EXHIBIT 99.3
[LETTERHEAD OF RESOURCE BANK]
April 29, 1998
Dear Fellow Shareholders:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders of Resource Bank on June 9, 1998, at 3:30 p.m., at the main office
of Resource Bank, located at 3720 Virginia Beach Boulevard, Virginia Beach,
Virginia 23452. The accompanying Notice and Proxy Statement describe the
proposed formation of a holding company, which we will be considering at that
meeting, as well as other regular items of business to be considered. Please
read this document carefully.
Specifically, at this meeting you will be asked to consider and approve
a proposal to adopt the formation of a bank holding company, to be called
Resource Bankshares Corporation. Under the proposal, the Bank will conduct its
banking operations as a wholly-owned subsidiary of Resource Bankshares
Corporation, a Virginia corporation organized for the purpose of serving as the
holding company for the Bank (the "Holding Company"). Each share of your stock
in the Bank will be converted, in a tax-free transaction, into two shares of
common stock in the Holding Company. Following the reorganization of the Bank
into a holding company structure, your percentage of equity ownership in the
Holding Company will be exactly the same as your present ownership in the Bank,
and the Bank will continue to operate from the same offices it currently
occupies.
The financial services industry is one of the most rapidly changing
segments of Virginia's and the nation's economy. Historical distinctions between
various types of financial institutions are eroding rapidly, and banks are
subject to new and more aggressive competition from all sides. Your Board
believes that the greater flexibility and investment opportunities provided by
the establishment of a holding company will help your management operate more
efficiently and take advantage of opportunities as they arise in this rapidly
changing environment.
You will also be asked to consider and approve three other items of
business: (i) the election of seven incumbent directors, each of whom will serve
a one year term and until their successors are duly elected and qualify, and
(ii) the ratification of the appointment of Goodman & Company, L.L.P. as
independent auditors for the 1998 fiscal year. The Board of Directors encourages
you to read carefully the enclosed Proxy Statement and to VOTE FOR the
reorganization of the Bank and the other matters to be considered at the
meeting.
We hope you can attend the Meeting. WHETHER OR NOT YOU PLAN TO ATTEND,
PLEASE COMPLETE, SIGN, AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE. Your vote is important regardless of the number of
shares you own. We look forward to seeing you at this Annual Meeting, and we
appreciate your continued loyalty and support.
Sincerely,
RESOURCE BANK
/s/ Lawrence N. Smith
Lawrence N. Smith
President and Chief Executive Officer
RESOURCE BANK
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 9, 1998
To Our Shareholders:
The 1998 Annual Meeting of Shareholders of Resource Bank (the "Bank")
will be held at its main office located at 3720 Virginia Beach Boulevard,
Virginia Beach, Virginia, on June 9, 1998, at 3:30 p.m., for the following
purposes:
1. To consider and vote upon an Agreement and Plan of
Reorganization dated as of April 10, 1998, and a related Plan
of Share Exchange (collectively, the "Agreement"), a copy of
which is attached to the accompanying Proxy Statement as
Exhibit A, providing for a share exchange in which each
shareholder of the Bank will receive two shares of common
stock of Resource Bankshares Corporation, a bank holding
company formed to serve as the holding company for the Bank,
for each share of Resource Bank common stock they now own.
2. To consider and vote upon the election of seven directors to
serve a one year term and until their successors are duly
elected and qualify.
3. To consider and vote upon the ratification of the
appointment of Goodman & Company, L.L.P. as independent
auditors for the 1998 fiscal year.
4. To transact such other business as may properly come before
the meeting.
Shareholders of record at the close of business on April 23, 1998,
will be entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
Each Bank Shareholder will have the right to dissent from the
Reorganization and to demand payment of the fair value of his shares in the
event the Reorganization is approved and consummated. Any right of a shareholder
to receive such payment is contingent upon strict compliance with the
requirements set forth in Article 15 of the Virginia Stock Corporation Act, the
full text of which is enclosed as Exhibit B attached to the accompanying Proxy
Statement/Prospectus.
Approval of the Reorganization will require the affirmative vote of a
majority of the outstanding shares of Bank Common Stock. Directors are elected
by a plurality of the votes cast. The affirmative vote of a majority of votes
cast by Bank shareholders is required to ratify the appointment of auditors. THE
BOARD OF DIRECTORS OF THE BANK UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF EACH OF THE ABOVE ITEMS.
By Order of the Board of Directors
/s/ Debra C. Dyckman
Debra C. Dyckman
Secretary of the Board
April 29, 1998
RESOURCE BANK
3720 Virginia Beach Boulevard
P. O. Box 61009
Virginia Beach, Virginia 23462-0218
PROXY STATEMENT
This Proxy Statement is furnished to the Shareholders of Resource Bank
(the "Bank") in connection with the solicitation of proxies by the Board of
Directors of the Bank for use at its 1998 Annual Meeting of Shareholders to be
held on June 9, 1998, at the time and place set forth in the accompanying Notice
of 1998 Annual Meeting of Shareholders and at any adjournment thereof (the
"Annual Meeting"). This Proxy Statement and the enclosed Proxy are being mailed
to the Shareholders of the Bank on or about April 29, 1998.
At the Annual Meeting, Shareholders will be asked to approve the
reorganization of the Bank into a holding company structure (the
"Reorganization") in accordance with the terms and conditions set forth in the
Agreement and Plan of Reorganization, dated as of April 10, 1998, and a related
Plan of Share Exchange (collectively, the "Agreement") between the Bank and
Resource Bankshares Corporation, a copy of which is attached as Exhibit A to
this Proxy Statement. The Agreement provides for the reorganization of the Bank
into a wholly-owned subsidiary of Resource Bankshares Corporation, a Virginia
corporation recently organized to serve as the holding company for the Bank (the
"Holding Company"). Under the terms of the Agreement, each Shareholder of the
Bank will receive two shares of Holding Company Common Stock in exchange for
each share of Bank Common Stock which they hold, in a tax-free transaction.
Existing warrants and options for Bank Common Stock will likewise be converted
into a corresponding number of warrants and options, respectively, for Holding
Company Stock based upon the two-for-one exchange ratio. After consummation of
the Reorganization, the Bank will conduct its business as a wholly-owned
subsidiary of the Holding Company in substantially the same manner and from the
same offices as before the Reorganization. If an adjournment is proposed, the
persons named as proxies will vote in favor of such adjournment those proxies
which are entitled to be voted in favor of the Agreement and against such
adjournment those proxies containing instructions to vote against approval of
the Agreement, unless the Shareholder clearly writes on the face of that Proxy
specific instructions stating how that Proxy should be voted in the case of an
adjournment proposed prior to a vote on the Reorganization. See "The Proposed
Reorganization."
At the Annual Meeting, shareholders of the Bank will also be asked to
vote on (i) the election of seven incumbent directors to serve a one year term
and until their successors are duly elected and qualify, and (ii) the
ratification of the appointment of Goodman & Company, L.L.P. as independent
auditors for the ensuing year.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE FEDERAL
RESERVE BOARD OF GOVERNORS OR THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS
ANY GOVERNMENT AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
THE SHARES OF HOLDING COMPANY COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THE DATE OF THIS PROXY STATEMENT IS APRIL 29, 1998.
This Proxy Statement also describes 2,640,758 shares of Holding Company
Common Stock, par value $3.00 per share, (which includes all shares authorized
for issuance pursuant to warrants and/or option plans of the Bank) to be issued
to Shareholders (and warrant and option holders) of the Bank in exchange for
their shares of Bank Common Stock or to be issued pursuant to outstanding
warrants and options. The trading market for Holding Company Common Stock is not
expected to vary significantly from the Bank's current trading market.
AVAILABLE INFORMATION
The Bank is currently subject to the informational requirements of the
rules and regulations of the Board of Governors of the Federal Reserve System
(the "FRB"), as promulgated under the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), in accordance therewith files reports, proxy
statements and other information with the FRB. In addition, the Holding Company
that will become the parent corporation of the Bank has filed proxy materials
with the FRB relating to this Reorganization. Such reports, proxy statements and
other information can be inspected and copied at the FRB's Freedom of
Information Department, 20th and Constitution Streets, N.W., Washington, DC
20551 or at the FRB's office in Richmond, Virginia at 701 East Byrd Street,
Richmond, VA 23219. Bank Common Stock is quoted on the NASDAQ National Market
System and such reports, proxy statements and other information are also
available for inspection and copying at NASDAQ's Listings Department, 1735 K
Street, N.W., Washington, DC 20006.
Pursuant to the Reorganization, the Holding Company will assume
reporting responsibilities with the Securities and Exchange Commission under the
Exchange Act as a successor issuer to the Bank, and will undertake similar
responsibilities with the Commission as previously performed by the Bank under
the rules and regulations of the FRB.
INFORMATION INCORPORATED BY REFERENCE AND
DELIVERED WITH THIS PROXY STATEMENT
THIS PROXY STATEMENT INCORPORATES CERTAIN DOCUMENTS OF THE BANK AND
REFERENCE WHICH ARE NOT PRESENTED HEREIN. COPIES OF ANY SUCH DOCUMENTS, OTHER
THAN EXHIBITS THERETO, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT IS DELIVERED UPON WRITTEN OR ORAL
REQUEST TO THE BANK, 3720 VIRGINIA BEACH BOULEVARD, VIRGINIA BEACH, VIRGINIA
23452, ATTENTION: DEBRA C. DYCKMAN, SENIOR VICE PRESIDENT, (757) 463-2265. IN
ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, A REQUEST MUST BE RECEIVED NO
LATER THAN MAY 15, 1998.
THE FOLLOWING DOCUMENTS OF THE BANK, FILED WITH THE FRB AND DELIVERED
HEREWITH, ARE INCORPORATED BY REFERENCE HEREIN:
The Bank's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997.
In addition, all documents filed by the Bank pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act and the rules and regulations of
the FRB and all documents filed by the Holding Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, in each case subsequent to the
date of this Proxy Statement and prior to latter of the termination of the
distribution of Holding Company Common Stock described herein, shall be deemed
to be incorporated herein and to be a part hereof from the respective dates of
filing thereof (all such documents being hereinafter referred to as
"Incorporated Documents"). Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a statement
contained herein or in any supplement hereto modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
This Proxy Statement contains certain forward-looking statements with
respect to the financial condition, results of operations and business of the
Bank. These forward-looking statements involve certain risks and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities: (1) competitive pressure in the banking industry
increases significantly; (2) changes in the interest rate environment reduces
margins or affects the fair market value of the Bank's assets to be acquired in
the Reorganization; (3) general economic conditions, either nationally or
regionally, are less favorable than expected, resulting in, among other things,
a deterioration in credit quality; (4) changes occur in the regulatory
environment; (5) changes occur in business conditions and inflation; and (6)
changes occur in the securities markets.
TABLE OF CONTENTS
Page
PROXY STATEMENT...................................................................................... 1
AVAILABLE INFORMATION................................................................................ 2
SUMMARY OF THE PROXY STATEMENT....................................................................... 5
SELECTED HISTORICAL FINANCIAL INFORMATION............................................................ 8
GENERAL INFORMATION.................................................................................. 9
Use and Revocation of Proxies................................................................ 9
Shareholders Entitled to Vote and Vote Required.............................................. 9
Solicitation of Proxies...................................................................... 9
Financial Statements......................................................................... 10
THE PROPOSED REORGANIZATION.......................................................................... 10
Description of the Reorganization............................................................ 10
Reasons for the Reorganization............................................................... 10
Management of the Holding Company............................................................ 11
Anticipated Effective Date of Reorganization................................................. 11
Conversion and Exchange of Stock............................................................. 11
Federal Income Tax Consequences.............................................................. 12
Required Regulatory Approvals................................................................ 12
Possible Abandonment of the Reorganization................................................... 13
Rights of Dissenting Shareholders............................................................ 13
Historical and Pro Forma Capitalization...................................................... 15
Prior to the Reorganization........................................................... 15
After the Reorganization.............................................................. 15
RESOURCE BANK ...................................................................................... 16
The Bank..................................................................................... 16
General...................................................................................... 16
Competition.................................................................................. 16
Description of Common Stock.................................................................. 17
Market for Bank Common Stock................................................................. 17
DESCRIPTION OF HOLDING COMPANY CAPITAL STOCK......................................................... 18
Authorized and Outstanding Capital Stock..................................................... 18
Common Stock................................................................................. 18
Preferred Stock.............................................................................. 19
COMPARATIVE RIGHTS OF SHAREHOLDERS................................................................... 19
General...................................................................................... 19
ELECTION OF DIRECTORS................................................................................ 20
BENEFICIAL OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL SHAREHOLDERS OF THE BANK ........................................................... 22
APPOINTMENT OF AUDITORS ............................................................................. 26
REGULATION AND SUPERVISION........................................................................... 27
The Bank..................................................................................... 27
The Holding Company.......................................................................... 27
SUBMISSION OF PROPOSALS.............................................................................. 28
LEGAL MATTERS ...................................................................................... 29
EXHIBIT A
Agreement and Plan of Reorganization and Plan of Share Exchange
EXHIBIT B
Article 15 of Title 13.1 of the Virginia Stock Corporation Act
SUMMARY OF THE PROXY STATEMENT
The following material is qualified in its entirety by the information
appearing elsewhere in this Proxy Statement and the Exhibits hereto.
ANNUAL MEETING
DATE, TIME AND PLACE. June 9, 1998 at 3:30 p.m. at the main office of
the Bank, 3720 Virginia Beach Boulevard, Virginia Beach, Virginia.
PURPOSE. Shareholders will be asked to vote on the proposed Agreement
and formation of a bank holding company for the Bank as well as other regular
matters of business. The affirmative vote of persons holding a majority of the
outstanding shares of Bank Common Stock will be required to approve this matter.
The vote required for approval of other matters is described below in "General
Information." The Bank's Board of Directors recommends that shareholders vote
"FOR" the Reorganization and other matters before the meeting.
THE REORGANIZATION
At the direction of the Board of Directors of the Bank, Resource
Bankshares Corporation (the "Holding Company") was incorporated under the laws
of Virginia to serve as a holding company for the Bank. The Bank and the Holding
Company have entered into an agreement by which the Bank will become a
wholly-owned subsidiary of the Holding Company in a tax-free share exchange
transaction. At the effective date of the Reorganization, shareholders of the
Bank will automatically become shareholders of the Holding Company and will
receive two shares of Holding Company common stock in exchange for each share of
Bank Common Stock they hold. Existing warrants and options for Bank Common Stock
will be converted into warrants and options for Holding Company Common Stock.
See "The Proposed Reorganization."
REASONS FOR THE REORGANIZATION
The Board of Directors believes that the establishment of a holding
company structure for the Bank will provide greater flexibility in responding to
the expanding financial needs of the Bank's customers and in meeting increasing
and ever-changing forms of competition for financial services. In particular,
the Holding Company will provide the Bank greater flexibility in repurchasing
common stock from shareholders, may facilitate affiliations with other financial
institutions, and in the future, may provide more defenses against an unwanted
attempt by another party to gain control of the Bank. The holding company
structure also may afford certain investment opportunities that otherwise would
not be available to the Bank. See "The Proposed Reorganization."
MANAGEMENT OF THE HOLDING COMPANY
Management of the Bank will not change as a result of the
Reorganization. The officers of the Holding Company will be Lawrence N. Smith -
President and Chief Executive Officer; Debra C. Dyckman - Senior Vice President
and Secretary; and Eleanor J. Whitehurst, Senior Vice President, Chief Financial
Officer, and Treasurer. The seven individuals currently slated to serve as
directors of the Holding Company include John B. Bernhardt (Chairman), Alfred E.
Abiouness, Thomas W. Hunt, Louis R. Jones, A. Russell Kirk, Lawrence N. Smith,
and Elizabeth A. Twohy, all currently serving also as directors of the Bank. See
"The Proposed Reorganization."
MARKET FOR COMMON STOCK
Bank Common Stock is listed on NASDAQ/NMS. There are several local
brokerage offices, "market makers," that will match or pair "buy" and "sell"
orders. Accordingly, there is an established market for the Bank's Common Stock;
however, due to the sporadic trades which occur, the prices quoted fluctuate.
Trades in Bank Common Stock since December 31, 1997 have been in the range of
$36.00 to $46.00 per share, with the most recent trade occurring on April 22,
1998, for 900 shares at a sales price of $49.13 per share. The Bank's management
is currently considering listing the Bank's, and subsequently the Holding
Company's, common stock on the American Stock Exchange; however, there can be no
guarantee that this listing will occur or what effect such a listing will have
upon trading in such stock. In addition, the current trading range may or may
not reflect the price a shareholder would receive if the stock were traded more
actively. Holding Company Common Stock is expected to trade primarily in the
local market in a substantially similar manner as the Bank's Common Stock. The
formation of a holding company should have little or no effect on the market or
market price of Common Stock.
THERE CAN BE NO ASSURANCE AS TO THE MARKET OR TRADING VALUE OF HOLDING
COMPANY COMMON STOCK AT THE EFFECTIVE DATE OR AT ANY TIME THEREAFTER.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is intended to qualify for federal income tax
purposes as a tax-free "reorganization" under Sections 368(a)(1)(B) of the
Internal Revenue Code in which no gain or loss will be recognized by a Bank
shareholder upon receipt of Holding Company Common Stock in exchange for Bank
Common Stock. See "The Proposed Reorganization."
COMPARISON IN THE RIGHTS OF SHAREHOLDERS
The Holding Company, like the Bank, is organized as a Virginia
corporation, subject to the provisions of the Virginia Stock Corporation Act
(the "Virginia SCA"). The articles of incorporation and bylaws of the Holding
Company, at least initially, will be virtually identical to those of the Bank.
Accordingly, there will be no material differences between the rights of the
Bank's present shareholders and the rights of shareholders receiving Holding
Company Common Stock in the Reorganization. See "The Proposed Reorganization."
GOVERNMENT REGULATION AND SUPERVISION
After the effective date, the Holding Company will be subject to the
Bank Holding Company Act of 1956, as amended (the "BHCA"), and will be subject
to regulation by the FRB with respect to its operations as a bank holding
company. The Bank will continue to be subject to regulation by the FRB and the
Virginia State Corporation Commission (the "SCC"). See "Regulation and
Supervision."
RIGHTS OF DISSENTING SHAREHOLDERS
Those shareholders of the Bank who object to the Reorganization will be
entitled to dissenters rights as provided in the Virginia SCA. See "The Proposed
Reorganization-Rights of Dissenting Shareholders."
CONDITIONS FOR CONSUMMATION, ANTICIPATED EFFECTIVE DATE, AND TERMINATION
Consummation of the Reorganization is subject to, among other things,
(i) the affirmative vote of a majority of the outstanding shares of Bank Common
Stock, and (ii) the approval by the SCC and the FRB. Applications for approval
of the Reorganization have been filed, and the Reorganization is expected to be
consummated on or about June 30, 1998. The Reorganization may be terminated by
either the Holding Company or the Bank prior to the approval of the Agreement by
the shareholders or by the mutual consent of the Board of Directors of the
Holding Company and the Bank after any required shareholder approval are
received. See "The Proposed Reorganization."
OTHER ITEMS OF BUSINESS
You will also be asked to consider and approve (i) the election of
seven incumbent directors, each of whom will serve a one year term and until
their successors are duly elected and qualify, and (ii) the ratification of the
appointment of Goodman & Company, L.L.P. as independent auditors for the 1998
fiscal year.
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth certain selected financial
information for the Bank. The selected financial information should be
read in conjunction with the financial statements of the Bank and the
related notes thereto in documents incorporated herein by reference. See
"Available Information."
1997 1996
---- ----
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
Income Statement Data:
Interest Income $10,937,495 $8,295,052
Interest Expense 5,983,424 4,689,758
Net Interest Income 4,954,071 3,605,294
Provision for Loan Losses (155,254) (290,000)
Other Income 4,520,319 2,755,203
Other Expense 6,533,326 4,451,038
Income Tax Expense (964,648) (153,274)
Net Income $1,821,162 $1,466,185
Per Share Data:
Net Income $1.84 $1.58
Cash Dividend $.25 $.10
Book Value $12.72 $8.94
Balance Sheet Data
Assets $209,330,018 $115,836,311
Loans Net of Unearned Income 148,016,531 80,934,739
Securities, available for sale 12,432,253 16,892,436
Securities, held to maturity 2,742,032 -
Deposits 169,508,332 99,178,555
Shareholders' Equity 15,601,817 8,655,061
Shares Outstanding 1,226,690 967,874
Performance Ratios:
Return on Average Assets 1.43% 1.45%
Return on Average Equity 18.92% 20.46%
Dividend Payout 14.97% 6.58%
Asset Quality Ratios:
Allowance for Loan Losses to Period
end loans 1.71% 1.27%
Allowance for Loan Losses to
non-performing loans 59% 247%
Non-performing assets to period end
loans and foreclosed property 2.91% .51%
Net Charge-offs to average loans .03% .15%
Capital Ratios:
Leverage 9.67% 7.04%
Risk-based
Tier I Capital 9.69% 10.22%
Tier II Capital 10.93% 11.45%
GENERAL INFORMATION
USE AND REVOCATION OF PROXIES
If the enclosed Proxy is properly executed and returned in time for
voting at the Annual Meeting, the shares represented thereby will be voted in
accordance with such instructions. If no instructions are given in a returned,
executed Proxy, the Proxy will be voted in favor of the Reorganization and the
other two matters for consideration at the meeting, and in the discretion of the
proxyholders as to any other matters which may properly come before the meeting.
Proxies will extend to, and will be voted at, any properly adjourned session of
the Annual Meeting, unless otherwise revoked. If an adjournment is proposed, the
persons named as proxies will vote in favor of such adjournment those Proxies
which are entitled to be voted in favor of the Reorganization and against such
adjournment those Proxies containing instructions to vote against the
Reorganization unless the shareholder clearly writes on the face of that Proxy
specific instructions stating how the Proxy should be voted in the case of an
adjournment proposed prior to a vote on the Reorganization.
Execution of a Proxy will not affect a shareholder's right to attend
the Annual Meeting and to vote in person. Any shareholder who has executed and
returned a Proxy for any reason desires to revoke it may do so at any time
before the Proxy is exercised by filing with the Secretary of the Bank an
instrument revoking it or a duly exercised Proxy bearing a later date, or by
attending the Annual Meeting and voting in person.
SHAREHOLDERS ENTITLED TO VOTE AND VOTE REQUIRED
Only holders of record of Bank Common Stock at the close of business on
April 23, 1998 (the "Record Date") are entitled to vote at the Annual Meeting.
On the Record Date, there were 1,226,690 shares of Bank Common Stock, par value
$3.00 per share, outstanding and entitled to vote. Each share of outstanding
Bank Common Stock is entitled to one vote on all matters presented at the Annual
Meeting. In order for the Reorganization to become effective, a majority of the
outstanding shares of Bank Common Stock must be voted in favor of the
Reorganization.
Although abstentions and broker non-votes (shares held by customers
which may not be voted on certain matters because the broker has not received
specific instructions from the customer) are counted for purposes of determining
the presence or absence of a quorum for the transaction of business, they are
generally not counted for purposes of determining whether such proposals have
been approved and therefore have no effect.
Directors, Executive Officers and their affiliates beneficially own and
may vote 423,944 of the outstanding shares of the Bank's Common Stock entitled
to vote on the Reorganization, which shares represent 34.6% of the votes
required to approve the Reorganization. The Bank believes that all of these
shares will be voted FOR the Reorganization.
SOLICITATION OF PROXIES
The Bank will bear its own expenses incident to soliciting proxies.
Directors, Officers, and employees of the Bank acting without commission or
other special compensation may solicit proxies in person, by telephone or by
mail.
FINANCIAL STATEMENTS
The consolidated financial statements for the year ended December 31,
1997 have previously been provided to Shareholders and are available upon
request. Additional copies of the reports will be furnished without charge to
Shareholders upon written request directed to Debra Dyckman, Senior Vice
President, at the Bank's address set forth on the cover page of the Proxy
Statement. The above-referenced financial statements and interim call reports
will be available at the Annual Meeting for inspection by Shareholders.
Additional financial information will be provided upon request (see "Additional
Information," above).
PROPOSAL ONE
THE PROPOSED REORGANIZATION
DESCRIPTION OF THE REORGANIZATION
The Board of Directors of the Bank has unanimously approved the
proposed Reorganization whereby the business of the Bank will be conducted under
a Holding Company structure. The Holding Company will be organized under the
laws of Virginia. The affirmative vote of persons holding a majority of the
outstanding shares of Bank Common Stock will be required to approve the
Reorganization.
The Bank and the Holding Company have entered into the Agreement under
the terms of which the Bank will become a wholly-owned subsidiary of the Holding
Company in a share exchange transaction. The material terms of the Agreement are
provided below. Pursuant to the Reorganization, each share of Bank Common Stock
will be exchanged for two shares of Holding Company Common Stock in a tax free
transaction. Each warrant or option to purchase shares of Bank Common Stock will
be converted into a warrant or option to purchase Holding Company Stock. The
Articles of Incorporation and Bylaws of the Holding Company will be
substantially identical to the Articles of Incorporation and Bylaws of the Bank.
Upon consummation of the Reorganization, shareholders of the Bank automatically
will become shareholders of the Holding Company and will receive two shares of
Holding Company Common Stock for each share of Bank Common Stock they hold
immediately prior to the Effective Date.
The Bank will conduct its business under the same name and in the same
manner as it did prior to the Reorganization. The officers and personnel of the
Bank will continue in their same capacity after the Reorganization. The Bank
will pay all expenses incurred in connection with the Reorganization, including
the costs of organizing the Holding Company.
REASONS FOR THE REORGANIZATION
The financial services industry is one of the most rapidly changing
segments of our nation's economy. Historical distinctions between different
types of financial institutions are eroding rapidly as a result of new
technology, legislative changes, and changing regulatory philosophies. In
addition, traditional restrictions on branch banking have given way to
multi-state banking and multi-bank holding companies. Accordingly, banks are
subject to aggressive competition from a wide variety of institutions offering
an expanding array of financial products and services. Current laws and
regulations applicable to banks limit their ability to supplement traditional
financial services and products and to diversify into other banking-related
ventures in response to increasing competition and changing customer needs. The
laws and regulations applicable to bank holding companies allow holding
companies greater flexibility in expanding their markets and in increasing the
variety of services they and their subsidiaries provide to customers. The Bank
has a number of large shareholders, and this flexibility may be particularly
useful to respond to an improving equity position at the Bank or to react to the
needs of a large shareholder to liquidate stock quickly. The Board of Directors
of the Bank believes that the new corporate structure will enhance the
institution's ability to compete under existing laws and regulations and to
respond effectively to changing market conditions.
A holding company structure also might facilitate future affiliations
between the Bank and other financial institutions. Although neither the Bank nor
the Holding Company has made any commitment to expand significantly its market
through acquisition of existing banks or to engage in activities other than
those currently conducted by the Bank, the Board anticipates that the holding
company structure will facilitate future combinations with other financial
institutions, if suitable opportunities arise for acquisition, expansion, or
affiliation. The holding company structure also may provide opportunities to
engage in new activities related to banking. Finally, the Holding Company may
provide more defenses against an unwanted attempt by another party to acquire or
gain control of the Bank, although the Bank is not presently aware of anyone who
has such plans.
MANAGEMENT OF THE HOLDING COMPANY
At the Effective Date, the Board of Directors, officers and employees
of the Bank will not change as a result of the Reorganization. Following the
Reorganization, the Bank will keep its existing name and office locations and
will continue to carry on its banking businesses in the same manner as before
the Share Exchange. The Board of Directors of the Holding Company will consist
of seven individuals currently serving as directors of the Bank, Alfred E.
Abiouness, John B. Bernhardt, Thomas W. Hunt, Louis R. Jones, A. Russell Kirk,
Lawrence N. Smith, and Elizabeth A. Twohy. Approval of the Reorganization by the
shareholders of the Bank at the Annual Meeting will be deemed to ratify the
seven designees as directors of the Holding Company. The Board of Directors and
executive officers of the Bank (and their affiliates) currently control
approximately 34.6 percent of Bank Common Stock outstanding, and all of those
individuals have indicated that they intend to vote for the Reorganization.
ANTICIPATED EFFECTIVE DATE OF REORGANIZATION
If the holders of a majority of the outstanding shares of Bank Common
Stock approve the Reorganization, the Reorganization will become effective upon
satisfaction of certain conditions and the receipt of required regulatory
approvals, including approval by the FRB and the State Corporate Commission
Bureau of Financial Institutions ("SCC"). Applications for approval of the
Reorganization have been filed with the FRB and the SCC. Subject to receipt of
all requisite regulatory approvals and the satisfaction of all other conditions
to the Reorganization, the objective is to have the Reorganization declared
effective on or about June 30, 1998 (the "Effective Date").
CONVERSION AND EXCHANGE OF STOCK
On the Effective Date, shareholders of the Bank will become
shareholders of the Holding Company. Each share of Bank Common Stock, par value
$3.00 per share, will, by virtue of the share exchange transsation, shall
represent two shares of Holding Company Common Stock, par value $3.00 per share.
(the "Exchange Ratio"). Outstanding certificates representing shares of Bank
Common Stock will thereafter represent an equal number of Holding Company Common
Stock and the holder thereof also shall be entitled to receive a certificate of
Holding Company Common Stock to reflect the additional shares deemed issued
pursuant to the Exchange Ratio. Shareholders shall maintain the same
proportional share interest in the Holding Company as they currently hold in the
Bank, except for nominal changes in interests resulting from the exercise, if
any, of dissenting shareholders' rights under Virginia law. Shareholders holding
certificates of Bank Common Stock will be entitled to exchange their
certificates at any time after the Effective Date for certificates of Holding
Company Common Stock.
Upon consummation of the Reorganization, promptly after the Effective
Date, the Bank, as exchange agent, will mail to Bank Common Stock shareholders
who hold stock immediately prior to the Effective Date the additional
certificates of Holding Company Common Stock to which they are entitled. A
letter of transmittal and instructions relating to the exchange of Bank Common
Stock certificates shall be made available upon request.
BANK SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES WITHOUT
CONTACTING THE BANK FIRST REGARDING DIRECTIONS FOR DOING SO.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is intended to qualify as a "reorganization" under
Section 368(a)(1)(B) of the Internal Revenue Code, and the material federal
income tax consequences summarized below are based on that assumption. One
condition to consummation of the Reorganization is the Bank's receipt of an
opinion of Mays & Valentine, L.L.P., counsel to the Bank and Holding Company,
that the Reorganization will qualify as a reorganization under Section
368(a)(1)(B) and that, for the Bank's shareholders who receive Holding Company
Common Stock for their Bank Common Stock, the exchange will result in the
non-recognition of gain or loss. A copy of that opinion is available for
inspection upon request from Debra C. Dyckman, Senior Vice President, Resource
Bank, 3720 Virginia Beach Boulevard, P. O. Box 61009, Virginia Beach, Virginia
23462-0218.
The Bank's shareholders will not recognize any gain or loss on the
exchange of Bank Common Stock solely for Holding Company Common Stock. A
shareholder's tax basis in the shares of Holding Company Common Stock received
in exchange for his Bank Common Stock will equal his tax basis in the shares of
Bank Common Stock exchanged therefor. The holding period for those shares of
Holding Company Common Stock will include the shareholder's holding period for
the shares of Bank Common Stock exchanged therefor, if they are held as a
capital asset at the time of the exchange.
Upon consummation of the Reorganization, no gain or loss will be
recognized by the Holding Company or Bank.
It is intended that the Reorganization will receive accounting
treatment similar to that for a pooling of interests.
THE FOREGOING DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES IS A
SUMMARY OF GENERAL INFORMATION MATERIAL TO MOST SHAREHOLDERS. DUE TO THE
INDIVIDUAL NATURE OF THE TAX CONSEQUENCES OF A REORGANIZATION, EACH BANK
SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR WITH REGARD TO
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE REORGANIZATION.
REQUIRED REGULATORY APPROVALS
The Reorganization must be approved by the FRB and the SCC. Management
of the Bank has filed the required applications for approval of the
Reorganization with the appropriate regulatory authorities. Subject to the
approval of the FRB and the SCC and the satisfaction of all other conditions to
the Reorganization, Management believes that the Reorganization will be declared
effective on or about June 30, 1998.
POSSIBLE ABANDONMENT OF THE REORGANIZATION
Consummation of the Reorganization is subject to obtaining the required
shareholder approval and various regulatory approvals. The Agreement may be
terminated by the unilateral action of the Boards of Directors of the Bank or
the Holding Company prior to the approval of the Reorganization by the
shareholders or by mutual consent of the respective Boards of Directors of the
Bank and the Holding Company after any required shareholder approval has been
obtained.
RIGHTS OF DISSENTING SHAREHOLDERS
A shareholder of Bank Common Stock who objects to the Reorganization (a
"Dissenting Shareholder") and who complies with provisions of Article 15 of
Title 13.1 of the Virginia SCA (specifically "Article 15") may demand the right
to receive a cash payment, if the Reorganization is consummated, for the fair
value of his or her stock immediately before the Effective Date, exclusive of
any appreciation or depreciation in anticipation of the Reorganization unless
such exclusion would be inequitable. In order to receive payment, a Dissenting
Shareholder must deliver to the Bank prior to the Annual Meeting a written
notice of intent to demand payment for his or her shares if the Reorganization
is consummated (an "Intent to Demand Payment") and must not vote his or her
shares in favor of the Reorganization. The Intent to Demand Payment should be
addressed to Lawrence N. Smith, President and CEO, Resource Bank, 3720 Virginia
Beach Boulevard, P. O. Box 61009, Virginia Beach, Virginia 23462-0218. A VOTE
AGAINST THE REORGANIZATION WILL NOT ITSELF CONSTITUTE SUCH WRITTEN NOTICE AND A
FAILURE TO VOTE WILL NOT CONSTITUTE A TIMELY WRITTEN NOTICE OF INTENT TO DEMAND
PAYMENT.
A shareholder of record of Bank Common Stock may assert dissenters'
rights as to fewer than all the shares registered in his or her name only if the
shareholder dissents with respect to all shares beneficially owned by any one
person and notifies the Bank in writing of the name and address of each person
on whose behalf he asserts dissenters' rights. The rights of such a partial
dissenter are determined as if the shares to which he dissents and his other
shares were registered in the names of different shareholders. A beneficial
shareholder of Bank Common Stock may assert dissenters' rights as to shares held
on his behalf by a shareholder of record only if (i) he submits to the Bank the
record shareholder's written consent to the dissent not later than the time when
the beneficial shareholder asserts dissenters' rights, and (ii) he dissents with
respect to all shares of which he is the beneficial shareholder or over which he
has power to direct the vote.
Within 10 days after the Effective Date, the Bank is required to
deliver a notice in writing (a "Dissenter's Notice") to each Dissenting
Shareholder who has filed an Intent to Demand Payment and who has not voted such
shares in favor of the Reorganization. The Dissenter's Notice shall (i) state
where the demand for payment (the "Payment Demand") shall be sent and where and
when stock certificates shall be deposited; (ii) supply a form for demanding
payment; (iii) set a date by which the Bank must receive the Payment Demand; and
(iv) be accompanied by a copy of Article 15. A Dissenting Shareholder who is
sent a Dissenter's Notice must submit the Payment Demand and deposit his or her
stock certificates in accordance with the terms of, and within the time frames
set forth in, the Dissenter's Notice. As a part of the Payment Demand, the
Dissenting Shareholder must certify whether he or she acquired beneficial
ownership of the shares before or after the date of the first public
announcement of the proposed Reorganization (the "Announcement Date"), which was
March __, 1998. The Bank will specify the Announcement Date in the Dissenter's
Notice.
Except with respect to shares acquired after the Announcement Date, the
Bank shall pay a Dissenting Shareholder the amount the Bank estimates to be the
fair value of his or her shares, plus accrued interest. Such payment shall be
made within 30 days of receipt of the Dissenting Shareholder's Payment Demand.
As to shares acquired after the Announcement Date, the Bank is only obligated to
estimate the fair value of the shares, plus accrued interest, and to offer to
pay this amount to the Dissenting Shareholder conditioned upon the Dissenting
Shareholder's agreement to accept it in full satisfaction of his or her claim.
If a Dissenting Shareholder believes that the amount paid or offered by
the Bank is less than the fair value of his or her shares, or that the interest
due is incorrectly calculated, that Dissenting Shareholder may notify the Bank
of his or her own estimate of the fair value of his shares and amount of
interest due and demand payment of such estimate (less any amount already
received by the Dissenting Shareholder) (the "Estimate and Demand"). The
Dissenting Shareholder must notify the Bank of the Estimate and Demand within 30
days after the date the Bank makes or offers to make payment to the Dissenting
Shareholder.
Within 60 days after receiving the Estimate and Demand, the Bank must
either commence a proceeding in the appropriate circuit court to determine the
fair value of the Dissenting Shareholder's shares and accrued interest, or the
Bank must pay each Dissenting Shareholder whose demand remains unsettled the
amount demanded. If a proceeding is commenced, the court must determine all
costs of the proceeding and must assess those costs against the Bank, except
that the court may assess costs against all or some of the Dissenting
Shareholders to the extent the court finds that the Dissenting Shareholders did
not act in good faith in demanding payment of the Dissenting Shareholder's
Estimates.
The foregoing discussion is a summary of the material provisions of
Article 15. Shareholders are strongly encouraged to review carefully the full
text of Article 15, which is included as Appendix B to this Proxy Statement. The
provisions of Article 15 are technical and complex, and a shareholder failing to
comply strictly with them may forfeit his Dissenting Shareholder's rights. Any
shareholder who intends to dissent from the Reorganization should review the
text of those provisions carefully and also should consult with his attorney. NO
FURTHER NOTICE OF THE EVENTS GIVING RISE TO DISSENTERS' RIGHTS OR ANY STEPS
ASSOCIATED THEREWITH WILL BE FURNISHED TO BANK SHAREHOLDERS, EXCEPT AS INDICATED
ABOVE OR OTHERWISE REQUIRED BY LAW.
Any Dissenting Shareholder who perfects his/her right to be paid the
fair value of his shares will recognize gain or loss, if any, for federal income
tax purposes upon the receipt of cash for his shares. The amount of gain or loss
and its character as ordinary or capital gain or loss will be determined in
accordance with applicable provisions of the Internal Revenue Code. See "The
Proposed Reorganization-Federal Income Tax Consequences."
HISTORICAL AND PRO FORMA CAPITALIZATION
The table below sets forth the capitalization of the Bank as of
December 31, 1997, and the pro forma capitalization of the Bank and Holding
Company as adjusted to reflect the consummation of the Reorganization.
HOLDING
PRIOR TO THE REORGANIZATION BANK COMPANY
---- -------
Number of shares of Capital Stock
Authorized Common Stock............................................ 3,333,333 6,666,666
Issued and Outstanding Common Stock................................ 1,226,690 0
Shares Authorized Preferred Stock.................................. 500,000 500,000
Issued and Outstanding Preferred Stock............................. 0 0
Shareholders' Equity
Common Stock....................................................... $ 3,680,070 0
Surplus............................................................ 10,769,249 0
Undivided Profits.................................................. 856,122 0
Net Unrealized Gains on Securities Available-
for-Sale, Net of Tax Effect...................................... 296,376 0
Total Shareholders' Equity............................................. $15,601817 0
---------
HOLDING COMPANY
COMBINED WITH
AFTER THE REORGANIZATION BANK THE BANK
---- ----------------
Number of shares of Capital Stock
Authorized Common Stock............................................ 3,333,333 6,666,666
Issued and Outstanding Common Stock................................ 1,226,690 2,453,380
Shares Authorized Preferred Stock.................................. 500,000 500,000
Issued and Outstanding Preferred Stock............................. 0 0
Shareholders' Equity
Common Stock....................................................... $ 3,680,070 $ 3,680,070
Surplus............................................................ 10,769,249 10,769,249
Undivided Profits.................................................. 856,122 856,122
Net Unrealized Gains on Securities Available-
for-Sale, Net of Tax Effect...................................... 296,376 296,376
Total Shareholders' Equity............................................. $15,601817 $15,601817
--------- ---------
- -----------------
(1) It is intended that the Reorganization will receive accounting
treatment similar to that for a pooling of interests.
(2) At the Effective Date, each of the issued and outstanding shares of
Bank common stock, par value $3.00 per share will be converted into and
become two shares of Holding Company common stock, par value $1.50 per
share, and the shareholders of the Bank will thereupon become
shareholders of the Holding Company. The Holding Company will then own
all the outstanding shares of Bank common stock. Shareholders of the
Bank will own the same proportional share interest in the Holding
Company as they hold in the Bank, except for nominal changes as a
result of the exercise, if any, of dissenters' rights under Virginia
law.
THE BANK BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
RESOURCE BANK
THE BANK
General. The Bank is a Virginia state-chartered commercial bank with
one full-service office in Virginia Beach, Virginia. The Bank was organized in
April of 1987 and commenced operations on September 1, 1988. The Bank's
principal executive office is located at 3720 Virginia Beach Boulevard, Virginia
Beach, Virginia 23452 and its telephone number is (757) 463-2265.
The Bank's primary market area is Virginia Beach and, to a lesser
extent, the surrounding cities of the South Hampton Roads area, including
Norfolk, Chesapeake, Portsmouth and Suffolk. The population of the market area
is estimated to be approximately 1 million.
The Bank has historically marketed its services to consumers, small to
medium sized businesses and professional people. The Bank provides a range of
services traditionally associated with independent community banks, with an
emphasis on personal relationship banking. These services include checking and
savings accounts, certificates of deposit and credit cards. The Bank also offers
services typically associated with large banks and bank holding companies. These
services include sweep account capacity, and corporate credit cards. The Bank
also offers a broad range of lending and deposit services to individual and
commercial customers. Loan activity includes home improvement loans, overdraft
protection and construction loans. The Bank offers other related services such
as safe deposit boxes, tax deposits, travelers checks, wire transfers and
savings bonds.
The Bank conducts mortgage operations through a division of the Bank.
This division originates residential mortgage loans and subsequently sells them
to investors. A competitive range of mortgage financing is provided through
offices in the Richmond and Hampton Roads metropolitan areas, Hilton Head, South
Carolina, and the northern Virginia/Washington, D.C. metropolitan areas.
The authorized capital stock of the Bank consists of Common Stock and
Preferred Stock. There are 1,226,690 shares of common stock outstanding held of
record by 949 stockholders as of December 31, 1997. The Bank is authorized to
issue the aggregate number of 3,333,333 shares of Common Stock, par value $3.00
per share, and 500,000 shares of Preferred Stock, par value $10.00 per share.
There are no shares of Preferred Stock currently outstanding. The Bank's common
stock is listed on the NASDAQ National Market System under the symbol "RBKV."
The Bank employs 119 full-time employees and 10 part-time employees.
On December 1, 1997, the Bank acquired Eastern American Bank FSB.
Pursuant to regulatory authority granted to the Bank in effecting the
acquisition, the Bank operates Eastern American Bank's offices as a branch of
the Bank under its own name.
Competition. Federal and state legislative changes have significantly
increased competition among financial institutions, and current trends toward
deregulation may be expected to increase competition even further. In its market
area, the Bank operates in an extremely competitive banking environment that
includes fourteen commercial banks, four savings banks and three credit unions.
Many of these institutions have substantially greater assets and capital than
the Bank. In many instances, these institutions have greater lending limits than
the Bank. As of March 31, 1998, the Bank could not loan in excess of $2.3
million to a single borrower, unless the Bank could sell participations in such
a loan to other financial institutions. Finally, the Bank faces competition for
deposits from short-term money market mutual funds and other corporate and
government securities funds. In summary, the Bank competes with many
institutions which are larger in size and therefore can offer more products than
the Bank at very competitive rates.
DESCRIPTION OF COMMON STOCK
As of the Record Date, the capital stock of the Bank consists of its
common stock, par value $3.00 per share, of which 3,333,333 shares are
authorized and its preferred stock, par value $10.00 per share, of which 500,000
shares are authorized. 1,226,690 shares of common stock were issued and
outstanding. No shares of preferred stock are issued, and there are currently no
plans to issue any.
The holders of Bank common stock are entitled to dividends, out of
funds legally available therefor, when and as declared by the Board of
Directors. Holders of Bank Common Stock are entitled to one vote for each share
held. Holders do not possess cumulative voting rights in the election of
directors or preemptive rights to purchase additional shares of Bank common
stock. The holders of Bank preferred stock, if and when issued, would be
entitled to such preferences, limitations and rights as the Board in its sole
discretion may assign. The Bank's preferred stock authorization is identical in
material respects to the Holding Company preferred stock described below in
"Description of Holding Company Capital Stock."
In the event of liquidation of the Bank, after payment of all debts and
expenses, the remaining assets of the Bank would be distributed to the holders
of Bank common stock ratably according to the number of shares held by each of
them, and to the holders of Bank preferred stock in accordance with the
preferences, limitations and rights that the Board may assign.
The outstanding shares of Bank common stock are fully paid and
nonassessable.
Wachovia Corporation is the transfer agent for the Bank's common stock.
The Bank furnishes its shareholders with annual reports which contain
audited consolidated financial statements for the Bank for the prior two years.
MARKET FOR BANK COMMON STOCK
Bank Common Stock is listed on the NASDAQ National Market System
("NASDAQ/NMS") under the symbol "RBKV." Quarterly information on the high and
low closing sales prices of Bank Common Stock on NASDAQ/NMS from April 12, 1996,
the date the stock was listed on NASDAQ/NMS, to March 31, 1998, are set forth in
the following table. From January 1, 1995, through April 11, 1996, Bank Common
Stock was quoted on the NNOTC Bulletin Board, an NASD sponsored and operated
inter-dealer quotation system for equity securities not listed on the NASDAQ
Stock Market. Quarterly information on the high and low closing bid prices for
this period is available upon request from the Bank.
NASDAQ/NMS
----------
Closing Sales Price*
High Low
---- ---
1998
Second Quarter (thru April 29) $50.00 $42.00
First Quarter 46.00 36.00
1997
Fourth Quarter $45.00 $27.50
Third Quarter 29.00 23.50
Second Quarter 26.00 18.50
First Quarter 20.50 18.00
1996
Fourth Quarter $18.75 $13.50
Third Quarter 13.50 11.75
Second Quarter (beginning April 12, 1996) 13.75 12.00
* The Exchange Ratio provided under the terms of the Reorganization
correspondingly will affect the price of Holding Company Common Stock after
the Effective Date.
During 1996, the Bank Board offered shares of Bank Common Stock for
sale at a price of $12.50 per share. In connection with the stock offering,
124,133 shares were sold to shareholders, depositors and the public. In December
1997, the Bank completed its acquisition of Eastern American Bank.
Pursuant to that transaction, the Bank issued 258,816 shares of its common
stock.
SHAREHOLDERS ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR BANK
COMMON STOCK. It is expected that, at least initially, Holding Company Common
Stock will be traded in a manner essentially similar to Bank common stock
pursuant to the Exchange Ratio provided in the Reorganization, the market price
is expected to be adjusted downward accordingly to approximately half of its
current price. However, no assurance can be given as to the market price of
Holding Company Common Stock at or after the Effective Date.
DESCRIPTION OF HOLDING COMPANY CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The Holding Company is authorized to issue up to 3,333,333 shares of
its common stock, par value $3.00 per share, and 500,000 shares of its preferred
stock, par value $10.00 per share. The following summary description of the
capital stock of the Holding Company is qualified in its entirety by reference
to the Articles of Incorporation of the Holding Company (the "Holding Company's
Articles") and the Holding Company's Bylaws, copies of which are available upon
written request to the President of the Bank at its principal office.
COMMON STOCK
In a manner identical to current Bank shareholder rights, the holders
of Holding Company Common Stock will be entitled to one vote per share on all
matters submitted to a vote of shareholders. Subject to certain limitations on
the payment of dividends, holders of Holding Company Common Stock will be
entitled to receive dividends when declared by the Holding Company's Board of
Directors for which funds are legally available.
All shares of Holding Company Common Stock to be issued in the
Reorganization are fully paid (or will be fully paid) and nonassessible. Holders
of common stock will not be entitled to cumulative voting rights. Therefore, the
holders of a majority of the shares voted in the election of directors can elect
all of the directors then standing for election subject to the rights of holders
of preferred stock, if and when issued. Holders of common stock have no
preemptive or other subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to the common stock. See
"Comparative Rights of Shareholders" below.
PREFERRED STOCK
Like the Bank, the Holding Company will be authorized to issue 500,000
shares of preferred stock, par value $10.00 per share. The Board of Directors is
authorized pursuant to the proposed Articles of Incorporation of the Holding
Company to assign preferences, limitations and relative rights to the shares of
preferred stock when they are issued. This authority gives the Board of
Directors of the Holding Company flexibility in the structuring and financing of
acquisitions and other financial activities. Like the Bank, the Holding Company
will also be able to use the Preferred Stock to help deter hostile takeover
attempts by assigning certain rights and preferences to the preferred stock that
will make it more difficult for a third party to gain control of the Holding
Company. See "Comparative Rights of Shareholders" below.
COMPARATIVE RIGHTS OF SHAREHOLDERS
GENERAL
The Bank is a state bank organized as a Virginia corporation and,
therefore, subject to the provisions of the Virginia SCA. Shareholders of the
Bank, whose rights are governed by the Bank's Articles of Incorporation and
Bylaws, will become shareholders of the Holding Company upon consummation of the
Reorganization. Upon consummation of the Reorganization, the rights of
shareholders of the Holding Company will be governed by the Holding Company's
Articles and Bylaws and by the Virginia SCA.
Except as otherwise discussed below, there are no material differences
between the rights of the Bank's shareholders and the rights of shareholders
receiving Holding Company Common Stock in the Reorganization. The Articles of
Incorporation and the Bylaws of the Bank and the Holding Company are
substantially identical in all respects with one exception, the increase in the
number of authorized shares. Under Virginia law, a board of directors is
permitting in the absence of anything to the contrary stated in the articles of
incorporation to amend a corporation's articles, without shareholder approval,
to convert each issued and unissued authorized share of an outstanding class
into a greater number of whole shares if the corporation has only shares of that
class outstanding. The Bank Board has designed the Reorganization to accomplish
this purpose. The authorized shares of the Holding Company Common Stock have
been set at a level which will have the effect of the above described conversion
when the Reorganization is consummated upon the Effective Date. With an Exchange
Ratio of two-to-one, the shareholders are receiving the same proportional
interests in the Holding Company as they currently hold in the Bank, and this
change is immaterial to the rights of shareholders. Management may at some point
consider other amendments to the Articles of Incorporation or Bylaws of the
Holding Company subsequent to consummation of the Reorganization, but no such
specific amendments are contemplated at this time. As required by Virginia law,
the shareholders of the Bank and its successor will be solicited separately
related to such proposals and will have an opportunity to vote on matters
requiring such vote.
The rights of the shareholders of the Bank and the Holding Company are
virtually identical in all respects. Neither group has preemptive rights to
subscribe for and purchase additional shares of stock or cumulative voting
rights with respect to the election of directors. In addition, there will be no
increase in the number of authorized shares of common stock or preferred stock
for issuance by the Holding Company. The Holding Company's Articles of
Incorporation do not change the maximum or minimum number of directors permitted
to serve on the Board of Directors, affect the terms for removal of directors,
vary the vote required to approve certain significant corporate actions, nor
change the limitation of liability and indemnification provisions applicable to
officers and directors, in any respect from that currently applicable under the
Bank's Articles of Incorporation and Bylaws.
In transactions involving mergers of Virginia banks which are governed
by Article 5 of the Virginia Banking Act, shareholders of state banks do not
have any dissenters' rights under the Virginia SCA. Therefore, if the Bank were
to engage in a merger transaction with another Virginia bank or national bank
doing business in the state, the shareholders of the Bank would not have the
right to dissent under Article 15 of the Virginia SCA. Conversely, if the
Holding Company were to merge with another entity, the shareholders of the
Holding Company would have the right to dissent from the transaction.
PROPOSAL TWO
ELECTION OF DIRECTORS
OF RESOURCE BANK
NOMINEES FOR ELECTION
Seven persons have been nominated by the Bank Board to serve as
directors until the 1999 Annual Meeting of Shareholders, and until their
successors have been elected and duly qualified. Proxies received from the Bank
shareholders will be voted for the election of such nominees unless marked to
the contrary. A shareholder of the Bank who desires to withhold voting of the
proxy for all or one or more nominees may so indicate on his or her proxy. All
of the nominees are currently members of the Bank Board and all have consented
to be named and have indicated their intent to service if elected. If any
nominee becomes unable to serve, an event which is not anticipated, the proxy
will be voted for a substitute nominee to be designated by the Bank Board, or
the number of directors will be reduced. The Bank Board does not have a separate
Nominating Committee.
The following table sets forth the names, ages and date of each
nominee's first election to the Board:
NAME AGE DIRECTOR SINCE
---- --- --------------
Alfred E. Abiouness(A)(C)(D) 66 1988
John B. Bernhardt(A)(B)(C)(D) 68 1992
Thomas W. Hunt(A)(B)(D) 41 1997
Louis R. Jones(A)(B)(D) 62 1993
A. Russell Kirk(A)(B)(D) 50 1992
Lawrence N. Smith(A)(B)(C) 60 1992
Elizabeth A. Twohy(A)(B) 46 1993
(A) Member of the Credit Risk Committee, which reviews all loan activity
and policy, acts upon large loan requests presented to the Bank, and
monitors outstanding loans and collection efforts. Also member of the
Market Risk and Liquidity Risk Committees. Each of these three
committees held 12 meetings in 1997.
(B) Member of the Audit Committee, which assists in establishing a budget
and audit compliance, establishes and periodically reviews the Bank's
asset management policy with emphasis on liquidity, cost of funds and
yield on investments, thoroughly reviews regulatory examinations and
assures strict compliance with such examinations. The Audit Committee
held 2 meetings in 1997.
(C) Member of the Proxy Committee, which collects and accounts for all
proxies and exercises the Bank's and/or the Bank Board's proxy
authority at all shareholder meeting. The Proxy Committee held 1
meeting in 1997.
(D) Member of the Compensation Committee, which recommends to the Bank
Board the salaries for officers and the compensation to be paid
directors, and determines the persons to whom incentive stock options
are granted, the number of shares subject to option, and the
appropriate vesting schedule.
The Compensation Committee held 2 meetings in 1997.
BACKGROUND AND EXPERIENCE
The following information relates to the seven director-nominees. There
are no family relationships among any of the director-nominees nor is there any
arrangement or understanding between any director-nominees and any other person
pursuant to which the director-nominee was selected.
Mr. Abiouness has been President of Abiouness, Cross & Bradshaw, Inc.,
a Norfolk structural engineering and architectural consulting firm since 1974.
Mr. Abiouness is a past Commissioner of the Norfolk Redevelopment and Housing
Authority.
Mr. Bernhardt has 31 years of commercial banking experience. Mr.
Bernhardt served as Executive Vice President of Virginia National Bank and
Virginia National Bankshares, Inc. from 1972 to 1979, and as President and
Director of those institutions from 1980 to 1983. From 1984 to 1988, Mr.
Bernhardt was the Vice Chairman of the Board of Director of Sovran Financial
Corporation, Norfolk, Virginia, and Sovran Bank, N.A., Richmond, Virginia. He
was also the President and Chief Executive Officer of Sovran Services from 1986
to 1988. Mr. Bernhardt resigned from all of his Sovran positions in April of
1988. He is currently a Managing Director of Bernhardt/Gibson, Inc., a financial
services firm, and serves as a director of Dominion the Banks, Inc.
Mr. Hunt is the Vice President of Summit Enterprises, 1997 Inc. of
McLean, Virginia, an investment management company focused primarily on venture
capital opportunities. He is the former Chairman of the Board of Directors of
Eastern American Bank, FSB, which the Bank acquired in 1997.
Mr. Jones has been President of Hollomon-Brown Funeral Home, Inc. since
1954. Mr. Jones has also been active in civic affairs and serves on the City
Council of Virginia Beach.
Mr. Kirk has been President of Armada/Hoffler Holding Company (a real
estate land development, construction and properties management firm) since 1983
and has been Co-CEO of Goodman Segar Hogan Hoffler since 1993. Mr. Kirk is also
Chairman and Commissioner of the Virginia Port Authority, Norfolk, Virginia.
Mr. Smith joined the Bank in December 1992 and serves as its President
and Chief Executive Officer. Mr. Smith has over 19 years of experience with
United Virginia Bank/Seaboard National and United Virginia Bank -- Eastern
Region, now known as Crestar Bank -- Eastern Region ("Crestar"). From 1973 until
May 1983, Mr. Smith was President of Crestar and also served on major committees
of the holding company, United Virginia Bankshares, Inc., now known as Crestar
Bankshares, Inc. He retired from Crestar in May 1983. Mr. Smith formed Essex
Financial Group, Inc., a savings and loan holding company, in May 1983 and still
serves as its Chairman. Mr. Smith serves on the board of Heilig-Meyers
Corporation, a national furniture retailer, Empire Machinery and Supply
Corporation, a Norfolk based supplier of industrial products, and he has been
active in civic affairs for the past 30 years.
Ms. Twohy is President of Capital Concrete, Inc. of Norfolk, Virginia,
a ready-mixed concrete manufacturer, and has been employed by the firm since
1976. Ms. Twohy is on the Board of Directors of Tidewater Builders Association
and is past president of the Virginia Ready-Mixed Concrete Association.
BENEFICIAL OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL SHAREHOLDERS OF THE BANK
The following table sets forth for (1) each director of the Bank, (2)
all directors and executive officers of the Bank as a group and (3) any persons
known by the Bank to own beneficially 5% or more of the outstanding shares of
Bank Common Stock: (i) the number of shares of the Bank Common Stock
beneficially owned on April 23, 1998, (ii) the percentage of ownership of
outstanding shares of Bank Common Stock on such date, and (iii) such persons'
percentage ownership of Bank Common Stock. Except as set forth below, the Bank
is not aware of any shareholder that beneficially owns 5% or more of the
outstanding shares of Bank Common Stock. All of the Bank's directors and
executive officers receive mail at the Bank's principal executive office at 3720
Virginia Beach Boulevard, Virginia Beach, Virginia 23452.
NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED OUTSTANDING SHARES(1)
- ---- ------------------ ---------------------
Alfred Abiouness 31,090(2) 2.6%
John B. Bernhardt 25,082(3) 2.0
Thomas W. Hunt 31,351(4) 2.5
Louis R. Jones 111,478(5) 9.1
A. Russell Kirk 51,148(6) 4.1
Lawrence N. Smith 64,856(7) 5.2
Elizabeth A. Twohy 19,670(8) 1.6
Directors and executives
officers as a group (7 persons) 341,425(9) 27.7%
Alan M. Voorhees 75,990(10) 6.1%
*Less than 1% beneficial ownership.
(1) Based upon 1,226,690 outstanding shares of Bank Common Stock. For
purposes of this table, beneficial ownership has been determined in
accordance with the provision of Rule 13d-3 of the Securities Exchange
Act of 1934 under which, in general, a person is deemed to be the
beneficial owner of a security if he or she has or shares the power to
vote or direct the voting of the security or the power to dispose of or
direct the disposition of the security, or if he has the right to
acquire beneficial ownership of the security within sixty days.
(2) Includes currently exercisable options to purchase 15,083 shares of
Bank Common Stock.
(3) Includes currently exercisable options to purchase 23,416 shares of
Bank Common Stock.
(4) Mr. Hunt is the son-in-law of Mr. Voorhees. Includes 2,464 shares held
in his sole name. Also, includes 6,930 shares held for the benefit of
Mr. Hunt's children, 15,207 shares by Mr. Hunt's spouse, and warrants
to purchase 6,750 shares held by Mr. Hunt's spouse and children, as to
which Mr. Hunt disclaims beneficial ownership. Does not include 20,482
shares held jointly by Mr. Hunt's spouse and Mr. Voorhees' spouse as
trustees for the benefit of Mr. Voorhees grandchildren.
(5) Includes currently exercisable options to purchase 10,083 shares of
Bank Common Stock.
(6) Includes currently exercisable options to purchase 10,083 shares of
Bank Common Stock.
(7) Includes currently exercisable options to purchase 24,133 shares of
Bank Common Stock.
(8) Includes currently exercisable options to purchase 10,083 shares of
Bank Common Stock.
(9) Includes currently exercisable options to purchase 92,881 shares of
Bank Common Stock.
(10) Includes 42,273 shares held by Mr. Voorhees' spouse as trustee for
several trusts, the beneficiaries of which are Mr. Voorhees' children
and grandchildren, as to which shares Mr. Voorhees disclaims beneficial
ownership. Also, includes warrants to purchase 9,000 shares held by Mr.
Voorhees and his spouse. Does not include an aggregate of 55,629 shares
held by Mr. Voorhees' adult children and Mr. Hunt, Mr. Voorhees
son-in-law, for their own benefit or for the benefit of Mr. Voorhees'
grandchildren.
BOARD AND COMMITTEE MEETINGS
The business of the Bank is managed under the direction of the Bank
Board. The Bank Board meets at least monthly to review significant developments
affecting the Bank and to act on matters requiring approval by the Bank Board.
The Bank Board held 12 meetings in 1997. During 1997, each member of the Bank
Board participated in at least 75% of all meetings of the Bank Board and at
least 75% of all applicable committee meetings.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires directors, officers and persons who beneficially own more than 10% of
Bank Common Stock to file initial reports of ownership and reports of changes in
beneficial ownership with the FRB. Such persons are also required to furnish the
Bank with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Bank, the Bank believes that all Section 16(a) filing requirements applicable to
its directors, officers and greater than 10% beneficial owners were complied
with in 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The directors and chief executive officer of the Bank, as well as
businesses and organizations with which they are associated or have a
significant financial interest, conduct normal banking relationships with the
Bank, including loans, and are expected to continue to do so. As of December 31,
1997, the Bank had direct and indirect loans to its directors and listed
executive officers totalling $1,302,456, which represented 8.35% of
stockholders' equity as of such date. All such transactions were made in the
normal course of business, at substantially the same rates, terms, collateral
and repayment terms as those prevailing at the same time for other comparable
transactions with other unrelated parties. Loan made to these individuals or
groups do not involve more than the normal risk of collectibility.
DIRECTORS COMPENSATION
Board members who are employees of the Bank do not receive any extra
compensation for attendance at Board or Committee meetings. During 1997,
non-employee directors received compensation for their service on the Bank Board
in the amount of $500 for each meeting attended. Non-employee directors received
$250 for each Market Risk Committee and Liquidity Risk Committee meeting
attended, $250 for each Credit Risk Committee meeting attended, and $500 for
each Audit Committee and Compensation Committee meeting attended. In addition,
an annual retainer of $8,000 was paid to the Chairman of the Bank Board in 1997,
and an annual retainer of $6,000 was paid to all of the other non-employee
directors.
EXECUTIVE COMPENSATION
The following table presents a summary of the executive compensation
paid to Lawrence N. Smith, the Bank's President and Chief Executive Officer,
during 1997, 1996, and 1995.
SUMMARY COMPENSATION
Long-Term
Compensation
Annual Compensation -------------
------------------- Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options(#) Compensation(1)
--------------------------- ---- ------ ----- ---------- ----------------
Lawrence N. Smith 1997 $200,000 $160,000 --- $4,774
President and Chief 1996 175,000 110,000 10,800 4,774
Executive Officer 1995 131,000 78,600 --- 4,834
(1) Represents the Bank's matching contributions under its 401(k) Plan.
The table below sets forth information for Mr. Smith concerning
unexercised stock options held as of December 31, 1997.
FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In the Money Options
Options at Fiscal at Fiscal
Year-End(#) Year-End($)(1)(2)
----------------------- ---------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Lawrence N. Smith 13,333(1) 0 $453,322(1) 0
10,800(2) 0 $297,000(2) 0
(1) These options entitle the named executive to purchase 13,333 shares at
$6.00 per share. These options were granted under the Bank's Employee
Stock Option Plan. At December 31, 1997, the "NASDAQ/NM", on which the
Bank's common stock is traded, listed a "bid" of $40.00, an "ask" of
$45.00, and the last sale at $40.00.
(2) These options entitle the named executive to purchase 10,800 shares at
$12.50 per share and were not execrable until the average price of
Common Stock traded on NASDAQ/NM (or any other over-the-counter
automated quotation system or national exchange on which the Common
Stock is actively traded) had been at least $25 for thirty (30)
consecutive trading days. These options were granted under the Bank's
1996 Long-Term Incentive Plan. See footnote (1) above for information
on the valuation of the shares at December 31, 1997. The fair value for
these options was estimated at the date of grant using a Black-Scholes
option pricing model. The black-Scholes option model was developed for
use in estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. Option valuation models
require the input of highly subjective assumptions including the
expected stock price volatility. Because the Bank's employee stock
options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in Management's opinion,
the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Mr. Smith is eligible to participate in the Bank's Retirement Savings
Plan ("Plan"). The Plan is a combined 401(k) profit sharing, stock bonus and
employee stock ownership plan, which means that contributions may be made by the
Bank to the Plan in either cash or Bank Common Stock and are derived from
current or accumulated profits. The Plan's assets may be invested in shares of
Bank Common Stock purchased either directly from the Bank or from third parties.
The Plan's 401(k) provisions permit employees to contribute to the Plan through
voluntary payroll savings on a pretax basis. These contributions are matched by
the Bank in an amount equal to 50% of payroll savings contributions made by
employees, up to 6% of an employee's total compensation.
The Bank has three stock option plans under which its directors and
officers have been granted options. The 1993 Long-Term Incentive Plan provided
for the issuance of options to purchase 16,666 shares of Bank Common Stock to
directors named in the plan and permitted the grant of options to purchase
43,333 shares of Bank Common Stock to key employees of the Bank. The 1994
Long-Term Bank Director Incentive Plan provided for the issuance of options to
purchase 26,667 shares of Bank Common Stock to the Bank's directors as specified
in the plan. The 1996 Long-Term Incentive Plan provides for the issuance of
options to purchase 33,750 shares of Bank Common Stock to directors named in the
plan, all of which options have been granted, and permits the grant of options
to purchase up to 50,000 shares of Bank Common Stock to key employees of the
Bank, 46,800 of which options have been granted.
During 1996, the Bank's Board of Directors approved a plan for the
payment of retirement benefits to certain key employees, and has entered into
limited binding agreements with these key employees. Under the terms of the
plan, the Bank may fund the liabilities associated with this plan with life
insurance contracts. In connection with funding the projected retirement
benefits, the Bank paid premiums on applicable life insurance contracts in the
amount of approximately $371,000 during 1997, and may continue to pay, in its
sole discretion, the same annual amount of insurance premiums over the next
three years. The present value of future benefits payable in connection with the
plan are currently insignificant, and the cash surrender value of the applicable
life insurance policies approximates the 1997 life insurance premium. As a
result, the plan did not materially affect the financial condition and results
of operations of the Bank in 1997.
THE BANK BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" ALL NOMINEES PROPOSED FOR DIRECTORS.
PROPOSAL THREE
APPOINTMENT OF AUDITORS
The Bank Board, upon recommendation of its Audit Committee, intends to
appoint Goodman & Company, L.L.P. as the firm of independent certified public
accountants to audit the Bank's financial statements for the year 1998, and the
Bank Board desires that such appointment be ratified by the shareholders at this
1998 Annual Meeting. Goodman & Company, L.L.P. has audited the financial
statements of the Bank since 1992. A representative of Goodman & Company, L.L.P.
will be present at the Bank Annual Meeting and will be available to respond to
appropriate questions and will have the opportunity to make a statement if he or
she desires.
THE BANK BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE RATIFICATION OF GOODMAN & COMPANY, L.L.P.
REGULATION AND SUPERVISION
THE BANK
The Bank operates, and upon consummation of the Reorganization will
continue to operate, as a state banking association subject to supervision and
regulatio1n by the Bureau of Financial Institutions of the SCC. The Bureau of
Financial Institutions regulates all areas of a state bank's commercial banking
and trust operations including reserves, loans, mergers, payment of dividends,
establishment of branches and other aspects of operations.
Additionally, the Bank is a member of the FRB System and will continue
to be subject to the regulations of the FRB. The Bank is also insured by the
FDIC which insures that member banks pay depositors to the extent provided by
law in the event an insured bank is closed without adequately providing for the
claims of depositors.
The earnings and growth of the banking industry are affected by the
general conditions of the economy and by the fiscal and monetary policies of the
Federal Government and its agencies, including the FRB Bank. The Board of
Governors regulates money and credit conditions and, as a result, has a strong
influence on interest rates and on general economic conditions. The effect of
such policies in the future on the business an earnings of the Bank cannot be
predicted with certainty.
THE HOLDING COMPANY
At the time the Holding Company acquires the shares of the Bank, and
thereby becomes a bank holding company within the meaning of the BHCA, it will
be registered as a bank holding company with the FRB, and will then be subject
to ongoing regulation, supervision and examination by the FRB. The Holding
Company will be required to file with the FRB periodic and annual reports and
other information concerning its own business operations and those of its
subsidiaries. In addition, the BHCA requires a bank holding company to obtain
FRB approval before it acquires, directly or indirectly, ownership or control of
any voting shares of a second or subsequent bank if, after such acquisition, it
would own or control more than 5% of such shares, unless it already owns or
controls a majority of such voting shares. FRB approval must also be obtained
before a bank holding company acquires all or substantially all of the assets of
another bank or merges or consolidates with another bank holding company.
A bank holding company is prohibited under the BHCA, with limited
exceptions, from acquiring or obtaining direct or indirect ownership or control
of more than 5% of the voting shares of any company which is not a bank, or from
engaging in any activities other than those of banking or of managing or
controlling banks or furnishing services to or performing services for its
subsidiaries. One of the exceptions to these prohibitions permits a bank holding
company to engage in, or acquire an interest in a company which engages in
activities which, after due notice and opportunity for hearing, the FRB by
regulation or order has determined is so closely related to banking or of
managing or controlling banks as to be a proper incident thereto. Specific
non-banking activities which current regulations of the FRB state are
sufficiently closely related to banking include, among others: (1) making,
acquiring, brokering, or servicing loans or other extensions of credit
(including factoring, issuing letters of credit and accepting drafts) for the
company's account or for the account of others; (2) performing any activity
usual in connection with making, acquiring, brokering or servicing loans or
other extensions of credit (including real estate and personal property
appraisal, arranging commercial real estate equity financing, check-guaranty
services, collection agency services, credit bureau services, asset management,
servicing, and collection activities, acquiring debt in default, and real estate
settlement services); (3) leasing personal or real property or acting as agent,
broker, or adviser in leasing such property; (4) operating nonbank depository
institutions (including industrial banks and savings associations); (5)
performing trust company functions or activities; (6) acting as investment or
financial advisor; (7) providing transactional services for customer investments
(including securities brokerage, riskless principal transactions, private
placement services, and futures commission merchant); (8) acting as principal in
investment transactions (including underwriting and dealing in government
obligations and money market instruments; foreign exchange; forward contracts,
options, futures, and similar contracts; buying and selling bullion and related
activities); (9) management consulting and counseling activities; (10) support
services(including courier services and printing and selling MICR-encoded
items); (11)insurance agency and underwriting; (12) performing community
development activities; (13) issuing and selling money orders and similar
consumer-type payment instruments, savings bonds, and traveler's checks; (14)
providing data processing and data transmission services. Other financially
related activities have been permitted by the FRB by order on a case-by-case
basis.
A bank holding company may not, without providing prior notice to the
FRB, purchase or redeem its own stock if the gross consideration to be paid,
when added to the net consideration paid by the company for all purchases or
redemptions by the company of its equity securities within the preceding 12
months, will equal 10% or more of the company's consolidated net worth unless it
meets the requirements of a well-capitalized and well-managed organization.
Under certain amendments to the Virginia Financial Institutions Holding
Company Act that became effective July 1, 1983, no corporation, partnership or
other business entity may acquire, or make any public offer to acquire, more
than 5% of the stock of any Virginia financial institution, or any Virginia
financial institution holding company, unless it first files an application with
the SCC. The SCC is directed by the statute to solicit the views of the affected
financial institution, or financial institution holding company, with respect to
such stock acquisition, and is empowered to conduct an investigation during the
60 days following receipt of such an application. If the SCC takes no action
within the prescribed period, or if during the prescribed period it issues
notice of its intent not to disapprove an application, the acquisition may be
completed. Under the BHCA, the FRB may disapprove an application or approve an
application subject to such conditions as it may deem advisable.
In addition to the filings required by the FRB as discussed above, the
Holding Company, upon consummation of the Reorganization and on a continuing
basis thereafter, will be required to make certain periodic filings with the SEC
as well as file certain reports on the occurrence of certain material events
specified in the 1934 Act. The Holding Company will be required to file
quarterly and annual reports with the SEC under Section 13 of the 1934 Act,
furnish annual reports to shareholders prior to annual meetings of shareholders,
and send proxy statements to shareholders prior to any shareholders' meeting,
all of which must comply with the provisions of the 1934 Act. In addition,
directors, officers and certain shareholders must make some detailed disclosures
under the 1934 Act.
SUBMISSION OF PROPOSALS
The next Annual Meeting of Shareholders of the Bank is scheduled for
May, 1999. Any shareholder who wishes to submit a proposal for consideration at
that meeting must submit the proposal in writing to Lawrence N. Smith,
President, before December 29, 1998.
LEGAL MATTERS
The legality of Holding Company common stock to be issued pursuant to
the Reorganization will be passed upon for the Holding Company by the law firm
of Mays & Valentine, L.L.P., Richmond, Virginia, which has acted as counsel to
the Bank and the Holding Company in connection with the Reorganization.
BY ORDER OF THE BOARD OF DIRECTORS
OF THE BANK
/s/ Debra C. Dyckman
Virginia Beach, Virginia ---------------------------
April 29, 1998 Debra C. Dyckman, Secretary
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
April 10, 1998, by and between Resource Bankshares Corporation, a proposed bank
holding company organized under the laws of Virginia, with its principal office
in Virginia Beach, Virginia (the "Holding Company"), and Resource Bank, a
banking corporation organized under the laws of the Commonwealth of Virginia,
with its main office in Virginia Beach, Virginia (the "Bank").
WITNESSETH:
The respective Boards of Directors of the Holding Company and the Bank
have resolved that the reorganization of the Bank under a holding company
structure pursuant to a statutory share exchange transaction under the Virginia
Stock Corporation Act (the "Share Exchange") so that the Bank will become a
wholly-owned subsidiary of the Holding Company, is in the respective best
interests of the constituent corporations and their shareholders. To that end,
each such Board has approved this Agreement and Plan of Reorganization.
NOW THEREFORE, in consideration of the mutual agreements set forth
herein, the constituent corporations agree as follows:
1. THE SHARE EXCHANGE. At the Effective Date of the Share Exchange, the
Bank shall become a banking subsidiary of the Holding Company. The Share
Exchange shall be effective upon the issuance of a Certificate of Share Exchange
by the Virginia State Corporation Commission upon filing of a Plan of Share
Exchange by the Constituent Corporations, substantially in the form attached
hereto as Appendix I.
2. NAME; ARTICLES OF INCORPORATION; BYLAWS; OFFICES. At the Effective
Date, the respective names, articles of incorporation and bylaws of the Holding
Company and Bank will not change. The main offices and branches of the Holding
Company and Bank immediately prior to the Share Exchange shall not change as a
result of the Share Exchange.
3. CONVERSION OF SHARES. Upon, and by reason of, the Share Exchange
becoming effective pursuant to the issuance of a Certificate of Share Exchange
by the Virginia State Corporation Commission (the "Effective Date"), no cash
shall be allocated to the shareholders of the Bank, and stock shall be issued
and allocated as follows:
(a) Each of the issued and outstanding shares of common stock of
the Bank ("Bank Common Stock") shall for all corporate purposes, and without any
action on the part of the holder thereof, automatically become and be converted
into two shares of common stock of the Holding Company ("Holding Company Common
Stock"). Outstanding certificates representing shares of Bank Common Stock will
thereafter represent an equal number of shares of Holding Company Common Stock
and the holder thereof shall be entitled to receive additional certificates of
Holding Company Common Stock in accordance with the Plan of Share Exchange. As
soon a practicable thereafter, the Holding Company will issue new stock
certificates representing the shares of Holding Company Common Stock received in
the Share Exchange. Certificates representing Bank Common Stock may at any time
thereafter be surrendered to the Wachovia Corporation, acting as exchange agent,
or such other or additional exchange agent as the Bank may select (together with
any transmittal materials or endorsements required by the exchange agent). Upon
the surrender of Bank stock certificates, duly endorsed for transfer, to the
Holding Company, the holder thereof will be entitled to receive in exchange
therefor a certificate or certificates representing an equivalent number of
shares of Holding Company Common Stock, but shareholders will not be required to
surrender their Bank stock certificates.
(b) Shares of Bank Common Stock issued and outstanding shall, by
virtue of the Share Exchange, continue to be issued and outstanding shares held
by the Holding Company.
4. CONVERSION OF STOCK OPTIONS AND WARRANTS. At the Effective Date, each
unexercised and theretofore unexpired outstanding option or warrant to purchase
Bank Common Stock shall be automatically exchanged for a new option or warrant
to acquire, for the same aggregate exercise price and under the same terms, the
number of shares, adjusted pursuant to the Exchange Ratio, of Holding Company
Common Stock. Outstanding Bank options or warrants will thereafter represent two
times the number of Holding Company options or warrants. As soon as practicable
thereafter, the Holding Company will issue instruments representing new warrants
or options to acquire Holding Company Common Stock. Instruments representing
Bank options or warrants may at any time thereafter be surrendered to the Bank,
acting as exchange agent, or such other or additional exchange agent as the Bank
may select (together with any transmittal materials or endorsements required by
the exchange agent). Each holder of Bank options or warrants, upon the surrender
of such instruments representing Bank options or warrants to the Holding Company
duly endorsed for transfer, will be entitled to receive in exchange therefor
replacement instrument(s) representing the aforementioned number of Holding
Company options or warrants, but holders will not be required to surrender such
Bank options or warrants.
5. CAPITAL OF THE BANK. The capital, surplus and undivided profits of
the Bank at the Effective Date will be equal to the capital structure of the
Bank at December 31, 1997, adjusted, however, for capital contributions, normal
earnings and expenses, and other capital changes between December 31, 1997, and
the Effective Date.
6. BOARD OF DIRECTORS; OFFICERS. (a) At the Effective Date, the members
of the boards of directors of the Bank and the Holding Company shall continue in
office as the directors of the Bank and the Holding Company, respectively,
except as otherwise determined in the discretion of the Boards prior to the
Effective Date, until the next annual meeting or until such time as their
successors have been elected and qualified.
(b) At the Effective Date, the respective officers of the Bank
and the Holding Company shall continue to serve in their then current positions
until such time as their successors have been elected or appointed.
7. RIGHTS OF DISSENTING SHAREHOLDERS. Shareholders of the Bank who
dissent from the Share Exchange will be entitled to the dissenters' rights and
remedies set forth in Article 15 of the Virginia Stock Corporation Act, Sections
13.1-729 et seq.
8. CONDITIONS TO THE SHARE EXCHANGE. Consummation of the Share Exchange
is conditioned upon (i) the approval of this Agreement by the affirmative vote
of the shareholders owning a majority of the outstanding shares of common stock
of the Bank at a meeting to be held on the call of its board of directors, (ii)
the receipt of the required regulatory approvals, and (iii) the receipt of an
opinion of counsel as to the tax-free nature of the transaction. Upon the
satisfaction of the foregoing conditions, the Share Exchange shall become
effective at the time specified in a Certificate of Share Exchange to be issued
by the Virginia State Corporation Commission approving the Share Exchange.
9. TERMINATION. This Agreement may be terminated by the unilateral
action of either of the boards of directors of the Bank or the Holding Company
prior to the approval of the Agreement by the Bank's shareholders or by the
mutual consent of the respective boards of directors of the Bank and the Holding
Company after the Bank's shareholders approve the transaction. Upon termination
for any reason, this Agreement shall be void and of no further effect, and there
shall be no liability by reason of this Agreement or the termination thereof on
the part of the Bank or the Holding Company or any of their directors, officers,
employees, agents or shareholders.
WITNESS, the following signatures and seals for the parties, each
hereunto set by its President and attested by its Secretary, pursuant to duly
authorized resolutions of its board of Directors.
ATTEST: RESOURCE BANK
/s/ Debra C. Dyckman By: /s/ Lawrence N. Smith
- ------------------------ ------------------------------
Secretary Lawrence N. Smith
President
ATTEST: RESOURCE BANKSHARES CORPORATION
/s/ Debra C. Dyckman By: /s/ Lawrence N. Smith
- ------------------------- ------------------------------
Secretary Lawrence N. Smith
President