted by the Office of the
Comptroller of the Currency discussed below and includes examples of appraisal
results in various transactions. . THE REQUIRED PROCEDURE SET FORTH IN SECTION
215A(B), (C) AND (D) OF TITLE 12 OF THE UNITED STATES CODE MUST BE FOLLOWED
EXACTLY OR ANY DISSENTERS' RIGHTS MAY BE LOST. The information set forth below
is a general summary of dissenters' rights as they apply to SRNB shareholders
and is qualified in its entirety by reference to Annex E.
-70-
<PAGE>
In order to be entitled to exercise dissenters' rights, a shareholder
of SRNB must vote "AGAINST" the merger or give notice in writing at or prior to
the special meeting that the shareholder dissents. Thus, any SRNB shareholder
who executes and returns a proxy in the accompanying form must specify that his
or her shares are to be voted "AGAINST" the merger. If the shareholder returns a
proxy without voting instructions or with instructions to vote "FOR" the merger,
his or her shares will automatically be voted in favor of the merger and the
shareholder will lose any dissenters' rights. In addition, if the shareholder
abstains from voting his or her shares, the shareholder will lose his or her
dissenters' rights.
Furthermore, in order to preserve his or her dissenters' rights, an
SRNB shareholder must make a written demand upon SRNB for the purchase of
dissenting shares and payment to the shareholder of the fair market value. The
written demand must be made prior to thirty days after the date of consummation
of the merger, and be accompanied by the surrendered certificates representing
the dissenting SRNB shareholders' interest in SRNB common stock. NVBancorp will
mail notice of the date of consummation of the merger immediately after
consummation to all dissenting SRNB shareholders, together with a letter of
transmittal for their use in submitting their SRNB stock certificates to
NVBancorp for payment. A vote "AGAINST" the merger does not constitute the
required written demand.
The value of the SRNB common stock to be purchased by NVBancorp from
dissenting SRNB shareholders will be determined as of the effective date of the
merger, by an appraisal made by a committee of three persons, one selected by
the majority vote of the dissenting SRNB shareholders, one by the directors of
SRNB and one by the two so selected. The valuation agreed upon by any two of the
three appraisers will govern. The appraisers will determine the value of any
dissenting shares within ninety days from the date of consummation of the
merger. In the event that any one or more appraiser is not selected or the
appraisers fail to determine the value of the dissenting shares within this
ninety day time period, any party may request an appraisal to be made by the
Office of the Comptroller of the Currency, which appraisal will be final and
binding on all parties.
If the valuation determined by the appraiser is unsatisfactory to any
dissenting SRNB shareholder, that shareholder may appeal to the Office of the
Comptroller of the Currency within five days after being notified of the
appraised value of the shares. In this event, the Office of the Comptroller of
the Currency will cause a reappraisal to be made and this reappraisal will be
final and binding as to the value of the shares of the appealing SRNB
shareholder. The expenses of the Office of the Comptroller of the Currency
incurred in making the appraisal or reappraisal, as the case may be, will be
paid by the resulting bank.
-71-
<PAGE>
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Combined Balance Sheet as
of September 30, 1999, combines the historical consolidated balance sheets of
NVBancorp and SRNB as if the merger had been effective on September 30, 1999,
after giving effect to certain adjustments. These adjustments are based on
estimates. The Unaudited Pro Forma Condensed Combined Statements of Operations
for the nine months ended September 30, 1999 and 1998 and for the years ended
December 31, 1998, 1997 and 1996 present the combined results of operations of
NVBancorp and SRNB as if the merger had been effective at the beginning of each
period. The Unaudited Pro Forma Condensed Combined Financial Information has
been prepared from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto of NVBancorp and SRNB.
The Unaudited Pro Forma Condensed Combined Financial Information and
accompanying notes reflect the application of the pooling of interests method of
accounting for the merger. Under this method of accounting, the recorded assets,
liabilities, shareholders' equity, income and expenses of NVBancorp and SRNB are
combined and reflected at their historical amounts.
The pro forma combined figures shown in the Unaudited Pro Forma
Condensed Combined Financial Information are simply arithmetical combinations of
NVBancorp's and SRNB's separate financial results; you should not assume that
NVBancorp and SRNB would have achieved the pro forma combined results if they
had actually been combined during the periods presented.
THE COMBINED COMPANY EXPECTS TO ACHIEVE MERGER BENEFITS IN THE FORM OF
OPERATING COST SAVINGS. THE PRO FORMA EARNINGS, WHICH DO NOT REFLECT ANY DIRECT
COSTS OR POTENTIAL SAVINGS WHICH ARE EXPECTED TO RESULT FROM THE CONSOLIDATION
OF THE OPERATIONS OF NVBANCORP AND SRNB, ARE NOT INDICATIVE OF THE RESULTS OF
FUTURE OPERATIONS. NO ASSURANCES CAN BE GIVEN WITH RESPECT TO THE ULTIMATE LEVEL
OF EXPENSE SAVINGS. FOR FURTHER EXPLANATION ABOUT THESE RISKS, READ THE
INFORMATION UNDER "INFORMATION REGARDING FORWARD-LOOKING STATEMENTS" AND "RISK
FACTORS."
-72-
<PAGE>
<TABLE>
<CAPTION>
NORTH VALLEY BANCORP AND SIX RIVERS NATIONAL BANK
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
NVBANCORP
ADJUSTMENTS AND SRNB
NVBANCORP SRNB (1) COMBINED
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 10,705 $ 6,820 $ $ 17,525
Federal funds sold 20,200 -- (801) 19,399
----------- ----------- -------- ---------
Total cash and cash equivalents 30,905 6,820 (801) 36,924
Cash held in trust 499 499
Interest bearing deposits in other financial
institutions 7,454 7,454
Securities:
Available for sale, at fair value 15,047 69,027 84,074
Held to maturity, at amortized cost 30,745 1,485 32,230
Loans and leases, net of allowance for loan
losses and deferred fees 209,519 106,745 316,264
Premises and equipment, net of
accumulated depreciation and
amortization 4,943 4,408 9,351
Accrued interest receivable 1,770 1,527 3,297
Intangibles, net of accumulated
amortization of $578.8 4,664 4,664
Other assets 10,927 4,057 14,984
--------- --------- -------- ---------
TOTAL ASSETS $ 304,355 $ 206,187 $ (801) $ 509,741
========= ========= ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing demand deposits $ 37,167 $ 26,574 $ 63,741
Interest-bearing deposits 229,204 150,432 -- 379,636
---------- --------- -------- ---------
Total deposits 266,371 177,006 -- 443,377
Other borrowings 8,401 8,401
Accrued expenses and other liabilities 5,558 1,703 -- 7,261
---------- --------- -------- ---------
Total liabilities 271,929 187,110 -- 459,039
STOCKHOLDERS' EQUITY:
Preferred stock
Common stock 10,325 7,381 17,706
Additional paid in capital 12,138 12,138
22,169 122 (801) 21,490
Accumulated other comprehensive income, net of tax (68) (564) -- (632)
---------- --------- -------- ---------
Total stockholders' equity 32,426 19,077 (801) 50,702
---------- --------- -------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 304,355 $ 206,187 $ (801) $ 509,741
========== ========= ======== =========
</TABLE>
-73-
<PAGE>
<TABLE>
<CAPTION>
NORTH VALLEY BANCORP AND SIX RIVERS NATIONAL BANK
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NVBANCORP
ADJUSTMENTS AND SRNB
NVBANCORP SRNB (1) COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans including fees $ 12,840 $ 7,236 -- $ 20,076
Securities:
Taxable 800 3,148 -- 3,948
Exempt from federal taxes 1,481 179 -- 1,660
Federal funds sold 705 150 -- 855
TOTAL INTEREST INCOME 15,826 10,713 -- 26,539
INTEREST EXPENSE
Interest on Deposits 6,056 4,034 -- 10,090
Other borrowings -- 267 -- 267
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 6,056 4,301 -- 10,357
----------- ----------- ----------- -----------
NET INTEREST INCOME 9,770 6,412 -- 16,182
PROVISION FOR LOAN LOSSES 835 220 -- 1,055
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 8,935 6,192 -- 15,127
----------- ----------- ----------- -----------
NONINTEREST INCOME
Service charges on deposit accounts 1,581 893 -- 2,474
Other fees and charges 802 -- -- 802
Gain on sale of available for sale securities 25 -- 25
Other 458 379 -- 837
----------- ----------- ----------- -----------
TOTAL OTHER OPERATING INCOME
2,866 1,272 -- 4,138
----------- ----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 3,506 2,935 -- 6,441
Occupancy 482 418 -- 900
Furniture and equipment expense 515 479 -- 994
Professional fees 331 502 -- 833
Advertising 149 122 -- 271
Supplies 201 127 -- 328
ATM expense 261 145 -- 406
Amortization of intangibles
-- 229 -- 229
Other 1,775 897 (55) 2,617
----------- ----------- ----------- -----------
TOTAL NONINTEREST EXPENSES 7,220 5,854 (55) 13,019
----------- ----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 4,581 1,610 (55) 6,246
Provision for income taxes 1,226 672 9 1,907
----------- ----------- ----------- -----------
NET INCOME $ 3,355 $ 938 $ (46) $ 4,339
=========== =========== =========== ===========
EARNINGS PER SHARE: (2)
Basic $ 0.91 $ 0.64 $ 0.07 $ 0.74
=========== =========== =========== ===========
Diluted $ 0.90 $ 0.64 $ 0.07 $ 0.74
=========== =========== =========== ===========
Weighted average common shares outstanding-basic 3,701,000 1,465,000 659,000 5,825,000
=========== =========== =========== ===========
Weighted average common share equivalents
outstanding-diluted 3,720,000 1,469,000 661,000 5,850,000
=========== =========== =========== ===========
</TABLE>
-74-
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
(IN THOUSANDS EXCEPT PER SHARE DATA)
NVBANCORP
ADJUSTMENTS AND SRNB
NVBANCORP SRNB (1) COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans including fees $ 11,625 $ 7,483 $ -- $ 19,108
Securities:
Taxable 1,105 2,824 -- 3,929
Exempt from federal taxes 1,654 49 -- 1,703
Federal funds sold 768 762 -- 1,530
----------- ----------- -------- -----------
TOTAL INTEREST INCOME 15,152 11,118 -- 26,270
----------- ----------- -------- -----------
INTEREST EXPENSE
Interest on Deposits 6,475 4,507 -- 10,982
Other borrowings -- 61 -- 61
----------- ----------- -------- -----------
TOTAL INTEREST EXPENSE 6,475 4,568 -- 11,043
----------- ----------- -------- -----------
NET INTEREST INCOME 8,677 6,550 -- 15,227
PROVISION FOR LOAN LOSSES 1,160 2,504 -- 3,664
----------- ----------- -------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
7,517 4,046 -- 11,563
----------- ----------- -------- -----------
NONINTEREST INCOME
Service charges on deposit accounts 1,288 865 -- 2,153
Other fees and charges 635 286 -- 921
Gain on sale of available for sale securities 728 -- -- 728
Other 358 36 -- 394
----------- ----------- -------- -----------
TOTAL OTHER OPERATING INCOME 3,009 1,187 -- 4,196
----------- ----------- -------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 3,335 2,576 -- 5,911
Occupancy 417 402 -- 819
Furniture and equipment expense 487 454 -- 941
Professional fees 292 501 -- 793
Advertising 166 99 -- 265
Supplies 210 231 -- 441
ATM expense 207 171 -- 378
Amortization of intangibles -- 234 -- 234
Other 1,359 1,282 -- 2,641
----------- ----------- -------- -----------
TOTAL NONINTEREST EXPENSES 6,473 5,950 -- 12,423
----------- ----------- -------- -----------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 4,053 (717) -- 3,336
Provision (benefit) for income taxes 1,135 (287) -- 848
----------- ----------- -------- -----------
NET INCOME (LOSS) $ 2,918 $ (430) $ -- $ 2,488
=========== =========== ======== ===========
EARNINGS (LOSS) PER SHARE: (2)
Basic $ 0.79 $ (0.30) $ -- $ 0.43
=========== =========== ======== ===========
Diluted $ 0.78 $ (0.30) $ -- $ 0.43
=========== =========== ======== ===========
Weighted average common shares outstanding-basic 3,680,000 1,450,000 653,000 5,783,000
=========== =========== ======== ===========
Weighted average common share equivalents
outstanding-diluted 3,719,000 1,450,000 653,000 5,822,000
=========== =========== ======== ===========
</TABLE>
-75-
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NVBANCORP
ADJUSTMENTS AND SRNB
NVBANCORP SRNB (1) COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans including fees $ 15,860 $ 10,013 $ -- $ 25,873
Securities:
Taxable 1,416 4,540 -- 5,956
Exempt from federal taxes 2,173 86 -- 2,259
Federal funds sold 1,019 275 -- 1,294
----------- ----------- ------- -----------
TOTAL INTEREST INCOME 20,468 14,914 -- 35,382
----------- ----------- ------- -----------
INTEREST EXPENSE
Interest on Deposits 8,583 5,991 -- 14,574
Other borrowings -- 76 -- 76
----------- ----------- ------- -----------
TOTAL INTEREST EXPENSE 8,583 6,067 -- 14,650
----------- ----------- ------- -----------
NET INTEREST INCOME 11,885 8,847 20,732
PROVISION FOR LOAN LOSSES 1,430 3,904 -- 5,334
----------- ----------- ------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,455 4,943 -- 15,398
----------- ----------- ------- -----------
NONINTEREST INCOME
Service charges on deposit accounts 1,786 1,185 -- 2,971
Other fees and charges 624 37 -- 661
Gain on sale of available for sale securities 979 -- -- 979
Other 706 373 -- 1,079
----------- ----------- ------- -----------
TOTAL OTHER OPERATING INCOME 4,095 1,595 -- 5,690
----------- ----------- ------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 4,679 3,512 -- 8,191
Occupancy 557 562 -- 1,119
Furniture and equipment expense
666 634 -- 1,300
Professional fees 373 966 -- 1,339
Advertising 217 142 -- 359
Supplies 292 290 -- 582
ATM expense 284 234 -- 518
Amortization of intangibles -- 248 -- 248
Other 1,818 1,826 -- 3,644
----------- ----------- ------- -----------
TOTAL NONINTEREST EXPENSES 8,886 8,414 -- 7,300
----------- ----------- ------- -----------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 5,664 (1,876) -- 3,788
Provision (benefit) for income taxes 1,579 (751) -- 828
----------- ----------- ------- -----------
NET INCOME (LOSS) $ 4,085 $ (1,125) $ -- $ 2,960
=========== =========== ========= ===========
EARNINGS (LOSS) PER SHARE:(2)
Basic $ 1.11 $ (0.77) $ -- $ 0.51
=========== =========== ========= ===========
Diluted $ 1.10 $ (0.77) $ -- $ 0.51
=========== =========== ========= ===========
Weighted average common shares outstanding - basic 3,684,000 1,453,000 654,000 5,791,000
=========== =========== ========= ===========
Weighted average common share equivalents
outstanding-diluted 3,720,000 1,453,000 654,000 5,827,000
=========== =========== ========= ===========
</TABLE>
-76-
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NVBANCORP
ADJUSTMENTS AND SRNB
NVBANCORP SRNB (1) COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans including fees $ 15,238 $ 8,359 -- $ 23,597
Securities:
Taxable 1,042 1,203 -- 2,245
Exempt from federal taxes 2,374 19 -- 2,393
Federal funds sold 1,079 482 -- 1,561
----------- ----------- -------- -----------
TOTAL INTEREST INCOME 19,733 10,063 -- 29,796
----------- ----------- -------- -----------
INTEREST EXPENSE
Interest on Deposits 8,644 3,922 -- 12,566
Other borrowings -- 70 -- 70
----------- ----------- -------- -----------
TOTAL INTEREST EXPENSE 8,644 3,992 -- 12,636
----------- ----------- -------- -----------
NET INTEREST INCOME 11,089 6,071 17,160
PROVISION FOR LOAN LOSSES 770 2,240 -- 3,010
----------- ----------- -------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,319 3,831 -- 14,150
----------- ----------- -------- -----------
NONINTEREST INCOME
Service charges on deposit accounts 1,400 646 -- 2,046
Other fees and charges 570 -- -- 570
Gain on sale of available for sale securities 250 -- -- 250
Life insurance proceeds 1,139 -- -- 1,139
Other 779 579 -- 1,358
----------- ----------- -------- -----------
TOTAL OTHER OPERATING INCOME 4,138 1,225 -- 5,363
----------- ----------- -------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 4,522 2,388 -- 6,910
Occupancy 503 399 -- 902
Furniture and equipment expense 553 491 -- 1,044
Professional fees 235 254 -- 489
Advertising 131 167 -- 298
Supplies 232 150 -- 382
ATM expense 247 139 -- 386
Amortization of intangibles -- 37 -- 37
Other 1,889 887 -- 2,776
----------- ----------- -------- -----------
TOTAL NONINTEREST EXPENSES 8,312 4,912 -- 13,224
----------- ----------- -------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 6,145 144 -- 6,289
Provision for income taxes 1,000 26 -- 1,026
----------- ----------- -------- -----------
NET INCOME (LOSS) $ 5,145 $ 118 $ -- $ 5,263
=========== =========== ======== ===========
EARNINGS PER SHARE:(2)
Basic $ 1.41 $ 0.17 $ -- $ 1.12
=========== =========== ======== ===========
Diluted $ 1.39 $ 0.16 $ -- $ 1.10
=========== =========== ======== ===========
Weighted average common shares outstanding-basic 3,658,000 712,000 320,000 4,690,000
=========== =========== ======== ===========
Weighted average common share equivalents
outstanding-diluted 3,702,000 752,000 338,000 4,792,000
=========== =========== ======== ===========
</TABLE>
-77-
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NVBANCORP
ADJUSTMENTS AND SRNB
NVBANCORP SRNB (1) COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans including fees $ 14,517 $ 7,126 -- $ 21,643
Securities:
Taxable 747 992 -- 1,739
Exempt from federal taxes 2,387 7 -- 2,394
Federal funds sold 990 141 -- 1,131
----------- ----------- -------- -----------
TOTAL INTEREST INCOME 18,641 8,266 -- 26,907
----------- ----------- -------- -----------
INTEREST EXPENSE
Interest on Deposits 8,077 3,243 -- 11,320
Other borrowings -- 66 -- 66
----------- ----------- -------- -----------
TOTAL INTEREST EXPENSE 8,077 3,309 -- 11,386
----------- ----------- -------- -----------
NET INTEREST INCOME 10,564 4,957 15,521
PROVISION FOR LOAN LOSSES 720 276 -- 996
----------- ----------- -------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,844 4,681 -- 14,525
----------- ----------- -------- -----------
NONINTEREST INCOME
Service charges on deposit accounts 1,342 604 -- 1,946
Other fees and charges 520 116 -- 636
Gain on sale of available for sale securities 31 235 -- 266
Other 688 -- -- 688
----------- ----------- -------- -----------
TOTAL OTHER OPERATING INCOME 2,581 955 -- 3,536
----------- ----------- -------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 3,934 2,136 -- 6,070
Occupancy 456 428 -- 884
Furniture and equipment expense 497 491 -- 988
Professional fees 136 134 -- 270
Advertising 92 88 -- 180
Supplies 222 169 -- 391
ATM expense 134 106 -- 240
Other 1,315 702 -- 2,017
----------- ----------- -------- -----------
TOTAL NONINTEREST EXPENSES 6,786 4,254 -- 11,040
----------- ----------- -------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,639 1,382 -- 7,021
Provision for income taxes 1,532 580 -- 2,112
----------- ----------- -------- -----------
NET INCOME $ 4,107 $ 802 $ -- $ 4,909
=========== =========== ======== ===========
EARNINGS PER SHARE: (2)
Basic $ 1.11 $ 1.42 $ -- $ 1.09
=========== =========== ======== ===========
Diluted $ 1.10 $ 1.35 $ -- $ 1.07
=========== =========== ======== ===========
Average common shares outstanding-basic 3,686,000 565,000 254,000 4,505,000
=========== =========== ======== ===========
Average common share equivalents outstanding-diluted 3,732,000 592,000 266,000 4,590,000
=========== =========== ======== ===========
</TABLE>
-78-
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSENSED COMBINED FINANCIAL STATEMENTS
(1) Merger Costs
The following table reflects all nonrecurring North Valley Bancorp
and Six Rivers National Bank incurred and estimated merger-related
costs. Merger costs expensed as of September 30, 1999 are shown as
adjustments on the unaudited pro forma condensed combined
statements of operations. Estimated merger costs are included on
the September 30, 1999 unaudited pro forma condensed combined
balance sheets as a reduction to stockholders' equity net of the
related tax benefit. Estimated merger costs will be charged to
expense as incurred. These merger costs are summarized below:
<TABLE>
<CAPTION>
NVBANCORP SRNB TOTAL
---------- ---------- -----------
<S> <C> <C> <C>
Financial advisory $ 61,000 $ 339,000 $ 400,000
Professional fees 273,000 209,000 482,000
Printing 15,000 10,000 25,000
Termination and severance benefits -- 92,000 92,000
Other 5,000 -- 5,000
---------- ---------- -----------
$ 354,000 $ 650,000 $ 1,004,000
---------- ---------- -----------
Estimated Tax Benefit 157,000
-----------
Total $ 847,000
===========
</TABLE>
(2) Common Stock
NVBancorp and SRNB combined earnings per share and outstanding
shares is calculated as the historical NVBancorp weighted average
shares plus the historical SRNB weighted average shares adjusted
for the assumed conversion ratio of 1.45.
-79-
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
MARKET QUOTATIONS
The NVBancorp common stock is listed and traded on the Nasdaq National
Market. The SRNB common stock is listed on the Nasdaq National Market. As of the
record date, there were approximately _______ holders of record of NVBancorp
common stock and approximately _____ holders of record of SRNB common stock.
The following table sets forth for NVBancorp common stock and SRNB
common stock the high and low closing prices and per share cash dividends
declared for the quarters indicated.
<TABLE>
<CAPTION>
NVBANCORP SRNB
---------------------------- ----------------------------
Common Stock Dividends Common Stock Dividends
High Low Declared High Low Declared
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter.............................. $12.00 $ 10.57 -- $20.00 $14.00 --
Second Quarter............................. 14.25 11.88 $ .175 18.25 17.00 --
Third Quarter.............................. 16.00 15.00 -- 17.50 16.50 --
Fourth Quarter............................. 16.19 15.57 .175 17.75 16.50 --
1998
First Quarter.............................. $16.625 $ 15.00 -- $19.25 $16.38 --
Second Quarter............................. 15.375 15.375 $ .175 19.63 16.38 --
Third Quarter.............................. 14.75 14.25 -- 18.27 9.75 --
Fourth Quarter............................. 12.25 12.25 .20 13.25 10.00 --
1999
First Quarter.............................. $13.375 $ 11.75 $ .10 $12.25 $10.00 --
Second Quarter............................. 13.75 12.00 .10 14.88 10.00 --
Third Quarter ............................. 12.25 10.00 .10 14.63 12.00 --
Fourth Quarter (through December 15)....... 11.50 9.375 .10 14.00 11.875 --
</TABLE>
At the close of business on October 1, 1999, the last trading day
immediately prior to the first public announcement of the merger, the high, low
and closing prices for NVBancorp common stock on the Nasdaq National Market were
$11.063, $10.563 and $11.063, respectively.
At the close of business on October 1, 1999, the last trading day
immediately prior to the first public announcement of the merger, the high, low
and closing prices for SRNB common stock on the Nasdaq National Market were
$13.50, $12.38 and $13.50, respectively.
DIVIDENDS AND DIVIDEND POLICY
NVBANCORP. NVBancorp's board of directors considers the advisability
and amount of proposed dividends each year. Future dividends will be determined
after consideration of NVBancorp's earnings, financial condition, future capital
funds, regulatory requirements and other factors as the board of directors may
deem relevant. NVBancorp's primary source of funds for payment of dividends to
its shareholders will be receipt of dividends and management fees from North
Valley Bank. The payment of dividends by a bank is subject to various legal and
regulatory restrictions.
-80-
<PAGE>
From 1993 through 1997, NVBancorp maintained a policy of paying
semi-annual dividends to its shareholders. Effective with the first quarter of
1998, NVBancorp adopted a policy to pay quarterly cash dividends to its
shareholders. NVBancorp has declared and paid cash dividends on its outstanding
shares of common stock totaling $.35 per share in 1997, $.375 per share in 1998
and $.30 per share through September 30, 1999. It is the intention of NVBancorp
to pay cash dividends, subject to the restrictions on the payment of cash
dividends as described above, depending upon the level of earnings, management's
assessment of future capital needs and other factors considered by the NVBancorp
board of directors.
Holders of NVBancorp common stock are entitled to receive dividends as
and when declared by the board of directors of NVBancorp out of funds legally
available therefor under the laws of the State of California. The California
General Corporation Law provides that a corporation may make a distribution to
its shareholders if the corporation's retained earnings equal at least the
amount of the proposed distribution. The California General Corporation Law
further provides that, in the event sufficient retained earnings are not
available for the proposed distribution, a corporation may nevertheless make a
distribution to its shareholders if, after giving effect to the distribution, it
meets two conditions, which generally stated are as follows: (i) the
corporation's assets must equal at least 125% of its liabilities; and (ii) the
corporation's current assets must equal at least its current liabilities or, if
the average of the corporation's earnings before taxes on income and before
interest expense for the two preceding fiscal years was less than the average of
the corporation's interest expense for those fiscal years, then the
corporation's current assets must equal at least 125% of its current
liabilities.
The Federal Reserve Board generally prohibits a bank holding company
from declaring or paying a cash dividend which would impose undue pressure on
the capital of subsidiary banks or would be funded only through borrowing or
other arrangements that might adversely affect a bank holding company's
financial position. The Federal Reserve Board's policy is that a bank holding
company should not continue its existing rate of cash dividends on its common
stock unless its net income is sufficient to fully fund each dividend and its
prospective rate of earnings retention appears consistent with its capital
needs, asset quality and overall financial condition.
Under the plan of reorganization, without the prior written consent of
SRNB, NVBancorp is prohibited from declaring or paying any dividends on or
making other distributions in respect of any of its capital stock, except
regular quarterly or semi-annual cash dividends in an amount substantially
equivalent to cash dividends paid in the two years prior to the date of the plan
of reorganization.
SRNB. SRNB's shareholders are entitled to receive dividends when and as
declared by its board of directors, out of funds legally available therefore,
subject to the restrictions set forth in the National Bank Act.
The payment of cash dividends by SRNB may be subject to the approval of
the Office of the Comptroller of the Currency, as well as restrictions
established by federal banking law and the Federal Deposit Insurance
Corporation. Approval of the Office of the Comptroller of the Currency is
required if the total of all dividends declared by SRNB's board of directors in
any calendar year will exceed SRNB's net profits for that year combined with its
retained net profits for the preceding two years, less any required transfers to
surplus or to a fund for the retirement of preferred stock. Additionally, the
Federal Deposit and Insurance Corporation and/or Office of the Comptroller of
the Currency, might, under certain circumstances, place restrictions on the
ability of a bank to pay dividends based upon peer group averages and the
performance and maturity of that bank.
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SRNB has not paid cash dividends in 1997, 1998 and 1999. SRNB does not
intend to pay cash or stock dividends prior to the closing of the transactions
contemplated by the plan of reorganization.
Under the plan of reorganization, without the prior written consent of
NVBancorp, SRNB is prohibited from declaring or paying any dividends on or
making other distributions in respect of any of its capital stock, except
regular quarterly or semi-annual cash dividends in an amount substantially
equivalent to cash dividends paid in the two years prior to the date of the plan
of reorganization.
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COMPARISON OF SHAREHOLDER RIGHTS
GENERAL
NVBancorp is incorporated under and subject to the provisions of the
California General Corporation Law. SRNB is a national banking association,
organized under and subject to the National Bank Act.
Upon consummation of the merger, except for those persons, if any, who
perfect dissenters' rights under the National Bank Act, the shareholders of SRNB
will become shareholders of NVBancorp. See "Dissenters' Rights" on page 69.
NVBancorp is a California corporation and, accordingly, is governed by
the California General Corporation Law and by its articles of incorporation and
bylaws. SRNB is chartered by the Office of the Comptroller of the Currency and
is governed by the National Bank Act, its articles of Association and bylaws,
which differ in certain material respects from the NVBancorp articles and
NVBancorp bylaws.
The following is a general comparison of certain similarities and
material differences between the rights of NVBancorp and SRNB shareholders under
their respective governing articles and bylaws. This discussion is only a
summary of certain provisions and is not a complete description of the
similarities and differences, and is qualified in its entirety by reference to
the California General Corporation Law, the National Bank Act, the common law
thereunder and the full text of the NVBancorp articles, NVBancorp bylaws, SRNB
articles and SRNB bylaws.
CERTAIN ANTI-TAKEOVER MEASURES
Some of the provisions in the NVBancorp articles and the NVBancorp
bylaws discussed below may deter efforts to obtain control of NVBancorp on a
basis which some shareholders might deem favorable. Those provisions are
designed to encourage any person attempting a change in control of NVBancorp to
enter into negotiations with the board of directors of NVBancorp. For example,
the NVBancorp board of directors has authorized a class of preferred stock and
the issuance of rights which may have the effect of delaying or preventing a
change in control of NVBancorp. See "Shareholder Rights Agreement" on page 89,
"Classified Board Provisions" on page 91 and "Description of NVBancorp Capital
Stock--Preferred Stock." on page 92. These anti-takeover measures may decrease
the likelihood that a person or group would obtain control of NVBancorp or may
perpetuate incumbent management.
The SRNB board of directors has adopted a shareholder rights agreement
which was designed to encourage any person attempting a change in control of
SRNB to enter into negotiations with the board of directors of SRNB. See
"Shareholders Rights Agreement" below.
QUORUM REQUIREMENTS
Both the NVBancorp bylaws and the SRNB bylaws provide that the presence
in person or by proxy of the holders of a majority of the shares entitled to
vote at any meeting of the shareholders will constitute a quorum for the
transaction of business.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
OVERVIEW OF CALIFORNIA LAW. Section 317 of the California General
Corporation Law expressly grants to each California corporation the power to
indemnify its directors, officers and agents against certain liabilities and
expenses incurred in the performance of their duties. Rights to indemnification
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beyond those provided by Section 317 may be valid to the extent that the rights
are authorized in the corporation's articles of incorporation. Indemnification
may not be made, however, with respect to liability incurred in connection with
any of the following acts for which the liability of directors may not be
limited under the California General Corporation Law: (1) acts or omissions that
involve intentional misconduct or a knowing and culpable violation of law; (2)
acts or omissions that a director believes to be contrary to the best interests
of the corporation or its shareholders or that involve the absence of good faith
on the part of the director; (3) any transaction from which a director derived a
personal benefit; (4) acts or omissions that show a reckless disregard for the
director's duty to the corporation or its shareholders in circumstances in which
the director was aware, or should have been aware, in the ordinary course of
performing a director's duties, of a risk of serious injury to the corporation
or its shareholders; (5) acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders; (6) acts or omissions arising out of certain
interested party transactions; or (7) acts in connection with illegal
distributions, loans or guarantees.
With respect to all proceedings other than shareholder derivative
actions, Section 317 permits a California corporation to indemnify any of its
directors, officers or other agents only if the person acted in good faith and
in a manner the person reasonably believed to be in the best interests of the
corporation and, in the case of a criminal proceeding, had no reasonable cause
to believe the conduct of the person was unlawful. In the case of derivative
actions, a California corporation may indemnify any of its directors, officers
or agents only if the person acted in good faith and in a manner the person
believed to be in the best interests of the corporation and its shareholders.
Furthermore, in derivative actions, no indemnification is permitted (1) with
respect to any matter with respect to which the person to be indemnified has
been held liable to the corporation, unless the indemnification is approved by
the court; (2) of amounts paid in settling or otherwise disposing of a pending
action without court approval; or (3) of expenses incurred in defending a
pending action which is settled or otherwise disposed of without court approval.
To the extent that a director, officer or agent of a corporation has been
successful on the merits in defense of any proceeding for which indemnification
is permitted by Section 317, a corporation is obligated by Section 317 to
indemnify the person against expenses actually and reasonably incurred by him in
connection with the proceeding.
NVBANCORP. The NVBancorp articles eliminate the liability of its
directors for monetary damages to the fullest extent permissible under
California law and NVBancorp to indemnify its directors, officers and agents
through agreements with the persons, bylaw provisions, vote of shareholders or
disinterested directors, or otherwise, in excess of the indemnification
otherwise permitted by Section 317, subject to applicable statutory prohibitions
upon indemnification.
The NVBancorp articles and bylaws obligate NVBancorp to indemnify to
the maximum extent permitted by California General Corporation Law its
directors, officers and other agents against liabilities and expenses incurred
in the performance of their duties, subject to the prohibitions of the
California General Corporation Law.
NVBancorp maintains directors' and officers' liability insurance
policies that indemnify its directors and officers against certain losses in
connection with claims made against them for certain wrongful acts. In addition,
NVBancorp has entered into separate indemnification agreements with its
directors and officers that require NVBancorp, among other things, (1) to
maintain directors' and officers' insurance in reasonable amounts in favor of
those individuals, and (2) to indemnify them against certain liabilities that
may arise by reason of their status or service as agents of NVBancorp to the
fullest extent permitted by California law.
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The NVBancorp bylaws and indemnification agreements with its directors
entitle the directors of NVBancorp to be indemnified against liabilities and
reasonable expenses incurred in connection with any claims brought against them
by reason of the fact that they are or were directors and are expressly stated
to be contract rights. NVBancorp directors have been granted the right to be
paid by NVBancorp the expenses incurred in defending the proceedings specified
above in advance of their final disposition, but the directors are required to
undertake to return any amounts advanced to the extent that it is ultimately
determined that they were not legally entitled to be indemnified by NVBancorp in
the proceeding. The directors are also granted the right to bring suit against
NVBancorp to recover unpaid amounts claimed with respect to indemnification and
any expenses incurred in bringing an action. While it is a defense to a suit
that indemnification is prohibited by the California General Corporation Law,
the burden of proving a defense is on NVBancorp.
The NVBancorp indemnification agreements obligate NVBancorp to
indemnify its directors except under certain circumstances including (1) with
respect to proceedings or claims initiated or brought voluntarily by the
director, except proceedings brought to establish or enforce a right to
indemnification or where the board of directors has approved initiating the
proceedings or claims; (2) expenses or liabilities which have been paid to the
director by an insurance carrier under D&O insurance maintained by NVBancorp;
(3) expenses incurred by the director in a proceeding to enforce or interpret
the indemnification agreement where a court determines that material assertions
made by the director were not made in good faith or were frivolous; (4) where
the indemnification is prohibited by law, Federal Deposit Insurance Corporation
regulations, or the articles of incorporation or bylaws of NVBancorp; (5)
expenses or liabilities incurred by the director under Section 16 of the
Securities Exchange Act of 1934, as amended.
SRNB. The SRNB articles are substantially similar to the NV Bancorp
articles regarding elimination of the liability of its directors for monetary
damages to the fullest extent permissible under California law and the power of
indemnification in excess of the indemnification otherwise permitted by Section
317, subject to applicable statutory prohibitions upon indemnification and the
restriction that no indemnification is available for expenses, penalties, or
other payments incurred in an administrative proceeding or action instituted by
an appropriate bank regulatory agency, which proceeding or action results in a
final order assessing civil money penalties or requiring affirmative action by
an individual or individuals in the form of payments to SRNB.
The SRNB bylaws do not include indemnification provisions which are
exclusively covered in the SRNB articles. SRNB also maintains directors' and
officers' liability insurance policies that indemnify its directors and officers
against certain losses in connection with claims made against them for certain
wrongful acts.
SRNB has entered into indemnity agreements with its directors which
obligate SRNB to pay certain litigation expenses as well as judgments, fines,
penalties and settlements, in the circumstances described below. "Expenses"
includes expenses of proceedings, court costs, attorney's fees and disbursements
and any expenses of establishing a right to indemnification under law or under
the agreement. It does not include judgments, fines, penalties or settlement
amounts paid by or on behalf of SRNB, unless those matters may be indemnified
under the California Corporations Code, federal law and federal banking
regulations. "Proceeding" includes threatened, pending or completed actions,
suits or proceedings, whether brought in the name of SRNB or otherwise, of a
civil, criminal, administrative or investigative nature. It includes proceedings
under the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, similar state laws and pertinent regulations adopted under
those laws. Proceeding does not include an action brought by a director against
SRNB.
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The director's involvement in the proceeding must relate to present or
former service as a SRNB director or as an officer or director of another
enterprise or employee benefit plan at SRNB'S request. Directors are indemnified
against expenses, judgments, fines, penalties, settlements, and other amounts,
actually and reasonably incurred in defending or settling the proceeding. The
director must have acted in good faith and in a manner he or she reasonably
believed to be in the best interests of SRNB. In a criminal proceeding, the
director must also have had no reasonable cause to believe the conduct was
unlawful.
However, if a director is involved in proceedings brought by or in the
right of SRNB to procure a judgment in its favor, indemnity is limited to
expenses actually and reasonably incurred in connection with defending or
settling the proceeding. Also in that instance, the director must have acted in
good faith in a manner the director believed to be in the best interests of SRNB
and its shareholders and the court must approve the settlement. If a director is
found liable to SRNB, we will indemnify only to the extent that the court
determines that the director is fairly and reasonably entitled to
indemnification for certain expenses.
To the extent that a director has been successful on the merits in
defending any proceeding or any claim, issue or matter in the proceeding, SRNB
will indemnify against all expenses actually and reasonably incurred.
SRNB will advance expenses prior to the final disposition of a
proceeding if the director agrees to repay advances to the extent it is
ultimately determined that the director was not entitled to indemnification or,
if required by law, if the director agrees to repay any advances received above
those to which it is ultimately determined the director was entitled. However,
in a proceeding brought by SRNB against the director we are not required to
advance expenses if a majority of the SRNB board of directors, supported by
advice of counsel, believes that the director did not act in good faith in
connection with the subject matter of the proceeding.
SRNB will also pay a director's expenses in connection with
successfully establishing a right to indemnification or advances. However, if
the director is only partially successful, we will pay only a reasonable and
fair amount of the total expenses unless we are legally prohibited from doing
so.
If legal action is brought to enforce the agreement, the prevailing
party is entitled to recover actual attorneys' fees and court costs awarded by
the court, in addition to any other amounts to which the prevailing party may be
entitled.
The indemnity agreement does not preclude any other indemnification
rights the director may have. Except as prohibited by federal law,
indemnification survives the end of the director's term, and may be claimed on
the director's behalf by heirs and personal representatives.
SRNB does not have to indemnify in connection with any claim:
(a) for which the director receives payment under a valid and
collectible insurance policy, except for amount the insurer
does not pay;
(b) for which SRNB is indemnifying the director under another
agreement or arrangement;
(c) for which the director gained any personal profit or advantage
he or she was not legally entitled to;
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(d) where SRNB has the right to demand return of the director's
securities trading profits, under Section 16(b) of the
Securities Exchange Act of 1934, or similar state laws;
(e) brought about or contributed to by the director's active and
deliberate dishonesty and dishonest purpose and intent, if
there is a final determination that these acts were material
to the subject matter of the proceeding;
(f) for omissions or acts committed in bad faith or which involve
intentional misconduct or a knowing violation of law;
(g) for any omission or act that the director believed at the time
to be contrary to, or inconsistent with, the best interests of
both the Bank and its shareholders; or
(h) for any transaction from which the director derived an
improper personal economic benefit in a capacity other than as
a SRNB shareholder.
Under the plan of reorganization, from and after the effective date,
NVBancorp will indemnify and hold harmless each present or former officer or
director of SRNB (determined as of the effective time) against all losses,
claims, damages, liabilities, costs, expenses or judgments or amounts that are
paid in the settlement of or in connection with any claim, action, suit,
proceeding or investigation based on or arising out of (1) the fact that the
person is or was a director or officer of SRNB and (2) the plan of
reorganization or the transactions contemplated by the plan of reorganization,
in each case to the full extent permitted by law.
Additionally, from and after the effective date, NVBancorp will include
in its director and officer insurance policy persons who served as directors and
officers of SRNB or obtain extended coverage under SRNB's director and officer
insurance policy to cover claims made for a period of three years after the
effective date of the merger regarding acts or omissions of SRNB's directors or
officers prior to the effective date of the merger. However, NVBancorp will not
be obligated to make annual premium payments for the insurance to the extent the
premiums exceed 150% of the premiums paid by SRNB for the insurance, as
previously disclosed to NVBancorp. If the premiums for the insurance would at
any time exceed 150% of the premiums paid by SRNB for the insurance, then
NVBancorp will maintain policies of insurance which, in NVBancorp's good faith
determination, provide a maximum coverage available at an annual premium equal
to 150% of the premiums paid by SRNB in respect of the insurance.
OVERVIEW OF FEDERAL LAW. Federal law authorizes the Federal Deposit
Insurance Corporation to limit, by regulation or order, the payment of
indemnification by insured banks or bank holding companies to their directors
and officers.The Federal Deposit Insurance Corporation has enacted a regulation
that permits the payment of indemnification by banks and bank holding companies
to institution-affiliated directors, officers and other parties only if certain
requirements are satisfied. This regulation permits an institution to make an
indemnification payment to, or for the benefit of, a director, officer or other
party only if the institution's board of directors, in good faith, certifies in
writing that the individual has a substantial likelihood of prevailing on the
merits and that the payment of indemnification will not adversely affect the
institution's safety and soundness. An institution's board of directors is
obligated to cease making or authorizing indemnification payments in the event
that it believes, or reasonably should believe, that the conditions discussed in
the preceding sentence are no longer being met. Further, an institution's board
of directors must provide the Federal Deposit Insurance Corporation and any
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other appropriate bank regulatory agency with prior written notice of any
authorization of indemnification. In addition, indemnification payments related
to an administrative proceeding or civil action instituted by an appropriate
federal bank regulatory agency are limited to the payment or reimbursement of
reasonable legal or other professional expenses. Finally, the director, officer
or other party must agree in writing to reimburse the institution for any
indemnification payments received should the proceeding result in a final order
being instituted against the individual assessing a civil money penalty,
removing the individual from office, or requiring the individual to cease and
desist from certain institutional activities.
SHAREHOLDER MEETINGS AND ACTION BY WRITTEN CONSENT
NVBANCORP. The NVBancorp articles authorize shareholder action by
written consent only when first authorized by the board of directors.
Additionally, the NVBancorp bylaws permit a director to be elected at any time
to fill a vacancy on the board of directors that has not been filled by the
directors by the written consent of the holders of a majority of the outstanding
shares entitled to vote for the election of directors.
SRNB. The SRNB articles authorize shareholder action by written consent
for the purpose of amending SRNB's articles of association.
CUMULATIVE VOTING
Cumulative voting allows a shareholder to cast a number of
votes equal to the number of directors to be elected multiplied by the number of
shares held in the shareholder's name on the record date. NVBancorp shareholders
are not entitled to cumulative voting in the election of directors. SRNB
shareholders are entitled to cumulative voting in the election of directors.
AMENDMENT OF ARTICLES AND BYLAWS
NVBANCORP. The NVBancorp articles and bylaws may be amended or repealed
by the affirmative vote or written consent of a majority of the outstanding
shares entitled to vote.
The NVBancorp bylaws may be amended or repealed by the affirmative vote
or written consent of a majority of the outstanding shares entitled to vote,
provided that any amendment which reduces (1) the number of directors on a
fixed-number board or (2) the minimum number of directors on a variable-number
board to a number less than five, cannot be adopted if the votes cast or
consents given opposing the action are equal to or more than 16 2/3% of all
outstanding shares entitled to vote.
Subject to the rights of shareholders to amend the bylaws, the
NVBancorp bylaws provide that the bylaws may be adopted, amended or repealed by
its board of directors, except that only the shareholders can adopt a bylaw or
amendment to the bylaws which (1) specifies or changes the number of directors
on a fixed number board, (2) specifies or changes the minimum or maximum number
of directors on a variable number board or (3) changes from a fixed number board
to a variable number board or vice versa.
SRNB. Subject to the laws of the United States, SRNB's articles of
association may be amended or repealed by the affirmative vote or written
consent of a majority of the outstanding shares unless the vote of a greater
amount of shares is required by law, and in that case with the vote or written
consent of the greater amount. SRNB's bylaws may be amended, altered or
repealed, at any duly called meeting of the SRNB board of directors by a
majority vote of the total number of directors.
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FILLING VACANCIES ON THE BOARD OF DIRECTORS
NVBANCORP. The NVBancorp bylaws provide that vacancies occurring on
their respective boards of directors may be filled by a vote of a majority of
the remaining directors, though less than a quorum, or by a sole remaining
director, except that a vacancy created by the removal of a director may only be
filled by the vote of a majority of the shares entitled to vote represented at a
duly held meeting or by unanimous written consent of the outstanding shares
entitled to vote. The NVBancorp bylaws also provide that the shareholders may
elect a director at any time to fill any vacancy not filled by the directors,
except that any election by written consent, other than to fill a vacancy
created by removal of a director, requires the consent of a majority of the
outstanding shares entitled to vote.
In addition, the California General Corporation Law provides that if,
after the filling of any vacancy by the directors, the directors then in office
who have been elected by the shareholders constitute less than a majority of the
directors then in office, (1) any holder or holders of an aggregate of 5% or
more of the total number of shares at the time outstanding having the right to
vote for the directors may call a special meeting of shareholders; or (2) the
California Superior Court of the proper county will, upon application of the
shareholder or shareholders, summarily order a special meeting of shareholders,
to be held to elect the entire board of directors.
SRNB. Any vacancy on the SRNB board of directors for any reason,
including an increase in the number of directors, may be filled by action of the
board of directors. Directors appointed by the SRNB board hold office until
their successors are elected and qualified.
CALL OF ANNUAL OR SPECIAL MEETING OF SHAREHOLDERS AND ACTION BY SHAREHOLDERS
WITHOUT A MEETING
NVBANCORP. The NVBancorp bylaws provide that a special meeting of the
shareholders may be called at any time by the board of directors, chairman of
the board, president or one or more shareholders holding shares in the aggregate
entitled to cast not less than 10% of the votes at that special meeting. Under
the California General Corporation Law, unless otherwise provided in the
articles of incorporation, any action which may be taken at any annual or
special meeting may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take the action at a meeting at which all
shares entitled to vote thereon were present and voted. The NVBancorp articles
provide that action without a meeting can be taken if the board of directors of
NVBancorp has by resolution first approved any of the action without a meeting.
SRNB. Any ten or more shareholders owning, in the aggregate, not less
than twenty percent of the outstanding shares of SRNB, may call a special
meeting of the shareholders at any time. Other than amending the articles, no
provision is made in the SRNB articles of association for the shareholders to
take any action in the absence of a duly called meeting.
SHAREHOLDER RIGHTS AGREEMENT
NVBANCORP. The board of directors of NVBancorp adopted a shareholders
rights agreement on September 9, 1999, under which the board of directors
declared a dividend of one right on each outstanding share of NVBancorp common
stock to shareholders of record as of September 23, 1999. The rights agreement
was not adopted in response to any specific proposal or effort to acquire
control of NVBancorp. Rather, it was adopted to deter abusive takeover tactics
that can be used to deprive shareholders of the full value of their investment.
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Under the rights agreement, until it is announced that person or group
has acquired 10% or more of the NVBancorp common stock ("an acquiring person")
or commences a tender offer that will result in that person or group owning 10%
or more of the NVBancorp common stock, the rights will be evidenced by the
NVBancorp common stock certificates, will automatically trade with the NVBancorp
common stock and will not be exercisable. Thereafter, separate rights
certificates will be distributed to each shareholder other than an acquiring
person and each right will entitle its holder to purchase participating
preferred stock having economic value equal to $90.00 for an exercise price of
$45.00. Until exercised, a right confers no voting or other prerogatives of
share ownership.
Ten days (or on an earlier or later date as determined by the board of
directors) following announcement that any person or group has become an
acquiring person, each right held by a shareholder who is not an acquiring
person or transferee of an acquiring person will entitle its holder to purchase
for the exercise price, a number of shares of NVBancorp common stock or
participating preferred stock having a market value of twice the exercise price.
In the event an acquiring person controls the board of directors of
NVBancorp and thereafter NVBancorp enters into, consummates or permits to occur
a transaction or series of transactions involving a merger or the sale of more
than 50% of its assets or earning power, and in the case of a merger, where the
acquiring person receives different treatment from other shareholders of
NVBancorp, or the person with whom the merger occurs is the acquiring person or
a person affiliated or associated with the acquiring person, each right will
entitle its holder to purchase a number of shares of common stock of the
acquiring person having a market value of twice the exercise price. If any
person or group acquires between 10% and 50% of the NVBancorp common stock, the
board of directors of NVBancorp may, at its option, exchange one share of
NVBancorp common stock for each right.
The board of directors may redeem the rights at the price of $0.001 for
each right at any time before a person or group becomes an acquiring person and
prior to the expiration of the rights on September 9, 2009.
This summary description of the NVBancorp shareholder rights agreement
is not complete and is qualified in its entirety by reference to the rights
agreement which is attached as an exhibit to a current report on Form 8-K dated
September 9, 1999, filed with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, and incorporated here by this
reference. See "Where You Can Find More Information" on page 97.
SRNB. The board of directors of SRNB adopted a shareholders rights
agreement on September 30, 1998, under which the board of directors declared a
dividend of one right on each outstanding share of SRNB common stock to
shareholders of record as of October 12, 1998. The rights agreement was not
adopted in response to any specific proposal or effort to acquire control of
SRNB. Rather, it was adopted to deter abusive takeover tactics that can be used
to deprive shareholders of the full value of their investment.
Under the rights agreement, until it is announced that a person or
group has acquired 10% or more of SRNB's outstanding common stock ("an acquiring
person") or commences a tender offer that will result in ownership of 10% or
more of SRNB's common stock, the rights will be evidenced by the SRNB common
stock certificates, will automatically trade with the SRNB common stock and will
not be exercisable. Thereafter, separate rights certificates will be distributed
to each shareholder other than an acquiring person and each right will entitle
its holder to purchase SNRB common stock at a price of $30.00 per share subject
to certain adjustments. Until exercised, a right confers no voting or other
prerogatives of share ownership.
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Ten days (or on an earlier or later date as determined by the board of
directors) following announcement that any person or group has become an
acquiring person, each right held by a shareholder who is not an acquiring
person or transferee of an acquiring person will entitle its holder to purchase
for the exercise price, a number of shares of SRNB common stock having a market
value of twice the exercise price. This provision also applies if there is a
reclassification of securities or other transaction which increases by more than
1% the proportion share of shares owned by the acquiring person.
In the event an acquiring person controls the board of directors of
SRNB and thereafter SRNB is involved in a merger or the sale of more than 50% of
its assets or earning power, and in the case of a merger, the acquiring person
receives different treatment from other shareholders of SNRB, or is itself the
acquiror in the merger, each right will entitle its holder to purchase a number
of shares of common stock of the acquiring person having a market value of twice
the exercise price. If any person or group acquires between 10% and 50% of SRNB
common stock, the board of directors of SNRB may, at its option, exchange one
share of SRNB common stock for each right.
The board of directors may redeem the rights at the price of $0.001 for
each right at any time before a person or group becomes an acquiring person and
prior to the expiration of the rights on October 2, 2002.
This summary description of the SRNB shareholder rights agreement is
not complete and is qualified in its entirety by reference to the rights
agreement which is attached as an exhibit to a current report on Form 8-K dated
December ____, 1999, filed by NVBancorp with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, and
incorporated here by this reference. See "Where You Can Find More Information"
on page 97.
CLASSIFIED BOARD PROVISIONS
NVBANCORP. At present, neither the NVBancorp articles nor the North
Valley Bank bylaws provide for a classified board. Assuming the classified board
proposed contained herein is approved by the shareholders of NVBancorp, the
NVBancorp articles will be amended to provide that, in the event that the
authorized number of directors will be fixed at nine or more, the board of
directors will be divided into three classes: Class I, Class II and Class III,
each consisting of a number of directors equal to as nearly as practicable
one-third the total number of directors. Directors in Class I, Class II and
Class III will initially serve for a term expiring respectively at the 2001,
2002 and 2003 annual meeting of shareholders. Thereafter, each director will
serve for a term ending at the third annual shareholders meeting following the
annual meeting at which the director was elected. In the event that the
authorized number of directors will be fixed with at least six but less than
nine, the board of directors will be divided into two classes, designated as
Class I and Class II, each consisting of one-half of the directors or as close
an approximation as possible. At each annual meeting, each of the successors to
the directors of the class whose term will have expired at such annual meeting
will be elected for a term running until the second annual meeting next
succeeding his or her election and until his or her successor will have been
duly elected and qualified. The number of directors is currently set between six
and 11. The use of a classified board may have the effect of discouraging
takeover attempts.
SRNB. SRNB's articles do not provide for a classified board of
directors.
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DESCRIPTION OF NVBANCORP CAPITAL STOCK
The authorized capital stock of NVBancorp consists of 20,000,000 shares
of NVBancorp common stock, without par value, and 5,000,000 shares of preferred
stock, without par value. As of _____________, 2000, _______________ shares of
NVBancorp common stock and no shares of preferred stock were outstanding and an
additional _______________ shares of the authorized NVBancorp common stock were
available for future grant and reserved for issuance to holders of outstanding
stock options under NVBancorp's stock option plans .
COMMON STOCK
Holders of NVBancorp common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of shareholders.
Shareholders may not cumulate their votes. Shareholders are entitled to receive
ratably dividends as may be legally declared by NVBancorp's board of directors.
There are legal and regulatory restrictions on the ability of NVBancorp to
declare and pay dividends. See "Market Price and Dividend Information--Dividends
and Dividend Policy" on page ___. In the event of a liquidation, common
shareholders are entitled to share ratably in all assets remaining after payment
of liabilities and liquidation preference for securities with a priority over
the NVBancorp common stock. Shareholders of NVBancorp common stock have no
preemptive or conversion rights. NVBancorp common stock is not subject to calls
or assessments. The transfer agent and registrar for NVBancorp common stock is
Chase Mellon Shareholder Services, LLC.
PREFERRED STOCK
The NVBancorp board of directors is authorized to fix the rights,
preferences, privileges and restrictions of the preferred stock and may
establish series of preferred stock and determine the variations between series.
If and when any preferred stock is issued, the holders of preferred stock may
have a preference over holders of NVBancorp common stock upon the payment of
dividends, upon liquidation of NVBancorp, in respect of voting rights and in the
redemption of the capital stock of NVBancorp. The issuance of any preferred
stock may have the effect of delaying, deferring or preventing a change in
control of NVBancorp without further action of its shareholders. The issuance of
preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of NVBancorp common stock. NVBancorp has established
a class of preferred stock known as Series A Junior Participating Preferred
Stock, in connection with the adoption of its Shareholder Protection Rights
Agreement. On September 9, 1999, NVBancorp declared a dividend of one right for
each outstanding share of common stock. Each right entitles the holder to
purchase from NVBancorp, upon the occurrence of certain events involving a
change in control of NVBancorp, one one-hundredth of a share of the Series A
Junior Participating Preferred Stock.
DESCRIPTION OF SRNB CAPITAL STOCK
The authorized capital stock of SRNB consists of 10,000,000 shares of
common stock, par value $5.00 per share. As of the _______________, 2000, there
were __________ common stock outstanding, and an additional _________ shares of
the authorized SRNB common stock available for future grant and reserved for
issuance to holders of outstanding stock options under SRNB's stock option plan.
COMMON STOCK
Holders of SRNB common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders, except that
under the SRNB bylaws, shareholders may cumulate their votes for the election of
directors. Shareholders are entitled to receive ratably dividends as may be
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legally declared by SRNB's board of directors. There are legal and regulatory
restrictions on the ability of SRNB to declare and pay dividends. See "Market
Price and Dividend Information--Dividends and Dividend Policy" on page 80. In
the event of a liquidation, common shareholders are entitled to share ratably in
all assets remaining after payment of liabilities and liquidation preferences
for securities with a priority over the SRNB common stock. Shareholders of SRNB
common stock have no preemptive or conversion rights. SRNB common stock is not
subject to calls or assessments. The transfer agent and registrar for SRNB
common stock is American Securities Transfer and Trust, Inc.
PROPOSAL TO CLASSIFY BOARD OF DIRECTORS
INTRODUCTION
The terms of the plan of reorganization require that two of the
existing directors of SRNB (to be designated by the board of directors of
NVBancorp) will be appointed to the NVBancorp board of directors promptly after
the consummation of the plan of reorganization and the merger. In addition,
NVBancorp agreed to adopt amendments to the NVBancorp articles of incorporation
and bylaws to divide the board of directors into three classes. If the
amendments are approved by the NVBancorp shareholders, one of the existing
directors of SRNB is to serve as a Class II director and another director of
SRNB is to serve as a Class III director, as discussed below.
On November 15, 1999, the board of directors adopted amendments to the
NVBancorp articles of incorporation and bylaws which provide that the board of
directors be divided into three classes of directors, each consisting of a
number of directors equal as nearly as practicable to one-third the total number
of directors, for so long as the board consists of at least nine authorized
directors and, in the event that the total number of authorized directors on the
board is at least six but less than nine, for classification of the board of
directors into two classes, each consisting of a number of directors equal as
nearly as practicable to one-half the total number of directors. After initial
implementation at the 2000 annual meeting of shareholders, each class of
directors would be subject to election every third year and would serve for a
three-year term for so long as the board remained classified into three classes,
or would be subject to election every second year and would serve for a two-year
term in the event the board were classified into two classes. Currently, all of
NVBancorp's directors are elected each year to serve a one-year term.
If the proposal is approved by the shareholders, the board of directors
will, for purposes of initial implementation, designate three classes of
directors for election at the special meeting. Class I will be elected initially
for a one-year term expiring at the 2001 annual meeting of shareholders; Class
II will be elected initially for a two-year term expiring at the 2002 annual
meeting of shareholders; and Class III will be elected for a three-year term
expiring at the annual meeting of shareholders to be held in the year 2003; and,
in each case, until their successors are duly elected and qualified. At each
annual meeting after the 2000 annual meeting, only directors of the class whose
term is expiring would be voted upon, and upon election each director would
serve a three-year term. Commencing with the annual meeting of shareholders
scheduled to occur in 2001, directors elected to Class I would serve for a
three-year term and until their successors are duly elected and qualified,
subject to any decrease in the total number of authorized directors, as
described above. Subsequently in the years 2002 and 2003, directors elected to
Class II and Class III, respectively, would also be elected for a three-year
term and until their successors are duly elected and qualified.
Classification of the board of directors is permitted by Section 301.5
of the California Corporations Code. Under Section 301.5, a qualifying
California corporation, like NVBancorp, may divide its board of directors into
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two or three classes, with one-half or one-third of the directors, respectively,
elected at each annual meeting (or as near to one-half or one-third as
practicable). The authorized number of directors must be not less than six in
the case of a two-class board and not less than nine in the case of a
three-class board. Classified boards of directors are permitted under the
corporate law of a majority of states, and NVBancorp believes that well over
one-half of Fortune 500 companies provide for classified boards.
The text of the proposed amendment to the articles is set forth in
Annex F attached to this joint proxy statement/prospectus. If this proposal is
adopted by the shareholders, in order to make the bylaws consistent with the
amendment to the articles described in this proposal, upon effectiveness of the
filing of the amendment to the articles with the Secretary of State of the State
of California, Section 16 of Article III of the bylaws will be amended to read
as set forth in Annex F, which is incorporated here by this reference.
EFFECT OF CLASSIFICATION OF BOARD
If adopted, the classification of the board will apply to every
subsequent election of directors for so long as at least six directors are
authorized under the NVBancorp bylaws and the classification provision is not
amended. The NVBancorp bylaws provide that the board of directors will consist
of not less than nine and not more than seventeen directors, with the exact
number of directors currently set at eleven. So long as the board continues to
consist of at least nine authorized directors, after initial implementation of
the classified board, directors will serve for a term of three years rather than
one year, and one-third of the directors (or as near to one-third as
practicable) will be elected each year.
In the event that the number of directors increases, the increase will
be apportioned by the board among the classes of directors to make each class as
nearly equal in number as possible. If the number of authorized directors is
decreased to at least six but less than nine, the directors will be apportioned
by the board among two classes, each consisting of one-half of the directors or
as close an approximation as possible, directors will serve for a term of two
years, and one-half the directors (or as near to one-half as practicable) will
be elected each year. In any event, a decrease in the number of directors cannot
shorten the term of any incumbent director. Vacancies on the board created by
any resignation, removal or other reason, or by an increase in the size of the
board, may be filled for the remainder of the term by the vote of the majority
of the directors remaining in office or by the vote of holders of a majority of
the outstanding shares of the NVBancorp common stock.
Under California law, members of the board of directors may be removed
by the board of directors for cause (defined to be a felony conviction or court
declaration of unsound mind), by the shareholders without cause or by court
order for fraudulent or dishonest acts or gross abuse of authority or
discretion. In the case of a board of directors that is not classified, no
director may be removed by the shareholders if the votes cast against the
removal (or, if done by written consent, the votes eligible to be cast by the
non-consenting shareholders) would have been sufficient to elect the director if
voted cumulatively at an election at which the same total number of votes were
cast (or, if the action is taken by written consent, all shares entitled to vote
were voted) and the entire number of directors authorized at the time of the
director's most recent election were then being elected (the "relevant number of
directors"). In the case of classified boards, the relevant number of directors
is (i) the number of directors elected at the most recent annual meeting of
shareholders or, if greater, (ii) the number of directors sought to be removed.
It should be noted that this removal provision applies equally to corporations
that permit cumulative voting and to those that do not.
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OTHER EFFECTS
The board of directors believes that the amendment of the articles and
bylaws is in the best interests of NVBancorp and its shareholders.
Public companies are potentially subject to attempts by various
individuals and entities to acquire significant minority positions in the
company with the intent either of obtaining actual control of the company by
electing their own slate of directors, or of achieving some other goal, such as
the repurchase of their shares by the company at a premium. Public companies
also are potentially subject to inadequately priced or coercive bids for control
through majority share ownership. These prospective acquirors may be in a
position to elect a company's entire board of directors through a proxy contest
or otherwise, even thought they do not own a majority of the company's
outstanding shares at the time. If this proposal is approved, a majority of
NVBancorp's directors could not be removed by those persons until two annual
meetings of shareholders have occurred, unless the removal was for cause and the
requisite vote was obtained. By providing this additional time to the board of
directors and eliminating the possibility of rapid removal of the board, the
directors of NVBancorp will have the necessary time to most effectively satisfy
their responsibility to the NVBancorp shareholders to evaluate any proposal and
to assess and develop alternatives without the pressure created by the threat of
imminent removal. In addition, this proposal, by providing that directors will
serve three-year terms rather than one-year terms, will enhance continuity and
stability in the composition of NVBancorp's board of directors and in the
policies formulated by the board. The board believes that this, in turn, will
permit it more effectively to represent the interests of all shareholders,
including responding to demands or actions by any shareholder or group.
Following adoption of the classified board structure, at any given time at least
one-third of the members of the board of directors will generally have had prior
experience as directors of NVBancorp. The board believes that this will
facilitate long-range planning, strategy and policy and will have a positive
impact on customer and employee loyalty. NVBancorp has not historically had
problems with either the continuity or stability of its board of directors.
The classification of the board of directors will have the effect of
making it more difficult to replace incumbent directors. So long as the board is
classified into three classes, a minimum of three annual meetings of
shareholders would generally be required to replace the entire board, absent
intervening vacancies. While the proposal is not intended as a
takeover-resistive measure in response to a specific threat, it may discourage
the acquisition of large blocks of NVBancorp's shares by causing it to take
longer for a person or group of persons who acquire a block of shares to effect
a change in management.
If this proposal is approved and implemented, a shareholder or group of
shareholders seeking to replace a majority of the directors on the board will
generally need to influence the voting of at least a majority of the outstanding
shares at two consecutive annual meetings. In addition, NVBancorp has other
corporate attributes that may also have the effect of helping NVBancorp to
resist an unfriendly acquisition. These include existing provisions in the
NVBancorp articles and bylaws eliminating, subject to certain exceptions, the
liability of directors for monetary damages and eliminating cumulative voting;
provisions in the articles and bylaws providing for indemnification of directors
and officers; and provisions in the bylaws requiring advance notice of
nomination of a candidate for election to the board of directors of NVBancorp
when the nomination is made by a person other than the nominating committee of
the Board.
This proposal is not in response to any attempt to acquire control of
NVBancorp. However, the board believes that adopting this proposal is prudent,
advantageous and in the best interests of shareholders because it will give the
board more time to fulfill its responsibilities to shareholders, and it will
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provide greater assurance of continuity and stability in the composition and
policies of the board of directors. The board also believes the advantages
outweigh any disadvantage relating to discouraging potential acquirors from
attempting to obtain control of NVBancorp.
REQUIRED APPROVAL
Approval of the proposed amendment to the articles and the bylaws
requires the affirmative vote of the holders of a majority of the outstanding
shares of NVBancorp's common stock. If this proposal is not approved, it is the
intention of NVBancorp and SRNB that the two existing directors of SRNB (to be
designated by the board of directors of NVBancorp) will be appointed to the
NVBancorp board of directors to serve along with the existing NVBancorp
directors, without classification as contemplated by this proposal.
RECOMMENDATION OF MANAGEMENT
The board of directors believes that the advantages of the proposed
amendments to the articles and bylaws classifying the board of directors for
purposes of the election of directors greatly outweigh the possible
disadvantages of the amendments. Accordingly, the board of directors has
unanimously approved the proposed amendments and unanimously recommends that the
shareholders vote "FOR" their approval.
EXPERTS
The consolidated financial statements of North Valley Bancorp
incorporated in this joint proxy statement/prospectus by reference from North
Valley Bancorp's annual report on Form 10-K for the year ended December 31, 1998
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report which is incorporated herein by reference. Those statements have
been so incorporated in reliance upon the report of Deloitte & Touche LLP, given
upon their authority as experts in accounting and auditing.
The financial statements of Six Rivers National Bank incorporated in
this joint proxy statement/prospectus by reference from Six Rivers National
Bank's annual report on Form 10-K SB, as amended, for the year ended December
31, 1998 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report which is incorporated herein by reference. Those
statements have been so incorporated in reliance upon the report of Deloitte &
Touche LLP, given upon their authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of NVBancorp common stock offered hereby and
certain legal matters in connection with the merger will be passed upon for
NVBancorp by Coudert Brothers, San Jose, California. Certain federal and
California tax matters will be passed upon by McCutchen, Doyle, Brown & Enersen,
LLP, San Francisco, California.
SOLICITATION OF PROXIES
Each of NVBancorp and SRNB will bear the cost of the solicitation of
proxies from their respective shareholders. In addition to solicitation by mail,
the directors, officers and employees of NVBancorp or SRNB may solicit proxies
from their respective shareholders by telephone or telegram or in person. Those
persons will not be additionally compensated, but will be reimbursed for
reasonable out-of-pocket expenses incurred in connection with the solicitations.
Arrangements will also be made with brokerage firms, nominees, fiduciaries and
other custodians, for the forwarding of solicitation materials to the beneficial
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owners of shares held of record by those persons, and NVBancorp or SRNB, as
applicable, will reimburse those persons for their reasonable out-of-pocket
expenses in connection with those solicitations. SRNB has retained Skinner & Co.
of San Francisco, California, to aid in the solicitation of proxies and to
verify certain records related to the solicitations. Skinner & Co. will receive
$5,000 as compensation for its services and $5,000 as reimbursement for its
related out-of-pocket expenses. NVBancorp does not intend to retain a proxy
solicitor.
WHERE YOU CAN FIND MORE INFORMATION
NVBancorp files annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information that NVBancorp files at
the Securities and Exchange Commission's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. You may also obtain copies of
this information by mail from the Public Reference Section of the SEC, 450 5th
Street, N.W., Room 1024, Washington, D.C. 20549 at prescribed rates. Please call
the Securities and Exchange Commission at (800) SEC-0330 for further information
on the public reference rooms. The Securities and Exchange Commission also
maintains an Internet World Wide Web site at "http://www.sec.gov" at which
reports, proxy and information statements and other information regarding
NVBancorp are available. In addition, reports, proxy statements and other
information concerning NVBancorp also may be inspected at the offices of The
Nasdaq Stock Market, 1735 K Street, Washington, D.C. 20006.
NVBancorp has filed with the Securities and Exchange Commission a
registration statement on Form S-4 under the Securities Act of 1933, as amended,
relating to the shares of NVBancorp common stock to be issued in connection with
the merger. This joint proxy statement/prospectus also constitutes the
prospectus of NVBancorp filed as part of the registration statement and does not
contain all the information set forth in the registration statement and exhibits
thereto. You may copy and read the registration statement and its exhibits at
the public reference facilities maintained by the Securities and Exchange
Commission at the public reference rooms specified above.
The Securities and Exchange Commission allows NVBancorp to "incorporate
by reference" information into this joint proxy statement/prospectus, which
means that NVBancorp can disclose important information to you by referring you
to another document filed separately with the Securities and Exchange
Commission. The information incorporated by reference is deemed to be a part of
this joint proxy statement/prospectus, except for any information superseded by
information contained directly in this joint proxy statement/prospectus. This
joint proxy statement/prospectus incorporates by reference the documents set
forth below that NVBancorp has previously filed with the Securities and Exchange
Commission. These documents contain important information about NVBancorp and
its financial condition.
<TABLE>
<CAPTION>
NVBANCORP SECURITIES AND EXCHANGE COMMISSION PERIOD
FILINGS
(FILE NO. 000-10652)
<S> <C>
Annual Report on Form 10-K.............. Year ended December 31, 1998
Quarterly Reports on Form 10-Q.......... Quarters ended March 31, 1999, June 30, 1999,
and September 30, 1999
Current Reports on Form 8-K............. Filed on January 4, 1999, February 25, 1999,
September 23, 1999, and October 12, 1999
Proxy Statement......................... Filed on April 23, 1999
</TABLE>
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NVBancorp incorporates by reference any additional documents that
NVBancorp may file with the Securities and Exchange Commission between the date
of this joint proxy statement/prospectus and the date of the special meeting of
NVBancorp shareholders. These include periodic reports, such as annual reports
on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as
well as proxy statements.
SRNB files annual, quarterly and current reports, proxy statements and
other information with the Office of the Comptroller of the Currency. The
following reports filed by SRNB with the Office of the Comptroller of the
Currency are incorporated here by this reference to the current report on Form
8-K of NVBancorp dated December 23, 1999, filed with the Securities and Exchange
Commission, which included the following reports and proxy statement, and other
information, as exhibits:
(1) SRNB's annual report to the Office of the Comptroller of the
Currency on Form 10-KSB for the fiscal year ended December 31,
1998, as amended on October 18, 1999;
(2) SRNB's proxy statement dated April 21, 1999;
(3) SRNB's quarterly reports to the Office of the Comptroller of
the Currency on Form 10-QSB for the periods ended March 31,
1999, June 30, 1999, as amended, and September 30, 1999; and
(4) SRNB's current reports to the Office of the Comptroller of the
Currency on Form 8-K dated May 12, 1999, October 3, 1999 and
October 4, 1999.
All documents filed by SRNB with the Office of the Comptroller of the
Currency under Section 13(a), 13(c), 14 or 15(d) of the Securities and Exchange
Act of 1934, as amended, after the date of this joint proxy statement/prospectus
and prior to the special meetings will be deemed incorporated by reference in
this proxy statement/prospectus and a part hereof from the date of filing by
NVBancorp of a Form 8-K with the Securities and Exchange Commission attaching
the reports as exhibits. SRNB and NVBancorp have undertaken that each document
will be filed by NVBancorp as an exhibit to a Form 8-K or other appropriate
filing for purposes of incorporation by reference herein.
Any statement incorporated by reference from the above documents will
be deemed to be modified or superseded for purposes of this joint proxy
statement/prospectus to the extent that a statement contained herein or in any
other document subsequently filed by NVBancorp which also is or is deemed to be
incorporated here by this reference modifies or supersedes the statement. Any
statement so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this joint proxy statement/prospectus.
NVBancorp has supplied all information contained or incorporated by
reference in the joint proxy statement/prospectus relating to NVBancorp and SRNB
has supplied all such information relating to SRNB.
This joint proxy statement/prospectus incorporates by reference
documents relating to NVBancorp which are not presented in this joint proxy
statement/prospectus or delivered with it. Those documents are available from
NVBancorp without charge, excluding all exhibits unless specifically
incorporated by reference in this joint proxy statement/prospectus, by
requesting them in writing or by telephone from NVBancorp, Corporate Secretary,
880 East Cypress Avenue, Redding, California 96002, (530) 221-8400.
NVBancorp and SRNB will provide without charge, to each person to whom
this joint proxy statement/prospectus is delivered, upon written or oral
request, a copy of any or all of the Office of the Comptroller of the Currency
reports of SRNB incorporated here by this reference to the Forms 8-K of
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NVBancorp (other than exhibits to those documents unless specifically
incorporated by reference into those documents). These requests should be
directed to:
North Valley Bancorp
880 East Cypress Avenue
Redding, California 96002
Attention: Michael J. Cushman, President
(530) 221-8400
or
Six Rivers National Bank
402 "F" Street
Eureka, California 95501
Attention: Michael W. Martinez, President
(707) 443-8400
In deciding how to vote on the transactions contemplated by the
reorganization agreement, including the merger, you should rely only on the
information contained or incorporated by reference in this joint proxy
statement/prospectus. Neither NVBancorp nor SRNB has authorized any person to
provide you with any information that is different from what is contained in
this joint proxy statement/prospectus. This joint proxy statement/prospectus is
dated ______________, 2000. You should not assume that the information contained
in this joint proxy statement/prospectus is accurate as of any date other than
the date of this proxy statement/prospectus, and neither the mailing to you of
this joint proxy statement/prospectus nor the issuance to you of shares of
NVBancorp common stock will create any implication to the contrary. This joint
proxy statement/prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any securities, or the solicitation of a proxy
in any jurisdiction in which, or to any person to whom, it is unlawful.
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EXECUTION COPY
AGREEMENT
AND
PLAN OF REORGANIZATION AND MERGER
BY AND AMONG
NORTH VALLEY BANCORP,
NVB INTERIM NATIONAL BANK
AND
SIX RIVERS NATIONAL BANK
OCTOBER 3, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
Recitals -1-
1. THE MERGER -2-
1.1. Effective Date and Time -2-
1.2. Effect of the Merger -2-
2. CONVERSION AND CANCELLATION OF SHARES -3-
2.1. Conversion of SRNB Shares. -3-
2.2 Fractional Shares -4-
2.3 Surrender of SRNB Shares -4-
2.4 Further Transfers of SRNB Shares -5-
2.5. Adjustments -5-
2.6 Treatment of Stock Options -5-
2.7 Dissenting Shareholders -6-
2.8 NVB Interim National Bank as Party -6-
3. COVENANTS OF THE PARTIES -6-
3.1. Covenants of NVBancorp -6-
a. Amendment of Articles and Bylaws. -6-
b. Appointment of Holding Company Directors -6-
c. Amendment of NVBancorp Stock Option Plan -7-
d. Reservation, Issuance and Registration of
NVBancorp Shares -7-
e. Nasdaq Stock Market Listing -7-
f. Director and Officer Liability -7-
g. Business Combination -9-
3.2. Covenants of SRNB -9-
a. Termination of SRNB Stock Option Plan -9-
b. Termination or Merger of SRNB Benefit Plans -9-
c. Capital Commitments and Expenditures. -10-
d. Compensation -10-
e. Loans. -10-
f. Certain Notices. -10-
g. Loan Review -11-
h. Loan Provision -11-
i. No Merger or Solicitation -11-
3.3. Mutual Covenants of NVBancorp and SRNB -12-
a. Appointment of Executive Officers -13-
b. Appointment of Bank Directors -13-
c. Executive Management Committee -13-
d. Classified Board of Directors -13-
e. Approval by Shareholders -14-
f. Shareholder Lists and Other Information -14-
g. Government Approvals -14-
h. Notification of Breach of Representations,
Warranties and Covenants. -15-
i. Financial Statements -15-
j. Conduct of Business in the Ordinary Course -16-
k. Press Releases -18-
l. Employee Benefit Plans -18-
m. Changes in Capital Stock; Dividends -18-
n. Access to Properties, Books and Records;
Confidentiality -19-
o. Loan Performance -20-
p. Preparation of Joint Proxy Statement/Prospectus -20-
q. Rights Plans. -21-
i
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF SRNB -20-
a. Corporate Status and Power to Enter Into
Agreements -21-
b. Articles, Bylaws, Books and Records -21-
c. Compliance With Laws, Regulations and Decrees -22-
d. Capitalization -22-
e. Trademarks and Trade Names -22-
f. Financial Statements, Regulatory Reports -23-
g. Tax Returns -23-
h. Material Adverse Change -24-
i. No Undisclosed Liabilities -24-
j. Properties and Leases -25-
k. Material Contracts -26-
l. Classified Loans -26-
m. No Restrictions on Investments -27-
n. Employment Benefit Plans/ERISA -27-
o. Collective Bargaining and Employment Agreements -28-
p. Compensation of Officers and Employees -29-
q. Legal Actions and Proceedings -29-
r. Execution and Delivery of the Agreement -29-
s. Retention of Broker or Consultant -30-
t. Insurance -30-
u. Loan Loss Reserves -30-
v. Transactions With Affiliates -31-
w. Risk Management Instruments -31-
x. Year 2000. -31-
y. Community Reinvestment Act Compliance -32-
z. Information in NVBancorp Registration Statement -32-
aa. Accuracy and Effective Date of Representations and
Warranties, Covenants and Agreements -33-
5. REPRESENTATIONS AND WARRANTIES OF NVBancorp -33-
a. Corporate Status and Power to Enter Into
Agreements -33-
b. Articles, Bylaws, Books and Records -34-
c. Compliance With Laws, Regulations and Decrees -34-
d. Capitalization -34-
e. Trademarks and Trade Names -35-
f. Financial Statements, Regulatory Reports -35-
g. Tax Returns -36-
h. Material Adverse Change -36-
i. No Undisclosed Liabilities -37-
j. Properties and Leases -37-
k. Material Contracts -39-
l. Classified Loans -39-
m. No Restrictions on Investments -39-
n. Employment Benefit Plans/ERISA -40-
o. Collective Bargaining and Employment Agreements -41-
p. Compensation of Officers and Employees -41-
q. Legal Actions and Proceedings -41-
r. Execution and Delivery of the Agreement -42-
s. Retention of Broker or Consultant -42-
t. Insurance -43-
u. Loan Loss Reserves -43-
v. Transactions With Affiliates -43-
w. Risk Management Instruments -44-
x. Year 2000 -44-
y. Community Reinvestment Act Compliance -45-
z. Information in NVBancorp Registration Statement -45-
aa. Accuracy and Effective Date of Representations and
Warranties, Covenants and Agreements -45-
ii
<PAGE>
6. SECURITIES ACT OF 1933; SECURITIES EXCHANGE ACT OF 1934 -46-
a. Preparation and Filing of Registration Statement -46-
b. Effectiveness of Registration Statement -46-
c. Sales and Resales of Common Stock -46-
d. Rule 145 -46-
7. CONDITIONS TO THE OBLIGATIONS OF NVBancorp -47-
a. Representations and Warranties -47-
b. Compliance and Performance Under Agreement -47-
c. Material Adverse Change -47-
d. Approval of Agreement -48-
e. Officer's Certificate -48-
f. Opinion of Counsel -48-
g. Absence of Proceedings -48-
h. Effectiveness of Registration Statement -48-
i. Government Approvals -48-
j. Tax Opinion -49-
k. Accountant's Comfort Letters -49-
l. Dissenting Shares -50-
m. Unaudited Financials -50-
n. Affiliate Agreements -50-
o. Closing Documents -50-
p. Consents -50-
q. Fairness Opinion -50-
r. Accounting Treatment -51-
s. Shareholder Agreements -51-
t. Performance Tests -51-
u. Compliance with Consent Agreement -51-
8. CONDITIONS TO THE OBLIGATIONS OF SRNB -51-
a. Representations and Warranties -51-
b. Compliance and Performance Under Agreement -52-
c. Material Adverse Change -52-
d. Approval of Agreement -52-
e. Officer's Certificate -52-
f. Opinion of Counsel -52-
g. Absence of Proceedings -52-
h. Effectiveness of Registration Statement -52-
i. Government Approvals -53-
j. Tax Opinion -53-
k. Accountant's Comfort Letters -54-
l. Dissenting Shares -54-
m. Unaudited Financials -54-
n. Affiliate Agreements -54-
o. Closing Documents -55-
p. Consents -55-
q. Fairness Opinion -55-
r. Accounting Treatment -55-
s. Shareholder Agreements -55-
9. CLOSING -55-
a. Closing Date -55-
b. Delivery of Documents -56-
c. Filings -56-
10. POST-CLOSING MATTERS -56-
iii
<PAGE>
11. EXPENSES -56-
12. AMENDMENT; TERMINATION -57-
a. Amendment -57-
b. Termination -57-
c. Termination Date -59-
d. Notice -60-
e. Effect of Termination; Liquidated Damages -60-
13. INDEMNIFICATION -60-
13.1. By NVBancorp -60-
13.2. By SRNB -61-
13.3. Notification -61-
14. MISCELLANEOUS -62-
a. Notices -62-
b. Knowledge -62-
c. Binding Agreement -62-
d. Material Adverse Effect -62-
e. Survival of Representations and Warranties -63-
f. Governing Law -63-
g. Attorneys' Fees. -63-
h. Entire Agreement; Severability -63-
i. Counterparts -63-
EXHIBITS
A. Merger Agreement
B. SRNB Affiliate Agreement
C. SRNB Shareholder Agreement
D. NVBancorp Affiliate Agreement
E. NVBancorp Shareholder Agreement
iv
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER, dated
as of October 3, 1999, ("Agreement"), is made and entered into by
and among North Valley Bancorp, a California corporation
("NVBancorp"), NVB Interim National Bank, an interim national
banking association to be formed at the direction of NVBancorp
("Interim Bank") and Six Rivers National Bank, a national banking
association ("SRNB").
Recitals:
A. The Boards of Directors of NVBancorp and SRNB deem it
advisable and in the best interests of NVBancorp and
SRNB, and their respective shareholders, that
NVBancorp, Interim Bank and SRNB enter into a business
combination, with the expectation that the resulting
multi-bank holding company structure will combine the
best elements of NVBancorp, North Valley Bank, a
California state-chartered banking corporation and
currently the wholly owned subsidiary of NVBancorp
("NVB"), and SRNB. Pursuant to a forward triangular
merger under the authority of 12 U.S.C. 215a, SRNB
shall merge with and into Interim Bank (the "Merger")
and the resulting national banking association will
continue with the national bank charter number of SRNB
and the name "Six Rivers National Bank" as a wholly-
owned subsidiary of NVBancorp.
B. Upon organization of the Interim Bank, the Interim Bank
will become a party to this Agreement by the execution
and delivery of an addendum to this Agreement, in form
and substance acceptable to NVBancorp, SRNB and the
directors and shareholders of the Interim Bank.
C. This Agreement and the Merger Agreement, substantially
in the form attached hereto as Exhibit A and intended
to be filed with the Office of the Comptroller of the
Currency (the "Merger Agreement"), have been approved
by the Boards of Directors of NVBancorp and SRNB, and
will be approved by the directors and shareholders of
the Interim Bank, and the principal terms of the Merger
will be submitted for approval of the shareholders of
NVBancorp and SRNB at special meetings of their
respective shareholders.
D. The Merger is intended to qualify as a tax-free
reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "IRC"),
and the Merger shall be accounted for as a "pooling of
interests."
E. Pursuant to the Merger, each SRNB shareholder will
receive, in exchange for each share of SRNB common
stock ("SRNB Share" or "SRNB Shares"), the number of
shares of NVBancorp common stock ("NVBancorp Share" or
"NVBancorp Shares") determined in accordance with the
conversion ratio as more fully set forth in this
Agreement and in the Merger Agreement (the "Conversion
Ratio").
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<PAGE>
F. The Boards of Directors of NVBancorp, NVB and SRNB have
determined that the Merger and the other transactions
contemplated by this Agreement are consistent with, and
will contribute to the furtherance of, their respective
business strategies and goals.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein and in the Merger Agreement,
the parties hereto agree as follows:
1. THE MERGER.
1.1. Effective Date and Time. Subject to the terms and
conditions of this Agreement, the Merger shall become effective
on the date ("Effective Date") and at the time ("Effective Time
of the Merger") selected by the parties after the Merger has been
certified by the Office of the Comptroller of the Currency
("OCC"), an executed copy of the Merger Agreement has been filed
with and accepted by the OCC, all Government Approvals have been
received and satisfied and all other conditions to the Merger
set forth in this Agreement have been satisfied.
1.2. Effect of the Merger. Subject to the terms and
conditions of this Agreement, at the Effective Time of the
Merger, SRNB shall be merged with and into the Interim Bank and
the resulting national banking association in the Merger (the
"Resulting Bank") will continue as a wholly-owned subsidiary of
NVBancorp with the national bank charter number of SRNB and the
name "Six Rivers National Bank." All assets, rights, privileges,
immunities, powers, franchises and interests of SRNB in and to
every type of property (real, personal and mixed) and chooses in
action, as they exist as of the Effective Date, including
appointments, designations and nominations and all other rights
and interests as trustee, executor, administrator, registrar of
stocks and bonds, guardian of estate, assignee, receiver and in
every other fiduciary capacity, shall pass and be transferred to
and vest in the Resulting Bank by virtue of the Merger at the
Effective Time of the Merger without any deed, conveyance or
other transfer; the separate corporate existence of SRNB and the
Interim Bank shall cease; and the Resulting Bank shall be deemed
to be the same entity as each of SRNB and the Interim Bank and
shall be subject to all of their duties and liabilities of every
kind and description. The Resulting Bank shall be responsible
and liable for all the liabilities and obligations of each of
SRNB and the Interim Bank; and any claim existing or action or
proceeding pending by or against SRNB or the Interim Bank may be
prosecuted as if the Merger had not taken place, or the Resulting
Bank may be substituted in the place of SRNB or the Interim Bank.
Neither the rights of creditors nor any liens upon the property
of either SRNB or the Interim Bank shall be impaired by reason of
the Merger.
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<PAGE>
2. CONVERSION AND CANCELLATION OF SHARES.
2.1. Conversion of SRNB Shares. At the effective time of
the Merger, by virtue of the Merger and without any action on the
part of NVBancorp, SRNB or any holder of SRNB Shares, subject to
Section 3.1.g. hereof, each outstanding SRNB Share (other than
any shares as to which dissenters' rights have been perfected as
provided in Section 2.7 hereof), shall be converted into the
right to receive a number of NVBancorp Shares (or fraction
thereof, subject to Section 2.2 hereof) based on a conversion
ratio (the "Conversion Ratio") determined as follows:
a. If the Average Closing Price is not less than
$10.00 and is not more than $12.06, the Conversion
Ratio shall be 1.450.
b. If the Average Closing Price is not less than
$12.07 and is not more than $12.50, the Conversion
Ratio shall be determined by dividing $17.50 by
the Average Closing Price.
c. If the Average Closing Price is more than $12.50
but is not more than $15.00, the Conversion Ratio
shall be 1.400.
d. If the Average Closing Price is less than $10.00,
the provisions of Section 12.b.(xvi) hereof shall
be applicable.
e. If the Average Closing Price is greater than
$15.00, the Conversion Ratio shall be determined
in accordance with the following formula:
Conversion Ratio = $21.00 + 0.56 x (Average Closing Price minus $15.00)
Average Closing Price
f. In addition to sub-paragraphs a. through e. above,
if the shareholders' equity of SRNB as of the
Determination Date is less than $19,000,000, then
NVBancorp and SRNB shall re-calculate and modify
the Conversion Ratio by reducing the Conversion
Ratio determined in accordance with sub-paragraphs
a. through e. above by 0.0P10 for each whole
$100,000 amount of shortfall then existing in the
shareholders' equity of SRNB. For example, if the
Average Closing Price is $12.50, but the
shareholders' equity of SRNB is $18,899,000, then
the Conversion Ratio shall be 1.390. As used
herein, "shareholders' equity of SRNB" shall be
the sum of the following components as reflected
on the books of SRNB: (i) common stock par value,
plus (ii) additional paid in capital, plus (iii)
retained earnings (or accumulated deficit), which,
as of June 30, 1999, was $19,151,000.
As used herein, "Average Closing Price" means the average of the
daily average of bid and ask prices of NVBancorp Shares on the
Nasdaq National Market for the twenty (20) consecutive trading
(business) days ending at the end of the third trading (business)
day immediately preceding the Effective Time of the Merger,
rounded to four decimal places (whether or not trades occurred on
those days). The third business day prior to the date of the
Proposed Closing Date, as defined in Section 9.a. hereof, is
hereinafter called the "Determination Date."
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<PAGE>
2.2 Fractional Shares. Notwithstanding any other provision
hereof, no fractional shares of NVBancorp Shares shall be issued
to holders of SRNB Shares. In lieu thereof, each such holder
entitled to a fraction of a NVBancorp Share shall receive, at the
time of surrender of the certificate or certificates representing
such holder's SRNB Shares, an amount in cash equal to the market
value per share of the NVBancorp Shares, being the closing price
of NVBancorp Shares on the Nasdaq National Market on the trading
(business) day immediately preceding the Effective Time of the
Merger, multiplied by the fraction of an NVBancorp Share to
which such holder otherwise would be entitled. No such holder
shall be entitled to dividends, voting rights, interest on the
value of, or any other rights in respect of a fractional share.
2.3 Surrender of SRNB Shares.
a. Prior to the Effective Date, NVBancorp shall
appoint ChaseMellon Shareholder Services, L.L.C., or its
successor, or any other bank or trust company (having capital of
at least $50 million) mutually acceptable to NVBancorp and SRNB,
as exchange agent (the "Exchange Agent") for the purpose of
exchanging certificates representing SRNB Shares and at and after
the Effective Time of the Merger, NVBancorp shall issue and
deliver to the Exchange Agent such number of certificates
representing NVBancorp Shares and cash for payment of fractional
shares, as shall be required to be delivered to holders of SRNB
Shares pursuant to Article 2 of the Merger Agreement. As soon as
practicable after the Effective Time of the Merger, each holder
of SRNB Shares converted pursuant to Section 2.1, upon surrender
to the Exchange Agent of one or more certificates for such SRNB
Shares for cancellation, will be entitled to receive a
certificate or certificates representing the number of NVBancorp
Shares determined in accordance with Section 2.1 and a payment in
cash with respect to fractional shares, if any, determined in
accordance with Section 2.2.
b. No dividends or other distributions of any kind
which are declared payable to shareholders of record of the
NVBancorp Shares after the Effective Date will be paid to persons
entitled to receive such certificates for NVBancorp Shares until
such persons surrender their certificates representing SRNB
Shares. Upon surrender of such certificates representing SRNB
Shares, the holder thereof shall be paid, without interest, any
dividends or other distributions with respect to the NVBancorp
Shares as to which the record date and payment date occurred on
or after the Effective Date and on or before the date of
surrender.
c. If any certificate for NVBancorp Shares is to be
issued in a name other than that in which the certificate for
SRNB Shares surrendered in exchange therefor is registered, any
transfer costs or expenses (except taxes) required by reason of
the issuance of certificates for such NVBancorp Shares in a name
other than the registered holder of the certificate surrendered
shall be paid by the person requesting such change.
d. All dividends or distributions, and any cash to
be paid pursuant to Section 2.2 in lieu of fractional shares, if
held by the Exchange Agent for payment or delivery to the holders
of unsurrendered certificates representing SRNB Shares and
unclaimed at the end of one year from the Effective Date, shall
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<PAGE>
(together with any interest earned thereon) at such time be paid
or redelivered by the Exchange Agent to NVBancorp, and after such
time any holder of a certificate representing SRNB Shares who has
not surrendered such certificate to the Exchange Agent shall,
subject to applicable law, look, as a general creditor, only to
NVBancorp for payment or delivery of such dividends or
distributions or cash, as the case may be.
2.4 Further Transfers of SRNB Shares. At the Effective Time
of the Merger, the stock transfer books of SRNB shall be closed
and no transfer of SRNB Shares theretofore outstanding shall
thereafter be made.
2.5. Adjustments. If, between the date of this Agreement and
the Effective Date, the outstanding shares of NVBancorp Shares or
SRNB Shares shall have been changed into a different number of
shares or a different class by reason of any reclassification,
recapitalization, split-up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with
a record date within such period, the number of NVBancorp Shares
to be issued and delivered in the Merger in exchange for each
outstanding SRNB Share shall be correspondingly adjusted.
2.6 Treatment of Stock Options.
a. Each person holding one or more options to
purchase SRNB Shares ("SRNB Option" or "SRNB Options") pursuant
to the Six Rivers National Bank Stock Option Plan, as amended to
date ("SRNB Stock Option Plan") shall have the right, in his or
her discretion, to either:
(i) exercise any vested portion (including any
portion vested as a result of the Merger) of the SRNB
Option to acquire SRNB Shares prior to the Effective
Date; or
(ii) as of the Effective Time of the Merger,
surrender the SRNB Option agreement to NVBancorp, in
which event such person will be entitled to receive a
substitute option ("Substitute Option") exercisable for
(a) the number of NVBancorp Shares equal to the number
of SRNB Shares for which such person held SRNB Options
multiplied by the Conversion Ratio and rounded down to
the nearest whole share, and (b) the exercise price for
the shares subject to the SRNB Option shall be adjusted
by dividing the pre-Merger exercise price for the SRNB
Option by the Conversion Ratio, rounded to the nearest
penny.
b. The Substitute Options to be received in exchange
for SRNB Options shall be, to the greatest extent practicable,
vested to the same extent as before the Merger (including any
portion vested as a result of the Merger), shall continue to vest
on the same vesting schedule as provided under the original
applicable SRNB Option agreement, shall be exercisable as
provided in the original applicable SRNB Option agreement and
shall otherwise preserve the characteristics, terms and
conditions of the original SRNB Option to the greatest extent
possible, subject to the requirements of law and any applicable
rules and regulations of the OCC.
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<PAGE>
2.7 Dissenting Shareholders. Any SRNB Shares held by
persons who have satisfied the requirements of 12 U.S.C. 215a(b)
("Section 215a(b)") with respect to such SRNB Shares shall not be
converted pursuant to this Agreement, but the holders thereof
shall be entitled only to such rights as are granted them by
Section 215a(b). Each dissenting shareholder who is entitled to
payment of his or her SRNB Shares pursuant to Section 215a(b)
shall receive payment from NVBancorp in an amount as determined
pursuant to Section 215a(b).
2.8 NVB Interim National Bank as Party. NVBancorp and SRNB
agree that, when organized and chartered by the OCC, the Interim
Bank shall become a party to this Agreement by the execution and
delivery of an addendum to the Agreement, in form and substance
acceptable to NVBancorp, SRNB and the directors and shareholders
of the Interim Bank.
3. COVENANTS OF THE PARTIES.
3.1. Covenants of NVBancorp. During the period from the date
of this Agreement and continuing until the Effective Time of the
Merger, except as expressly contemplated or permitted by this
Agreement or to the extent that SRNB shall otherwise consent in
writing, which consent will not be unreasonably withheld or
delayed more than three (3) business days after the request for
consent is delivered:
a. Amendment of Articles and Bylaws. The Board of
Directors of NVBancorp shall take all necessary corporate action,
to be effective at the Effective Time of the Merger, to amend the
Articles of Association and Bylaws of the Interim Bank to the
extent required by applicable law or regulation and subject to
any required approvals of shareholders, government agencies or
regulatory authorities, to: (i) change the name of the Resulting
Bank to "Six Rivers National Bank"; and (ii) provide for a range
in the number of authorized directors of not less than five (5)
and not more than eleven (11), and to adopt a resolution fixing
the exact number of directors at eight (8) or such other number
agreed to by NVBancorp and SRNB.
b. Appointment of Holding Company Directors.
Promptly after the Effective Time of the Merger, two (2) of the
existing directors of SRNB (to be designated by the NVBancorp
Board of Directors) shall be appointed to the NVBancorp Board of
Directors. One such director shall serve as a Class II Director
and the other such director shall serve as a Class III Director,
under the classified Board structure contemplated by
Section 3.3.d. below.
c. Amendment of NVBancorp Stock Option Plan.
NVBancorp shall take all necessary corporate action, including
any required approval of the shareholders of NVBancorp to amend
its 1998 Employee Stock Incentive Plan or establish a new stock
option plan (at the meeting described in Section 3.3.e hereof)
and shall cause to be filed and become effective under the
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<PAGE>
Securities Act of 1933, as amended (the "1933 Act"), as of the
Effective Time of the Merger, a registration statement with
respect to the options to be granted and shares to be issued
thereunder to fulfill the obligations to grant Substitute Options
to holders of SRNB Options pursuant to Section 2.6 of this
Agreement.
d. Reservation, Issuance and Registration of
NVBancorp Shares. NVBancorp shall reserve for issuance in
connection with the Merger and in accordance with the terms of
this Agreement (i) a number of NVBancorp Shares sufficient to
complete the exchange of NVBancorp Shares for the outstanding
SRNB Shares pursuant to the Conversion Ratio and the provisions
of Section 2.1 above and (ii) the maximum number of NVBancorp
Shares to which the holders of Substitute Options may be entitled
pursuant to Section 2.6 above at or after the Effective Time of
the Merger. NVBancorp shall cause such NVBancorp Shares to be
registered under the 1933 Act, as provided in Section 6 below.
e. Nasdaq Stock Market Listing. NVBancorp shall
take all necessary action to list NVBancorp's Shares with the
Nasdaq Stock Market for trading on the Nasdaq National Market, to
be effective as soon as practicable following the Effective Time
of the Merger.
f. Director and Officer Liability. In the event of
any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or
has been at any time prior to the date of this Agreement, or who
becomes prior to the Effective Time, a director or officer of
SRNB ("Indemnified Parties") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in
part out of, or pertaining to (i) the fact that he is or was a
director or officer of SRNB or any predecessor or (ii) this
Agreement or any of the transactions contemplated hereby, whether
in any case asserted or arising before or after the Effective
Date, NVBancorp and SRNB agree to cooperate and use their best
efforts to defend against and respond thereto. It is understood
and agreed that after the Effective Date, NVBancorp shall
indemnify and hold harmless, as and to the fullest extent
permitted by law, each such Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including
reasonable attorney's fees and expenses in advance of the final
disposition of any claim, suit, proceeding or investigation to
each Indemnified Party to the fullest extent permitted by law
upon receipt of any undertaking required by applicable law),
judgments, fines and amounts paid in settlement in connection
with any such threatened or actual claim, action, suit,
proceeding or investigation and in the event of any such
threatened or actual claim, action, suit, proceeding, or
investigation (whether asserted or arising before or after the
Effective Date), the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with
NVBancorp; provided, however, that (1) NVBancorp shall have the
right to assume the defense thereof and upon such assumption
NVBancorp shall not be liable to any Indemnified Party for any
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<PAGE>
legal expenses of other counsel or any other expenses
subsequently incurred by any Indemnified Party in connection with
the defense thereof, except that if NVBancorp elects not to
assume such defense or counsel for the Indemnified Parties
reasonably advises the Indemnified Parties that there are issues
which raise conflicts of interest between NVBancorp and the
Indemnified Parties, the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with
NVBancorp, and NVBancorp shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties, (2)
NVBancorp shall be obligated pursuant to this paragraph to pay
for only one firm of counsel for all Indemnified Parties, unless
an Indemnified Party shall have reasonably concluded; based on
the advice of counsel, that in order to be adequately
represented, separate counsel is necessary for such Indemnified
Party, in which case, NVBancorp shall be obligated to pay for
such separate counsel, (3) NVBancorp shall not be liable for any
settlement effected without its prior written consent (which
consent shall not be unreasonably withheld), and (4) NVBancorp
shall have no obligation hereunder to any Indemnified Party when
and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in
the manner contemplated hereby is prohibited by applicable law;
provided, further, that NVBancorp hereby expressly undertakes the
indemnification of certain officers and directors and former
officers and directors in existing matters for which
indemnification is being provided by SRNB and, notwithstanding
the provisions of this Section 3.1.f., such indemnification shall
be on the same terms and subject to the same limitations as shall
exist on the Effective Date. Any Indemnified Party wishing to
claim Indemnification under this Section 3.1.f., upon learning of
any such claim, action, suit, proceeding or investigation, shall
notify NVBancorp thereof, provided that the failure to so notify
shall not affect the obligations of NVBancorp under this
Section 3.1.f. except to the extent such failure to notify
materially prejudices NVBancorp. NVBancorp's obligations under
this Section 3.1.f. continue in full force and effect for a
period of four (4) years from the Effective Date; provided,
however, that all rights to indemnification in respect of any
claim ("Claim") asserted or made within such period shall
continue until the final disposition of such Claim and provided
further that NVBancorp shall have the right of setoff against any
payments required to be made by NVBancorp to an Indemnified Party
pursuant to this Section 3.1.f. to the extent that such
Indemnified Party shall have received the indemnification to
which such Indemnified Party is entitled from an insurer under a
directors' and officers' liability insurance policy maintained by
SRNB or NVBancorp.
NVBancorp, from and after the Effective Date, will
directly or indirectly cause the persons who served as directors
or officers of SRNB on or before the Effective Date to be covered
by NVBancorp's existing directors' and officers' liability
insurance policy (provided that NVBancorp may substitute therefor
policies of at least the same coverage and amounts containing
terms and conditions which are not less advantageous than such
policy) or so-called tail coverage obtained in connection with
SRNB's directors' and officers' liability insurance policies in
effect as of the Effective Date; provided that NVBancorp shall
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<PAGE>
not be obligated to make annual premium payments for such
insurance to the extent such premiums exceed 150% of the premiums
paid as of the date hereof by SRNB for such insurance. Subject
to the preceding sentence, such insurance coverage, shall
commence on the Effective Date and will be provided for a period
of no less than three (3) years after the Effective Date. From
the date hereof through the Effective Date and subject to the
foregoing, SRNB shall use its best efforts to arrange for tail
coverage related to its then current policies of directors' and
officers' liability insurance and, following the Effective Date,
NVBancorp shall exercise those rights which it may have to in
order to commence such coverage. In connection with any active,
pending claim under an existing SRNB directors' and officers'
liability insurance policy, NVBancorp will take no action that
would have the effect of waiving any such claim and will not omit
to take any action that is necessary to preserve such a claim.
In the event NVBancorp or any of its successors or
assigns (A) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (B) transfers or conveys all or
substantially all of its properties and assets to any person,
then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of
NVBancorp assume the obligations set forth in this Section 3.1.f.
The provisions of this Section 3.1.f. are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party
and his or her heirs and representatives.
g. Business Combination. NVBancorp shall not
solicit or accept any offer from any third party regarding a
Business Combination (as defined in Section 3.2.i. below) of
NVBancorp or NVB with any other entity unless such offer is
expressly conditioned upon the performance by NVBancorp or the
successor in interest of NVBancorp's obligations under this
Agreement. In the event of such a Business Combination, the
Conversion Ratio shall be 1.400.
3.2. Covenants of SRNB. During the period from the date of
this Agreement and continuing until the Effective Time of the
Merger, except as expressly contemplated or permitted by this
Agreement or to the extent that NVBancorp shall otherwise consent
in writing, which consent will not be unreasonably withheld or
delayed more than three (3) business days after the request for
consent is delivered:
a. Termination of SRNB Stock Option Plan. SRNB
shall take all necessary action to cause the termination of the
SRNB Stock Option Plan at the Effective Time of the Merger and
the exercise or surrender (in exchange for Substitute Options) of
SRNB Options outstanding thereunder.
b. Termination or Merger of SRNB Benefit Plans. If
requested by NVBancorp and subject to the mutual agreement of the
parties, SRNB shall take all necessary action to cause the
termination or merger of SRNB Employee Plans (as defined in
Section 4.n. hereof) at the Effective Time of the Merger.
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c. Capital Commitments and Expenditures. After the
execution of this Agreement, no new capital commitments shall be
entered into, and no capital expenditures shall be made by SRNB
in excess of Fifty Thousand Dollars ($50,000) in the aggregate,
including but not limited to, creation of any new branches and
acquisitions or leases of real property, except commitments or
expenditures within existing operating and capital budgets
heretofore furnished to and approved in writing by NVBancorp.
d. Compensation. SRNB shall not make or approve any
increase in the compensation payable or to become payable by it
to any of its directors, officers, employees or agents with
annual salaries in excess of Seventy-five Thousand Dollars
($75,000) (including but not limited to compensation through any
profit sharing, pension, retirement, severance, incentive or
other employee benefit program or arrangement other than
compensation related to a SRNB Employee Stock Ownership Plan
contribution for 1999 which is consistent with the amount
contributed for 1998), nor shall any bonus payment or any
agreement or commitment to make a bonus payment be made, nor
shall any stock option, warrant or other right to acquire capital
stock be granted (except as provided in Section 2.6), or
employment agreement (other than any such employment agreement
that may arise by operation of law upon the hiring of any new
employee) or consulting agreement be entered into by SRNB with
any such directors, officers, employees or agents unless
NVBancorp has given its prior written consent. Nothing herein
shall prevent the payment to officers and employees of SRNB of
regular salary increases, consistent with past practices in
connection with regular salary reviews or bonuses consistent with
past practices, as heretofore disclosed by SRNB to NVBancorp.
e. Loans. SRNB shall not, without first having
obtained the written consent of NVBancorp (which shall be deemed
to have been given if no response is provided following written
request therefor within three (3) business days of receipt of
such request), cause, allow, or suffer its officers or agents to
commit to any loan or renewal which does not comply in all
material respects with its credit policies in effect and as
disclosed and provided to NVBancorp prior to the date of this
Agreement, provided, however, that all new stand-alone extensions
of credit over Two Hundred Thousand Dollars ($200,000), except
for conforming FHLMC and FNMA loans, shall be subject to such
prior written consent. The prior written consent of NVBancorp
shall be deemed waived for any new stand-alone extension of
credit which is below Two Hundred Thousand Dollars ($200,000) and
where such new stand-alone extension of credit is either in
compliance with SRNB credit policy and the approving officer has
the requisite lending authority or has (have) been approved by
the SRNB loan committee or equivalent committee of the SRNB Board
of Directors performing such function. SRNB shall promptly
provide to NVBancorp for its review and comment relevant
information concerning any proposed new stand-alone extension of
credit in excess of One Hundred Thousand Dollars ($100,000).
f. Certain Notices. SRNB shall notify NVBancorp
promptly (but not less often than weekly) in writing upon the
occurrence of any of the following:
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(i) the classification of any loan as "Non-
Accrual," "Watch," "Other Assets Specially Mentioned,"
"Substandard," "Doubtful" or "Loss"; or
(ii) the filing or commencement of any legal
action or other proceeding or investigation against
SRNB.
g. Loan Review. Until the Effective Date, SRNB will
submit to NVBancorp upon request (but not less often than
monthly) a list of loans that may reasonably be described as or
are included in any of the following categories or
specifications: (i) any new stand-alone extension of credit over
One Hundred Thousand Dollars ($100,000), (ii) any restructured
loan as defined under SFAS 15, regardless of amount, (iii) any
renewal or upgrade or other change in status of an existing loan
over Fifty Thousand Dollars ($50,000), and (iv) any renewal of an
existing loan previously classified by management or internal
policy or procedure of SRNB, or by any outside review examiner,
accountant or any bank regulatory authority as "Non-Accrual,"
"Watch," "Other Assets Specially Mentioned," "Substandard,"
"Doubtful," or "Loss," or classified using categories or words
with similar import, in a commitment amount over Twenty-five
Thousand Dollars ($25,000) or where the aggregate debt of the
borrower and its affiliates and/or related interests will exceed
Twenty-five Thousand Dollars ($25,000). SRNB will provide to
NVBancorp a copy of the loan approval/credit write-up and
supporting information on any loan described in subsections (i),
(ii), (iii) or (iv) above at the time of delivery of such list of
loans. Copies of such supporting information shall be returned
to SRNB within seven (7) days of receipt.
h. Loan Provision. SRNB shall maintain adequate
reserves for loan losses. Without limiting the generality of the
foregoing, each month following the date of this Agreement
through the Effective Date, SRNB shall expense as a provision to
its allowance for loan losses, such amount as may be required by
the written loan loss policy and procedures adopted by the Board
of Directors of SRNB and provided to NVBancorp prior to the date
of this Agreement.
i. No Merger or Solicitation.
(i) Subject to the continuing fiduciary duty of
the Board of Directors of SRNB to its shareholders,
prior to the Effective Time of the Merger, SRNB shall
not effect or agree to effect or enter into a
transaction or series of transactions with one or more
third persons, groups or entities providing for the
acquisition of all or a substantial part of SRNB or its
subsidiaries, whether by way of merger, exchange of
stock, sale of assets, or otherwise ("Business
Combination"), acquire or agree to acquire any of its
own capital stock or the capital stock or asset (except
in a fiduciary capacity or in the Ordinary Course of
Business) of any other entity, or commence any
proceedings for winding up and dissolution affecting
either of them.
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(ii) Subject to the continuing fiduciary duty of
the Board of Directors of SRNB to its shareholders,
prior to the Effective Time of the Merger, neither SRNB
nor any of its officers, directors or affiliates, nor
any investment banker, attorney, accountant or other
agent, advisor or representative retained by SRNB shall
(a) solicit or encourage, directly or indirectly, any
inquiries, discussions or proposals for, continue,
propose or enter into discussions or negotiations
looking toward, or enter into any agreement or
understanding providing for, any Business Combination
with any third party; or (b) disclose, directly or
indirectly, any nonpublic information to any
corporation, partnership, person or other entity or
group concerning SRNB's business and properties or
afford any such other party access to its properties,
books or records or otherwise assist or encourage any
such other party in connection with the foregoing, or
(c) furnish or cause to be furnished any information
concerning its business, financial condition,
operations, properties or prospects to another person,
having any actual or prospective role with respect to
any such Business Combination.
(iii) SRNB shall notify NVBancorp immediately of
the details of any indication of interest of any
person, corporation, firm, association or group to
acquire by any means a controlling interest in SRNB or
engage in any Business Combination with SRNB.
(iv) Notwithstanding anything to the contrary
contained in this Agreement, in the event the Board of
Directors of SRNB receives a bona fide unsolicited
offer for a Business Combination of SRNB with another
entity, and reasonably determines, upon advice of
counsel, that as a result of such offer, any duty to
act or to refrain from doing any act pursuant to this
Agreement is inconsistent with the continuing fiduciary
duties of the Board of Directors to its shareholders,
subject to the provisions of this Agreement including,
without limitation, Section 12.e.(ii) and the rights
accorded NVBancorp thereunder which shall remain in
effect, such duty to act or to refrain from doing any
act shall be excused and such failure to act or refrain
from doing any act shall not (a) constitute the failure
of any condition, breach of any covenant or otherwise
constitute any breach of this Agreement, or (b) create
any claim or cause of action asserting any liability
against any member of the Board of Directors of SRNB.
3.3. Mutual Covenants of NVBancorp and SRNB.
a. Appointment of Executive Officers. At the
Effective Time of the Merger, the following persons shall become
executive officers of the Resulting Bank and shall be appointed
to the positions indicated: Michael W. Martinez, Chief Executive
Officer and Chief Financial Officer, Shelton Francis, Executive
Vice President and Chief Credit Officer and Marjorie Plum,
Executive Vice President and Branch Administrator.
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b. Appointment of Bank Directors. At the Effective
Time of the Merger, all of the six (6) existing directors of
SRNB, as named below, shall become members of the Board of
Directors of the Resulting Bank, to serve until their successors
are duly elected and qualified: William T. Kay, Jr., Dolores M.
Vellutini, Kevin D. Hartwick, Warren L. Murphy, J. Michael
McGowan and Michael W. Martinez. In addition, two (2) of the
existing directors of NVBancorp (to be designated by the
NVBancorp Board of Directors) shall also become members of the
Board of Directors of the Resulting Bank at the Effective Time of
the Merger.
c. Executive Management Committee. From and after
the Effective Time of the Merger, Michael W. Martinez, President
and Chief Executive Officer of SRNB, shall become a member of the
Executive Management Committee of NVBancorp.
d. Classified Board of Directors. After execution
hereof, the NVBancorp Board of Directors will adopt an amendment
(the "Amendment") to the NVBancorp's Articles of Incorporation
("Articles") and Bylaws to provide that the NVBancorp Board of
Directors shall be divided into three classes of directors, each
consisting of a number of directors equal as nearly as
practicable to one-third the total number of directors, for so
long as such Board consists of at least nine (9) authorized
directors and, in the event that the total number of authorized
directors on such Board is at least six (6) but less than nine
(9), for classification of the Board of Directors into two
classes, each consisting of a number of directors equal as nearly
as practicable to one-half the total number of directors.
Pursuant to the Amendment, each class of directors would be
subject to election every third year and would serve for a
three-year term for so long as the Board remained classified into
three classes, or would be subject to election every second year
and would serve for a two-year term in the event the Board were
classified into two classes. Currently, all of the directors of
NVBancorp are elected each year to serve a one-year term.
NVBancorp shall cause the Amendment to be submitted for the
approval of its shareholders, together with the other principal
terms of the Merger, as provided in Section 3.3.e. below. In
connection with the approval of the Merger as provided in Section
3.3.e., SRNB shall advise its shareholders of the proposed
Amendment and inform its shareholders that their approval of the
Merger will constitute their consent to the Amendment. If the
Merger, including the Amendment, is approved by the shareholders
of NVBancorp and SRNB, the NVBancorp Board of Directors will, for
purposes of initial implementation, designate three classes of
directors for election at the 2000 Annual Meeting of Shareholders
of NVBancorp, as follows: Class I will be elected initially for
a one-year term expiring at the 2001 NVBancorp Annual Meeting of
Shareholders; Class II will be elected initially for a two-year
term expiring at the 2002 NVBancorp Annual Meeting of
Shareholders; and Class III will be elected for a three-year term
expiring at the NVBancorp Annual Meeting of Shareholders to be
held in the year 2003; and, in each case, until their successors
are duly elected and qualified. At each NVBancorp Annual Meeting
after the 2000 Annual Meeting, only directors of the class whose
term is expiring would be voted upon, and upon election each such
director would serve a three-year term. Commencing with the
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NVBancorp Annual Meeting of Shareholders scheduled to occur in
2001, directors elected to Class I would serve for a three-year
term and until their successors are duly elected and qualified,
subject to any decrease in the total number of authorized
directors, as described above. Subsequently, in the years 2002
and 2003, directors elected to Class II and Class III,
respectively, would also be elected for a three-year term and
until their successors are duly elected and qualified.
e. Approval by Shareholders. NVBancorp and SRNB
shall each cause the principal terms of the Merger to be
submitted promptly for the approval of their respective
shareholders at meetings to be called and held in accordance with
applicable laws. Subject to continuing fiduciary duties to their
shareholders, the Board of Directors of NVBancorp and the Board
of Directors of SRNB, in authorizing the execution and delivery
of this Agreement, unanimously recommend that the principal terms
of the Merger be approved by their respective shareholders. In
connection with the call of such meetings, NVBancorp and SRNB
shall cause the Joint Proxy Statement/Prospectus described in
Section 6 of this Agreement to be mailed to their respective
shareholders. Subject to its continuing fiduciary duty to the
shareholders of NVBancorp or SRNB, as the case may be, the Board
of Directors of NVBancorp and the Board of Directors of SRNB
shall at all times prior to and during such meetings of their
respective shareholders recommend that the principal terms of the
Merger be approved and, subject to such duty, use its best
efforts to cause such approvals.
f. Shareholder Lists and Other Information. After
execution hereof, each of NVBancorp and SRNB shall from time to
time make available to the other party, upon request, a list of
its shareholders and their addresses and such other information
as the other party shall reasonably request regarding the
ownership of the common stock of NVBancorp and SRNB,
respectively.
g. Government Approvals. Each party will use its
best efforts in good faith to take or cause to be taken as
promptly as practicable all such steps as shall be necessary to
obtain (i) the prior approval of the Merger and the transactions
contemplated pursuant to this Agreement and the Merger Agreement
by the Federal Deposit Insurance Corporation (the "FDIC") under
the Bank Merger Act, the Board of Governors of the Federal
Reserve System (the "FRB") under the Bank Holding Company Act of
1956, as amended, the OCC under the National Bank Act and other
federal laws and regulations applicable to national banking
associations, and (ii) all other such consents or approvals of
government agencies and regulatory authorities as shall be
required by law or otherwise desirable, and shall do any and all
acts and things necessary or appropriate in order to cause the
Merger to be consummated on the terms provided in the Merger
Agreement and this Agreement as promptly as practicable. All
approvals referred to in this Section 3.3.g. are hereinafter
referred to as the "Government Approvals."
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h. Notification of Breach of Representations,
Warranties and Covenants. Each party shall promptly give written
notice to the each other party upon becoming aware of the
occurrence or impending or threatened occurrence of any event
which would cause or constitute a breach of any of the
representations, warranties or covenants of that party contained
or referred to in the Merger Agreement or this Agreement and
shall use its best efforts to prevent the same or to remedy the
same promptly.
i. Financial Statements.
(v) NVBancorp and SRNB have delivered or shall
deliver to each other prior to the date hereof true and
correct copies of (consolidated, as applicable)
statements of income, changes in shareholders' equity
and, as applicable, statements of cash flows, for the
six (6) months ended June 30, 1999 , and for the fiscal
years ended December 31, 1998, 1997, 1996, 1995 and
1994, and balance sheets as of the six (6) month period
ended June 30, 1999, and as of December 31, 1998, 1997,
1996, 1995 and 1994. Such financial statements at
December 31, 1998, 1997, 1996, 1995 and 1994 and for
the fiscal years ended December 31, 1998, 1997, 1996,
1995 and 1994 have been or shall be audited by Deloitte
& Touche LLP, as independent public accountants for
NVBancorp during the relevant periods, and Deloitte &
Touche LLP, as independent public accountants for SRNB
during the relevant periods, and include or shall
include an opinion of such accounting firm to the
effect that such financial statements have been
prepared in accordance with generally accepted
accounting principles consistently applied throughout
the periods covered by such financial statements and
present fairly, in all material respects, the
(consolidated, as applicable) financial position,
results of operations and cash flows of each party at
the dates indicated and for the periods then ending.
The opinions of such accounting firm do not and shall
not contain any qualifications.
(vi) NVBancorp and SRNB shall provide to each
other, at or prior to the Effective Date, copies of all
financial statements and proxy statements issued or to
be issued to its shareholders between the date of this
Agreement and the Effective Date.
(vii) NVBancorp and SRNB have delivered or shall
deliver, to each other true and complete copies of its
Annual Reports to Shareholders for the years ended
December 31, 1999, 1998, 1997, 1996, 1995 and 1994, all
periodic reports required to be filed by it pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended (the "1934 Act") or Section 12(i)
of the 1934 Act since December 31, 1993, all proxy
statements and other written material furnished to its
shareholders since December 31, 1993, and all other
material reports, including call reports, relating to
NVBancorp, NVB and SRNB filed by NVBancorp,
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NVB and SRNB with the FDIC, the California Department
of Financial Institutions, FRB, or OCC during 1994
through the Effective Date. As of their respective
filing dates, each of the documents described in the
preceding sentence complied or shall comply in all
material respects with all legal and regulatory
requirements applicable thereto.
j. Conduct of Business in the Ordinary Course. Prior
to the Effective Time of the Merger:
(i) NVBancorp and SRNB shall conduct their
businesses (including the businesses of their
subsidiaries) in the ordinary course as heretofore
conducted. For purposes of this Agreement, the
"Ordinary Course of Business" of each party shall
consist of the banking and related businesses as
presently conducted by it and its subsidiaries in
compliance with customary safe and sound banking
practices and applicable laws and regulations. Unless
a party has given its previous written consent (which
shall not be unreasonably withheld and shall be deemed
to have been given if no response is provided following
written request therefor within three (3) business days
of receipt of such request) to any act or omission to
the contrary, each party shall, and shall cause its
subsidiaries to, until the Effective Date:
(a) preserve its business and business
organizations intact;
(b) preserve the good will of customers and
others having business relations with it and take
no action that would impair the benefit to each
party of the goodwill of it or the other benefits
of the Merger;
(c) consult with each party as to the
making of any decisions or the taking of any
actions in matters other than in the Ordinary
Course of Business;
(d) maintain its properties in customary
repair, working order and condition (reasonable
wear and tear excepted);
(e) comply with all laws, regulations and
decrees applicable to
the conduct of its business;
(f) use its best efforts to keep in force
at not less than its present limits all policies
of insurance (including deposit insurance of the
FDIC) to the extent reasonably practicable in
light of the prevailing market conditions in the
insurance industry;
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(g) use its reasonable best commercial
efforts to keep available the services of its
present officers and employees (it being
understood that each party shall have the right to
terminate the employment of any of its officers or
employees in accordance with its established
employment procedures);
(h) comply with all orders of and
agreements or memoranda of understanding with
respect to it made by or with, the FDIC, FRB, OCC,
or any other government agency or regulatory
authority of competent jurisdiction, and promptly
forward to each party all communications received
from any such agency or authority that are not
prohibited by such agency or authority from being
so disclosed and inform each party of any material
restrictions imposed by any government agency or
regulatory authority on its business;
(i) file in a timely manner (taking into
account any extensions duly obtained) all reports,
tax returns and other documents required to be
filed with federal, state, local and other
authorities;
(j) conduct an environmental audit prior to
foreclosure on any property concerning which it
has knowledge, or should have knowledge, that
asbestos or asbestos-containing material, PCB's or
PCB-contaminated materials, any petroleum product,
or hazardous substance or waste (as defined under
any applicable environmental laws) was or is
present, manufactured, recycled, reclaimed,
released, stored, treated, or disposed of, and
provide the results of such audit to and consult
with each party regarding the significance of the
audit prior to the foreclosure on any such
property;
(k) not sell, lease, pledge, assign,
encumber or otherwise dispose of any of its assets
except in the Ordinary Course of Business, for
adequate value, without recourse and consistent
with its customary practice;
(l) not take any action with respect to its
investments or risk management arrangements which
are inconsistent with the policies established by
its Board of Directors;
(m) not take any action to create, relocate
or terminate the operations of any banking office
or branch, or to form any new subsidiary or
affiliated entity; and
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(n) not settle or otherwise take any action
to release or reduce any of its rights with
respect to any litigation involving a claim of
more than Twenty-five Thousand Dollars ($25,000)
in which it is a party.
k. Press Releases. No party shall issue any press
release or written statement for general circulation relating to
the Merger, this Agreement or the Merger Agreement unless
previously provided to each party for review and approval (which
approval will not be unreasonably withheld or delayed) and each
party shall cooperate with each other party in the development
and distribution of all news releases and other public
information disclosures with respect to the Merger, this
Agreement or the Merger Agreement; provided that a party may,
without the consent of each other party, make any disclosure with
regard to the Merger, this Agreement or the Merger Agreement that
it determines with advice of counsel is required under any
applicable law or regulation.
l. Employee Benefit Plans. The parties agree that
the employee benefit plans of SRNB shall be terminated, frozen,
modified or merged into the employee benefit plans of NVBancorp
on or after the Effective Date in accordance with applicable laws
and regulations and the provisions of the IRC, as determined by
mutual agreement of the parties or by NVBancorp. On the
Effective Date, SRNB employees that become employees of NVBancorp
or NVB will commence participation in NVBancorp's employee
benefit plans in accordance with the terms and conditions
provided under such plans; provided, however, that each employee
of SRNB who becomes an employee of NVBancorp or NVB or the
national bank resulting from the merger of SRNB with and into the
Interim Bank ("Transferred Employee") shall receive credit for
his or her years of service with SRNB for purposes of eligibility
and vesting under NVBancorp's employee benefit plans; provided,
further, that each Transferred Employee who elects coverage under
NVBancorp's health plan within thirty (30) days after coverage is
extended to him or her shall not be subject to any pre-existing
condition limitation under such health plan; provided, further
that for a period of twelve (12) months following the Effective
Date, each Transferred Employee shall continue to be entitled to
the benefits of the SRNB severance policy in effect as of the
date of this Agreement.
m. Changes in Capital Stock; Dividends. On or after
the date hereof and at or prior to the Effective Time of the
Merger, except with the prior written consent of each other party
or as otherwise provided in this Agreement and the Merger
Agreement:
(i) No party shall amend its Articles of
Incorporation or Association or Bylaws or the Articles
of Incorporation or Bylaws of its subsidiary; make any
change in their respective authorized, issued or
outstanding capital stock or any other equity security;
issue, grant, sell, pledge, assign or otherwise
encumber or dispose of, or purchase, redeem, retire or
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otherwise acquire (other than in a fiduciary capacity),
shares of or securities convertible into, capital stock
or other equity securities of their respective
companies, or enter into any agreement, call or
commitment of any character so to do; grant or issue
any stock option relating to or right to acquire shares
of their capital stock or other equity security; or
agree to do any of the foregoing, except as expressly
provided herein. Nothing herein shall prohibit the
issuance of shares upon exercise of options granted
under the NVBancorp 1989 Director Stock Option Plan,
the NVBancorp 1998 Employee Stock Incentive Plan or the
NVBancorp 1999 Director Stock Option Plan or the SRNB
Stock Option Plan and outstanding at the time this
Agreement is executed; and
(ii) Neither NVBancorp nor SRNB shall declare, set
aside or pay any dividend or other distribution in
respect of its common stock (including, without
limitation, any stock dividend or distribution) other
than regular quarterly or semi-annual cash dividends on
its common stock in amounts substantially equivalent to
cash dividends paid in the two (2) years prior to the
date hereof (it being understood that declaration of a
quarterly or semi-annual cash dividend equal to the
most recent previous quarterly or semi-annual cash
dividend will be deemed to meet this standard).
n. Access to Properties, Books and Records;
Confidentiality. Prior to the Effective Time of the Merger, each
party shall give each other party and its counsel, independent
accountants and agents, full access during normal business hours
and upon reasonable request, to all of its properties, books,
contracts, commitments and records including, but not limited to,
the corporate, financial and operational records, papers,
reports, instructions, procedures, tax returns and filings tax
settlement letters, material contracts or commitments, regulatory
examinations and correspondences (but excluding any documents or
materials subject to the attorney-client privilege or related to
consideration of the Merger), and shall allow each other party to
make copies of such materials (excluding regulatory examinations
and correspondence to the extent prohibited by applicable law or
regulation) and shall furnish each other party with all such
information concerning its affairs as each other party may
reasonably request. Each party shall also use its best efforts
to cause its independent accountants to make available to each
other party, its accountants, counsel and other agents, to the
extent reasonably requested in connection with such review, such
independent accountants' work papers and documentation relating
to its work papers and its audits of the books and records of
each party. The availability or actual delivery of such
information about a party shall not affect the covenants,
representations and warranties of any party contained in this
Agreement and in the Merger Agreement. Each party shall use its
best efforts to cause its officers, directors, employees,
auditors, independent accountants and attorneys to cooperate with
each other party in its reasonable requests for information.
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Each party shall treat as confidential all such information in
the same manner as each party treats similar confidential
information of its own, and if this Agreement is terminated, each
party shall continue to treat all such information as
confidential and to cause its employees to keep all such
information confidential and shall return such documents
theretofore delivered by each other party as each other party
shall request, and shall use such information, or cause it to be
used, solely for the purposes of evaluating and completing the
transactions contemplated hereby; provided that each party may
disclose any such information to the extent required by federal
or state securities laws or otherwise required by any government
agency or regulatory authority, or by generally accepted
accounting principles. The foregoing confidentiality obligations
shall not apply in respect of any information publicly available
or to any information previously known to the party in question,
the use of which is not otherwise restricted. Notwithstanding
the foregoing, the parties agree to comply with the terms and
provisions of that certain Confidentiality Agreement entered into
between the parties dated June 22, 1999, and any inconsistency
between the terms and provisions of that Confidentiality
Agreement and the foregoing provisions shall be resolved in favor
of the terms and provisions contained in the Confidentiality
Agreement.
o. Loan Performance. From and after the date of this
Agreement until the Effective Date, each party will provide to
the other the following reports for each such month concurrent
with the distribution of the monthly board report materials for
the respective Boards of Directors of NVBancorp, NVB and SRNB:
(i) a status report on all loans classified as
other assets specially mentioned, special
mention, substandard, doubtful or loss;
(ii) past due reports by loan;
(iii) non-accrual reports by loan;
(iv) loss reports by loan;
(v) restructured loans reports; and
(vi) quarterly call reports submitted to
regulators during such month, if any.
p. Preparation of Joint Proxy Statement/Prospectus.
SRNB shall cooperate with NVBancorp in the preparation pursuant
to Section 6 hereof of a joint proxy statement and prospectus of
NVBancorp and SRNB to be sent to the shareholders of NVBancorp
and SRNB (the proxy materials and prospectus, together with any
amendments or supplements thereto, being herein referred to as
the "Joint Proxy Statement/Prospectus").
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q. Rights Plans. Prior to the date of this
Agreement, each of NVBancorp and SRNB has adopted a rights plan
with respect to its common stock and each has entered into a
shareholder rights agreement. NVBancorp and SRNB agree to
cooperate and take any and all action necessary or desirable from
time to time until the Effective Time of the Merger, including
the execution of an amendment to either or both of such
shareholder rights agreements, in order to ensure that no
shareholder rights will "flip-in" as a result of the execution
and delivery of this Agreement or the Merger or any of the
transactions described herein.
4. REPRESENTATIONS AND WARRANTIES OF SRNB.
SRNB represents and warrants to NVBancorp that, except as
set forth on a schedule (the "SRNB Disclosure Schedule") to be
delivered to NVBancorp within ten (10) business days after the
execution and delivery of this Agreement, corresponding in number
with the applicable section of this Agreement:
a. Corporate Status and Power to Enter Into
Agreements. (i) SRNB is a national banking association,
organized and existing under the laws of the United States of
America, (ii) subject to obtaining the Government Approvals and
approval of the principal terms of the Merger by the SRNB
shareholders, SRNB has all necessary corporate power to enter
into this Agreement and the Merger Agreement and to carry out all
of the terms and provisions hereof and thereof to be carried out
by it, (iii) SRNB holds a currently valid national bank charter,
issued by the OCC to engage in the commercial banking business
with offices in the State of California at the locations at which
it is licensed and currently conducts business, and (iv) except
for the Consent Order dated April 12, 1999 (the "Consent
Agreement") between SRNB and the OCC and as set forth in the SRNB
Disclosure Schedule, SRNB is not subject to any directive,
resolution, memorandum of understanding or order of the FDIC,
FRB, OCC or any other regulatory authority having jurisdiction
over its business or any of its assets or properties. SRNB is in
substantial compliance in all material respects with its
obligations under the Consent Agreement. Neither the scope of
the business of SRNB nor the location of its properties requires
it to be licensed to do business in any jurisdiction other than
the State of California. SRNB's deposits are insured by the FDIC
to the maximum extent permitted by applicable law and regulation.
b. Articles, Bylaws, Books and Records. The copies
of the Articles of Association and Bylaws of SRNB heretofore
delivered to NVBancorp are complete and accurate copies thereof
as in effect on the date hereof. The minute books of SRNB made
available to NVBancorp contain a complete and accurate record of
all meetings of SRNB's Board of Directors (and committees
thereof) and shareholders. The corporate books and records
(including financial statements) of SRNB fairly reflect the
material transactions to which SRNB is a party or by which its
properties are subject or bound, and such books and records have
been properly kept and maintained.
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c. Compliance With Laws, Regulations and Decrees.
SRNB (i) has the corporate power to own or lease its properties
and to conduct its business as currently conducted, (ii) to its
knowledge, has complied in all material respects with, and is not
in material default of any laws, regulations, ordinances, orders
or decrees applicable to the conduct of its business and the
ownership of its properties, including but not limited to all
federal and state laws (including but not limited to the Bank
Secrecy Act), rules and regulations relating to the offer, sale
or issuance of securities, and the operation of a commercial
bank, other than where such noncompliance or default is not
likely to result in a material limitation on the conduct of the
business of SRNB or is not likely to otherwise have a material
adverse effect on SRNB, (iii) has not failed to file with the
proper federal, state, local or other authorities any material
report or other document required to be filed, and (iv) has all
approvals, authorizations, consents, licenses, clearances and
orders of, and has currently effective all registrations with,
all government and regulatory authorities which are necessary to
the business and operations of SRNB as now being conducted.
d. Capitalization. As of the date of this Agreement,
the authorized capital stock of SRNB consists of 10,000,000
shares of SRNB common stock, par value $5.00 per share, of which
1,476,128 shares are duly authorized, validly issued, fully paid
and nonassessable and currently outstanding. Said capital stock
has been offered, sold and issued in compliance with all
applicable securities laws. As of the date of this Agreement,
there are outstanding options to purchase 100,387 shares of SRNB
common stock, at a weighted average exercise price of $12.47 per
share, issued pursuant to the SRNB Stock Option Plan. Said
options were issued and, upon issuance in accordance with the
terms of the outstanding options, said shares shall be issued, in
compliance with all applicable securities laws. Otherwise, other
than rights under the SRNB Rights Agreement dated as of October
1, 1998, there are no outstanding (i) options, agreements, calls
or commitments of any character which would obligate SRNB to
issue, sell, pledge, assign or otherwise encumber or dispose of,
or to purchase, redeem or otherwise acquire, any SRNB common
stock or any other equity security of SRNB, or (ii) warrants or
options relating to, rights to acquire, or debt or equity
securities convertible into, shares of SRNB common stock or any
other equity security of SRNB. The outstanding common stock of
SRNB is registered with the Securities and Exchange Commission
(the "Commission") pursuant to Section 12(g) of the 1934 Act.
Except as collateral for outstanding loans held in its loan
portfolio, directly or indirectly, any equity interest in any
bank, corporation or other entity.
e. Trademarks and Trade Names. To the best of its
knowledge, SRNB (i) owns and has the exclusive right to use all
trademarks, trade names, patents, copyrights, service marks,
trade secrets, or other intellectual property rights
(collectively, "Intellectual Property Rights") used in or
necessary for the conduct of its business as now or heretofore
conducted; and (ii) its not infringing upon the Intellectual
Property Rights of any other person or entity. No claim is
pending or threatened by any person or entity against or
otherwise affecting the use by SRNB of any Intellectual Property
Rights and, to the best of its knowledge, there is no valid basis
for any such claim.
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f. Financial Statements, Regulatory Reports. No
financial statement or other document provided or to be provided
to NVBancorp as required by Section 3.3(i) hereof, as of the date
of such document, contained, or as to documents to be delivered
after the date hereof, will contain, any untrue statement of a
material fact, or, at the date thereof, omitted or will omit to
state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which such
statements were or will be made, not misleading; provided,
however, that information as of a later date shall be deemed to
modify contrary information as of any earlier date. SRNB has
filed all material documents and reports required to be filed by
them with the OCC and any other government agency or regulatory
authority having jurisdiction over its business, assets or
properties. All such reports conform in all material respects
with the requirements promulgated by such government agencies and
regulatory authorities. All compliance or corrective action
relating to SRNB required by government agencies and regulatory
authorities having jurisdiction over SRNB has been taken. Except
as disclosed in such statements, reports or documents, SRNB have
not received any notification, formally or informally, from any
agency or department of any federal, state or local government or
any regulatory authority or the staff thereof (i) asserting that
it is not in compliance with any of the statutes, regulations or
ordinances which such government or regulatory authority
enforces, or (ii) threatening to revoke any license, franchise,
permit or government authorization. SRNB has paid all
assessments made or imposed by any government agency. SRNB has
delivered to NVBancorp copies of all annual management letters
and opinions, and has made available to NVBancorp for inspection
all reviews, correspondence and other documents in the files of
SRNB prepared by certified public accountants engaged by SRNB and
delivered to SRNB since December 31, 1994. The financial records
of SRNB have been, and are being and shall be, maintained in all
material respects in accordance with all applicable legal and
accounting requirements sufficient to insure that all
transactions reflected therein are, in all material respects,
executed in accordance with management's general or specific
authorization and recorded in conformity with generally accepted
accounting principles at the time in effect. The data processing
equipment, data transmission equipment, related peripheral
equipment and software used by SRNB in the operation of its
business to generate and retrieve its financial records are
adequate for the current needs of SRNB.
g. Tax Returns.
(i) SRNB has timely filed all federal,
state, county, local and foreign tax returns required
to be filed by it, including, without limitation,
estimated tax, use tax, excise tax, real property and
personal property tax reports and returns, employer's
withholding tax returns, other withholding tax returns
and Federal Unemployment Tax Returns, and all other
reports or other information required or requested to
be filed by SRNB, and each such return, report or other
information was, when filed, complete and accurate in
all material respects. SRNB has paid all taxes, fees
and other government charges, including any interest
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and penalties thereon, when they have become due,
except those that are being contested in good faith,
which contested matters have been disclosed to
NVBancorp. SRNB has not been requested to give nor has
it given any currently effective waivers extending the
statutory period of limitation applicable to any tax
return required to be filed by it for any period.
There are no claims pending against SRNB for any
alleged deficiency in the payment of any taxes, and
SRNB does not know of any pending or threatened audits,
investigations or claims for unpaid taxes or relating
to any liability in respect of any taxes. There have
been no events, including a change in ownership, that
would result in a reappraisal and establishment of a
new base-year full value for purposes of applicable
provisions of the California Constitution, of any real
property owned in whole or in part by SRNB or to the
best of SRNB's knowledge, of any real property leased
by SRNB.
(ii) SRNB has heretofore delivered to
NVBancorp copies of all its tax returns with respect to
taxes payable to the United States of America and the
State of California for the fiscal years ended December
31, 1998, 1997, 1996, 1995 and 1994.
(iii) No consent has been filed relating to
SRNB pursuant to Section 341(f) of the IRC.
h. Material Adverse Change. Except as heretofore
disclosed in writing by SRNB to NVBancorp, since June 30, 1999,
there has been (i) no material adverse change in the business,
assets, licenses, permits, franchises, results of operations or
financial condition of SRNB (whether or not in the Ordinary
Course of Business), (ii) no change in any of the assets,
licenses, permits or franchises of SRNB that has had or can
reasonably be expected to have a material adverse effect on any
of the items listed in clause (h)(i) above, (iii) no damage,
destruction, or other casualty loss (whether or not covered by
insurance) that has had or can reasonably be expected to have a
material adverse effect on any of the items listed in clause
(h)(i) above, (iv) no amendment, modification, or termination of
any existing, or entering into of any new, contract, agreement,
plan, lease, license, permit or franchise that is material to the
business, financial condition, assets, liabilities or operations
of SRNB, except in the Ordinary Course of Business; and (v) no
disposition by SRNB of one or more assets that, individually or
in the aggregate, are material to SRNB, except sales of assets in
the Ordinary Course of Business.
i. No Undisclosed Liabilities. Except for items for
which reserves have been established in the unaudited balance
sheets of SRNB as of June 30, 1999, SRNB has not incurred or
discharged, and is not legally obligated with respect to, any
indebtedness, liability (including, without limitation, a
liability arising out of an indemnification, guarantee, hold
harmless or similar arrangement) or obligation (accrued or
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contingent, whether due or to become due, and whether or not
subordinated to the claims of its general creditors), other than
as a result of operations in the Ordinary Course of Business
after such date. No agreement pursuant to which any loans or
other assets have been or will be sold by SRNB entitles the buyer
of such loans or other assets, unless there is a material breach
of a representation or covenant by SRNB, to cause SRNB to
repurchase such loan or other asset or to pursue any other form
of recourse against SRNB. SRNB has not knowingly made or shall
make any representation or covenant in any such agreement that
contained or shall contain any untrue statement of a material
fact or omitted or shall omit to state a material fact necessary
in order to make the statements contained therein, in light of
the circumstances under which such representations and/or
covenants were made or shall be made, not misleading. No cash,
stock or other dividend or any other distribution with respect to
the SRNB Shares has been declared, set aside or paid, nor have
any of the SRNB Shares been purchased, redeemed or otherwise
acquired, directly or indirectly, by SRNB since December 31,
1996.
j. Properties and Leases.
(i) SRNB has good and marketable title, free and
clear of all liens and encumbrances and the right of
possession, subject to existing leaseholds, to all real
properties and good title, free and clear of all liens
and encumbrances, to all other property and assets,
tangible and intangible, reflected in the SRNB balance
sheet as of June 30, 1999 (except property held as
lessee under leases disclosed in writing prior to the
date hereof and except personal property sold or
otherwise disposed of since June 30, 1999, in the
Ordinary Course of Business), except for (a) liens for
taxes or assessments not delinquent, (b) such other
liens and encumbrances and imperfections of title as do
not materially affect the value of such property as
reflected in the SRNB balance sheet as of June 30,
1999, or as currently shown on the books and records of
SRNB and which do not interfere with or impair its
present and continued use, or (c) exceptions disclosed
in title reports and preliminary title reports, copies
of which have been provided to NVBancorp. To the
knowledge of SRNB, all tangible properties of SRNB
conform in all material respects with all applicable
ordinances, regulations and zoning laws. All tangible
properties of SRNB are in a good state of maintenance
and repair and are adequate for the current business of
SRNB. No properties of SRNB, and, to the best of
SRNB's knowledge, no properties in which SRNB holds a
collateral or contingent interest or purchase option,
are the subject of any pending or threatened
investigation, claim or proceeding relating to the use,
storage or disposal on such property of or
contamination of such property by any toxic or
hazardous waste material or substance. To the best of
its knowledge, SRNB does not own, possess or have a
collateral or contingent interest or purchase option in
any properties or other assets which contain or have
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located within or thereon any hazardous or toxic waste
material or substance unless the location of such
hazardous or toxic waste material or other substance or
its use thereon conforms in all material respects with
all federal, state and local laws, rules, regulations
or other provisions regulating the discharge of
materials into the environment. As to any real
property not owned or leased by SRNB and held as
security for a loan or in which SRNB otherwise has an
interest, SRNB has not controlled, directed or
participated in the operation or management of any such
real property or any facilities or enterprise conducted
thereon, such that it has become an owner or operator
of such real property under applicable environmental
laws.
(ii) All properties held by SRNB under
leases are held under valid, binding and enforceable
leases, with such exceptions as are not material and do
not interfere with the conduct of the business of SRNB,
and SRNB enjoys quiet and peaceful possession of such
leased property. SRNB is not in material default in any
respect under any material lease, agreement or
obligation regarding its properties to which it is a
party or by which it is bound.
(iii) Except as disclosed to NVBancorp in
writing, all of SRNB's rights and obligations under the
leases referred to in Section 4(j)(ii) above do not
require the consent of any other party to the
transaction contemplated by this Agreement and the
Merger Agreement. Where required, SRNB shall obtain,
prior to the Effective Date, the consent of such
parties to such transaction.
k. Material Contracts. Except as disclosed in the
SRNB Disclosure Schedule and excluding loans, lines of credit,
loan commitments or letters of credit to which SRNB is a party,
SRNB is not a party to or bound by any contract or other
agreement made in the Ordinary Course of Business which involves
aggregate future payments by or to SRNB of more than Twenty-five
Thousand Dollars ($25,000) and which is made for a fixed period
expiring more than one year from the date hereof, and SRNB is not
a party to or bound by any agreement not made in the Ordinary
Course of Business which is to be performed at or after the date
hereof. Each of the contracts and agreements disclosed to
NVBancorp pursuant to this Section 4(k) is a legal and binding
obligation (subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and subject,
as to enforceability, to equitable principles of general
applicability), and no breach or default (and no condition which,
with notice or passage of time, or both, could become a breach or
default) exists with respect thereto.
l. Classified Loans. Except as disclosed in the SRNB
Disclosure Schedule, there are no loans presently owned by SRNB
that have been classified by SRNB management or SRNB internal
policy or procedure, any outside review examiner, accountant or
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any bank regulatory authority as "Non-Accrual," "Watch," "Other
Assets Specially Mentioned," "Substandard," "Doubtful," or "Loss"
or classified using categories or words with similar import and
all loans or portions thereof so classified shall have been
reserved to the extent required. SRNB regularly review and
appropriately classify their loans in accordance with all
applicable legal and regulatory requirements and generally
accepted banking practices. All loans and investments of SRNB
are legal, valid and binding obligations enforceable in
accordance with their respective terms and are not subject to any
setoffs, counterclaims or disputes (subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to equitable
principles of general applicability), except as disclosed in the
SRNB Disclosure Schedule or reserved for in the unaudited balance
sheet of SRNB as of June 30, 1999, and were duly authorized under
and made in compliance with applicable federal and state laws and
regulations. SRNB does not have any extensions of credit,
investments, guarantees, indemnification agreements or
commitments for the same (including without limitation
commitments to issue letters of credit, to create acceptances, or
to repurchase securities, federal funds or other assets) other
than those documented on the books and records of SRNB.
m. No Restrictions on Investments. Except for
pledges to secure public and trust deposits and repurchase
agreements in the Ordinary Course of Business and securities
classified as "held-to-maturity" as defined under SFAS No. 115,
none of the investments reflected in the SRNB balance sheet as of
June 30, 1999, and none of the investments made by SRNB since
June 30, 1999, is subject to any restriction, whether contractual
or statutory, which materially impairs the ability of SRNB to
freely dispose of such investment at any time.
n. Employment Benefit Plans/ERISA.
(i) SRNB has provided to NVBancorp an
accurate list setting forth all bonus, incentive
compensation, profit-sharing, pension, retirement,
stock purchase, stock option, deferred compensation,
severance, hospitalization, medical, dental, vision,
group insurance, death benefit, disability and other
fringe benefit plans, trust agreements, arrangements
and commitments of SRNB (including but not limited to
any such plans, agreements, arrangements and
commitments applicable to former employees or retired
employees, or for which such persons are eligible)
(collectively, "Employee Plans"), if any, together with
copies of all such Employee Plans that are documented
and any and all contracts of employment, and has made
available to NVBancorp any Board of Directors' minutes
(or committee minutes) authorizing, approving or
guaranteeing such Employee Plans and contracts; and
(ii) All contributions, premiums or other
payments due from SRNB to (or under) any Employee Plans
have been fully paid or adequately provided for on
SRNB's audited financial statements for the year ended
December 31, 1998 or unaudited financial statements for
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the six (6) months ended June 30, 1999. All accruals
thereon (including, where appropriate, proportional
accruals for partial periods) have been made in
accordance with generally accepted accounting
principles consistently applied on a reasonable basis;
and
(iii) SRNB has disclosed in writing to
NVBancorp the names of each director, officer and
employee of SRNB; and
(iv) The Employee Plans have been
administered where required in substantial compliance
with ERISA, the IRC and the terms of such Employee
Plans, and there is no pending or threatened litigation
relating to any such Employee Plan; and
(v) SRNB has not offered in the past health
benefits for retired employees and has no intention to
offer any additional health or other benefits for
retired employees; and
(vi) Each Employee Plan is in full force and
effect, and neither SRNB nor any other party thereto is
in material default under any of them, and there have
been no claims of default and there are no facts or
conditions which if continued, or on notice, will
result in a material default under any Employee Plans;
and
(vii) SRNB has provided to NVBancorp a list of
all agreements or other understandings pursuant to
which the consummation of the transactions contemplated
hereby will (a) entitle any current or former employee
or officer of SRNB to severance pay, unemployment
compensation or any other payment, or (b) accelerate
the time of payment or vesting or increase the amount
of compensation due any such employee or officer.
o. Collective Bargaining and Employment Agreements.
Except as provided in this Agreement or as previously disclosed
to NVBancorp and NVB in writing, SRNB does not have any union or
collective bargaining or written employment agreements, contracts
or other agreements with any labor organization or with any
member of management, or any management or consultation agreement
not terminable at will by SRNB without liability and no such
contract or agreement has been requested by, or is under
discussion by management with, any group of employees, any member
of management or any other person. There are no material
controversies pending between SRNB and any current or former
employees, and to the best of SRNB's knowledge, there are no
efforts presently being made by any labor union seeking to
organize any of such employees.
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p. Compensation of Officers and Employees. Except as
disclosed in the SRNB Disclosure Schedule, (i) no officer or
employee of SRNB is receiving aggregate direct remuneration at a
rate exceeding Seventy-five Thousand Dollars ($75,000) per annum,
and (ii) the consummation of the transactions contemplated by
this Agreement and the Merger Agreement will not (either alone or
upon the occurrence of any additional or further acts or events)
result in any payment (whether of severance pay or otherwise)
becoming due from SRNB or NVBancorp to any employee of SRNB.
q. Legal Actions and Proceedings. Except as
disclosed in the SRNB Disclosure Schedule, SRNB is not a party
to, or so far as known to it, threatened with, and to SRNB's
knowledge, there is no reasonable basis for, any legal action or
other proceeding or investigation before any court, any
arbitrator of any kind or any government agency, and SRNB is not
subject to any potential adverse claim, the outcome of which
could involve the payment or receipt by SRNB of any amount in
excess of Twenty-five Thousand Dollars ($25,000), unless an
insurer has agreed to defend against and pay the amount of any
resulting liability without reservation, or, if any such legal
action, proceeding, investigation or claim will not involve the
payment by SRNB of a monetary amount, which could have a material
adverse effect on SRNB or its business or property or the
transactions contemplated hereby. SRNB has no knowledge of any
pending or threatened claims or charges under the Community
Reinvestment Act, before the Equal Employment Opportunity
Commission, the California Department of Fair Housing & Economic
Development, the California Unemployment Appeals Board, or any
federal or state human relations commission or agency. There is
no labor dispute, strike, slow-down or stoppage pending or, to
the best of the knowledge of SRNB, threatened against SRNB.
r. Execution and Delivery of the Agreement.
(i) The execution and delivery of this
Agreement and the Merger Agreement have been duly
authorized by the Board of Directors of SRNB and, when
the principal terms of the Merger, this Agreement and
the Merger Agreement have been duly approved by the
affirmative vote of the holders of two-thirds of the
outstanding SRNB Shares at a meeting of shareholders
duly called and held, the Merger, this Agreement and
the Merger Agreement will be duly and validly
authorized by all necessary corporate action on the
part of SRNB.
(ii) This Agreement has been duly executed
and delivered by SRNB and (assuming due execution and
delivery by NVBancorp) constitutes, and the Merger
Agreement, upon its execution and delivery by SRNB (and
assuming due execution and delivery by NVBancorp) will
constitute, a legal and binding obligation of SRNB in
accordance with its terms.
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(iii) The execution and delivery by SRNB of
this Agreement and the Merger Agreement and the
consummation of the transactions herein and therein
contemplated (a) do not violate any provision of the
Articles of Association or Bylaws of SRNB, or violate
in any material respect any provision of federal or
state law or any government rule or regulation
(assuming (1) receipt of the Government Approvals, (2)
receipt of the requisite SRNB shareholder approval
referred to in Section 4(r)(i) hereof, (3) due
registration of the NVBancorp Shares under the 1933
Act, and (4) receipt of appropriate permits or
approvals under state securities or "blue sky" laws),
and (b) do not require any consent of any person under,
conflict in any material respect with or result in a
material breach of, or accelerate the performance
required by any of the terms of, any material debt
instrument, lease, license, covenant, agreement or
understanding to which SRNB is a party or by which it
is bound or any order, ruling, decree, judgment,
arbitration award or stipulation to which SRNB is
subject, or constitute a material default thereunder or
result in the creation of any lien, claim, security
interest, encumbrance, charge, restriction or right of
any third party of any kind whatsoever upon any of the
properties or assets of SRNB.
s. Retention of Broker or Consultant. No broker,
agent, finder, consultant or other party (other than legal,
compliance, loan reviewers and accounting advisors) has been
retained by SRNB or is entitled to be paid based upon any
agreements, arrangements or understandings made by SRNB in
connection with any of the transactions contemplated by this
Agreement or the Merger Agreement, except that SRNB has engaged
the firm of Hoefer & Arnett, Inc. to provide consulting services
to SRNB, including an opinion regarding the fairness of the
consideration to be received by SRNB shareholders in the Merger.
SRNB has provided NVBancorp with a true and accurate copy of its
agreement(s) with Hoefer & Arnett, Inc.
t. Insurance. SRNB is and continuously since its
inception has been, insured with reputable insurers against all
risks normally insured against by banks, and all of the insurance
policies and bonds maintained by SRNB are in full force and
effect, SRNB is not in default thereunder and all material claims
thereunder have been filed in due and timely fashion. In the
best judgment of the management of SRNB, such insurance coverage
is adequate for SRNB. Since December 31, 1998, there has not
been any damage to, destruction of, or loss of any assets of SRNB
not covered by insurance that could have a material adverse
effect on the business, financial condition, properties, assets
or results of operations of SRNB.
u. Loan Loss Reserves. The allowance for loan losses
in the SRNB balance sheets dated December 31, 1998, June 30,
1999, and as of the Determination Date are and will be adequate
in all material respects under the requirements of all applicable
state and federal laws and regulations to provide for possible
loan losses on outstanding loans, net of recoveries. SRNB has
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disclosed to NVBancorp in writing prior to the date hereof, and
will promptly inform NVBancorp of the amounts of all loans,
leases, other extensions of credit or commitments, or other
interest-bearing assets of SRNB, that have been classified as of
the date hereof or hereafter by SRNB management or SRNB internal
policy or procedure, any outside review examiner, accountant or
any bank regulatory authority as "Other Loans Specially
Mentioned," "Special Mention," "Substandard," "Doubtful," or
"Loss" or classified using categories or words with similar
import in the case of loans (or that would have been so
classified, in the case of other interest-bearing assets, had
they been loans). Notwithstanding the above, SRNB shall be under
no obligation to disclose to NVBancorp any such classification by
any bank regulatory authority where such disclosure would violate
any obligation of confidentiality of SRNB imposed by such bank
regulatory authority. SRNB has furnished and will continue to
furnish to NVBancorp true and accurate information concerning the
loan portfolio of SRNB, and no material information with respect
to the loan portfolio has been or will be withheld from
NVBancorp.
v. Transactions With Affiliates. Except in the
Ordinary Course of Business, SRNB has not extended credit,
committed itself to extend credit, or transferred any asset to or
assumed or guaranteed any liability of the employees or directors
of SRNB, or to any spouse or child of any of them, or to any of
their "affiliates" or "associates" as such terms are defined in
Rule 405 under the 1933 Act. SRNB has not entered into any other
transactions with the employees or directors of SRNB or any
spouse or child of any of them, or any of their affiliates or
associates, except as disclosed in writing to NVBancorp. Any
such transactions have been on terms no less favorable to SRNB
than those which would prevail in an arms-length transaction with
an independent third party. SRNB has not violated any applicable
regulation of any government agency or regulatory authority
having jurisdiction over SRNB in connection with any such
transactions described in this subsection
w. Risk Management Instruments. All interest rate
swaps, caps, floors, option agreements, futures and forward
contracts and other similar risk management arrangements, whether
entered into for SRNB's own account (all of which are listed on
the SRNB Disclosure Schedule), if any, were entered into in
accordance with prudent business practices and all applicable
laws, rules, regulations and regulatory policies and with
counterparties believed to be financially responsible at the
time; and each of them constitutes the valid and legally binding
obligation of SRNB, enforceable in accordance with its terms
(except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles), and
are in full force and effect. Neither SRNB, nor to SRNB's
knowledge, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement.
x. Year 2000. To the knowledge of SRNB, the mission
critical computer software operated by SRNB is currently capable
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of providing, or is being adapted to provide, uninterrupted
millennium functionality to record, store, process and present
calendar dates falling on or after January 1, 2000 in
substantially the same manner and with substantially the same
functionality as such mission critical software records, stores,
processes and presents such calendar dates falling on or before
December 31, 1999. To the knowledge of SRNB, the costs of
adaptations referred to in this clause will not have a material
adverse effect with respect to the business and operations of
SRNB. SRNB has not received, and does not reasonably expect to
receive, any deficiency notice from any federal banking
authority. SRNB has previously disclosed to NVBancorp a complete
and accurate copy of its plan, including an estimate of
anticipated associated costs, for addressing the issues set forth
in all Federal Financial Institutions Examination Council
Interagency Statements as such issues affect SRNB. Between the
date of this Agreement and the Effective Time, SRNB shall use
commercially reasonable and practicable efforts to implement such
plan.
y. Community Reinvestment Act Compliance. SRNB is in
substantial compliance with the applicable provisions of the
Community Reinvestment Act of 1977 and the regulations
promulgated thereunder (collectively, the "CRA") and has received
a CRA rating of "satisfactory" from the OCC in its most recent
examination, and SRNB has no knowledge of the existence of any
fact or circumstance or set of facts or circumstances which could
be reasonably expected to result in SRNB failing to be in
substantial compliance with such provisions or having its current
rating lowered.
z. Information in NVBancorp Registration Statement.
The information pertaining to SRNB which has been or will be
furnished to NVBancorp for or on behalf of SRNB for inclusion in
the NVBancorp Registration Statement and the Joint Proxy
Statement/Prospectus, or in the applications to be filed to
obtain the Government Approvals (the "Applications"), does not
and will not contain any untrue statement of any material fact or
omit or will omit to state any material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not
misleading; provided, however, that information of a later date
shall be deemed to modify contrary information as of an earlier
date. All financial statements of SRNB included in the NVBancorp
Registration Statement and the Joint Proxy Statement/Prospectus,
or the Applications, will present fairly the financial condition
and results of operations of SRNB at the dates and for the
periods covered by such statements in accordance with generally
accepted accounting principles consistently applied throughout
the periods covered by such statements. SRNB shall promptly
advise NVBancorp in writing if prior to the Effective Time of the
Merger SRNB shall obtain knowledge of any facts that would make
it necessary to amend or supplement the NVBancorp Registration
Statement, the Joint Proxy Statement/Prospectus or any
Application, in order to make the statements therein not
misleading or to comply with applicable law or regulation.
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aa. Accuracy and Effective Date of Representations and
Warranties, Covenants and Agreements. Each representation,
warranty, covenant and agreement of SRNB set forth in this
Agreement shall be deemed to be made on and as of the date hereof
(except to the extent that a representation or warranty is
qualified as set forth in a Schedule corresponding in number with
the applicable section of such representation or warranty and
delivered on or before the Document Delivery Date, and upon such
delivery it shall be deemed made on and as of the date of
delivery), the Closing Date and the Effective Time of the Merger.
No representation or warranty by SRNB, and no statement by SRNB
in any certificate, agreement, schedule or other document
furnished or to be furnished in connection with the transactions
contemplated by this Agreement or the Merger Agreement, was or
will be inaccurate, incomplete or incorrect in any material
respect as of the date furnished or contains or will contain any
untrue statement of a material fact or omits or will omit to
state any material fact necessary to make such representation,
warranty or statement not misleading to NVBancorp.
5. REPRESENTATIONS AND WARRANTIES OF NVBancorp.
In the following representations and warranties, all
references to assets, liabilities, properties, rights,
obligations, financial condition, operations, knowledge,
information and other characteristics of NVBancorp shall be
deemed to include reference to those characteristics of NVBancorp
on a consolidated basis, except as the context otherwise
indicates or requires. NVBancorp represents and warrants to SRNB
that, except as set forth on a schedule (the "NVBancorp
Disclosure Schedule") to be delivered to SRNB within ten (10)
business days after the execution and delivery of this Agreement,
corresponding in number with the applicable section of this
Agreement:
a. Corporate Status and Power to Enter Into
Agreements. (i) NVBancorp is a corporation duly incorporated,
validly existing and in good standing under California law and is
a registered bank holding company under the Bank Holding Company
Act of 1956, as amended, (ii) subject to obtaining the Government
Approvals and approval of the principal terms of the Merger by
the NVBancorp shareholders, NVBancorp has all necessary corporate
power to enter into this Agreement and the Merger Agreement and
to carry out all of the terms and provisions hereof and thereof
to be carried out by it, (iii) NVB holds a currently valid
license issued by the California Commissioner of Banking to
engage in the commercial banking business in the State of
California at the locations at which it is licensed and currently
conducts business, and (iv) neither NVBancorp nor NVB is subject
to any directive, resolution, memorandum of understanding or
order of the FDIC, FRB, California Commissioner of Banking or any
other regulatory authority having jurisdiction over its business
or any of its assets or properties. Neither the scope of the
business of NVBancorp nor the location of its properties requires
NVBancorp or NVB to be licensed to do business in any
jurisdiction other than the State of California. NVB's deposits
are insured by the FDIC to the maximum extent permitted by
applicable law and regulation.
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b. Articles, Bylaws, Books and Records. The copies
of the Articles of Incorporation and Bylaws of NVBancorp
heretofore delivered to SRNB are complete and accurate copies
thereof as in effect on the date hereof. The minute books of
NVBancorp made available to SRNB contain a complete and accurate
record of all meetings of NVBancorp's Board of Directors (and
committees thereof) and shareholders. The corporate books and
records (including financial statements) of NVBancorp fairly
reflect the material transactions to which NVBancorp is a party
or by which its properties are subject or bound, and such books
and records have been properly kept and maintained.
c. Compliance With Laws, Regulations and Decrees.
NVBancorp (i) has the corporate power to own or lease its
properties and to conduct its business as currently conducted,
(ii) to its knowledge, has complied in all material respects
with, and is not in material default of any laws, regulations,
ordinances, orders or decrees applicable to the conduct of its
business and the ownership of its properties, including but not
limited to all federal and state laws (including but not limited
to the Bank Secrecy Act), rules and regulations relating to the
offer, sale or issuance of securities, and the operation of a
commercial bank, other than where such noncompliance or default
is not likely to result in a material limitation on the conduct
of the business of NVBancorp or is not likely to otherwise have a
material adverse effect on NVBancorp and NVB taken as a whole,
(iii) have not failed to file with the proper federal, state,
local or other authorities any material report or other document
required to be filed, and (iv) have all approvals,
authorizations, consents, licenses, clearances and orders of, and
have currently effective all registrations with, all government
agencies and regulatory authorities which are necessary to the
business and operations of NVBancorp and NVB as now being
conducted.
d. Capitalization. As of the date of this Agreement,
the authorized capital stock of NVBancorp consists of 20,000,000
shares of NVBancorp common stock, no par value, of which
3,707,816 shares are duly authorized, validly issued, fully paid
and nonassessable and currently outstanding, and 5,000,000 shares
of NVBancorp preferred stock of which no shares are outstanding.
A total of 125,000 shares of Series A Junior Participating
Preferred Stock have been designated by the NVBancorp Board of
Directors for purposes of the NVBancorp Shareholder Protection
Rights Agreement dated as of September 9, 1999. Said capital
stock has been offered, sold and issued in compliance with all
applicable securities laws. As of the date of this Agreement,
there are currently outstanding options to purchase 484,096
shares of NVBancorp common stock, at a weighted average exercise
price of $11.39 per share, issued pursuant to the NVBancorp 1989
Director Stock Option Plan, the NVBancorp 1998 Employee Stock
Incentive Plan and the NVBancorp 1999 Director Stock Option Plan.
Said options were issued and, upon issuance in accordance with
the terms of the outstanding options said shares shall be issued,
in compliance with all applicable securities laws. Otherwise,
other than rights under the NVBancorp Shareholder Protection
Rights Agreement dated as of September 9, 1999, there are no
outstanding (i) options, agreements, calls or commitments of any
character which would obligate NVBancorp to issue, sell, pledge,
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assign or otherwise encumber or dispose of, or to purchase,
redeem or otherwise acquire, any NVBancorp common stock or any
other equity security of NVBancorp, or (ii) warrants or options
relating to, rights to acquire, or debt or equity securities
convertible into, shares of NVBancorp common stock or any other
equity security of NVBancorp. NVBancorp owns all of the
outstanding equity securities of NVB. Except as collateral for
outstanding loans held in their loan portfolios, neither
NVBancorp nor NVB owns, directly or indirectly, any equity
interest in any bank (other than NVBancorp's ownership of NVB),
corporation or other entity.
e. Trademarks and Trade Names. To the best of
NVBancorp's knowledge, NVBancorp and NVB (i) own and have the
exclusive right to use all Intellectual Property Rights used in
or necessary for the conduct of their businesses as now or
heretofore conducted; and (ii) are not infringing upon the
Intellectual Property Rights of any other person or entity. No
claim is pending or threatened by any person or entity against or
otherwise affecting the use by NVBancorp or NVB of any
Intellectual Property Rights and, to the best of its knowledge,
there is no valid basis for any such claim.
f. Financial Statements, Regulatory Reports. No
financial statement or other document provided or to be provided
to SRNB as required by Section 3.3(i) hereof, as of the date of
such document, contained, or as to documents to be delivered
after the date hereof, will contain, any untrue statement of a
material fact, or, at the date thereof, omitted or will omit to
state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which such
statements were or will be made, not misleading; provided,
however, that information as of a later date shall be deemed to
modify contrary information as of any earlier date. NVBancorp
has filed all material documents and reports required to be filed
by it with the Commission, FDIC, FRB, the California Department
of Financial Institutions and any other government agency or
regulatory authority having jurisdiction over their business,
assets or properties. All such reports conform in all material
respects with the requirements promulgated by such government
agencies and regulatory authorities. All compliance or
corrective action relating to NVBancorp and NVB required by
government agencies and regulatory authorities having
jurisdiction over NVBancorp or NVB has been taken. Except as
disclosed in such statements, reports or documents, neither
NVBancorp nor NVB has received any notification, formally or
informally, from any agency or department of any federal, state
or local government or any regulatory authority or the staff
thereof (a) asserting that it is not in compliance with any of
the statutes, regulations or ordinances which such government or
regulatory authority enforces, or (b) threatening to revoke any
license, franchise, permit or government authorization.
NVBancorp and NVB have paid all assessments made or imposed by
any government agency. NVBancorp has delivered to SRNB copies of
all annual management letters and opinions, and has made
available to SRNB for inspection all reviews, correspondence and
other documents in the files of NVBancorp prepared by certified
public accountants engaged by NVBancorp and delivered to
NVBancorp since December 31, 1994. The financial records of
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NVBancorp have been, and are being and shall be, maintained in
all material respects in accordance with all applicable legal and
accounting requirements sufficient to insure that all
transactions reflected therein are, in all material respects,
executed in accordance with management's general or specific
authorization and recorded in conformity with generally accepted
accounting principles at the time in effect. The data processing
equipment, data transmission equipment, related peripheral
equipment and software used by NVBancorp in the operation of its
business to generate and retrieve its financial records are
adequate for the current needs of NVBancorp.
g. Tax Returns.
(i) NVBancorp has timely filed all federal,
state, county, local and foreign tax returns required
to be filed by it, including, without limitation,
estimated tax, use tax, excise tax, real property and
personal property tax reports and returns, employer's
withholding tax returns, other withholding tax returns
and Federal Unemployment Tax Returns, and all other
reports or other information required or requested to
be filed by NVBancorp, and each such return, report or
other information was, when filed, complete and
accurate in all material respects. NVBancorp has paid
all taxes, fees and other government charges, including
any interest and penalties thereon, when they have
become due, except those that are being contested in
good faith, which contested matters have been disclosed
to SRNB. NVBancorp has not been requested to give nor
has it given any currently effective waivers extending
the statutory period of limitation applicable to any
tax return required to be filed by it for any period.
There are no claims pending against NVBancorp for any
alleged deficiency in the payment of any taxes, and
NVBancorp does not know of any pending or threatened
audits, investigations or claims for unpaid taxes or
relating to any liability in respect of any taxes.
There have been no events, including a change in
ownership, that would result in a reappraisal and
establishment of a new base-year full value for
purposes of applicable provisions of the California
Constitution, of any real property owned in whole or in
part by NVBancorp or to the best of NVBancorp's
knowledge, of any real property leased by NVBancorp.
(ii) NVBancorp has heretofore delivered to SRNB
copies of all its tax returns with respect to taxes
payable to the United States of America and the State
of California for the fiscal years ended December 31,
1998, 1997, 1996, 1995 and 1994.
(iii) No consent has been filed relating to
NVBancorp pursuant to Section 341(f) of the IRC.
h. Material Adverse Change. Except as heretofore
disclosed in writing by NVBancorp to SRNB, since June 30, 1999,
there has been (i) no material adverse change in the business,
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assets, licenses, permits, franchises, results of operations or
financial condition of NVBancorp (whether or not in the Ordinary
Course of Business), (ii) no change in any of the assets,
licenses, permits or franchises of NVBancorp that has had or can
reasonably be expected to have a material adverse effect on any
of the items listed in clause (h)(i) above, (iii) no damage,
destruction, or other casualty loss (whether or not covered by
insurance) that has had or can reasonably be expected to have a
material adverse effect on any of the items listed in clause
(h)(i) above, (iv) no amendment, modification, or termination of
any existing, or entering into of any new, contract, agreement,
plan, lease, license, permit or franchise that is material to the
business, financial condition, assets, liabilities or operations
of NVBancorp, except in the Ordinary Course of Business, and (v)
no disposition by NVBancorp of one or more assets that,
individually or in the aggregate, are material to NVBancorp,
except sales of assets in the Ordinary Course of Business.
i. No Undisclosed Liabilities. Except for items for
which reserves have been established in the unaudited balance
sheets of NVBancorp as of June 30, 1999, NVBancorp has not
incurred or discharged, and is not legally obligated with respect
to, any indebtedness, liability (including, without limitation, a
liability arising out of an indemnification, guarantee, hold
harmless or similar arrangement) or obligation (accrued or
contingent, whether due or to become due, and whether or not
subordinated to the claims of its general creditors), other than
as a result of operations in the Ordinary Course of Business
after such date. No agreement pursuant to which any loans or
other assets have been or will be sold by NVBancorp entitles the
buyer of such loans or other assets, unless there is a material
breach of a representation or covenant by NVBancorp to cause
NVBancorp repurchase such loan or other asset or to pursue any
other form of recourse against NVBancorp. NVBancorp has not
knowingly made or shall make any representation or covenant in
any such agreement that contained or shall contain any untrue
statement of a material fact or omitted or shall omit to state a
material fact necessary in order to make the statements contained
therein, in light of the circumstances under which such
representations and/or covenants were made or shall be made, not
misleading.
j. Properties and Leases.
(i) NVBancorp has good and marketable title,
free and clear of all liens and encumbrances and the
right of possession, subject to existing leaseholds, to
all real properties and good title, free and clear of
all liens and encumbrances, to all other property and
assets, tangible and intangible, reflected in the
NVBancorp balance sheet as of June 30, 1999 (except
property held as lessee under leases disclosed in
writing prior to the date hereof and except personal
property sold or otherwise disposed of since June 30,
1999, in the Ordinary Course of Business), except for
(a) liens for taxes or assessments not delinquent, (b)
such other liens and encumbrances and imperfections of
title as do not materially affect the value of such
property as reflected in the NVBancorp balance sheet as
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of June 30, 1999, or as currently shown on the books
and records of NVBancorp and which do not interfere
with or impair its present and continued use, or (c)
exceptions disclosed in title reports and preliminary
title reports, copies of which have been provided to
SRNB. All tangible properties of NVBancorp conform in
all material respects with all applicable ordinances,
regulations and zoning laws. To the knowledge of
NVBancorp, all tangible properties of NVBancorp are in
a good state of maintenance and repair and are adequate
for the current business of NVBancorp. No properties
of NVBancorp, and, to the best of NVBancorp's
knowledge, no properties in which NVBancorp holds a
collateral or contingent interest or purchase option,
are the subject of any pending or threatened
investigation, claim or proceeding relating to the use,
storage or disposal on such property of or
contamination of such property by any toxic or
hazardous waste material or substance. To the best of
NVBancorp's knowledge, NVBancorp does not own, possess
or have a collateral or contingent interest or purchase
option in any properties or other assets which contain
or have located within or thereon any hazardous or
toxic waste material or substance unless the location
of such hazardous or toxic waste material or other
substance or its use thereon conforms in all material
respects with all federal, state and local laws, rules,
regulations or other provisions regulating the
discharge of materials into the environment. As to any
real property not owned or leased by NVBancorp and held
as security for a loan or in which NVBancorp otherwise
has an interest, NVBancorp has not controlled, directed
or participated in the operation or management of any
such real property or any facilities or enterprise
conducted thereon, such that it has become an owner or
operator of such real property under applicable
environmental laws.
(ii) All properties held by NVBancorp under
leases are held under valid, binding and enforceable
leases, with such exceptions as are not material and do
not interfere with the conduct of the business of
NVBancorp, and NVBancorp enjoy quiet and peaceful
possession of such leased property. NVBancorp is not in
material default in any respect under any material
lease, agreement or obligation regarding its properties
to which it is a party or by which it is bound.
(iii) Except as disclosed to SRNB in writing, all
of NVBancorp's rights and obligations under the leases
referred to in Section 5(j)(ii) above do not require
the consent of any other party to the transaction
contemplated by this Agreement and the Merger
Agreement. Where required, NVBancorp shall obtain,
prior to the Effective Date, the consent of such
parties to such transactions.
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k. Material Contracts. Except as previously
disclosed to SRNB in writing and excluding loans, lines of
credit, loan commitments or letters of credit to which NVBancorp
is a party, NVBancorp is not a party to or bound by any contract
or other agreement made in the Ordinary Course of Business which
involves aggregate future payments by or to NVBancorp of more
than Seventy-five Thousand Dollars ($75,000) and which is made
for a fixed period expiring more than one year from the date
hereof, and NVBancorp is not a party to or bound by any agreement
not made in the Ordinary Course of Business which is to be
performed at or after the date hereof. Each of the contracts and
agreements disclosed to SRNB pursuant to this Section 5(k) is a
legal and binding obligation (subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally
and subject, as to enforceability, to equitable principles of
general applicability), and no breach or default (and no
condition which, with notice or passage of time, or both, could
become a breach or default) exists with respect thereto.
l. Classified Loans. Except as previously disclosed
to SRNB in writing, there are no loans presently owned by
NVBancorp that have been classified by NVBancorp management or
NVBancorp internal policy or procedure, any outside review
examiner, accountant or any bank regulatory authority as "Non-
Accrual," "Watch," "Other Assets Specially Mentioned,"
"Substandard," "Doubtful," or "Loss" or classified using
categories or words with similar import and all loans or portions
thereof so classified have been reserved to the extent required.
NVBancorp regularly reviews and appropriately classifies its
loans in accordance with all applicable legal and regulatory
requirements and generally accepted banking practices. All loans
and investments of NVBancorp are legal, valid and binding
obligations enforceable in accordance with their respective terms
and are not subject to any setoffs, counterclaims or disputes
(subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general
applicability), except as disclosed to SRNB in writing or
reserved for in the unaudited balance sheet of NVBancorp as of
June 30, 1999, and were duly authorized under and made in
compliance with applicable federal and state laws and
regulations. NVBancorp has no extensions of credit, investments,
guarantees, indemnification agreements or commitments for the
same (including without limitation commitments to issue letters
of credit, to create acceptances, or to repurchase securities,
federal funds or other assets) other than those documented on the
books and records of NVBancorp.
m. No Restrictions on Investments. Except for
pledges to secure public and trust deposits and repurchase
agreements in the Ordinary Course of Business and securities
classified as "held-to-maturity" as defined under SFAS No. 115,
none of the investments reflected in the NVBancorp balance sheet
as of June 30, 1999, and none of the investments made by
NVBancorp since June 30, 1999, is subject to any restriction,
whether contractual or statutory, which materially impairs the
ability of NVBancorp to freely dispose of such investment at any
time.
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n. Employment Benefit Plans/ERISA.
(i) NVBancorp has provided to SRNB an accurate
list setting forth all bonus, incentive compensation,
profit-sharing, pension, retirement, stock purchase,
stock option, deferred compensation, severance,
hospitalization, medical, dental, vision, group
insurance, death benefit, disability and other fringe
benefit plans, trust agreements, arrangements and
commitments of NVBancorp (including but not limited to
any such plans, agreements, arrangements and
commitments applicable to former employees or retired
employees, or for which such persons are eligible)
(collectively, "Employee Plans"), if any, together with
copies of all such Employee Plans that are documented
and any and all contracts of employment, and has made
available to SRNB any Board of Directors' minutes (or
committee minutes) authorizing, approving or
guaranteeing such Employee Plans and contracts; and
(ii) All contributions, premiums or other
payments due from NVBancorp to (or under) any Employee
Plans have been fully paid or adequately provided for
on NVBancorp's audited financial statements for the
year ended December 31, 1998 or unaudited financial
statements for the six months ended June 30, 1999. All
accruals thereon (including, where appropriate,
proportional accruals for partial periods) have been
made in accordance with generally accepted accounting
principles consistently applied on a reasonable basis;
and
(iii) NVBancorp has disclosed in writing to SRNB
the names of each director, officer and employee of
NVBancorp and NVB; and
(iv) The Employee Plans have been administered
where required in substantial compliance with ERISA,
the IRC and the terms of such Employee Plans, and there
is no pending or threatened litigation relating to any
such Employee Plan; and
(v) Except as disclosed in the NVBancorp
Disclosure Schedule, NVBancorp and NVB have not offered
in the past health benefits for retired employees and
have no intention to offer any additional health or
other benefits for retired employees; and
(vi) Each Employee Plan is in full force and
effect, and neither NVBancorp, NVB, nor any other party
thereto is in material default under any of them, and
there have been no claims of default and there are no
facts or conditions which if continued, or on notice,
will result in a material default under any Employee
Plans; and
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(vii) NVBancorp has provided to SRNB a list of
all agreements or other understandings pursuant to
which the consummation of the transactions contemplated
hereby will (a) entitle any current or former employee
or officer of NVBancorp or NVB to severance pay,
unemployment compensation or any other payment, or (b)
accelerate the time of payment or vesting or increase
the amount of compensation due any such employee or
officer.
o. Collective Bargaining and Employment Agreements.
Except as disclosed in the NVBancorp Disclosure Schedule,
NVBancorp has no union or collective bargaining or written
employment agreements, contracts or other agreements with any
labor organization or with any member of management, or any
management or consultation agreement not terminable at will by
NVBancorp without liability and no such contract or agreement has
been requested by, or is under discussion by management with, any
group of employees, any member of management or any other person.
There are no material controversies pending between NVBancorp and
any current or former employees, and to the best of NVBancorp's
knowledge, there are no efforts presently being made by any labor
union seeking to organize any of such employees.
p. Compensation of Officers and Employees. Except as
disclosed in the NVBancorp Disclosure Schedule, (i) no officer or
employee of NVBancorp or NVB is receiving aggregate direct
remuneration at a rate exceeding Seventy-five Thousand Dollars
($75,000) per annum, and (ii) the consummation of the
transactions contemplated by this Agreement and the Merger
Agreement will not (either alone or upon the occurrence of any
additional or further acts or events) result in any payment
(whether of severance pay or otherwise) becoming due from
NVBancorp to any employee of NVBancorp.
q. Legal Actions and Proceedings. Except as disclosed
in the NVBancorp Disclosure Schedule, NVBancorp is not a party
to, or so far as known to it, threatened with, and to NVBancorp's
knowledge, there is no reasonable basis for, any legal action or
other proceeding or investigation before any court, any
arbitrator of any kind or any government agency, and NVBancorp is
not subject to any potential adverse claim, the outcome of which
could involve the payment or receipt by NVBancorp of any amount
in excess of Fifty Thousand Dollars ($50,000), unless an insurer
has agreed to defend against and pay the amount of any resulting
liability without reservation, or, if any such legal action,
proceeding, investigation or claim will not involve the payment
by NVBancorp of a monetary amount, which could reasonably be
expected to have a material adverse effect on NVBancorp or its
business or property or the transactions contemplated hereby.
NVBancorp has no knowledge of any pending or threatened claims or
charges under the Community Reinvestment Act, before the Equal
Employment Opportunity Commission, the California Department of
Fair Housing and Economic Development, the California
Unemployment Appeals Board, or any federal or state human
relations commission or agency. There is no labor dispute,
strike, slow-down or stoppage pending or, to the best of the
knowledge of NVBancorp, threatened against NVBancorp.
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r. Execution and Delivery of the Agreement.
(i) The execution and delivery of this
Agreement and the Merger Agreement have been duly
authorized by the Boards of Directors of NVBancorp and,
when the principal terms of the Merger, this Agreement
and the Merger Agreement have been duly approved by the
affirmative vote of the holders of a majority of the
outstanding NVBancorp Shares at a meeting of
shareholders duly called and held, the Merger, this
Agreement and the Merger Agreement will be duly and
validly authorized by all necessary corporate action on
the part of NVBancorp.
(ii) This Agreement has been duly executed and
delivered by NVBancorp and (assuming due execution and
delivery by SRNB) constitutes, and the Merger
Agreement, upon its execution and delivery by NVBancorp
and the Interim Bank (and assuming due execution and
delivery by the Interim Bank and SRNB) will constitute,
a legal and binding obligation of NVBancorp in
accordance with its terms.
(iii) The execution and delivery by NVBancorp of
this Agreement and the Merger Agreement and the
consummation of the transactions herein and therein
contemplated (a) do not violate any provision of the
Articles of Incorporation or Bylaws of NVBancorp,
respectively, or violate in any material respect any
provision of federal or state law or any government
rule or regulation (assuming (1) receipt of the
Government Approvals, (2) receipt of the requisite
NVBancorp shareholder approval referred to in Section
5(r)(i) hereof, (3) due registration of the NVBancorp
Shares under the 1933 Act, and (4) receipt of
appropriate permits or approvals under state securities
or "blue sky" laws, and (b) do not require any consent
of any person under, conflict in any material respect
with or result in a material breach of, or accelerate
the performance required by any of the terms of, any
material debt instrument, lease, license, covenant,
agreement or understanding to which NVBancorp is a
party or by which it is bound or any order, ruling,
decree, judgment, arbitration award or stipulation to
which NVBancorp is subject, or constitute a material
default thereunder or result in the creation of any
lien, claim, security interest, encumbrance, charge,
restriction or right of any third party of any kind
whatsoever upon any of the properties or assets of
NVBancorp.
s. Retention of Broker or Consultant. No broker,
agent, finder, consultant or other party (other than legal,
compliance, loan reviewers and accounting advisors) has been
retained by NVBancorp or is entitled to be paid based upon any
agreements, arrangements or understandings made by NVBancorp in
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connection with any of the transactions contemplated by this
Agreement or the Merger Agreement, except that NVBancorp has
engaged the firm of Alex Sheshunoff & Co. to act as its financial
advisor and to render an opinion regarding the fairness of the
Conversion Ratio in the Merger, from a financial point of view,
to NVBancorp shareholders. NVBancorp has provided SRNB with a
true and accurate copy of its agreement(s) with Alex Sheshunoff &
Co.
t. Insurance. NVBancorp is and continuously since
its inception have been, insured with reputable insurers against
all risks normally insured against by bank holding companies and
banks, and all of the insurance policies and bonds maintained by
NVBancorp are in full force and effect, NVBancorp is not in
default thereunder and all material claims thereunder have been
filed in due and timely fashion. In the best judgment of the
management of NVBancorp, such insurance coverage is adequate for
NVBancorp. Since December 31, 1994, there has not been any
damage to, destruction of, or loss of any assets of NVBancorp not
covered by insurance that could reasonably be expected to have a
material adverse effect the business, financial condition,
properties, assets or results of operations of NVBancorp.
u. Loan Loss Reserves. The allowance for loan losses
in the NVBancorp consolidated balance sheets dated December 31,
1998 and June 30, 1999, are, and as of the Determination Date
will be, adequate in all material respects under the requirements
of all applicable state and federal laws and regulations to
provide for possible loan losses on outstanding loans, net of
recoveries. NVBancorp has disclosed to SRNB in writing prior to
the date hereof, and will promptly inform SRNB of the amounts of
all loans, leases, other extensions of credit or commitments, or
other interest-bearing assets of NVBancorp and NVB, that have
been classified as of the date hereof or hereafter by NVBancorp
or NVB management or NVBancorp or NVB internal policy or
procedure, any outside review examiner, accountant or any bank
regulatory authority as "Non-Accrual," "Watch," "Other Assets
Specially Mentioned," "Substandard," "Doubtful," or "Loss" or
classified using categories or words with similar import in the
case of loans (or that would have been so classified, in the case
of other interest-bearing assets, had they been loans).
Notwithstanding the above, NVBancorp shall be under no obligation
to disclose to SRNB any such classification by any bank
regulatory authority, where such disclosure would violate any
obligation of confidentiality of NVBancorp or NVB imposed by such
bank regulatory authority. NVBancorp has furnished and will
continue to furnish to SRNB true and accurate information
concerning the loan portfolio of NVBancorp and NVB, and no
material information with respect to the loan portfolio has been
or will be withheld from SRNB.
v. Transactions With Affiliates. Except in the
Ordinary Course of Business, NVBancorp has not extended credit,
committed itself to extend credit, or transferred any asset to or
assumed or guaranteed any liability of the employees or directors
of NVBancorp, or to any spouse or child of any of them, or to any
of their "affiliates" or "associates" as such terms are defined
in Rule 405 under the 1933 Act. NVBancorp has not entered into
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any other transactions with the employees or directors of
NVBancorp or any spouse or child of any of them, or any of their
affiliates or associates, except as disclosed in writing to SRNB.
Any such transactions have been on terms no less favorable to
NVBancorp than those which would prevail in an arms-length
transaction with an independent third party. NVBancorp has not
violated any applicable regulation of any government agency or
regulatory authority having jurisdiction over NVBancorp in
connection with any such transactions described in this
subsection.
w. Risk Management Instruments. All interest rate
swaps, caps, floors, option agreements, futures and forward
contracts and other similar risk management arrangements, whether
entered into for NVBancorp's own account, or for the account of
one or more of NVBancorp's subsidiaries or their customers (all
of which are listed on the NVBancorp Disclosure Schedule), if
any, were entered into in accordance with prudent business
practices and all applicable laws, rules, regulations and
regulatory policies and with counterparties believed to be
financially responsible at the time; and each of them constitutes
the valid and legally binding obligation of NVBancorp or one of
its subsidiaries, enforceable in accordance with its terms
(except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles), and
are in full force and effect. Neither NVBancorp nor its
subsidiaries, nor to NVBancorp's knowledge, any other party
thereto, is in breach of any of its obligations under any such
agreement or arrangement.
x. Year 2000. To the knowledge of NVBancorp, the
mission critical computer software operated by NVBancorp and/or
any of its subsidiaries is currently capable of providing, or is
being adapted to provide, uninterrupted millennium functionality
to record, store, process and present calendar dates falling on
or after January 1, 2000 in substantially the same manner and
with substantially the same functionality as such mission
critical software records, stores, processes and presents such
calendar dates falling on or before December 31, 1999. To the
knowledge of NVBancorp, the costs of adaptations referred to in
this clause will not have a material adverse effect with respect
to the business and operations of NVBancorp. Neither NVBancorp
nor any of its subsidiaries has received, and does not reasonably
expect to receive, any deficiency notice from any federal or
California banking authority. NVBancorp has previously disclosed
to SRNB a complete and accurate copy of its and its subsidiaries'
plan, including an estimate of anticipated associated costs, for
addressing the issues set forth in all Federal Financial
Institutions Examination Council Interagency Statements as such
issues affect NVBancorp and/or its subsidiaries. Between the
date of this Agreement and the Effective Time, NVBancorp and NVB
shall use commercially reasonable and practicable efforts to
implement such plan.
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y. Community Reinvestment Act Compliance. NVBancorp
is in substantial compliance with the applicable provisions of
the Community Reinvestment Act of 1977 and the regulations
promulgated thereunder (collectively, the "CRA") and has received
a CRA rating of "satisfactory" from the FDIC in its most recent
examination, and neither NVBancorp nor NVB has no knowledge of
the existence of any fact or circumstance or set of facts or
circumstances which could be reasonably expected to result in
NVBancorp failing to be in substantial compliance with such
provisions or having its current rating lowered.
z. Information in NVBancorp Registration Statement.
The information pertaining to NVBancorp which has been or will be
included in the NVBancorp Registration Statement and the Joint
Proxy Statement/Prospectus, or in the Applications to be filed to
obtain the Government Approvals, does not and will not contain
any untrue statement of any material fact or omit or will omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading;
provided, however, that information of a later date shall be
deemed to modify contrary information as of an earlier date. All
financial statements of NVBancorp included in the NVBancorp
Registration Statement and the Joint Proxy Statement/Prospectus,
or the Applications, will present fairly the financial condition
and results of operations of NVBancorp at the dates and for the
periods covered by such statements in accordance with generally
accepted accounting principles consistently applied throughout
the periods covered by such statements. NVBancorp shall promptly
advise SRNB in writing if prior to the Effective Time of the
Merger NVBancorp shall obtain knowledge of any facts that would
make it necessary to amend or supplement the NVBancorp
Registration Statement, the Joint Proxy Statement/Prospectus or
any Application, in order to make the statements therein not
misleading or to comply with applicable law or regulation.
aa. Accuracy and Effective Date of Representations and
Warranties, Covenants and Agreements. Each representation,
warranty, covenant and agreement of NVBancorp set forth in this
Agreement shall be deemed to be made on and as of the date hereof
(except to the extent that a representation or warranty is
qualified as set forth in the NVBancorp Disclosure Schedule in a
section corresponding in number with the applicable section of
such representation or warranty), the Closing Date and the
Effective Time of the Merger. No representation or warranty by
NVBancorp, and no statement by NVBancorp in any certificate,
agreement, schedule or other document furnished or to be
furnished in connection with the transactions contemplated by
this Agreement or the Merger Agreement, was or will be
inaccurate, incomplete or incorrect in any material respect as of
the date furnished or contains or will contain any untrue
statement of a material fact or omits or will omit to state any
material fact necessary to make such representation, warranty or
statement not misleading to SRNB.
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6. SECURITIES ACT OF 1933; SECURITIES EXCHANGE ACT OF 1934.
a. Preparation and Filing of Registration Statement.
NVBancorp shall promptly prepare and file with the Commission (i)
a registration statement on the appropriate form (the "NVBancorp
Registration Statement") under and pursuant to the provisions of
the 1933 Act for the purpose of registering a sufficient number
of NVBancorp Shares to complete the exchange of NVBancorp Shares
for the outstanding SRNB Shares pursuant to the Conversion Ratio
and the provisions of Section 2.1 above, and (ii) in sufficient
time to be effective on or before the Effective Time of the
Merger one or more registration statements or amendments to
existing registration statements under the 1933 Act for the
purpose of registering the maximum number of NVBancorp Shares to
which the holders of Substitute Options may be entitled pursuant
to Section 2.6 above at or after the Effective Time of the
Merger. NVBancorp shall promptly prepare a Joint Proxy
Statement/Prospectus for the purpose of submitting the principal
terms of the Merger (including the Amendment, as described in
Section 3.3.d. hereof), this Agreement and the Merger Agreement
to the shareholders of NVBancorp for approval. SRNB shall
cooperate in all reasonable respects with regard to the
preparation of the Joint Proxy Statement/Prospectus and will
promptly prepare and file with the OCC its proxy materials,
incorporating the Joint Proxy Statement/Prospectus, for the
purpose of submitting the principal terms of the Merger
(including the Amendment, as described in Section 3.3.d. hereof),
this Agreement and the Merger Agreement to the shareholders of
SRNB for approval. The Joint Proxy Statement/Prospectus in
definitive form is expected to serve as the prospectus to be
included in the NVBancorp Registration Statement. NVBancorp and
SRNB shall each provide promptly to the other such information
concerning its business and financial condition and affairs as
may be required or appropriate for inclusion in the NVBancorp
Registration Statement or the Joint Proxy Statement/Prospectus or
the SRNB proxy materials, and shall cause its counsel and
auditors to cooperate with the other's counsel and auditors in
the preparation of the NVBancorp Registration Statement and the
Joint Proxy Statement/Prospectus and the SRNB proxy materials.
b. Effectiveness of Registration Statement.
NVBancorp and SRNB shall use their best efforts to have the
NVBancorp Registration Statement and any amendments or
supplements thereto declared effective under the 1933 Act as soon
as practicable, and thereafter NVBancorp and SRNB shall
distribute the Joint Proxy Statement/Prospectus to holders of
their respective common stock in accordance with applicable laws
and the Articles of Incorporation and Bylaws of each.
c. Sales and Resales of Common Stock. NVBancorp
shall not be required to maintain the effectiveness of the
NVBancorp Registration Statement for the purpose of sale or
resale of the NVBancorp Shares by any person.
d. Rule 145. Securities representing NVBancorp
Shares issued to affiliates of SRNB (as determined by counsel to
NVBancorp and SRNB) under Rule 145 of the 1933 Act pursuant to
the Merger Agreement may be subject to stop transfer orders and a
restrictive legend which confirm and state that such securities
representing NVBancorp Shares have been issued or transferred to
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the registered holder as the result of a transaction to which
Rule 145 under the 1933 Act applies, and that such securities may
not be sold, hypothecated, transferred or assigned, and the
issuer or its transfer agent shall not be required to give effect
to any attempted sale, hypothecation, transfer or assignment,
except (i) pursuant to a then current effective registration
statement under the 1933 Act, (ii) in a transaction permitted by
Rule 145 as to which the issuer has, in the opinion of its
counsel, received reasonably satisfactory evidence of compliance
with the provisions of Rule 145, or (iii) in a transaction which,
in the opinion of counsel satisfactory to the issuer or as
described in a "no action" or interpretive letter from the staff
of the Securities and Exchange Commission, is not required to be
registered under the 1933 Act.
7. CONDITIONS TO THE OBLIGATIONS OF NVBancorp.
The obligations of NVBancorp under this Agreement are, at
its option, subject to fulfillment at or prior to the Effective
Time of the Merger of each of the following conditions; provided,
however, that any one or more of such conditions may be waived by
the Board of Directors of NVBancorp at any time at or prior to
the Effective Time of the Merger:
a. Representations and Warranties. The
representations and warranties of SRNB in Section 4 hereof shall
be true and correct in all material respects on and as of the
date of this Agreement (except to the extent that a
representation or warranty is qualified as set forth in the SRNB
Disclosure Schedule corresponding in number with the applicable
section of such representation or warranty), the Closing Date and
the Effective Time of the Merger, with the same effect as though
such representations and warranties had been made on and as of
each such date or time except as to any representation or
warranty which specifically relates to an earlier date or time.
b. Compliance and Performance Under Agreement. SRNB
shall have performed and complied in all material respects with
all terms, agreements, covenants and conditions of this Agreement
and the Merger Agreement required to be performed or complied
with by it at or prior to the Effective Time of the Merger.
c. Material Adverse Change. No material adverse
change shall have occurred since June 30, 1999, in the business,
financial condition, results of operations or assets of SRNB.
Other than as set forth in the SRNB Disclosure Schedule, SRNB
shall not be a party to or threatened with, and to the best of
SRNB's knowledge there is no reasonable basis for, any legal
action or other proceeding before any court, any arbitrator of
any kind or any government agency. No material adverse change
shall have occurred as a result of any subsequent legal actions
or proceedings, or any subsequent developments in the legal
actions or proceedings as set forth in the SRNB Disclosure
Schedule, which in the reasonable judgment of NVBancorp, could
have a material adverse effect on the business, financial
condition, results of operations or assets of SRNB.
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d. Approval of Agreement. The principal terms of the
Merger, this Agreement and the Merger Agreement shall have been
duly approved by (i) the affirmative vote or consent of the
holders of a two-thirds majority of the outstanding SRNB Shares
and (ii) the affirmative vote or consent of the holders of a
majority of the outstanding NVBancorp Shares.
e. Officer's Certificate. NVBancorp shall have
received a certificate, dated the Effective Date, signed on
behalf of SRNB by its President and Chief Financial Officer and
its Executive Vice President and Branch Administrator, in
substantially the form delivered to NVBancorp with the SRNB
Disclosure Schedule.
f. Opinion of Counsel. McCutchen, Doyle, Brown &
Enersen LLP, counsel to SRNB, shall have delivered to NVBancorp
its opinion dated the Effective Date in form and substance
acceptable to NVBancorp and its counsel.
g. Absence of Proceedings. No legal, administrative,
arbitration, investigatory or other proceeding by any government
agency or regulatory authority shall have been instituted or
threatened to restrain or prohibit the Merger or the transactions
contemplated by this Agreement.
h. Effectiveness of Registration Statement. The
NVBancorp Registration Statement and any amendments or
supplements thereto shall have become effective under the 1933
Act, no stop order suspending the effectiveness of such
Registration Statement shall be in effect and no proceedings for
such purpose shall have been initiated or threatened by or before
the Commission and the NVBancorp Shares registered thereby shall
have received all state securities and "blue sky" permits or
approvals required to consummate the transactions contemplated by
this Agreement and the Merger Agreement.
i. Government Approvals. All Government Approvals
shall be in effect, and all conditions or requirements prescribed
by law or by any such Approvals shall have been satisfied;
provided, however, that no Government Approval shall be deemed to
have been received if it shall require the divestiture or
cessation of any of the present businesses or operations
conducted by any of the parties hereto or shall impose any other
condition or requirement, which condition or requirement
NVBancorp in its reasonable judgment shall deem to be materially
burdensome (in which case NVBancorp shall promptly notify SRNB).
For purposes of this agreement no condition or requirement shall
be deemed to be "materially burdensome" if such condition or
requirement does not materially differ from conditions or
requirements regularly imposed in orders approving transactions
of the type contemplated by this Agreement and compliance with
such condition or requirement would not:
(i) require the taking of any action materially
inconsistent with the manner in which NVBancorp, NVB or
SRNB has conducted its business previously;
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(ii) have a material adverse effect on the
business, financial condition or results of operations
of NVBancorp, NVB or SRNB; or
(iii) preclude satisfaction of any of the
conditions to consummation of the transactions
contemplated by this Agreement.
j. Tax Opinion. McCutchen, Doyle, Brown & Enersen
LLP shall have delivered to NVBancorp and SRNB a tax opinion
subject to customary assumptions and exceptions included in such
opinions and the prior delivery of certificates from SRNB and
NVBancorp, substantially to the effect that under federal income
tax law and California income and franchise tax law:
(i) the Merger will not result in any recognized
gain or loss to NVBancorp or SRNB;
(ii) except for any cash received in lieu of any
fractional share, no gain
or loss will be recognized by holders of SRNB Shares
who receive NVBancorp Shares in exchange for the SRNB
Shares which they hold;
(iii) the holding period of NVBancorp Shares
exchanged for SRNB Shares will include the holding
period of the SRNB Shares for which they are exchanged,
assuming the SRNB Shares are capital assets in the
hands of the holder thereof at the Effective Date;
(iv) the basis of the NVBancorp Shares received
in the exchange will be the same as the basis of the
SRNB Shares for which they are exchanged, less any
basis attributable to fractional shares for which cash
is received; and
(v) an SRNB shareholder who dissents to the
Merger and receives cash for his or her SRNB Shares
will be treated as having received a distribution in
redemption of his or her SRNB Shares, subject to the
provisions and limitations of Section 302 of the IRC.
k. Accountant's Comfort Letters. On or prior to the
date of effectiveness of the NVBancorp Registration Statement,
NVBancorp shall have received a letter addressed to NVBancorp
from Deloitte & Touche LLP, independent public accountants for
SRNB, in form and substance satisfactory to NVBancorp and its
counsel and customary for "comfort" letters prepared in
accordance with the provisions of Statement of Accounting
Standards No. 71, Interim Financial Information. NVBancorp shall
also have received from Deloitte & Touche LLP, a "comfort" letter
dated the Effective Date, in form and substance satisfactory to
NVBancorp and its counsel, as to such matters, as of a specified
date not more than five (5) business days prior to the Effective
Date, as NVBancorp may reasonably request.
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l. Dissenting Shares. Holders of not more than ten
percent (10%) of the outstanding SRNB Shares and NVBancorp Shares
shall have perfected dissenter's rights pursuant to 12 U.S.C.
215a (by voting against the Merger at the SRNB meeting of
shareholders or by giving notice in writing at or prior to such
meeting that he or she dissents from the Merger and thereafter
submitting a timely request for the value of his or her SRNB
Shares in the manner required by the National Bank Act and the
rules and regulations of the OCC) and pursuant to Chapter 13 of
the California General Corporation Law, respectively.
m. Unaudited Financials. Not later than five (5)
business days prior to the Effective Date, SRNB shall have
furnished NVBancorp a copy of its most recently prepared
unaudited month-end consolidated financial statements, including
a balance sheet and statement of income of SRNB, for the month
ending at least ten (10) business days prior to the Effective
Date.
n. Affiliate Agreements. NVBancorp shall have
received signed affiliate agreements on or before the date of
mailing the Joint Proxy Statement/Prospectus to the shareholders
of SRNB and NVBancorp, from each person who, in the opinion of
SRNB's and NVBancorp's counsel, might be deemed to be an
affiliate of SRNB or NVBancorp under Rule 144 or 145 of the 1933
Act. Said agreements will include provisions restricting certain
actions by an affiliate related to SRNB Shares or NVBancorp
Shares, including the sale, purchase, acquisition or transfer of
SRNB Shares or NVBancorp Shares in a manner which may render
pooling-of-interests accounting treatment unavailable in the
Merger, and shall be substantially in the form attached hereto as
Exhibit C.
o. Closing Documents. NVBancorp shall have received
such certificates and other closing documents as counsel for
NVBancorp shall reasonably request.
p. Consents. SRNB shall have received, or NVBancorp
shall have satisfied itself that SRNB will receive, all consents
of third parties as may be required including consents of other
parties to and required by material mortgages, notes, leases,
franchises, agreements, licenses and permits applicable to SRNB,
in each case in form and substance reasonably satisfactory to
NVBancorp and its counsel, and no such consent or license or
permit shall have been withdrawn or suspended.
q. Fairness Opinion. The Board of Directors of
NVBancorp shall have received an opinion of Alex Sheshunoff &
Co., dated the date of this Agreement and the date of mailing or
a date within three (3) days prior to the date of mailing the
Joint Proxy Statement/Prospectus, to the effect that the
Conversion Ratio in the Merger is fair, from a financial point of
view, to NVBancorp shareholders, and such opinion shall not have
been withdrawn by the Effective Time of the Merger.
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r. Accounting Treatment. NVBancorp shall have
received a letter from Deloitte & Touche LLP, subject to
customary qualifications and receipt of such certificates as may
be reasonable and customary in connection with such letters,
satisfactory in form and substance to NVBancorp and its counsel,
to the effect that the Merger shall qualify for the pooling-of-
interests method of accounting in accordance with generally
accepted accounting principles, plus a copy of the letter to SRNB
from Deloitte & Touche LLP as described in Section 8.r. hereof.
There shall have been no determination by any court, tribunal,
regulatory authority or other government agency, that the Merger
fails or will fail to qualify for pooling-of-interests accounting
treatment.
s. Shareholder Agreements. NVBancorp and SRNB shall
have received signed shareholder agreements from members of the
Boards of Directors and the executive officers of NVBancorp and
SRNB on or before the date of mailing the Joint Proxy
Statement/Prospectus, pursuant to which each such person in their
capacity as a shareholder commits to vote their NVBancorp Shares
or SRNB Shares in favor of the Merger and the transactions
contemplated thereby and pursuant to this Agreement and the
Merger Agreement, and to recommend to shareholders, subject to
the exercise of fiduciary duties, that they vote in favor of the
Merger and the transactions contemplated thereby and pursuant to
this Agreement and the Merger Agreement. Said agreements shall
be substantially in the form attached hereto as Exhibit D.
t. Performance Tests. As of the Determination Date,
the Closing Date and the Effective Date, SRNB shall have (i)
total shareholders' equity and leverage, tier 1 and total risk-
based capital ratios, respectively, in amounts required to comply
with the "well capitalized" category of applicable federal
banking regulations, and (ii) total reserves for losses on
outstanding loans shall be in compliance with the SRNB loan loss
policy and procedures described in Section 3.2.i. hereof and at a
level which, in the reasonable determination of NVBancorp, are
adequate for regulatory purposes and for purposes of generally
accepted accounting principles.
u. Compliance with Consent Agreement. SRNB shall be
in substantial compliance in all material respects with its
obligations under the Consent Agreement.
8. CONDITIONS TO THE OBLIGATIONS OF SRNB.
The obligations of SRNB under this Agreement are, at its
option, subject to the fulfillment at or prior to the Effective
Time of the Merger of each of the following conditions provided,
however, that any one or more of such conditions may be waived by
the Board of Directors of SRNB at any time at or prior to the
Effective Time of the Merger:
a. Representations and Warranties. The
representations and warranties of NVBancorp in Section 5 hereof
shall be true and correct in all material respects on and as of
the date of this Agreement (except to the extent that a
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representation or warranty is qualified as set forth in the
NVBancorp Disclosure Schedule corresponding in number with the
applicable section of such representation or warranty), the
Closing Date and the Effective Time of the Merger, with the same
effect as though such representations and warranties had been
made on and as of each such date or time except as to any
representation or warranty which specifically relates to an
earlier date or time.
b. Compliance and Performance Under Agreement.
NVBancorp shall have performed and complied in all material
respects with all terms, agreements, covenants and conditions of
this Agreement and the Merger Agreement required to be performed
or complied with by NVBancorp at or prior to the Effective Time
of the Merger.
c. Material Adverse Change. No material adverse
change shall have occurred since June 30, 1999, in the business,
financial condition, results of operations or assets of NVBancorp
and NVB taken as a whole, and NVBancorp shall not be a party to
or threatened with, and to the best of NVBancorp's knowledge
there is no reasonable basis for, any legal action or other
proceeding before any court, any arbitrator of any kind or any
government agency, which legal action or proceeding, in the
reasonable judgment of SRNB, could have a material adverse effect
on the business, financial condition, results of operations or
assets of NVBancorp and NVB taken as a whole.
d. Approval of Agreement. The principal terms of the
Merger, this Agreement and the Merger Agreement shall have been
duly approved by (i) the affirmative vote or consent of the
holders of a majority of the outstanding NVBancorp Shares and
(ii) the affirmative vote or consent of the holders of a two
thirds majority of the outstanding SRNB Shares.
e. Officer's Certificate. SRNB shall have received a
certificate, dated the Effective Date, signed on behalf of
NVBancorp by its President and its Chief Financial Officer, in
substantially the form delivered to SRNB with the NVBancorp
Disclosure Schedule.
f. Opinion of Counsel. Coudert Brothers, NVBancorp's
counsel, shall have delivered to SRNB its opinion dated the
Effective Date in form and substance acceptable to SRNB and its
counsel.
g. Absence of Proceedings. No legal, administrative,
arbitration, investigatory or other proceeding by any government
agency or regulatory authority shall have been instituted or
threatened to restrain or prohibit the Merger or the transactions
contemplated by this Agreement.
h. Effectiveness of Registration Statement. The
NVBancorp Registration Statement and any amendments or
supplements thereto shall have become effective under the 1933
Act, no stop order suspending the effectiveness of such
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Registration Statement shall be in effect and no proceedings for
such purpose shall have been initiated or threatened by or before
the Commission and the NVBancorp Shares registered thereby shall
have received all state securities and "blue sky" permits or
approvals required to consummate the transactions contemplated by
this Agreement and the Merger Agreement.
i. Government Approvals. All Government Approvals
shall be in effect, and all conditions or requirements prescribed
by law or by any such Approvals shall have been satisfied;
provided, however, that no Government Approval shall be deemed to
have been received if it shall require the divestiture or
cessation of any of the present businesses or operations
conducted by any of the parties hereto or shall impose any other
condition or requirement, which condition or requirement SRNB in
its reasonable judgment shall deem to be materially burdensome
(in which case SRNB shall promptly notify NVBancorp). For
purposes of this agreement no condition or requirement shall be
deemed to be "materially burdensome" if such condition or
requirement does not materially differ from conditions or
requirements regularly imposed in orders approving transactions
of the type contemplated by this Agreement and compliance with
such condition or requirement would not:
(i) require the taking of any action materially
inconsistent with the manner in which SRNB, NVBancorp
or NVB has conducted its business previously;
(ii) result in a material adverse change on the
business, financial condition or results of operations
of SRNB, NVBancorp or NVB; or
(iii) preclude satisfaction of any of the
conditions to consummation of the transactions
contemplated by this Agreement.
j. Tax Opinion. McCutchen, Doyle, Brown & Enersen
LLP shall have delivered to NVBancorp and SRNB a tax opinion
subject to customary assumptions and exceptions included in such
opinions and the prior delivery of certificates from SRNB and
NVBancorp, substantially to the effect that under federal income
tax law and California income and franchise tax law:
(i) the Merger will not result in any recognized
gain or loss to SRNB, NVBancorp;
(ii) except for any cash received in lieu of any
fractional share, no gain or loss will be recognized by
holders of SRNB Shares who receive NVBancorp Shares in
exchange for the SRNB Shares which they hold;
(iii) the holding period of NVBancorp Shares
exchanged for SRNB Shares will include the holding
period of the SRNB Shares for which they are exchanged,
assuming the SRNB Shares are capital assets in the
hands of the holder thereof at the Effective Date;
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(iv) the basis of the NVBancorp Shares received in
the exchange will be the same as the basis of the SRNB
Shares for which they are exchanged, less any basis
attributable to fractional shares for which cash is
received; and
(v) an SRNB shareholder who dissents to the
Merger and receives cash for his or her SRNB Shares
will be treated as having received a distribution in
redemption of his or her SRNB Shares, subject to the
provisions and limitations of Section 302 of the IRC.
k. Accountant's Comfort Letters. On or prior to the
date of effectiveness of the NVBancorp Registration Statement,
SRNB shall have received a letter addressed to SRNB from Deloitte
& Touche LLP, independent public accountants for NVBancorp, in
form and substance satisfactory to SRNB and its counsel and
customary for "comfort" letters prepared in accordance with the
provisions of Statement of Accounting Standards No. 71, Interim
Financial Information. SRNB shall also have received from
Deloitte & Touche LLP a "comfort" letter dated the Effective
Date, in form and substance satisfactory to SRNB and its counsel,
as to such matters, as of a specified date not more than five (5)
business days prior to the Effective Date, as SRNB may reasonably
request.
l. Dissenting Shares. Holders of not more than ten
percent (10%) of the outstanding SRNB Shares and NVBancorp Shares
shall have perfected dissenter's rights pursuant to 12 U.S.C.
215a (by voting against the Merger at the SRNB meeting of
shareholders or by giving notice in writing at or prior to such
meeting that he or she dissents from the Merger and thereafter
submitting a timely request for the value of his or her SRNB
Shares in the manner required by the National Bank Act and the
rules and regulations of the OCC) and pursuant to Chapter 13 of
the California General Corporation Law, respectively.
m. Unaudited Financials. Not later than five (5)
business days prior to the Effective Date, NVBancorp shall have
furnished SRNB a copy of its most recently prepared unaudited
month-end consolidated financial statements, including a balance
sheet and statement of income of NVBancorp, for the month ending
at least ten (10) business days prior to the Effective Date.
n. Affiliate Agreements. SRNB shall have received
signed affiliate agreements on or before the Document Delivery
Date, from each person who, in the opinion of SRNB's and
NVBancorp's counsel, might be deemed to be an affiliate of SRNB
or NVBancorp under Rule 144 or 145 of the 1933 Act. Said
agreements will include provisions restricting certain actions by
an affiliate related to SRNB Shares or NVBancorp Shares,
including the sale, purchase, acquisition or transfer of SRNB
Shares or NVBancorp Shares in a manner which may render pooling-
of-interests accounting treatment unavailable in the Merger, and
shall be substantially in the form attached hereto as Exhibit E.
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o. Closing Documents. SRNB shall have received such
certificates and other closing documents as counsel for SRNB
shall reasonably request.
p. Consents. NVBancorp shall have received, or SRNB
shall have satisfied itself that NVBancorp will receive, all
consents of third parties as may be required including consents
of other parties to and required by material mortgages, notes,
leases, franchises, agreements, licenses and permits applicable
to NVBancorp, in each case in form and substance reasonably
satisfactory to SRNB, and no such consent or license or permit
shall have been withdrawn or suspended.
q. Fairness Opinion. The Board of Directors of SRNB
shall have received an opinion of Hoefer & Arnett Incorporated,
dated the date of this Agreement and the date of mailing or a
date within three (3) days prior to the date of mailing the Joint
Proxy Statement/Prospectus, to the effect that the Conversion
Ratio in the Merger is fair, from a financial point of view, to
SRNB and its shareholders, and such opinion shall not have been
withdrawn by the Effective Time of the Merger.
r. Accounting Treatment. SRNB shall have received a
letter from Deloitte & Touche LLP, subject to customary
qualifications and receipt of such Certificates as may be
reasonable and customary in connection with such letters,
satisfactory in form and substance to SRNB and its counsel, to
the effect that no conditions exist that would preclude SRNB from
being a party to a transaction intended to qualify for the
pooling-of-interests method of accounting in accordance with
generally accepted accounting principles. There shall have been
no determination by any court, tribunal, regulatory authority or
other government agency, that the Merger fails or will fail to
qualify for pooling-of-interests accounting treatment.
s. Shareholder Agreements. SRNB and NVBancorp shall
have received signed shareholder agreements from members of the
Boards of Directors and the executive officers of SRNB and
NVBancorp on or before the Document Delivery Date, pursuant to
which each such person in their capacity as a shareholder commits
to vote their SRNB Shares or NVBancorp Shares in favor of the
Merger and the transactions contemplated thereby and pursuant to
this Agreement and the Merger Agreement, and to recommend to
shareholders, subject to the exercise of fiduciary duties, that
they vote in favor of the Merger and the transactions
contemplated thereby and pursuant to this Agreement and the
Merger Agreement. Said agreements shall be substantially in the
form attached hereto as Exhibit F.
9. CLOSING.
a. Closing Date. On the third business day following
receipt of all required regulatory approvals (not including any
applicable waiting periods), the parties shall select a proposed
date for the consummation of the Merger (the "Proposed Closing
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Date") which the parties shall use their reasonable best efforts
to cause to be the Closing Date. The closing (the "Closing")
shall, unless another date, time or place is agreed to in writing
by NVBancorp and SRNB, be held at the offices of Coudert
Brothers, 303 Almaden Boulevard, Fifth Floor, San Jose,
California 95110, at a time mutually agreed upon between the
parties and on a date as soon as practicable but not less than
fifteen (15) days following the last to occur of (i) the
expiration of any waiting periods under applicable law or
regulation, and (ii) the date on which all conditions to the
obligations of the parties to consummate the Merger have been
satisfied (the "Closing Date").
b. Delivery of Documents. At the Closing, the
parties shall use their respective best efforts to deliver or
cause to be delivered the opinions, certificates and other
documents required to be delivered by this Agreement.
c. Filings. At the Closing, NVBancorp and SRNB shall
instruct their respective representatives to make or confirm such
filings as shall be required in the opinion of counsel to
NVBancorp and SRNB to give effect to the Merger.
10. POST-CLOSING MATTERS.
NVBancorp will prepare and file with the Commission on the
appropriate form as soon as practicable the results of combined
operations of NVBancorp, NVB and the Resulting Bank for the first
full calendar quarter after the Effective Date.
11. EXPENSES.
Each party hereto agrees to pay as incurred its expenses
incident to the Merger and transactions contemplated pursuant to
this Agreement in compliance with generally accepted accounting
principles, without right of reimbursement from the other party
and whether or not the transactions contemplated by this
Agreement or the Merger Agreement shall be consummated, relating
to the payment of costs and expenses incurred by such party
incident to the performance of its obligations under this
Agreement and the Merger Agreement, including without limitation,
costs incident to the preparation of the Merger Agreement, this
Agreement, the NVBancorp Registration Statement and Joint Proxy
Statement/Prospectus (including the audited financial statements
of the parties contained therein) and incident to the
consummation of the Merger and of the other transactions
contemplated herein and in the Merger Agreement, including the
fees and disbursements of counsel, accountants, consultants and
financial advisers employed by such party in connection
therewith. Each party shall bear the costs of distributing the
Joint Proxy Statement/Prospectus and other proxy materials and
information relating to these transactions to its shareholders
and of conducting a meeting of its shareholders. Notwithstanding
the foregoing, each party shall pay one-half of (i) the printing
costs of the Registration Statement and the Joint Proxy
Statement/Prospectus, (ii) fees and costs related to obtaining a
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tax opinion and (iii) fees and costs related to obtaining a
letter from Deloitte & Touche LLP, regarding pooling-of-interests
accounting treatment; provided, however, that in the event of a
termination pursuant to Section 12.b.(v) or Section 12.b.(xi)
hereof, by reason of a failure to fulfill the condition in
Section 7.l. or Section 8.l., respectively, then each party shall
pay one-half of items (i), (ii) and (iii) set forth above in this
Section 11 plus one-half of (iv) all fees and costs payable
pursuant to state "blue sky" securities laws, (v) the fee
required to be paid to the Commission to register the NVBancorp
Shares, (vi) the fees and costs related to any amendments to the
NVBancorp 1998 Employee Stock Incentive Plan or for the
preparation of a new NVBancorp Stock Option Plan including the
cost of obtaining any permits or approvals of government agencies
and regulatory authorities and applicable filing fees and (vii)
the fees related to preparation and filing of applications with
government agencies or regulatory authorities for approval of the
transactions contemplated by the Merger, this Agreement and the
Merger Agreement. The fees and costs related to the listing of
the NVBancorp Shares with the Nasdaq Stock Market for trading on
the Nasdaq National Market shall be paid by NVBancorp.
12. AMENDMENT; TERMINATION.
a. Amendment. This Agreement and the Merger
Agreement may be amended by NVBancorp and SRNB at any time prior
to the Effective Time of the Merger without the approval of the
shareholders of NVBancorp and shareholders of SRNB with respect
to any of their terms except the terms relating to the Conversion
Ratio or the form or amount of consideration to be delivered to
the SRNB shareholders in the Merger or otherwise as required by
applicable law.
b. Termination. This Agreement and the Merger
Agreement may be terminated as follows:
(i) By the mutual consent of the Boards of
Directors of NVBancorp and SRNB at any time prior to
the Effective Time of the Merger.
(ii) By the Boards of Directors of NVBancorp or
SRNB upon the failure of the shareholders of NVBancorp
or SRNB to give the requisite approval of this
Agreement and the transactions contemplated hereby.
(iii) By the Boards of Directors of NVBancorp or
SRNB upon the expiration of thirty (30) days after any
government agency or regulatory authority denies or
refuses to grant any approval, consent or qualification
required to be obtained in order to consummate the
transactions contemplated by this Agreement unless,
within said thirty (30) day period after such denial or
refusal, NVBancorp and SRNB agree to appeal such denial
or refusal or agree to amend and re-submit the
application to the government agency or regulatory
authority that has denied or refused to grant the
approval, consent or qualification requested.
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(iv) By the Board of Directors of NVBancorp
within five (5) business days after receipt by
NVBancorp of the SRNB Disclosure Schedule.
(v) By the Board of Directors of NVBancorp on
or after the Termination Date, if any of the conditions
in Section 7 to which the obligations of NVBancorp are
subject have not been fulfilled.
(vi) By the Board of Directors of NVBancorp if
a material adverse change shall have occurred since
June 30, 1999, in the business, financial condition,
results of operations or assets of SRNB.
(vii) By the Board of Directors of NVBancorp in
the event that SRNB or its affiliates enter into a
Business Combination.
(viii) By the Board of Directors of NVBancorp
upon the expiration of forty-five (45) days from
delivery of written notice by NVBancorp to SRNB of
SRNB's breach of or failure to satisfy any covenant or
agreement contained in this Agreement resulting in a
material impairment of the benefit reasonably expected
to be derived by NVBancorp and NVB from the performance
or satisfaction of such covenant or agreement (provided
that such breach has not been waived by NVBancorp or
cured by SRNB prior to expiration of such forty-five
(45) day period).
(ix) By the Board of Directors of SRNB within
five (5) business days after receipt by SRNB of the
NVBancorp Disclosure Schedule.
(x) By the Board of Directors of SRNB if
NVBancorp fails to comply with the provisions of
Section 3.1.g.
(xi) By the Board of Directors of SRNB on or
after the Termination Date, if any of the conditions
contained in Section 8 to which the obligations of SRNB
are subject have not been fulfilled.
(xii) By the Board of Directors of SRNB if a
material adverse change shall have occurred since June
30, 1999 in the business, financial condition, results
of operations or assets of NVBancorp and NVB taken as a
whole.
(xiii) By the Board of Directors of SRNB upon the
expiration of forty-five (45) days from delivery of
written notice by SRNB to NVBancorp of NVBancorp's
breach of or failure to satisfy any covenant or
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agreement contained in this Agreement resulting in a
material impairment of the benefit reasonably expected
to be derived by SRNB from the performance or
satisfaction of such covenant or agreement (provided
that such breach has not been waived by SRNB or cured
by NVBancorp prior to expiration of such forty-five
(45) day period).
(xiv) By the Board of Directors of NVBancorp in
the event that SRNB shall fail to deliver or cause to
be delivered to NVBancorp the following signed
documents, in form and substance reasonably acceptable
to NVBancorp and its counsel: (a) the affiliate
agreement to be delivered pursuant to Section 7(n)
hereof; and (b) the shareholder agreements to be
delivered pursuant to Section 7(s) hereof; and (iii)
the form of the following documents, in form and
substance reasonably acceptable to NVBancorp and its
counsel: (a) the officer's certificate to be delivered
pursuant to Section 7(e) hereof; and (b) the opinion of
counsel to SRNB to be delivered pursuant to Section
7(f) hereof.
(xv) By the Board of Directors of SRNB in the
event that NVBancorp shall fail to deliver or cause to
be delivered to SRNB the following signed documents, in
form and substance reasonably acceptable to SRNB and
its counsel: (a) the affiliate agreement to be
delivered pursuant to Section 8(n) hereof; and (b) the
shareholder agreements to be delivered pursuant to
Section 8(s) hereof; and (iii) the form of the
following documents, in form and substance reasonably
acceptable to SRNB and its counsel: (a) the officer's
certificate to be delivered pursuant to Section 8(e)
hereof; and (b) the opinion of counsel to NVBancorp to
be delivered pursuant to Section 8(f) hereof.
(xvi) If the Average Closing Price as of the
Determination Date shall be less than $10.00, by the
Board of Directors of SRNB, within two (2) trading
(business) days after the Determination Date. If SRNB
does not give timely notice of termination, then the
Conversion Ratio shall be 1.450 and this Agreement
shall remain in effect in accordance with its terms.
c. Termination Date. This Agreement shall be
terminated if the Closing shall not have occurred on or before
March 31, 2000 or such other date approved by the Boards of
Directors of NVBancorp, SRNB and the Interim Bank; provided,
however, that if the only conditions to the Closing which remain
unsatisfied at March 31, 2000 are the receipt of the Government
Approvals or the expiration of any waiting periods under
applicable law or regulation, the Closing Date shall be
automatically extended to May 31, 2000, or such other date as the
parties may mutually agree upon (the "Termination Date"), for the
purpose of obtaining such Government Approvals or the expiration
of such waiting periods.
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d. Notice. The power of termination hereunder may be
exercised by NVBancorp or SRNB, as the case may be, only by
giving written notice of termination to NVBancorp or SRNB, as
applicable, signed on behalf of each such party by its Chairman
of the Board or President.
e. Effect of Termination; Liquidated Damages.
(i) If this Agreement is terminated for any
reason, the Merger Agreement shall automatically
terminate. Termination of this Agreement shall not
terminate or affect the obligations of the parties to
pay expenses as provided in Section 11, to maintain the
confidentiality of the each party's information
obtained pursuant to this Agreement and the
Confidentiality Agreement between the parties dated
June 22, 1999, or the provisions of this Section 12(e)
or the applicable provisions of Section 14.
(ii) If NVBancorp terminates this Agreement
pursuant to Section 12.b.(vii), or pursuant to Section
12.b.(viii) or Section 12.b.(xiv) as a result of SRNB's
willful or deliberate failure to comply with Section
12.b.(viii) or Section 12.b.(xiv), which compliance was
not beyond the reasonable control of SRNB, SRNB shall
pay to NVBancorp, on demand, the sum of Two Million
Dollars ($2,000,000). In each such case, the amount
indicated shall be deemed liquidated damages for
expenses incurred and the lost opportunity cost for
time devoted to the transactions contemplated by this
Agreement.
(iii) If SRNB terminates this Agreement pursuant
to Section 12.b.(x), or pursuant to Section 12.b.(xiii)
or Section 12.b.(xv) as a result of NVBancorp's willful
or deliberate failure to comply with Section
12.b.(xiii) or Section 12.b.(xv), which compliance was
not beyond the reasonable control of NVBancorp, then
NVBancorp shall pay to SRNB, on demand, the sum of Two
Million Dollars ($2,000,000). In each such case, the
amount indicated shall be deemed liquidated damages for
expenses incurred and the lost opportunity cost for
time devoted to the transactions contemplated by this
Agreement.
13. INDEMNIFICATION.
13.1. By NVBancorp. NVBancorp agrees to defend,
indemnify and hold harmless SRNB, its respective officers and
directors, attorneys, accountants, and each person who controls
SRNB within the meaning of the 1933 Act from and against any
costs, damages, liabilities and expenses of any nature, insofar
as such costs, damages, liabilities and expenses arise out of or
are based upon any untrue statement or alleged untrue statement
of any material fact contained in the NVBancorp Registration
Statement and Joint Proxy Statement/Prospectus or any amendments
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or supplements thereto, or arise out of or are based upon the
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 NVBancorp shall
be liable in any such case only to the extent that any such cost,
damage, liability or expense arises out of or is based upon any
untrue statement or alleged untrue statement or omission or
alleged omission made in said Registration Statement and Joint
Proxy Statement/Prospectus or amendments or supplements thereto,
in reliance upon and in conformity with information provided by
and with respect to NVBancorp used in preparing the Registration
Statement. If and to the extent such agreement to indemnify may
be unenforceable for any reason, NVBancorp shall make the maximum
contribution to the payment and satisfaction of each of the
indemnified liabilities which may be permitted under applicable
law.
13.2. By SRNB. SRNB agrees to defend, indemnify and
hold harmless NVBancorp, its officers and directors, attorneys,
accountants, and each person who controls NVBancorp within the
meaning of the 1933 Act from and against any costs, damages,
liabilities and expenses of any nature, insofar as such costs,
damages, liabilities and expenses arise out of or are based upon
any untrue statement or alleged untrue statement of any material
fact contained in the NVBancorp Registration Statement and Joint
Proxy Statement/Prospectus or any amendments or supplements
thereto, or arise out of or are based upon the 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 SRNB shall be liable in any
such case only to the extent that any such cost, damage,
liability or expense arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged
omission made in said Registration Statement and Joint Proxy
Statement/Prospectus or amendments or supplements thereto, in
reliance upon and in conformity with information provided by and
with respect to SRNB used in preparing the Registration Statement
and Joint Proxy Statement/Prospectus. If and to the extent such
agreement to indemnify may be unenforceable for any reason, SRNB
shall make the maximum contribution to the payment and
satisfaction of each of the indemnified liabilities which may be
permitted under applicable law.
13.3. Notification. Promptly after receipt by any party
to be indemnified pursuant to this sub-article (the "Indemnified
Party") of notice of (i) any claim or (ii) the commencement of
any action or proceeding, the Indemnified Party will give the
other party (the "Indemnifying Party") written notice of such
claim or the commencement of such action or proceeding. The
Indemnifying Party shall have the right, at its option, to
compromise or defend, by its own counsel, any such matter
involving the Indemnified Party's asserted liability. In the
event that the Indemnifying Party shall undertake to compromise
or defend any such asserted liability, it shall promptly notify
the Indemnified Party of its intention to do so, and the
Indemnified Party agrees to cooperate fully with the Indemnifying
Party and its counsel in the compromise of, or defense against,
any such asserted liability. In any event, the Indemnifying
Party shall have the right to participate in the defense of such
asserted liability.
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14. MISCELLANEOUS.
a. Notices. Any notice or other communication required or
permitted under this Agreement shall be effective only if it is
in writing and delivered personally, or by Federal Express or
similar overnight courier, or by facsimile or sent by first class
United States mail, postage prepaid, registered or certified
mail, addressed as follows:
To NVBancorp: To SRNB:
North Valley Bancorp Six Rivers National Bank
880 E. Cypress Avenue 402 "F" Street
Redding, California 96002 Eureka, California 95501
Telephone: (530) 221-8400 Telephone: (707) 443-8400
Telecopier:(530) 222-1768 Telecopier: (707) 443-3631
With a copy to: With a copy to:
Coudert Brothers McCutchen, Doyle, Brown & Enersen
303 Almaden Blvd., Fifth Floor Three Embarcadero Center
San Jose, California 95110-2721 San Francisco, California 94111
Telephone: (408) 297-9982 Telephone: (415) 393-2000
Telecopier: (408) 297-3191 Telecopier:(415) 393-2286
or to such other address as either party may designate by notice
to the other, and shall be deemed to have been given upon
receipt.
b. Knowledge. Whenever the term "knowledge" or "to
the best knowledge" or words of similar import are used in this
Agreement in connection with a party's representations and
warranties, it shall mean the actual knowledge of a party after
due inquiry of a party's directors and executive officers.
c. Binding Agreement. This Agreement is binding upon
and is for the benefit of NVBancorp, the Interim Bank and SRNB
and their respective successors and permitted assigns. This
Agreement is not made for the benefit of any person, firm,
corporation or association not a party hereto, and no other
person, firm, corporation or association shall acquire or have
any right under or by virtue of this Agreement. No party may
assign this Agreement or any of its rights, privileges, duties or
obligations hereunder without the prior written consent of the
other party to this Agreement.
d. Material Adverse Effect. As used in this
Agreement, any reference to any event, change or effect being
"material" with respect to any entity means an event, change or
effect which is material in relation to the condition (financial
or otherwise), properties, assets, liabilities, businesses,
results of operations of such entity and its subsidiaries taken
as a whole, and the term "material adverse effect" means, with
respect to any entity, a material adverse effect (whether or not
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required to be accrued or disclosed under Statement of Financial
Accounting Standards No. 5 ("SFAS No. 5")) (i) on the condition
(financial or otherwise), properties, assets, liabilities,
businesses, results of operations of such entity and its
subsidiaries taken as a whole (but does not include any such
effect resulting from or attributable to any action or omission
by NVBancorp or SRNB or any subsidiary of either of them taken
with the prior written consent of the other parties hereto, in
contemplation of the transactions contemplated hereby), or (ii)
on the ability of such entity to perform its obligations
hereunder on a timely basis.
e. Survival of Representations and Warranties. No
investigation by NVBancorp or SRNB made before or after the date
of this Agreement shall affect the representations and warranties
which are contained in this Agreement and such representations
and warranties shall survive such investigation, provided that,
except with respect to covenants, agreements and indemnification
to be performed in whole or in part subsequent to the Effective
Time of the Merger (as to which the related representations and
warranties shall survive until their performance) which
covenants, agreements and indemnification shall survive the
Effective Time of the Merger, the representations, warranties,
covenants and agreements of NVBancorp and SRNB contained in this
Agreement shall terminate upon the Effective Time of the Merger.
f. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
California.
g. Attorneys' Fees. In any action at law or suit in
equity in relation to this Agreement, the prevailing party in
such action or suit shall be entitled to receive a reasonable sum
for its attorneys' fees and all other reasonable costs and
expenses incurred in such action or suit.
h. Entire Agreement; Severability. This Agreement
and the documents, certificates, agreements, letters, schedules
and exhibits attached or required to be delivered pursuant hereto
set forth the entire agreement and understandings of the parties
in respect of the transactions contemplated hereby, and supersede
all prior agreements, arrangements and understanding relating to
the subject matter hereof, excluding that certain Confidentiality
Agreement between the parties dated June 22, 1999. Each
provision of this Agreement shall be interpreted in a manner to
be effective and valid under applicable law, but if any provision
hereof shall be prohibited or ruled invalid under applicable law,
the validity, legality and enforceability of the remaining
provisions shall not, except as otherwise required by law, be
affected or impaired as a result of such prohibition or ruling.
i. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, NVBancorp and SRNB have caused this
Agreement and Plan of Reorganization and Merger to be signed by
their duly authorized officers as of the day and year first above
written.
NORTH VALLEY BANCORP SIX RIVERS NATIONAL BANK
By: /s/ Michael J. Cushman By: /s/ Michael W. Martinez
---------------------- ------------------------------
President and President and
Chief Executive Chief Executive
Officer Officer
By: /s/ J. M. Wells, Jr. By: /s/ Margie L. Plum
---------------------- ------------------------------
Secretary Executive Vice
President
and Branch Administrator
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ANNEX B
____________, 2000
Members of the Board of Directors
Six Rivers National Bank
402 F Street
Eureka, California 95501
Members of the Board:
You have requested our opinion as investment bankers as to the
fairness, from a financial point of view, to the holders of the outstanding
shares of Common Stock, $5.00 par value, of Six Rivers National Bank ("SRNB") of
the Conversion Ratio, as defined in Section 2.1. of the Agreement and Plan of
Reorganization and Merger dated as of October 3, 1999 (the "Agreement"), in the
proposed merger (the "Merger") of SRNB and North Valley Bancorp ("NVBancorp").
Hoefer & Arnett Incorporated, as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. Hoefer & Arnett Incorporated provides a full range of financial
advisory and securities services and, in the course of its normal trading
activities, may from time to time effect transactions and hold securities, of
SRNB or NVBancorp for its own account and for the accounts of customers. We are
familiar with SRNB having acted as its financial advisor in connection with the
Agreement.
In connection with this opinion, we have reviewed, among other things,
the Agreement; the Annual Report to Shareholders of SRNB and NVBancorp for the
years ended December 31, 1997 and 1998; the Annual Report on Form 10-K of SRNB
and NVBancorp for the years ended December 31, 1997 and 1998; certain interim
reports to shareholders and Quarterly Reports on Form 10-Q of SRNB and
NVBancorp; certain other communications from SRNB and NVBancorp to the their
respective shareholders; and certain internal financial analyses and forecasts
for SRNB and NVBancorp prepared by their respective managements including
forecasts for certain costs savings and revenue opportunities (the "Synergies")
expected to be achieved as a result of the Merger. We also have held discussions
with members of the senior management of SRNB and NVBancorp regarding the
strategic rationale for, and the potential benefits of, the Merger and the past
and current business operations, regulatory relationships, financial condition
and future prospects of their respective companies. In addition, we have
reviewed the reported price and trading activity for the shares of SRNB and
NVBancorp, compared certain financial and stock market information for SRNB and
NVBancorp with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the commercial banking industry and performed such
other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the
financial and other information reviewed by us and have assumed such accuracy
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and completeness for purposes of rendering this opinion. In that regard, we have
assumed, with your consent, that the financial forecasts, including, without
limitation, the Synergies and projections regarding under-performing and
non-performing assets and net charge-offs have been reasonably prepared on a
basis reflecting the best currently available judgments and estimates of SRNB
and NVBancorp and that such forecasts will be realized in the amounts and at the
times contemplated thereby. We are not experts in the evaluation of loan and
lease portfolios for purposes of assessing the adequacy of the allowances for
losses with respect thereto and have assumed, with your consent, that such
allowances for each of SRNB and NVBancorp are in the aggregate adequate to cover
all such losses. In addition, we have not reviewed individual credit files nor
have we made an independent evaluation or appraisal of the assets and
liabilities of SRNB, NVBancorp or any of their subsidiaries and we have not been
furnished with any such evaluation or appraisal. We also have assumed, with your
consent, that the Merger will be accounted for as a pooling of interests under
generally accepted accounting principles and that obtaining any necessary
regulatory approvals and third party consents for the Merger or otherwise will
not have a material adverse effect on SRNB, NVBancorp or the combined company
pursuant to the Merger. In addition, our opinion does not address the relative
merits of the Merger as compared to any alternative business transaction that
might be available to SRNB.
Our advisory services and the opinion expressed herein are provided for
the information and assistance of the board of directors of SRNB in connection
with its consideration of the Merger and such opinion does not constitute a
recommendation as to how any holder of shares of SRNB should vote with respect
to such transaction.
Based upon and subject to the foregoing and based upon such other
matters as we consider relevant, it is our opinion that as of the date hereof
the Conversion Ratio pursuant to the Agreement is fair from a financial point of
view to the holders of the outstanding shares of Common Stock of Six Rivers
National Bank.
Very truly yours,
HOEFER & ARNETT INCORPORATED
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ANNEX C
________________, 2000
Board of Directors
North Valley Bancorp
880 E. Cypress Avenue
Redding, California 96099-4630
Members of the Board:
North Valley Bancorp ("NVBancorp") and Six Rivers National Bank
("SRNB") entered into an Agreement and Plan of Reorganization and Merger dated
as of October 3, 1999 (the "Agreement"), that provides, among other things, for
the exchange of all of the capital stock of SRNB for the capital stock of
NVBancorp by means of a merger of SRNB with and into NVB Interim National Bank,
a subsidiary of NVBancorp (the "Merger"). Pursuant to the Agreement, each SRNB
shareholder will receive, in exchange for each share of SRNB Common Stock, the
number of shares of NVBancorp Common Stock determined in accordance with the
conversion ratio as more fully set forth in Section 2.1 of the Agreement (the
"Conversion Ratio"). Pursuant to the Agreement, the Conversion Ratio shall equal
1.45 shares of Common Stock of NVBancorp in exchange for one share of SRNB
Common Stock provided the Average Closing Price on the Determination Date of
NVBancorp Common Stock is not less than $10.00 per share and not more than
$12.49 per share. If the Average Closing Price is not less than $12.50 per share
and is not more than $15.00 per share, the Conversion Ratio shall be 1.40 shares
of Common Stock of NVBancorp in exchange for one share of SRNB Common Stock. If
the Average Closing Price is greater than $15.00 per share, the Conversion Ratio
shall be determined in accordance with the following formula: $21.00 + .56 x
(Average Closing Price minus $15.00) divided by Average Closing Price.
If the Average Closing Price on the Determination Date of NVBancorp
Common Stock shall be less than $10.00, NVBancorp or SRNB shall have the right
to terminate the Agreement pursuant to the terms and conditions set forth in
Section 12 of the Agreement.
You requested Alex Sheshunoff & Co. Investment Banking's
("Sheshunoff's") opinion, as to whether the Conversion Ratio is fair from a
financial point of view to NVBancorp Common Shareholders. In connection with our
opinion, Sheshunoff has: (i) reviewed a draft copy of the Agreement; (ii)
reviewed certain publicly available financial statements and other information
of NVBancorp and SRNB, respectively; (iii) reviewed certain estimates of cost
savings prepared by NVBancorp's management arising from the transaction; (iv)
analyzed the pro forma impact of the Merger on the combined company's earnings,
book value, dividends and tangible book value per share based upon assumptions
provided by NVBancorp's management, (v) discussed NVBancorp's past and current
operations, financial condition, and prospects with its executive management;
(vi) compared NVBancorp and SRNB from a financial point of view with certain
other companies which Sheshunoff deemed to be relevant; (vi) reviewed the
financial terms, to the extent publicly available, of certain comparable merger
transactions, (vii) reviewed reported market prices and historical trading
activity of NVBancorp's common stock and certain analysts' projections of
NVBancorp's potential 1999 and 2000 earnings per share; (viii) performed such
other analyses and examinations as Sheshunoff has deemed appropriate.
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Sheshunoff assumed and relied upon without independent verification the
accuracy and completeness of the information supplied or otherwise made
available to us by NVBancorp. Sheshunoff did not make an independent evaluation
of the assets or liabilities of SRNB nor NVBancorp. Sheshunoff did not perform
any due diligence review of either SRNB or NVBancorp and did not visit either
institution. Sheshunoff assumed that NVBancorp's budgets and financial forecasts
were reasonably prepared and reflect the best currently available estimates and
judgments of NVBancorp's management, as to its future financial performance.
Sheshunoff assumed such forecasts and projections will be realized in the
amounts and at the times contemplated thereby. In that regard, Sheshunoff
assumed, with NVBancorp's consent, that the financial forecasts, including,
without limitation, projected cost savings and projections regarding
under-performing and non-performing assets and net charge-offs had been
reasonably prepared on a basis reflecting the best then available judgments and
estimates of NVBancorp and SRNB and that such forecasts will be realized in the
amounts and at the times contemplated thereby. Sheshunoff makes no
representations or warranty that the financial forecasts and projections
prepared by NVBancorp will be realized in the amounts and at the times
forecasted and projected. Sheshunoff assumed that obtaining any necessary
regulatory approvals and third party consents for the Merger will not have an
adverse effect on NVBancorp, SRNB or the combined company. Sheshunoff has
further assumed that the Merger will be accounted for as a pooling-of-interests
under generally accepted accounting principals and that it will qualify as a
tax-free reorganization for U.S.
federal income tax purposes.
Sheshunoff is not an expert in the evaluation of loan portfolios for
the purpose of assessing the adequacy of the allowance for losses, and assumed
based upon NVBancorp's management representations that such allowances, for each
of the companies, are in the aggregate, adequate to cover such losses.
Sheshunoff did not review any individual credit files nor made any independent
evaluation, appraisal or physical inspection of the assets or individual
properties of SRNB or NVBancorp.
Sheshunoff did not assess, nor was it furnished with any assessments,
of SRNB's compliance with operational and regulatory standards for its data
processing and other systems compliance with the Year 2000 capability. If SRNB
is not able to bring its operations into compliance with the year 2000
capability, the fairness of the Conversion Ratio may be adversely impacted.
Sheshunoff's opinion is necessarily based on economic, market and other
conditions in effect on, and the information made available to it, as of the
date hereof. Events occurring after the date hereof could materially affect the
assumptions used in preparing this opinion. Sheshunoff assumed that there are no
material changes in SRNB's or NVBancorp's assets, financial condition, results
of operations, business or prospects since the respective dates of their last
financial statements reviewed by it, and that off-balance sheet activities will
not materially impact the future financial position or results of operation of
SRNB and NVBancorp. Sheshunoff assumed the Merger will be completed as set forth
in the Agreement and that no material changes will be made in the Agreement nor
will restrictions be imposed by regulatory or other parties on the terms of the
Agreement.
Sheshunoff's opinion is limited to the fairness, from a financial point
of view, to the holders of NVBancorp's Common Stock of the Conversion Ratio.
Sheshunoff does not address NVBancorp's underlying business decision to
undertake the Merger. This letter, and the opinion expressed herein, do not
constitute a recommendation to any shareholder as to how any shareholder should
vote in the shareholder's vote on the Merger or the Agreement. This letter is
for the information of the board of directors of NVBancorp and may not be used
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for any other purpose without Sheshunoff's prior written consent, except that
this opinion may be included in its entirety in any filing made by NVBancorp or
SRNB with the Securities and Exchange Commission with respect to the Merger.
Based upon and subject to the foregoing, it is Sheshunoff's opinion
that, as of the date hereof, the Conversion Ratio is fair from a financial point
of view to NVBancorp's shareholders.
Very truly yours,
DRAFT
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING, L.P.
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ANNEX D
CHAPTER 13. DISSENTERS' RIGHTS.
SS.1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES;
CORPORATE PURCHASE AT FAIR MARKET VALUE; DEFINITIONS--
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which
come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of Section
25100 or (B) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and Sections
1301, 1302, 1303 and 1304; provided, however, that this provision does not apply
to any shares with respect to which there exists any restriction on transfer
imposed by the corporation or by any law or regulation; and provided, further,
that this provision does not apply to any class of shares described in
subparagraph (A) or (B) if demands for payment are filed with respect to 5
percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination
of shareholders entitled to vote on their organization and (A) were not voted in
favor of the reorganization or, (B) if described in subparagraph (A) or (B) of
paragraph (1) (without regard to the provisos in that paragraph), were voted
against the reorganization, or which were held of record on the effective date
of a short-form merger; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any case where the approval
required by Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with Section
1301.
(4) Which the dissenting shareholder has submitted for
endorsement, in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
SS.1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS;
DEMAND FOR PURCHASE; TIME; CONTENTS--
(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to
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purchase their shares for cash, such corporation shall mail to each such
shareholder a notice of the approval of the reorganization by its outstanding
shares (Section 152) within 10 days after the date of such approval, accompanied
by a copy of Sections 1300, 1302, 1303, 1304 and this section, a statement of
the price determined by the corporation to represent the fair market value of
the dissenting shares, and a brief description of the procedure to be followed
if the shareholder desires to exercise the shareholder's right under such
sections. The statement of price constitutes an offer by the corporation to
purchase at the price stated any dissenting shares as defined in subdivision (b)
of Section 1300, unless they lose their status as dissenting shares under
Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who
desires the corporation to purchase such shares shall make written demand upon
the corporation for the purchase of such shares and payment to the shareholder
in cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' special meeting to vote
upon the reorganization, or (2) in any other case within 30 days after the date
on which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
SS.1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT;
UNCERTIFICATED SECURITIES--
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
SS.1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR
MARKET VALUE; FILING; TIME OF PAYMENT--
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
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(b) Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
SS.1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR
FAIR MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATIOn; DETERMINATION OF ISSUES;
APPOINTMENT OF APPRAISERS--
(a) If the corporation denies that the shares are dissenting shares, or
the corporation and the shareholder fail to agree upon the fair market values of
the shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues.
If the status of the shares as dissenting shares is in issue, the court shall
first determine that issue. If the fair market value of the dissenting shares is
in issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
SS.1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT;
JUDGMENT; PAYMENT; APPEAL; COSTS--
(a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share. Within the time
fixed by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be
rendered against the corporation for payment of an amount equal to the fair
market value of each dissenting share multiplied by the number of dissenting
shares which any dissenting shareholder who is a party, or who has intervened,
is entitled to require the corporation to purchase, with interest thereon at the
legal rate from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
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(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
SS.1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS;
INTEREST--
To the extent that the provisions of Chapter 5 prevent the payment to
any holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
SS.1307. DIVIDENDS ON DISSENTING SHARES--
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
SS.1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION;
WITHDRAWAL OF DEMAND FOR PAYMENT--
Except as expressly limited in this chapter, holders of dissenting
shares continue to have all the rights and privileges incident to their shares,
until the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
SS.1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS--
Dissenting shares lose their status as dissenting shares and the
holders thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of any of
the following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for conversion
into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
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(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
SS.1310. SUSPENSION Of RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OF SHAREHOLDERS' APPROVAL--
If litigation is instituted to test the sufficiency or regularity of
the votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation.
SS.1311. EXEMPT SHARES--
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
SS.1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR
RESCIND MERGER OR REORGANIZATION; RESTRAINING ORDER or INJUNCTION; CONDITIONS--
(a) No shareholder of a corporation who has a right under this chapter
to demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
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ANNEX E
TITLE 12, UNITED STATES CODE, SECTION 215A (B), (C) AND (D):
DISSENTING SHAREHOLDERS
(b) If a merger shall be voted for at the called meetings by the
necessary majorities of the shareholders of each association or State bank
participating in the plan of merger, and thereafter the merger shall be approved
by the Comptroller, any shareholder of any association or State bank to be
merged into the receiving association who has voted against such merger at the
meeting of the association or bank of which he is a stockholder, or has given
notice in writing at or prior to such meeting to the presiding officer that he
dissents from the plan of merger, shall be entitled to receive the value of the
shares so held by him when such merger shall be approved by the Comptroller upon
written request made to the receiving association at any time before thirty days
after the date of consummation of the merger, accompanied by the surrender of
his stock certificates.
VALUATION OF SHARES
(c) The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the merger, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the receiving association;
and (3) one selected by the two so selected. The valuation agreed upon by any
two of the three appraisers shall govern. If the value so fixed shall not be
satisfactory to any dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the appraised value of
his shares, appeal to the Comptroller, who shall cause a reappraisal to be made
which shall be final and binding as to the value of the shares of the appellant.
APPLICATION TO SHAREHOLDERS OF MERGING ASSOCIATIONS; APPRAISAL BY
COMPTROLLER; EXPENSES OF RECEIVING ASSOCIATION; SALE AND RESALE OF
SHARES; STATE APPRAISAL AND MERGER LAW
(d) If, within ninety days from the date of consummation of the merger,
for any reason one or more of the appraisers is not selected as herein provided,
or the appraisers fail to determine the value of such shares, the Comptroller
shall upon written request of any interested party cause an appraisal to be made
which shall be final and binding on all parties. The expenses of the Comptroller
in making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be promptly
paid to the dissenting shareholders by the receiving association. The shares of
stock of the receiving association which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertised public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or persons and at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State bank
shall be determined in the manner prescribed by the law of the State in such
cases, rather than as provided in this section, if such provision is made in the
State law; and no such merger shall be in contravention of the law of the State
under which such bank is incorporated. The provisions of this subsection shall
apply only to shareholders of (and stock owned by them in) a bank or association
being merged into the receiving association.
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Comptroller of the Currency
Washington, DC 20219
Banking Circular
BC-259
1992 OCC CB LEXIS 21
March 5, 1992
[*1]
Stock Appraisals
To: Chief Executive Officers of National Banks, Deputy Comptrollers
(District), Department and Division Heads, and Examining Personnel
PURPOSE
This banking circular informs all national banks of the valuation methods used
by the Office of the Comptroller of the Currency (OCC) to estimate the value of
a bank's shares when requested to do so by a shareholder dissenting to the
conversion, merger, or consolidation of its bank. The results of appraisals
performed by the OCC between January 1, 1985 and September 30, 1991 are
summarized.
References: 12 U.S.C. 214A, 215 and 215a; 12 CFR 11.590 (Item 2)
BACKGROUND
Under 12 U.S.C. SECTION 214A, a shareholder dissenting from a conversion,
consolidation, or merger involving a national bank is entitled to receive the
value of his or her shares from the resulting bank. A valuation of the shares
shall be made by a committee of three appraisers (a representative of the
dissenting shareholder, a representative of the resulting bank, and a third
appraiser selected by the other two). If the committee is formed and renders an
appraisal that is acceptable to the dissenting shareholder, the process is
complete and [*2] the appraised value of the shares is paid to the dissenting
shareholder by the resulting bank. If, for any reason, the committee is not
formed or if it renders an appraisal that is not acceptable to the dissenting
shareholder, an interested party may request an appraisal by the OCC. 12 U.S.C.
SECTION 215 provides these appraisal rights to any shareholder dissenting to a
consolidation. Any dissenting shareholder of a target bank in a merger is also
entitled to these appraisal rights pursuant to 12 U.S.C. SECTION 215A.
The above provides only a general overview of the appraisal process. The
specific requirements of the process are set forth in the statutes themselves.
METHODS OF VALUATION USED
Through its appraisal process, the OCC attempts to arrive at a fair estimate of
the value of a bank's shares. After reviewing the particular facts in each case
and the available information on a bank's shares, the OCC selects an appropriate
valuation method, or combination of methods, to determine a reasonable estimate
of the shares' value.
Market Value
The OCC uses various methods to establish the market value of shares being
appraised. If sufficient trading in the shares [*3] exists and the prices are
available from direct quotes from the Wall Street Journal or a market-maker,
those quotes are considered in determining the market value. If no market value
is readily available, or if the market value available is not well established,
the OCC may use other methods of estimating market value, such as the investment
value and adjusted book value methods.
E-2
<PAGE>
Investment Value
Investment value requires an assessment of the value to investors of a share in
the future earnings of the target bank. Investment value is estimated by
applying an average price/earnings ratio of banks with similar earnings
potential to the earnings capacity of the target bank.
The peer group selection is based on location, size, and earnings patterns. If
the state in which the subject bank is located provides a sufficient number of
comparable banks using location, size and earnings patterns as the criteria for
selection, the price/earnings ratios assigned to the banks are applied to the
earnings per share estimated for the subject bank. In order to select a
reasonable peer group when there are too few comparable independent banks in a
location that is comparable to that [*4] of the subject bank, the pool of banks
from which a peer group is selected is broadened by including one-bank holding
company banks in a comparable location, and/or by selecting banks in less
comparable locations, including adjacent states, that have earnings patterns
similar to the subject bank.
Adjusted Book Value
The OCC also uses an "adjusted book value" method for estimating value.
Historically, the OCC has not placed any weight on the bank's "unadjusted book
value", since that value is based on historical acquisition costs of the bank's
assets, and does not reflect investors' perceptions of the value of the bank as
an ongoing concern. Adjusted book value is calculated by multiplying the book
value of the target bank's assets per share times the average market price to
book value ratio of comparable banking organizations. The average market price
to book value ratio measures the premium or discount to book value, which
investors attribute to shares of similarly situated banking organizations.
Both the investment value method and the adjusted book value method present
appraised values which are based on the target bank's value as a going concern.
These techniques [*5] provide estimates of the market value of the shares of the
subject bank.
OVERALL VALUATION
The OCC may use more than one of the above-described methods in deriving the
value of shares of stock. If more than one method is used, varying weights may
be applied in reaching an overall valuation. The weight given to the value by a
particular valuation method is based on how accurately the given method is
believed to represent market value. For example, the OCC may give more weight to
a market value representing infrequent trading by shareholders than to the value
derived from the investment value method when the subject bank's earnings trend
is so irregular that it is considered to be a poor predictor of future earnings.
PURCHASE PREMIUMS
For mergers and consolidations, the OCC recognizes that purchase premiums do
exist and may, in some instances, be paid in the purchase of small blocks of
shares. However, the payment of purchase premiums depends entirely on the
acquisition or control plans of the purchasers, and such payments are not
regular or predictable elements of market value. Consequently, the OCC's
valuation methods do not include consideration of purchase premiums [*6] in
arriving at the value of shares.
STATISTICAL DATA
The chart below lists the results of appraisals the OCC performed between
January 1, 1985 and September 30, 1991. The OCC provides statistical data on
book value and price/earnings ratios for comparative purposes, but does not
necessarily rely on such data in determining the value of the banks' shares.
Dissenting shareholders should not view these statistics as determinative for
future appraisals.
In connection with disclosures given to shareholders under 12 CFR 11.590 (Item
2), banks may provide shareholders a copy of this banking circular or disclose
the information in the banking circular, including the past results of OCC
appraisals. If the bank discloses the past results of the OCC appraisals, it
should advise shareholders that: (1) the OCC did not rely on all the information
set forth in the chart in performing each appraisal; and, (2) the OCC's past
appraisals are not necessarily determinative of its future appraisals of a
particular bank's shares.
E-3
<PAGE>
APPRAISAL RESULTS
- --------------------------------------------------------------------------------
OCC Average Price/
Appraisal Appraisal Price Book Earnings Ratio
Date * Value Offered Value of Peer Group
- --------- ----- ------- ----- -------------
1/1/85 107.05 110.00 178.29 5.3
1/2/85 73.16 NA 66.35 6.8
1/15/85 53.41 60.00 83.95 4.8
1/31/85 22.72 20.00 38.49 5.4
2/1/85 30.63 24.00 34.08 5.7
2/25/85 27.74 27.55 41.62 5.9
4/30/85 25.98 35.00 42.21 4.5
7/30/85 3,153.10 2,640.00 6,063.66 NC
9/1/85 17.23 21.00 21.84 4.7
11/22/85 316.74 338.75 519.89 5.0
11/22/85 30.28 NA 34.42 5.9
12/16/85 66.29 77.00 89.64 5.6
12/27/85 60.85 57.00 119.36 5.3
12/31/85 61.77 NA 73.56 5.9
12/31/85 75.79 40.00 58.74 12.1
1/12/86 19.93 NA 26.37 7.0
3/14/86 59.02 200.00 132.20 3.1
4/21/86 40.44 35.00 43.54 6.4
5/2/86 15.50 16.50 23.69 5.0
7/3/86 405.74 NA 612.82 3.9
7/31/86 297.34 600.00 650.63 4.4
- --------------------------------------------------------------------------------
[*7]
* - The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA - Not Available
NC - Not Computed
APPRAISAL RESULTS
- --------------------------------------------------------------------------------
OCC Average Price/
Appraisal Appraisal Price Book Earnings Ratio
Date * Value Offered Value of Peer Group
- --------- ----- ------- ----- -------------
8/22/86 103.53 106.67 136.23 NC
12/26/86 16.66 NA 43.57 4.0
12/31/86 53.39 95.58 69.66 7.1
5/1/87 186.42 NA 360.05 5.1
6/11/87 50.46 70.00 92.35 4.5
6/11/87 38.53 55.00 77.75 4.5
7/31/87 13.10 NA 20.04 6.7
8/26/87 55.92 57.52 70.88 NC
8/31/87 19.55 23.75 30.64 5.0
8/31/87 10.98 NA 17.01 4.2
10/6/87 56.48 60.00 73.11 5.6
3/15/88 297.63 NA 414.95 6.1
6/2/88 27.26 NA 28.45 5.4
6/30/88 137.78 NA 215.36 6.0
E-4
<PAGE>
APPRAISAL RESULTS
- --------------------------------------------------------------------------------
OCC Average Price/
Appraisal Appraisal Price Book Earnings Ratio
Date * Value Offered Value of Peer Group
- --------- ----- ------- ----- -------------
8/30/88 768.62 677.00 1,090.55 10.7
3/31/89 773.62 NA 557.30 7.9
5/26/89 136.47 180.00 250.42 4.5
5/29/90 9.87 NA 11.04 9.9
- --------------------------------------------------------------------------------
* - The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA - Not Available
NC - Not Computed
For more information regarding the OCC's stock appraisal process, contact the
Office of the Comptroller of the Currency, Bank Organization and Structure.
Frank Maguire
[*8] Acting Senior Deputy Comptroller
Corporate Policy and Economic Analysis
E-5
<PAGE>
ANNEX F
TEXT OF PROPOSED AMENDMENTS TO RESTATED ARTICLES OF INCORPORATION AND BYLAWS
CONCERNING THE CLASSIFICATION OF THE BOARD OF DIRECTORS
The Restated Articles of Incorporation of NVBancorp shall be amended by
adding thereto a new Article Sixth which shall read as set forth below:
Sixth: CLASSIFIED BOARD OF DIRECTORS.
(a) The number of directors which shall constitute the whole board
of directors of this corporation shall be specified in the
bylaws of the corporation.
(b) In the event that the authorized number of directors shall be
fixed at nine (9) or more, the board of directors shall be
divided into three classes: Class I, Class II and Class III,
each consisting of a number of directors equal as nearly as
practicable to one-third the total number of directors.
Directors in Class I shall initially serve for a term expiring
at the 2001 annual meeting of shareholders, directors in Class
II shall initially serve for a term expiring at the 2002
annual meeting of shareholders, and directors in Class III
shall initially serve for a term expiring at the 2003 annual
meeting of shareholders. Thereafter, each director shall serve
for a term ending at the third annual shareholders meeting
following the annual meeting at which such director was
elected. In the event that the authorized number of directors
shall be fixed with at least six (6) but less than nine (9),
the board of directors shall be divided into two classes,
designated Class I and Class II, each consisting of one-half
of the directors or as close an approximation as possible. At
each annual meeting, each of the successors to the directors
of the class whose term shall have expired at such annual
meeting shall be elected for a term running until the second
annual meeting next succeeding his or her election and until
his or her successor shall have been duly elected and
qualified. The foregoing notwithstanding, each director shall
serve until his or her successor shall have been duly elected
and qualified, unless he or she shall resign, die, become
disqualified or disabled, or shall otherwise be removed.
(c) At each annual election, the directors chosen to succeed those
whose terms then expire shall be identified as being of the
same class as the directors they succeed, unless, by reason of
any intervening changes in the authorized number of directors,
the board of directors shall designate one or more
directorships whose term then expires as directorships of
another class in order more nearly to achieve equality in the
number of directors among the classes. When the board of
directors fills a vacancy resulting from the resignation,
death, disqualification or removal of a director, the director
chosen to fill that vacancy shall be of the same class as the
director he or she succeeds, unless, by reason of any previous
changes in the authorized number of directors, the board of
directors shall designate the vacant directorship as a
directorship of another class in order more nearly to achieve
equality in the number of directors among the classes.
(d) Notwithstanding the rule that the classes shall be as nearly
equal in number of directors as possible, in the event of any
change in the authorized number of directors, each director
then continuing to serve as such will nevertheless continue as
a director of the class of which he or she is a member, until
the expiration of his current term or his or her earlier
resignation, death, disqualification or removal. If any newly
F-1
<PAGE>
created directorship or vacancy on the board of directors,
consistent with the rule that the three classes shall be as
nearly equal in number of directors as possible, may be
allocated to one or two or more classes, the board of
directors shall allocate it to that of the available class
whose term of office is due to expire at the earliest date
following such allocation.
Section 16 of Article III of the NVBancorp bylaws shall be amended in its
entirety to read as follows:
Section 16. Election and Term of Office. The directors shall be elected
annually by the shareholders at the annual meeting of the shareholders;
provided, that if for any reason, the annual meeting or an adjournment thereof
is not held or the directors are not elected thereat, then the directors may be
elected at any special meeting of the shareholders called and held for that
purpose. The term of office of the directors shall, except as provided in
Section 17, begin immediately after their election and shall continue until
their respective successors are elected and qualified. In the event that the
authorized number of directors shall be fixed at nine (9) or more, the board of
directors shall be divided into three classes, designated Class I, Class II and
Class III. Each class shall consist of one-third of the directors or as close an
approximation as possible. The initial term of office of the directors of Class
I shall expire at the annual meeting to be held during fiscal year 2001, the
initial term of office of the directors of Class II shall expire at the annual
meeting to be held during fiscal year 2002 and the initial term of office of the
directors of Class III shall expire at the annual meeting to be held during
fiscal year 2003. At each annual meeting, commencing with the annual meeting to
be held during fiscal year 2001, each of the successors to the directors of the
class whose term shall have expired at such annual meeting shall be elected for
a term running until the third annual meeting next succeeding his or her
election until his or her successor shall have been duly elected and qualified.
In the event that the authorized number of directors shall be fixed with at
least six (6) but less than nine (9), the board of directors shall be divided
into two classes, designated Class I and Class II. Each class shall consist of
one-half of the directors or as close an approximation as possible. At each
annual meeting, each of the successors to the directors of the class whose term
shall have expired at such annual meeting shall be elected for a term running
until the second annual meeting next succeeding his or her election and until
his or her successor shall have been duly elected and qualified. Notwithstanding
the rule that the classes shall be as nearly equal in number of directors as
possible, in the event of any change in the authorized number of directors, each
director then continuing to serve as such shall nevertheless continue as a
director of the class of which he or she is a member until the expiration of his
or her current term, or his or her prior death, resignation or removal. At such
annual election, the directors chosen to succeed those whose terms then expire
shall be of the same class as the directors they succeed, unless, by reason of
any intervening changes in the authorized number of directors, the board of
directors shall designate one or more directorships whose term then expires as
directorships of another class in order more nearly to achieve equality of
number of directors among the classes.
This Section 16 may be amended or repealed only by approval of the
board of directors and the outstanding shares (as defined in Section 152 of the
California General Corporation Law) voting as a single class, notwithstanding
Section 903 of the California General Corporation Law.
F-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California Corporations Code authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors,
officers, employees and other agents of the corporation ("Agents") in terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended.
Article Fifth of the Registrant's articles of incorporation, as
amended, authorizes the Registrant to indemnify its Agents, through bylaw
provisions, agreements, votes of shareholders or disinterested directors or
otherwise, in excess of the indemnification otherwise permitted by Section 317
of the California Corporations Code, subject to the applicable limits set forth
in Section 204 of the California Corporations Code with respect to actions for
breach of duty to the Registrant and its shareholders. Section 47 of Article V
of the Registrant's bylaws provides for mandatory indemnification of each
director of the Registrant except as prohibited by law.
The Registrant maintains a directors' and officers' liability insurance
policy that indemnifies the Registrant's directors and officers against certain
losses in connection with claims made against them for certain wrongful acts. In
addition, the Registrant has entered into separate indemnification agreements
with its directors and officers that require the Registrant, among other things,
(i) to maintain directors' and officers' insurance in reasonable amounts in
favor of those individuals, and (ii) to indemnify them against certain
liabilities that may arise by reason of their status or service as Agents of the
Registrant to the fullest extent permitted by California law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) Exhibits.
Exhibit
Number
-------
2.1 Agreement and Plan of Reorganization and Merger by and
among the Registrant, NVB Interim National Bank and Six
Rivers National Bank, dated as of October 3, 1999
(included as Annex A to the joint proxy
statement/prospectus (without certain exhibits)).
4.1 Specimen of the Registrant's common stock certificate.
5.1 Opinion of Coudert Brothers.
8.1 Form of Tax Opinion of McCutchen, Doyle, Brown &
Enersen, LLP.
23.1 Consent of Deloitte & Touche LLP (NVBancorp).
23.2 Consent of Deloitte & Touche LLP (SRNB).
23.3 Consent of Coudert Brothers (included in Exhibit 5.1).
23.4 Consent of Hoefer & Arnett Incorporated.
<PAGE>
23.5 Consent of Alex Sheshunoff & Co. Investment Banking,
L.P.
23.6 Consent of McCutchen, Doyle, Brown & Enersen, LLP.
24.1 Power of Attorney (see Page II-4).
99.1 Form of proxy to be used in soliciting shareholders of
NVBancorp for the special meeting.
99.2 Form of proxy to be used in soliciting shareholders of
SRNB for the special meeting.
(B) Financial Statement Schedules: Not applicable.
ITEM 22. UNDERTAKINGS
(1) The undersigned registrant hereby undertakes: (a) To file, during
any period in which offers or sales are being made, a post-effective amendment
to this registration statement: (i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933, as amended; (ii) To reflect in
the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in the volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; (iii) To include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement; (b) That, for the purpose of
determining any liability under the Securities Act of 1933, as amended, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; (c)
To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) The undersigned registrant hereby undertakes as follows: that prior
to any public re-offering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such re-offering prospectus will the contain information
called for by the applicable registration form with respect to re-offerings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
<PAGE>
(4) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (3) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933, as amended,
and is used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933, as amended, and will be
governed by the final adjudication of such issue.
(6) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(7) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Redding,
State of California, on the 20TH day of December, 1999.
NORTH VALLEY BANCORP
By /s/ MICHAEL J. CUSHMAN
---------------------------
Michael J. Cushman
President and
Chief Executive Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Michael J. Cushman and J.M. ("Mike") Wells, Jr.,
and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments, including
post-effective amendments, to this Registration Statement, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirement of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ MICHAEL J. CUSHMAN President and Chief Executive Officer December 20, 1999
- ----------------------- (Principal Executive Officer) and
Michael J. Cushman Director
/s/ SHARON L. BENSON Senior Vice President and Chief December 20, 1999
- ----------------------- Financial Officer (Principal Financial
Sharon L. Benson Officer and Principal Accounting Officer)
/s/ RUDY V. BALMA Chairman and Director December 20, 1999
- -----------------------
Rudy V. Balma
/s/ WILLIAM W. COX Director December 20, 1999
- -----------------------
William W. Cox
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ ROYCE L. FRIESEN Director December 20, 1999
- -----------------------
Royce L. Friesen
/s/ DAN W. GHIDINELLI Director December 20, 1999
- -----------------------
Dan W. Ghidinelli
/s/ THOMAS J. LUDDEN Director December 20, 1999
- -----------------------
Thomas J. Ludden
/s/ DOUGLAS M. TREADWAY Director December 20, 1999
- -----------------------
Douglas M. Treadway
/s/ J.M. WELLS, JR. Director December 20, 1999
- -----------------------
J.M. Wells, Jr.
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document Description
------- --------------------
2.1 Agreement and Plan of Merger by and among the
Registrant, NVB Interim National Bank and Six Rivers
National Bank, dated as of October 3, 1999 (included as
Annex A to the joint proxy statement/prospectus
(without certain exhibits)).
4.1 Specimen of the Registrant's common stock certificate.
5.1 Opinion of Coudert Brothers.
8.1 Form of Tax Opinion of McCutchen, Doyle, Brown &
Enersen, LLP.
23.1 Consent of Deloitte & Touche LLP (NVBancorp).
23.2 Consent of Deloitte & Touche LLP (SRNB).
23.3 Consent of Coudert Brothers (included in Exhibit 5.1).
23.4 Consent of Hoefer & Arnett Incorporated.
23.5 Consent of Alex & Sheshunoff & Co. Investment Banking,
L.P.
23.6 Consent of McCutchen, Doyle, Brown & Enersen, LLP.
24.1 Power of Attorney (see Page II-4).
99.1 Form of proxy to be used in soliciting shareholders of
NVBancorp for the special meeting.
99.2 Form of proxy to be used in soliciting shareholders of
SRNB for the special meeting.
SFU 20146
[GRAPHIC LOGO OMITTED] [S H A R E S]
NORTH VALLEY BANCORP
REDDING, CALIFORNIA
INCORPORATED UNDER THE LAWS
OF THE STATE OF CALIFORNIA
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
SHARES OF THE CAPITAL STOCK OF THE
=============================NORTH VALLEY BANCORP===============================
transferable only on the books of this Corporation in person or by attorney upon
surrender of this Certificate properly endorsed.
The amount of capital stock is set forth on the books of the
Corporation. The par value of the shares of said stock is set forth in the
Articles of Incorporation of the Corporation and the amendments thereto, which
are hereby expressly incorporated herein by reference.
This Certificate is not valid until countersigned and registered by the
transfer agent and registrar.
IN WITNESS WHEREOF the duly authorized officers of the Corporation have
hereunto subscribed their names and caused the corporate seal to be hereto
affixed.
Dated:
/s/ MICHAEL J. CUSHMAN
- ------------------------- COUNTERSIGNED AND REGISTERED
President CHASEMELLON SHAREHOLDER SERVICES, LLC
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATORY
/s/ J. M. WELLS, JR.
- -------------------------
Secretary
[CORPORATE SEAL OF NORTH VALLEY BANCORP CALIFORNIA]
[INCORPORATED *]
<PAGE>
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>
<CAPTION>
<S> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT --................CUSTODIAN...............
TENENT -- as tenants by the entireties [CUST] [MINOR]
JT TEN -- as joint tenants with right of under Uniform Gifts to Minor
survivorship and not as tenants Act.....................................
in common [STATE]
UNIF TRF MIN ACT --..............CUSTODIAN [UNTIL AGE.......]
[CUST]
..................UNDER UNIFORM TRANSFERS
TO MINORS ACT............................
[STATE]
</TABLE>
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED THROUGH 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 OR 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.
Dated
--------------------------
X
-------------------------------
X
-------------------------------
NOTICE: THE SIGNATURE(S) TO
THE ASSIGNMENT MUST
CORRESPOND WITH THE
NAME(S) AS WRITTEN
UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR, WITHOUT
ALTERATION OR
ENLARGEMENT OR ANY
CHANGE WHATEVER.
By
--------------------------
THE SIGNATURE 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 17
A.d-15.
This certificate also evidences and entitles the holder hereof to certain rights
as set forth in an agreement between North Valley Bancorp and ChaseMellon
Shareholder Services, L.L.C. dated as of September 9, 1999 (the "Rights
Agreement"), the terms of which are incorporated herein by reference and a copy
of which is on file at the principal executive offices of North Valley Bancorp.
Under certain circumstances, as set forth in the Rights Agreement, such Rights
will be evidenced by separate certificates and will no longer be evidenced by
this certificate. North Valley Bancorp will mail to the holder of this
certificate a copy of the Rights Agreement without charge after receipt of a
written request therefor. Under certain circumstances, as set forth in the
Rights Agreement, Rights issued to any Person who becomes an Acquiring Person
(as defined in the Rights Agreement) may become null and void.
EXHIBIT 5.1
[LETTERHEAD OF COUDERT BROTHERS]
December 22, 1999
North Valley Bancorp
880 East Cypress Avenue
Redding, California 96002
Re: North Valley Bancorp -- Registration Statement on Form S-4
Ladies and Gentlemen:
With reference to the Registration Statement on Form S-4 filed by North
Valley Bancorp, a California corporation ("NVBancorp"), with the Securities and
Exchange Commission in connection with the registration under the Securities Act
of 1933, as amended, of 1,644,238 shares of NVBancorp Common Stock, no par value
per share (the "Shares"), to be issued in connection with the merger
contemplated by the Agreement and Plan of Reorganization and Merger, dated as of
October 3, 1999 (the "Agreement"), among Six Rivers National Bank, a national
banking association organized under the laws of the United States, and NVB
Interim National Bank, a national banking association to be formed at the
direction of NVBancorp, which Agreement is described therein and filed as an
exhibit thereto:
We are of the opinion that the Shares have been duly authorized and,
when issued in accordance with the Agreement, will be legally issued, fully paid
and nonassessable. We hereby consent to the filing of this opinion as Exhibit
5.1 to the Registration Statement and the use of our name under the caption
"Legal Matters" in the Registration Statement and in the Joint Proxy
Statement/Prospectus included therein.
Very truly yours,
/s/ COUDERT BROTHERS
- ---------------------
Coudert Brothers
EXHIBIT 8.1
__________________, 2000 FORM OF OPINION TO BE RENDERED AT CLOSING
North Valley Bancorp
880 E. Cypress Avenue
Redding, California 96002
Six Rivers National Bank
401 F Street
Eureka, California 95501
MERGER OF NVB INTERIM BANK INTO SIX RIVERS NATIONAL BANK
Ladies and Gentlemen:
You have asked for our opinion as to certain federal and California
income tax consequences of the proposed reorganization transaction that will
result in the merger of Six Rivers National Bank, a national banking association
("SRNB") with and into NVB Interim Bank, an interim national banking association
("Interim Bank") and a wholly-owned subsidiary of North Valley Bancorp, a
California corporation ("NVBancorp"), pursuant to the Agreement and Plan of
Reorganization and Merger dated as of October 3, 1999 (the "Agreement"). This
opinion is delivered to you pursuant to Sections 7.j and 8.j of the Agreement.
Capitalized terms used in this letter without definition have the respective
meanings given them in the Agreement.
The Agreement provides that at the Effective Time of the Merger, SRNB
will be merged with and into Interim Bank, with Interim Bank as the surviving
corporation. In the Merger, each share of SRNB common stock will be exchanged
for the right to receive a specified number of shares of NVBancorp common stock.
No fractional shares of NVBancorp common stock will be issued in the Merger, but
SRNB shareholders who would otherwise be entitled to receive fractional shares
will receive cash in lieu thereof.
SRNB has only common stock outstanding.
In rendering the opinions expressed in this letter, we have assumed
that the transactions described in the Agreement will be carried out in all
respects as provided therein. In addition, we have examined and are relying upon
(without any independent investigation or review) the truth, correctness and
completeness at all relevant times of the statements, covenants, representations
and warranties contained in the Agreement, letters dated __________ delivered to
us by NVBancorp and SRNB (the "Tax Representation Letters"), the Proxy
Statement/Prospectus dated ___________ delivered to SRNB shareholders in
connection with the solicitation of proxies for the SRNB vote on the Merger (the
"Proxy Statement/Prospectus"), and such other instruments and documents as we
have deemed necessary.
Based upon our understanding of the transaction as described above and
the above information, representations and assumptions, and upon existing
statutes, regulations, court decisions and published rulings of the Internal
Revenue Service, it is our opinion that, for purposes of federal income tax law
and California income and franchise tax law:
<PAGE>
1. The merger of SRNB with and into Interim Bank and the issuance of
NVBancorp common stock in the transaction as described in the Agreement will
qualify as a reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Code.
2. The Merger will not result in the recognition of gain or loss by
NVBancorp or SRNB.
3. No gain or loss will be recognized by holders of SRNB stock on the
exchange of SRNB stock for NVBancorp common stock, except to the extent gain is
recognized with respect to cash received in lieu of fractional shares.
4. The holding period of NVBancorp stock received in exchange for SRNB
stock (including any fractional share prior to its conversion into cash) will
include the holding period of the SRNB stock for which it is exchanged, assuming
that the shares of SRNB stock are capital assets in the hands of the holder at
the Effective Time of the Merger.
5. The aggregate adjusted tax basis of the shares of NVBancorp stock
received by an SRNB shareholder in the Merger (including any fractional share
prior to its conversion into cash) will be the same as the aggregate adjusted
tax basis of the SRNB shares surrendered in exchange therefor.
6. An SRNB shareholder who dissents to the Merger and receives cash for
his or her SRNB stock will be treated as having received a distribution in
redemption of his or her SRNB stock, subject to the provisions and limitations
of Section 302 of the Internal Revenue Code of 1986, as amended.
We hereby consent to the filing of this opinion as an exhibit to the
Proxy Statement/Prospectus and the reference to the name of our firm therein and
under the caption "Certain Federal Income Tax Consequences."
Very truly yours,
/s/ McCUTCHEN, DOYLE, BROWN & ENERSEN, LLP
------------------------------------------
McCUTCHEN, DOYLE, BROWN & ENERSEN, LLP
By
A Member of the Firm
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
North Valley Bancorp on Form S-4 of our report dated January 27, 1999, appearing
in the Annual Report on Form 10-K of North Valley Bancorp for the year ended
December 31, 1998 and to the references to us under the headings "Selected
Financial Data" and "Experts" in the joint proxy statement/prospectus, which is
part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
- ---------------------------------
DELOITTE & TOUCHE LLP
San Francisco, California
December 21, 1999
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
North Valley Bancorp on Form S-4 of our report dated February 24, 1999,
appearing in the Annual Report on Form 10-KSB of Six Rivers National Bank for
the year ended December 31, 1998 and to the references to us under the headings
"Selected Financial Data" and "Experts" in the joint proxy statement/prospectus,
which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
- ---------------------------------
DELOITTE & TOUCHE LLP
San Francisco, California
December 21, 1999
EXHIBIT 23.4
CONSENT OF HOEFER & ARNETT INCORPORATED
We hereby consent to the inclusion of our opinion letter dated
______________, 2000, to the Board of Directors of Six Rivers National Bank as
Annex B to the Joint Proxy Statement/Prospectus relating to the proposed plan of
reorganization and merger among North Valley Bancorp, NVB Interim National Bank
and Six Rivers National Bank contained in the Registration Statement on Form S-4
as filed with the Securities and Exchange Commission and to the references to
our firm and our opinion in the Joint Proxy Statement/Prospectus. In giving our
consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
/s/ HOEFER & ARNETT INCORPORATED
--------------------------------
HOEFER & ARNETT INCORPORATED
December 21, 1999
EXHIBIT 23.5
CONSENT OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING, L.P.
We hereby consent to the inclusion of our opinion letter dated
______________, 2000, to the Board of Directors of North Valley Bancorp as Annex
C to the Joint Proxy Statement/Prospectus relating to the proposed plan of
reorganization and merger among North Valley Bancorp, NVB Interim National Bank
and Six Rivers National Bank contained in the Registration Statement on Form S-4
as filed with the Securities and Exchange Commission and to the references to
our firm and our opinion in the Joint Proxy Statement/Prospectus. In giving our
consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
/s/ ALEX SHESHUNOFF & CO. INVESTMENT BANKING, L.P.
--------------------------------------------------
ALEX SHESHUNOFF & CO. INVESTMENT BANKING, L.P.
December 22, 1999
EXHIBIT 23.6
CONSENT OF MCCUTCHEN, DOYLE, BROWN & ENERSEN, LLP
We consent to the reference to our firm and our tax opinion under the
caption "Legal Matters" and elsewhere in the Registration Statement on Form S-4
as filed by North Valley Bancorp with the Securities and Exchange Commission and
to the filing of the form of our tax opinion as Exhibit 8.1 to the Registration
Statement.
/s/ MCCUTCHEN, DOYLE, BROWN & ENERSEN, LLP
------------------------------------------
MCCUTCHEN, DOYLE, BROWN & ENERSEN, LLP
December 22, 1999
EXHIBIT 99.1
NORTH VALLEY BANCORP
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS
ON ______________, 2000
The undersigned holder of common stock acknowledges receipt of a copy
of the notice of special meeting of shareholders of North Valley Bancorp and the
accompanying proxy statement/prospectus dated December __, 1999, and revoking
any proxy heretofore given, hereby constitutes and appoints
____________________, and each of them, with full power of substitution, as
attorneys and proxies to appear and vote all of the shares of common stock of
North Valley Bancorp, a California corporation, outstanding in the name of the
undersigned which the undersigned could vote if personally present and acting at
the special meeting of shareholders of North Valley Bancorp, to be held at the
administrative office of North Valley Bank at 880 East Cypress Avenue, Redding,
California, on ___________________, at ____:___ __.m. or at any postponements or
adjournments thereof, upon the following items as set forth in the notice of
meeting and proxy statement/prospectus and to vote according to their discretion
on all matters which may be properly presented for action at the meeting or any
postponements or adjournments thereof.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE
FOLLOWING ITEMS:
1. To consider and vote on a proposal to approve the Agreement and Plan
of Reorganization and Merger, dated as of October 3, 1999, among North Valley
Bancorp, Six Rivers National Bank and NVB Interim National Bank and the
transactions contemplated by the plan of reorganization, including the merger of
Six Rivers National Bank into NVB Interim National Bank.
2. To approve amendments to the North Valley Bancorp articles of
incorporation and bylaws to provide for the classification of the board of
directors.
3. In their discretion, to transact such other business as may properly
come before the special meeting or any postponements or adjournments of the
special meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2 SET
FORTH ABOVE. THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS MADE, IT WILL BE VOTED "FOR" PROPOSALS 1 AND 2 SET FORTH ABOVE.
<PAGE>
SHAREHOLDER(S) No. of Common Shares ______
- ------------------------------
- ------------------------------
Date:_________________, 2000 Please date and sign exactly as your
name(s) appears. When signing as
attorney, executor, administrator,
trustee, or guardian, please give
full title. If more than one
trustee, all should sign. All joint
owners should sign. WHETHER OR NOT
YOU PLAN TO ATTEND THIS MEETING,
PLEASE EITHER DATE, SIGN AND RETURN
THIS PROXY AS PROMPTLY AS POSSIBLE
IN THE ENCLOSED POSTAGE-PAID
ENVELOPE OR VOTE BY TELEPHONE AS
INDICATED BELOW.
I/we do [ ] or do not [ ] expect to
attend this meeting.
THIS PROXY IS SOLICITED BY, AND ON BEHALF OF, THE BOARD OF
DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
<PAGE>
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
- --------------------------------------------------------------------------------
VOTE BY TELEPHONE
- --------------------------------------------------------------------------------
[GRAPHIC OF TELEPHONE OMITTED] [GRAPHIC OF TELEPHONE OMITTED]
[ ] QUICK *** EASY *** IMMEDIATE [ ]
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch-tone telephone 24
HOURS A DAY-7 DAYS A WEEK
There is NO CHARGE to you for this call. - Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box
in the lower right hand corner of this form.
- --------------------------------------------------------------------------------
OPTION 1: To vote as the Board of Directors recommends on ALL proposals, press 1
- --------------------------------------------------------------------------------
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
- --------------------------------------------------------------------------------
OPTION 2: If you choose to vote on each Proposal separately, press 0. You will
hear these instructions:
- --------------------------------------------------------------------------------
Proposal 1 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0
Proposal 2 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
The instructions are the same for all remaining proposals.
OR
2. VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in the
enclosed envelope.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK your Proxy Card.
THANK YOU FOR VOTING.
<PAGE>
EXHIBIT 99.2
SIX RIVERS NATIONAL BANK
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS
ON _______________, 2000
The undersigned holder of common stock acknowledges receipt of a copy
of the notice of special meeting of shareholders of Six Rivers National Bank and
the accompanying joint proxy statement/prospectus dated December ___, 1999 and
revoking any proxy heretofore given, hereby constitutes and appoints
__________________, and each of them, with full power of substitution, as
attorneys and proxies to appear and vote all of the shares of common stock of
Six Rivers National Bank, a national banking association, outstanding in the
name of the undersigned which the undersigned could vote if personally present
and acting at the special meeting of shareholders of Six Rivers National Bank,
to be held at the main office of the Bank, located at 402 F Street, Eureka,
California, on ____________, ________________, at ___:___ __.m. or at any
postponements or adjournments thereof, upon the following items as set forth in
the notice of meeting and to vote according to their discretion on all matters
which may be properly presented for action at the meeting or any postponements
or adjournments thereof.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE
FOLLOWING ITEMS:
1. To consider and vote on a proposal to approve the Agreement and Plan
of Reorganization and Merger, dated as of October 3, 1999, among North Valley
Bancorp, Six Rivers National Bank and NVB Interim National Bank and the
transactions contemplated by the plan of reorganization, including the merger of
Six Rivers National Bank into NVB Interim National Bank.
2. In their discretion, to transact such other business as may properly
come before the special meeting or any postponements or adjournments of the
special meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1 SET FORTH
ABOVE. THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS MADE, IT WILL BE VOTED "FOR" PROPOSAL 1 SET FORTH ABOVE.
<PAGE>
SHAREHOLDER(S) No. of Common Shares ______
- ------------------------------
- ------------------------------
Date:_________________, 2000 Please date and sign exactly as your
name(s) appears. When signing as
attorney, executor, administrator,
trustee, or guardian, please give
full title. If more than one
trustee, all should sign. All joint
owners should sign. WHETHER OR NOT
YOU PLAN TO ATTEND THIS MEETING,
PLEASE EITHER DATE, SIGN AND RETURN
THIS PROXY AS PROMPTLY AS POSSIBLE
IN THE ENCLOSED POSTAGE-PAID
ENVELOPE OR VOTE BY TELEPHONE AS
INDICATED BELOW.
I/we do [ ] or do not [ ] expect to
attend this meeting.
THIS PROXY IS SOLICITED BY, AND ON BEHALF OF, THE BOARD OF
DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
- --------------------------------------------------------------------------------
* * * IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW* * *
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
- --------------------------------------------------------------------------------
[GRAPHIC OF TELEPHONE OMITTED] [GRAPHIC OF TELEPHONE OMITTED]
HELP US SAVE MONEY--VOTE BY TELEPHONE
QUICK *** EASY *** IMMEDIATE
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF TWO WAYS:
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
o You will be asked to enter a Control Number which is located in the box in
the lower right hand corner of this form.
o You will then hear these instructions:
To vote FOR approval of the Merger Agreement, press 1; to vote AGAINST
approval of the Merger Agreement, press 9.
To ABSTAIN, press 0 and listen to the instructions.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
CALL ** TOLL-FREE ** ON A TOUCH-TONE TELEPHONE
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
THANK YOU FOR VOTING.
