<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to _______________
COMMISSION FILE NUMBER 0-28292
----------------------
BANK PLUS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4571410
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
4565 COLORADO BOULEVARD 90039
LOS ANGELES, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 241-6215
----------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
As of July 31, 1997, Registrant had outstanding 19,308,340 shares of Common
Stock, par value $.01 per share.
================================================================================
<PAGE>
BANK PLUS CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of June 30, 1997 and
December 31, 1996............................................................................ 1
Consolidated Statements of Operations for the quarters and six months ended June 30,
1997 and 1996................................................................................ 2
Consolidated Statements of Cash Flows for the quarters and six months ended June 30,
1997 and 1996................................................................................ 3
Notes to Consolidated Financial Statements..................................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................................................. 30
Item 2. Changes in Securities.......................................................................... 32
Item 3. Defaults Upon Senior Securities................................................................ 32
Item 4. Submission of Matters to a Vote of Security Holders............................................ 32
Item 5. Other Information.............................................................................. 32
Item 6. Exhibits and Reports on Form 8-K............................................................... 33
a. Exhibits.................................................................................. 33
b. Reports on Form 8-K....................................................................... 35
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ -------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents............... $ 169,559 $ 70,126
Certificate of deposit.................. 1,582 --
Investment securities available for
sale, at fair value.................... 157,354 156,251
Investment securities held to maturity
at amortized cost (market value of
$5,338 and $5,198 at June 30, 1997 and
December 31, 1996, respectively)....... 5,332 5,178
Mortgage-backed securities held for
trading................................ 10,767 14,121
Mortgage-backed securities available
for sale, at fair value................ 196,942 179,403
Mortgage-backed securities held to
maturity, at amortized cost (market
value of $23,396 and $27,169 at
June 30, 1997 and December 31, 1996,
respectively).......................... 27,965 30,024
Loans receivable, net of allowances of
$59,964 and $57,508 at June 30, 1997
and December 31, 1996, respectively.... 2,787,120 2,691,931
Interest receivable..................... 20,809 20,201
Investment in Federal Home Loan Bank
("FHLB") stock......................... 55,246 52,330
Real estate owned, net.................. 23,640 24,663
Premises and equipment, net............. 32,238 31,372
Other assets............................ 45,448 54,690
---------- ----------
$3,534,002 $3,330,290
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits.............................. $2,701,677 $2,495,933
FHLB advances......................... 569,846 449,851
Commercial paper...................... -- 40,000
Mortgage-backed notes................. -- 100,000
Other liabilities..................... 31,661 31,099
---------- ----------
3,303,184 3,116,883
---------- ----------
Minority Interest: Preferred stock of
consolidated subsidiary................ 51,750 51,750
Stockholders' equity:
Common Stock:
Common stock, par value $.01 per share;
78,500,000 shares authorized;
19,308,340 and 18,245,265 shares
outstanding at June 30, 1997 and
December 31, 1996, respectively...... 193 182
Paid-in capital....................... 273,942 261,902
Unrealized (losses) gains on
securities........................... (1,061) 1,043
Accumulated deficit................... (94,006) (101,470)
---------- ----------
179,068 161,657
---------- ----------
$3,534,002 $3,330,290
========== ==========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans................................................. $ 49,384 $ 54,096 $ 99,224 $ 110,276
Mortgage-backed securities............................ 4,673 756 8,977 1,260
Investment securities and other....................... 4,398 4,704 8,961 8,074
----------- ----------- ----------- -----------
Total interest income............................... 58,455 59,556 117,162 119,610
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits.............................................. 29,572 29,787 58,712 60,822
FHLB advances......................................... 8,034 3,175 13,977 6,842
Other borrowings...................................... 523 4,828 3,790 8,342
----------- ----------- ----------- -----------
Total interest expense.............................. 38,129 37,790 76,479 76,006
----------- ----------- ----------- -----------
NET INTEREST INCOME..................................... 20,326 21,766 40,683 43,604
Provision for estimated loan losses................... 4,251 3,905 8,502 7,810
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
ESTIMATED LOAN LOSSES.................................. 16,075 17,861 32,181 35,794
----------- ----------- ----------- -----------
NONINTEREST INCOME (EXPENSE):
Loan fee income....................................... 512 560 1,020 1,374
Gains on loan sales, net.............................. 21 6 28 6
Fee income from sale of uninsured investment products. 1,550 1,092 3,063 2,291
Fee income on deposits and other income............... 796 874 1,546 1,664
Gains on securities and trading activities, net....... 995 235 2,216 152
----------- ----------- ----------- -----------
3,874 2,767 7,873 5,487
----------- ----------- ----------- -----------
Provision for estimated real estate losses............ (620) (578) (1,362) (1,246)
Direct costs of real estate operations, net........... (1,205) (1,237) (2,764) (3,024)
----------- ----------- ----------- -----------
(1,825) (1,815) (4,126) (4,270)
----------- ----------- ----------- -----------
Total noninterest income.............................. 2,049 952 3,747 1,217
----------- ----------- ----------- -----------
OPERATING EXPENSE:
Personnel and benefits................................ 7,086 6,833 13,787 13,806
Occupancy............................................. 2,788 2,689 5,288 5,406
FDIC insurance........................................ 587 1,931 1,081 3,962
Professional services................................. 2,138 2,780 4,758 5,283
Office-related expenses............................... 832 846 1,680 1,932
Other................................................. 1,610 1,459 2,783 2,776
----------- ----------- ----------- -----------
Total operating expense............................. 15,041 16,538 29,377 33,165
----------- ----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTEREST IN SUBSIDIARY....................... 3,083 2,275 6,551 3,846
Income tax (benefit) expense.......................... (2,500) 53 (4,800) 93
----------- ----------- ----------- -----------
EARNINGS BEFORE MINORITY INTEREST IN SUBSIDIARY......... 5,583 2,222 11,351 3,753
Minority interest in subsidiary (dividends on
subsidiary preferred stock)......................... 2,333 1,552 3,886 1,552
----------- ----------- ----------- -----------
NET EARNINGS............................................ 3,250 670 7,465 2,201
Preferred stock dividends............................. -- -- -- 1,553
----------- ----------- ----------- -----------
EARNINGS AVAILABLE FOR COMMON STOCKHOLDERS.............. $ 3,250 $ 670 $ 7,465 $ 648
=========== =========== =========== ===========
EARNINGS PER COMMON SHARE............................... $ 0.18 $ 0.04 $ 0.41 $ 0.04
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.............. 18,248,754 18,242,465 18,247,019 18,242,465
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
BANK PLUS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ------------------------------
1997 1996 1997 1996
----------- ------------ ----------- ----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings ............................................... $ 3,250 $ 670 $ 7,465 $ 2,201
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Provisions for estimated loan and real estate losses.... 4,871 4,483 9,864 9,056
Gains on sale of loans and securities .................. (1,016) (241) (2,244) (158)
Capitalized loan origination costs ..................... (4) -- (13) --
Amortization of deferred items, net .................... (1,593) (568) (2,075) (1,009)
FHLB stock dividend .................................... (768) (727) (1,659) (1,375)
Depreciation and amortization .......................... 893 992 1,763 1,970
Purchases of mortgage-backed securities (MBS")
held for trading ......................................... -- -- (9,979) --
Principal repayments of MBS held for trading ............... 195 -- 352 --
Proceeds from sales of MBS held for trading ................ -- -- 13,074 --
Interest receivable decrease (increase) .................... (121) (285) 510 (1,206)
Other assets decrease (increase) ........................... 120 (2,576) 31,420 (6,766)
Deferred income tax benefit ................................ (2,597) -- (5,001) --
Interest payable (decrease) increase ....................... (9,720) (1,516) (5,099) 82
Other liabilities increase ................................. 442 2,941 1,734 4,665
--------- --------- ---------- ---------
Net cash (used in) provided by operating activities....... (6,048) 3,173 40,112 7,460
--------- --------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Hancock acquisition ....................................... 52,908 -- 52,908 --
Purchases of investment securities available for sale...... -- (83,450) -- (151,025)
Maturities of investment securities available for sale..... -- 22,950 -- 22,950
Purchases of MBS available for sale ....................... (149,399) (38,961) (215,946) (38,961)
Principal repayments of MBS available for sale ............ 10,368 852 15,990 2,759
Proceeds from sales of MBS available for sale.............. 142,254 20,158 185,949 20,158
Principal repayments of MBS held to maturity............... 1,290 -- 2,060 --
Loans receivable (increase) decrease....................... (15,117) 53,642 19,610 98,196
Net proceeds from sales of real estate owned............... 6,415 13,653 17,746 17,597
Premises and equipment additions, net...................... (831) (266) (1,202) (1,021)
--------- --------- ---------- ---------
Net cash provided by (used in) investing activities...... 47,888 (11,422) 77,115 (29,347)
--------- --------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Demand deposits and passbook savings, net increase.......... (13,945) (34,887) (7,609) (101,740)
Certificate accounts, net (increase) decrease............... (4,940) 8,770 9,782 53,817
Payments of preferred stock dividend........................ -- -- -- (1,553)
Proceeds from FHLB advances................................. 435,941 -- 485,941 --
Repayments of FHLB advances................................. (253,246) -- (365,946) (60,000)
Short-term borrowings (decrease) increase................... (40,000) 42,457 (40,000) 102,357
Repayments of long-term borrowings.......................... (100,000) -- (100,000) --
Net proceeds from issuance of capital stock................. 38 -- 38 --
Other financing activity.................................... -- (36) -- (36)
--------- --------- ---------- ---------
Net cash provided by (used in) financing activities........ 23,848 16,304 (17,794) (7,155)
--------- --------- ---------- ---------
Net increase (decrease) in cash and cash equivalents.... 65,688 8,055 99,433 (29,042)
Cash and cash equivalents at the beginning of the period... 103,871 57,697 70,126 94,794
--------- --------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................... $ 169,559 $ 65,752 $ 169,559 $ 65,752
========= ========= ========== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash (paid) received during the period for:
Interest on deposits, advances and other borrowings.... $ 47,674 (38,631) $ 80,821 $ (74,570)
Income tax payment (refund)............................ 243 (81) 243 302
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Additions to real estate acquired through foreclosure.... 8,111 12,346 20,777 21,220
Loans originated to finance sale of real estate owned.... 4,472 1,129 6,088 1,379
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash (paid) received during the period for:
Interest on deposits, advances and other borrowings.... $47,674 $ (38,631) $ 80,821 $ (74,570)
Income tax payment (refund)............................ 243 (81) 243 302
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Additions to real estate acquired through foreclosure.... 8,111 12,346 20,777 21,220
Loans originated to finance sale of real estate owned.... 4,472 1,129 6,088 1,379
DETAILS OF ACQUISITION:
Fair value of assets and intangible acquired............. 212,693 -- 212,693 --
Goodwill................................................. 6,589 -- 6,589 --
Liabilities assumed...................................... 207,270 -- 207,270 --
Common stock issued...................................... 12,012 -- 12,012 --
Cash acquired............................................ 52,908 -- 52,908 --
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
In the opinion of Bank Plus Corporation ("Bank Plus") and Bank Plus together
with its subsidiaries (the "Company"), the accompanying unaudited consolidated
financial statements, prepared from the Company's books and records, contain all
adjustments (consisting of only normal recurring accruals) necessary for a fair
presentation of the Company's financial condition as of June 30, 1997 and
December 31, 1996, and the results of operations and statements of cash flows
for the three and six months ended June 30, 1997 and 1996.
Bank Plus is the holding company for Fidelity Federal Bank, a Federal Savings
Bank, and its subsidiaries (the "Bank" or "Fidelity") and Gateway Investment
Services, Inc. ("Gateway"). The Company's headquarters are in Los Angeles,
California. The Company offers a broad range of consumer financial services,
including demand and term deposits, uninsured investment products, and loans to
consumers, through 38 full-service branches, all of which are located in
Southern California, principally in Los Angeles and Orange counties. All
significant intercompany transactions and balances have been eliminated. Certain
reclassifications have been made to prior years' consolidated financial
statements to conform to the 1997 presentation.
In May 1996, the Bank completed a reorganization pursuant to which all of the
outstanding Class A Common Stock of Fidelity was converted on a one-for-one
basis into all of the outstanding common stock of Bank Plus and Bank Plus became
the holding company for Fidelity (the "Reorganization"). Bank Plus currently
has no significant business or operations other than serving as the holding
company for Fidelity and Gateway, which prior to the Reorganization was a
subsidiary of the Bank. All references to "Fidelity" prior to the
Reorganization include Gateway.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and include all
information and footnotes required for interim financial statement presentation.
The financial information provided herein, including the information under the
heading Item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations" ("MD&A"), is written with the presumption that the users
of the interim financial statements have read, or have access to, the most
recent Annual Report on Form 10-K which contains the latest available audited
consolidated financial statements and notes thereto, as of December 31, 1996,
together with the MD&A as of such date.
Supplementary Earnings/Loss per Share Data
Net earnings per common share for the three and six months ended June 30,
1997, as adjusted to reflect the dividends on preferred stock of subsidiary, was
determined based on 18,248,754 and 18,247,019 shares outstanding, respectively,
and 18,242,465 for the three and six months ended June 30, 1996. Common stock
equivalents for the three and six months ended June 30, 1997 and 1996 did not
impact the calculation of net earnings per common share.
2. ACQUISITION
On July 29, 1997, the Company completed the acquisition of all of the
outstanding common stock of Hancock Savings Bank, F.S.B., A Federal Savings Bank
("Hancock"), a Los Angeles-based institution with five branches. The total
consideration paid to the Hancock stockholders was 1,058,575 million shares of
Bank Plus Common Stock valued at $11.347 per share.
The acquisition of Hancock was accounted for as a purchase and has been
reflected in the consolidated statement of condition of the Company as of June
30, 1997. The Company's consolidated statement of operations will include the
revenues and expenses of the acquired business beginning July 1, 1997. The
purchase price was allocated to the assets purchased (including identifiable
intangible assets) and the liabilities assumed based upon their estimated fair
values at the date of acquisition. The Company identified a core deposit
intangible of approximately $8.6 million, which will be amortized over seven
years, the estimated average life of the deposits acquired. The excess of the
purchase price over the estimated fair value of net assets acquired amounted to
4
<PAGE>
approximately $6.6 million, which has been accounted for as goodwill and will be
amortized over 15 years using the straight-line method. This allocation was
based on preliminary estimates related to fair value of loans acquired and
acquisition transaction costs and may be revised at a later date.
The following unaudited pro forma information presents a summary of
consolidated results of operations for the six months ended June 30, 1997 and
1996 of the Company and Hancock assuming the acquisition had occurred on January
1, 1997 and 1996, with pro forma adjustments to give effect to the amortization
of goodwill and the core deposit intangible.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
-----------------------------------------------
1997 1996
------------------------ -------------------
(Dollars in thousands, except per share amounts)
<S> <C> <C>
Net interest income............. $43,071 $46,020
Provisions for estimated loan
losses......................... 9,012 8,360
Other income.................... 3,914 1,273
Operating expenses.............. 32,671 36,074
Net earnings.................... 6,214 1,262
Net earnings (loss) per common
share.......................... 0.32 (0.02)
</TABLE>
These pro forma results have been prepared for comparative purposes only and
do not purport to be indicative of the results of operations which actually
would have resulted had the transaction been consummated on the above dates, nor
are they indicative of future results of operations of the consolidated
entities.
3. ALLOWANCE FOR ESTIMATED LOAN LOSSES
The following summarizes the activity in the allowance of estimated loan
losses:
<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS ENDED
JUNE 30,
----------------------------------------------
1997 1996
---------------------- --------------------
(Dollars in thousands)
<S> <C> <C>
Balance on January 1.................... $57,508 $89,435
Provisions for losses................. 8,502 7,805
Charge-offs........................... (22,504) (25,010)
Allowances related to acquisition..... 12,770(1) --
Recoveries and other.................. 3,688 1,492
------- -------
Ending balance.......................... $59,964 $73,722
======= =======
</TABLE>
- -------------------
(1) Included in the estimated loan losses related to the Hancock acquisition is
$5.8 million associated with the Accelerated Asset Resolution Plan
discussed below.
In the fourth quarter of 1995, the Bank adopted the Accelerated Asset
Resolution Plan (the "Plan"), which was designed to aggressively dispose of,
resolve or otherwise manage a pool (the "AARP Pool") of primarily multifamily
loans and real estate owned ("REO") that at that time were considered by the
Bank to have higher risk of future nonperformance or impairment relative to the
remainder of the Bank's multifamily loan portfolio. The Plan reflected both
acceleration in estimated timing of asset resolution, as well as a potential
change in recovery method from the normal course of business. In an effort to
maximize recovery on loans and REO included in the AARP Pool, the Plan allowed
for a range of possible methods of resolution including, but not limited to, (i)
individual loan restructuring, potentially including additional extensions of
credit or write-offs of existing principal, (ii) foreclosure and sale of
collateral properties, (iii) securitization of loans, (iv) the bulk sale of
loans and (v) bulk sale or accelerated disposition of REO properties.
5
<PAGE>
The AARP Pool originally consisted of 411 assets with an aggregate gross book
balance of approximately $213.3 million, comprised of $137.0 million in gross
book balance of loans and $76.3 million in gross book balance of REO. As a
consequence of the adoption of the Plan, the Bank recorded a $45.0 million loan
portfolio charge in the fourth quarter of 1995, which was reflected as a credit
to the Bank's allowance for estimated loan and REO losses. This amount
represented the estimated additional losses, net of specific valuation
allowances ("SVAs"), anticipated to be incurred by the Bank in executing the
Plan. Such additional losses represented, among other things, estimated reduced
recoveries from restructuring loans and the acceptance of lower proceeds from
the sale of individual REO and the estimated incremental losses associated with
recovery through possible bulk sales of performing and nonperforming loans and
REO.
In conjunction with the acquisition of Hancock, the Bank identified a pool of
Hancock assets, with similar risk profiles to the assets included in the Bank's
AARP Pool, for inclusion in the Plan. The Bank identified 54 of Hancock assets
with an aggregate gross book balance of approximately $29.3 million, comprised
of $25.8 million in gross book balance of loans and $3.5 million in gross book
balance of REO. Simultaneously with the consummation of the acquisition, the
Bank recorded $5.8 million as an addition to the allowance for estimated loan
losses representing the estimated reduced recoveries in executing the Plan.
Through June 30, 1997, (i) $38.2 million in gross book balances of AARP Pool
loans had been resolved through either a negotiated sale or discounted payoff,
(ii) $7.9 million in gross book balances of AARP Pool loans were collected
through normal principal amortization or paid off through the normal course
without loss, (iii) $22.5 million in gross book balances of AARP Pool loans had
been modified or restructured and retained in the Bank's mortgage portfolio,
(iv) $15.4 million in gross book balances of AARP Pool loans were removed from
the AARP Pool upon management's determination that such assets no longer met the
risk profile for inclusion in the AARP Pool or that accelerated resolution of
such assets was no longer appropriate and (v) $110.6 million in gross book
balances of REO were sold ($43.6 million in gross book balances of AARP Pool
loans were taken through foreclosure and acquired as REO since the inception of
the AARP). As of June 30, 1997, the AARP Pool consisted of 40 assets with an
aggregate gross book balance of $18.7 million, comprised primarily of accruing
and nonaccruing multifamily real estate loans totaling approximately $9.4
million and REO properties totaling approximately $9.3 million, which are
reported as real estate owned on the statement of financial condition. Through
June 30, 1997, of the $45.0 million of reserves established in connection with
the Plan, not including the $5.8 million established for the Hancock assets,
$28.2 million had been charged off and $9.5 million had been allocated to SVAs
or REO writedowns in connection with the Bank's estimate of recovery for AARP
Pool assets. Due to the addition of the Hancock assets to the Plan, it is now
anticipated that the remaining AARP Pool will be resolved by 1998.
Notwithstanding the actions taken by the Bank in implementing the Plan, there
can be no assurance that the AARP Pool assets retained by the Bank will not
result in additional losses. The Bank's allowance for loan and REO losses and
the SVAs established in connection with such assets are ultimately subjective
and inherently uncertain. There can be no assurance that further additions to
the Bank's allowance for loan and REO losses will not be required in the future
in connection with such assets, which could have an adverse effect on the Bank's
financial condition, results of operations and levels of regulatory capital.
The performance of the Company's loan portfolio has been adversely affected by
Southern California economic conditions. The performance of the Company's
multifamily loan portfolio is particularly susceptible to further declines in
the Southern California economy, increasing vacancy rates, declining rents,
increasing interest rates, declining debt coverage ratios, declining market
values for multifamily residential properties, and the possibility that
investors may abandon properties or seek bankruptcy protection with respect to
properties experiencing negative cash flow, particularly where such properties
are not cross-collateralized by other performing assets. There can be no
assurances that these economic conditions will improve in the near future as
many factors key to recovery may be impacted adversely by the Federal Reserve
Bank's interest rate policy as well as other factors. Consequently, rents and
real estate values may not stabilize which may affect future delinquency and
foreclosure levels and may adversely impact the Company's asset quality,
earnings performance and capital levels.
6
<PAGE>
4. COMMITMENTS AND CONTINGENCIES
As a result of the Hancock acquisition, the Company has assumed the
commitment to absorb losses from certain loan sales by Hancock to FNMA which
contained recourse provisions. Loans sold subject to recourse provisions had
remaining unpaid principal balances at June 30, 1997 of $28.4 million. At June
30, 1997, Hancock had pledged mortgage-backed securities of $4.8 million as
security for the recourse contingencies associated with the loans. The
corresponding contingent liability for credit losses secured by the pledged
assets was $0.8 million at June 30, 1997 and is included in other liabilities.
5. DERIVATIVE FINANCIAL INSTRUMENTS
As part of its trading program, the Company has employed interest rate
swaps, caps, floors and commitments for forward purchase and sale of securities
to manage the risks and returns of the program. These financial instruments are
carried at fair value with realized and unrealized changes in fair value
recognized in earnings in the period in which the change occurs. The premiums
paid for interest rate caps and floors are capitalized and amortized over the
life of the contracts using the straight line method.
6. RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") issued Statement of
Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128") and "Disclosure
of Information about Capital Structure" ("SFAS 129") in February 1997, and
issued "Reporting Comprehensive Income" ("SFAS 130") and "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131") in June 1997.
SFAS 128 - Earnings Per Share
SFAS 128 simplifies the standards for computing and presenting earnings per
share ("EPS") as previously prescribed by Accounting Principles Board Opinion
No. 15, "Earnings per Share." SFAS 128 replaces primary EPS with basic EPS and
fully diluted EPS with diluted EPS. Basic EPS excludes dilution and is computed
by dividing income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted form
issuance of common stock that then shared in earnings. SFAS 128, also requires
dual presentation of basic and diluted EPS on the face of the income statement
and a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997, and earlier application is not permitted. If the Company had
adopted SFAS 128 as of January 1, 1997, proforma basic EPS and proforma diluted
EPS would have been $0.41 for the six months ending June 30, 1997.
SFAS 129 - Disclosure of Information about Capital Structure
SFAS 129 consolidates existing reporting standards for disclosing
information about an entity's capital structure. SFAS 129 also supersedes
specific requirements found in previously issued accounting statements. SFAS 129
must be adopted for financial statements for periods ending after December 15,
1997.
SFAS 130 - Reporting Comprehensive Income
SFAS 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. SFAS 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. SFAS 130 does not require a
specific format for that financial statement but requires that an enterprise
display an amount representing total comprehensive income for the period in that
financial statement.
SFAS 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position.
SFAS 130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required.
SFAS 131 - Disclosures about Segments of an Enterprise and Related Information
SFAS 131 establishes standards for the reporting by public business
enterprises of information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS 131 supersedes FASB Statement No.
14, "Financial Reporting for Segments of a Business Enterprise," but retains the
requirements to report information about major customers. It amends FASB
Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries," to remove
the special disclosure requirements for previously unconsolidated subsidiaries.
SFAS 131 requires that a public business enterprise report financial and
descriptive information about its reportable operating segments. Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision-maker in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments.
SFAS 131 requires that a public business enterprise report a measure of
segment profit or loss, certain specific revenue and expense items, and segment
assets. It requires reconciliations of total segment revenues, total segment
profit or loss, total segment assets, and other amounts disclosed for segments
to corresponding amounts in the enterprise's general-purpose financial
statements. It requires that all public business enterprises report information
about the revenues derived from the enterprise's products or services (or groups
of similar products and services), about the countries in which the enterprise
earns revenues and holds assets, and about major customers regardless of whether
that information is used in making operating decisions. However, SFAS 131 does
not require an enterprise to report information that is not prepared for
internal use if reporting it would be impracticable.
SFAS 131 also requires that a public business enterprise report descriptive
information about the way that the operating segments were determined, the
products and services provided by the operating segments, differences between
the measurements used in reporting segment information and those used in the
enterprise's general-purpose financial statements, and changes in the
measurement of segment amounts from period to period.
SFAS 131 is effective for financial statements for periods beginning after
December 15, 1997. In the initial year of application, comparative information
for earlier years is to be restated. This Statement need not be applied to
interim financial statements in the initial year of its application, but
comparative information for interim periods in the initial year of application
is to be reported in financial statements for interim periods in the second year
of application.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Bank Plus, through Fidelity, operates 38 full-service branches, all of
which are located in Southern California, principally in Los Angeles and Orange
Counties. The Company offers a broad range of consumer financial services
including demand and term deposits and loans to consumers. The Bank closed its
wholesale correspondent single family origination network and its multifamily
origination operations in the third quarter of 1994 due to the economic and
competitive environments. Since that time the Bank has entered into strategic
partnerships with established providers of consumer credit products pursuant to
which all consumer credit products made available to the Bank's customers are
referred to and underwritten, funded and serviced by the strategic partners. In
addition, through Gateway, a National Association of Securities Dealers, Inc.
("NASD") registered broker/dealer, the Company provides customers with uninsured
investment products, including a number of mutual funds, annuities and unit
investment trusts.
RECENT DEVELOPMENTS
Registration of Common Stock
In the first quarter of 1997, the Board of Directors of the Company
approved the filing of a Registration Statement on Form S-4 (the "Acquisition S-
4") of up to approximately $75.0 million in shares of Bank Plus Common Stock
(the "Acquisition Shares") that may be issued from time to time as consideration
(in whole or in part) for possible future acquisitions. The Securities and
Exchange Commission (the "SEC") declared the Acquisition S-4 effective on June
2, 1997. The Board of Directors of Bank Plus (the "Board") (or an authorized
committee thereof) will negotiate, determine and approve on behalf of the
Company the number of Acquisition Shares to be issued in any acquisition and the
terms and conditions of all agreements to be entered into by the Company in
connection therewith. Offers to sell any of the Acquisition Shares, if any, will
be made only pursuant to the prospectus constituting a part of the Acquisition
S-4. Under the Acquisition S-4 the Company, on July 29, 1997, has issued
1,058,575 shares of Bank Plus Common Stock in connection with the acquisition of
Hancock Savings Bank, F.S.B., A Federal Savings Bank ("Hancock") (see "--Hancock
Merger").
Hancock Merger
On July 29, 1997, the Company completed the acquisition of all of the
outstanding stock of Hancock, which had five branches, assets of approximately
$210.1 million and deposits of approximately $203.7 million at June 30, 1997.
The Company acquired all of the stock of Hancock in exchange for 1,058,575
shares of Bank Plus Common Stock in a transaction valued at approximately $12
million.
The acquisition of Hancock was accounted for as a purchase and has been
reflected in the consolidated statement of condition of the Company as of June
30, 1997 and in all amounts and ratios reported as of June 30, 1997 throughout
Item 2. "Management's Discussion and Analysis of Financial Condition and Results
of Operations" ("MD&A"). The Company's consolidated statements of operations
will include the revenues and expenses of the acquired business beginning July
1, 1997. The purchase price was allocated to the assets purchased (including
identifiable intangible assets) and the liabilities assumed based upon their
estimated fair market values at the date of acquisition. The Company identified
a core deposit intangible of approximately $8.6 million, which will be amortized
over seven years, the estimated average life of the deposits acquired. The
excess of the purchase price over the estimated fair value of net assets
acquired amounted to approximately $6.6 million, which has been accounted for as
goodwill and will be amortized over 15 years using the straight-line method.
This allocation was based on preliminary estimates related to fair value of
loans acquired and acquisition transaction costs and may be revised at a later
date.
The acquisition of Hancock provides a number of benefits to the Company,
including, an increased customer base and larger branch network, lower yielding
deposits and possible operating efficiencies through consolidation.
8
<PAGE>
The acquired branch network and associated customer base, which includes
approximately 11.3 thousand and 6.0 thousand transaction and time deposit
accounts, respectively, will provide new territory to implement Fidelity's sales
platform of credit and alternative investment products. Through strategic
alliances with third party providers, the Company will introduce to the Hancock
customer base a wide range of securities, insurance and consumer loan products
to enhance the Company's fee income.
Hancock's assets at June 30, 1997, were $210.1 million funded through
$203.7 million of deposits, which had a yield of 4.52% or 23 basis points lower
than the yield on Fidelity deposits. Of the $203.7 million in deposits, $48.2
million were invested in overnight federal funds and were available to pay down
existing higher yielding borrowings at Fidelity or to invest in higher yielding
loans and securities than overnight federal funds.
The Company anticipates a reduction in consolidated operating expenses as a
result of the merger through the closure and consolidation of the administrative
office of Hancock and the consolidation of two of the five branches acquired
into existing Fidelity branches.
Proposed Deposit Purchase
The Company and Coast Federal Bank, FSB ("Coast") have signed a definitive
agreement under which Fidelity will purchase the deposits of Coast's Westwood,
Los Angeles, branch for a price equivalent to a deposit premium of approximately
3.0%. As of June 30, 1997, the balance of deposits at the Westwood branch was
approximately $57.1 million. The proposed transaction has been approved by the
Office of Thrift Supervision (the "OTS") and is expected to close in the third
quarter of 1997. There can be no assurance that the transaction will be
completed as contemplated.
Exchange Offer
On June 18,1997, the Company commenced an exchange offer (the "Exchange
Offer") of up to approximately $51.8 million principal amount of the Company's
12% Senior Notes due July 18, 2007 (the "Senior Notes") for the outstanding
shares of 12% Noncumulative Exchangeable Perpetual Stock, Series A (the "Series
A Preferred Stock") issued by Fidelity in 1995. The Exchange Offer expired at
12:00 midnight, New York City time, on July 18, 1997. On July 28, 1997, the
Company accepted 2,059,120 shares of Series A Preferred Stock in exchange for
$51.5 million principal amount of Senior Notes. The terms of the Series A
Preferred Stock expressly provided for the making of such an exchange offer.
BUSINESS STRATEGY
The Company's business strategy is to be a consumer-focused provider of
financial services, by enhancing its franchise to integrate its traditional
services and products (deposit services, checking and savings accounts) with the
offering of investment products through Gateway and consumer credit products
through strategic partners. As a part of such strategy, management continues to
explore new opportunities to expand the integrated sales platform, to increase
fee income growth, and to build upon the use of technology in delivering
financial products and services. In addition, the Company is continuing to focus
on improving the quality of its loan portfolio by reducing the level of problem
assets through aggressive management (see "--Asset Quality--Accelerated Asset
Resolution Plan") and increasing operating efficiency by reducing and
maintaining lower levels of operating expenses.
Gateway has been awarded the contract to serve as the Financial Education
Presenter for the California Public Employees' Retirement System ("CalPERS").
Under the terms of the contract Gateway's primary responsibility will be to
coordinate with CalPERS the development and production of financial planning
seminars to provide financial education information to CalPERS members. The
contract is for an initial one-year term and is thereafter renewable for a two-
year period.
Under the contract, Gateway will be responsible for providing, among other
services, experienced speakers at CalPERS-scheduled and coordinated financial
planning seminars throughout California, customized seminar materials, the offer
of personal consultations to seminar attendees (which will include the
development of a
9
<PAGE>
personalized financial plan) and quarterly reports of all investment products
and services sold to CalPERS members.
On June 12, 1997, Fidelity entered into an agreement pursuant to which it
will act as cash services provider for a national network of automatic teller
machines operated by Americash, L.L.C. The Bank has agreed to provide up to
$37.5 million of its cash for Americash ATMs throughout the United States, and
will be paid fees based on the volume of cash withdrawal transactions.
Fidelity has formed a plan to develop affinity credit card issuance
programs with strategic allies. These programs will include unsecured credit
cards and credit cards secured by real estate or by cash deposits. The Bank has
recently entered into contracts to establish such programs with two separate
entities. Fidelity will serve as issuer and owner of certain credit card
accounts and will develop the card portfolio from prospects provided by the
strategic allies. As part of the affinity agreements, the strategic allies will
have the right to purchase outstanding receivables of these accounts at par and,
in exchange, will provide credit enhancements to guarantee full repayment of the
Bank's outstanding receivables in the event of cardholder defaults. The credit
enhancements will include the funding of a reserve account or pledging of
collateral as receivables are funded by the Bank. The Bank has committed to fund
up to an aggregate outstanding balance of $425 million under the current
programs, and at June 30, 1997, credit card balances associated with the
affinity program were $6.1 million. Two board members of one of the strategic
allies are also board members of Fidelity.
Additionally, as a part of its business strategy, the Company has developed
but not yet fully implemented a plan to grow assets (loans and securities) by
approximately $600 million in 1997. This plan, in general terms, is based upon
certain risk adjusted return and liquidity objectives and is designed to
increase the Company's securities and loan portfolios to enhance the Company's
earning capabilities. The proposed increase in earning assets may be at a lower
interest rate spread than the Company's assets are currently yielding depending
on available financing sources. Accordingly, if the plan is implemented, the
Company's interest rate spread may decline. In conjunction with this plan, the
Company continues its exploration of other asset origination capabilities,
customer base expansion and acquisition opportunities for financial services
institutions. If such opportunities are pursued or if the interest rate
environment is not desirable for growth, these may limit the asset growth
strategy discussed above to an amount significantly less than $600 million.
Consumer-Focused Provider of Financial Services
Management believes that, given the highly competitive nature of the
financial services industry and the regulatory constraints that the Company
faces in competing with unregulated companies, the Company must continue to
expand from its historical business focus and provide customers with a wider
array of products through a variety of delivery channels. The Company is
pursuing the use of various electronic delivery systems, which include an
Internet bank, and software to enhance customer convenience and the Company's
fee income opportunities. The Company is currently negotiating with a provider
of electronic delivery services to begin implementing an Internet bank. The
Internet bank will offer on-line transactional capabilities for selected bank
services with plans to expand to the alternative investment products currently
sold through the Company's integrated sales platform.
RESULTS OF OPERATIONS
The Company reported net earnings available to common stockholders of $3.3
million, after minority interest in subsidiary (dividend on subsidiary preferred
stock) of $2.3 million ($0.18 per common share; computed on the basis of
18,248,754 weighted average common shares outstanding) for the three months
ended June 30, 1997. For the six months ended June 30, 1997, net earnings
available to common stockholders were $7.5 million, after minority interest in
subsidiary (dividends on subsidiary preferred stock) of $3.9 million ($0.41 per
common share; computed on the basis of 18,247,019 weighted average common shares
outstanding). This compares to net earnings available to common stockholders of
$0.7 million after minority interest in subsidiary of $1.6 million ($0.04 per
common share; computed on the basis of 18,242,465 weighted average common shares
outstanding) for the three months ended June 30, 1996. For the six months ended
June 30, 1996, net earnings available for
10
<PAGE>
common stockholders were $0.6 million after minority interest in subsidiary and
dividends on preferred stock totaling $3.1 million ($0.04 per common share;
computed on the basis of 18,242,465 weighted average common shares outstanding).
Net earnings for the three months ended June 30, 1997, as compared to the
same period in 1996, reflect: (a) decreased operating expenses of $1.5 million
primarily due to lower Federal Deposit Insurance Corporation ("FDIC")
insurance costs resulting from the recapitalization of the Savings Association
Insurance Fund (the "SAIF") in 1996 and an upgrade in the Bank's assessment
classification, (b) increased noninterest income of $1.1 million due primarily
to gains on sales of mortgage-backed securities ("MBS") and fee income from sale
of uninsured investment products and (c) increased income tax benefit of $2.6
million (see "--Income Taxes"). These favorable changes were partially offset by
(a) decreased net interest income of $1.4 million primarily due to lower rates
on average interest earning assets and higher levels of average borrowing
balances, (b) increased dividends on preferred stock of $0.8 million as a result
of the Exchange Offer (see "--Exchange Offer") and (c) increased provision for
estimated loan losses of $0.3 million
Net earnings for the six months ended June 30, 1997, as compared to the
same period in 1996, reflect: (a) decreased operating expenses of $3.8 million
primarily due to lower Federal Deposit Insurance Corporation ("FDIC")
insurance costs resulting from the recapitalization of the Savings Association
Insurance Fund (the "SAIF") in 1996 and an upgrade in the Bank's assessment
classification, (b) increased noninterest income of $2.5 million due primarily
to gains on sales of mortgage-backed securities ("MBS") and fee income from sale
of uninsured investment products and (c) increased income tax benefit of $4.8
million (see "--Income Taxes"). These favorable changes were partially offset by
(a) decreased net interest income of $2.9 million primarily due to lower rates
on average interest earning assets and higher levels of average borrowing
balances, (b) increased dividends on preferred stock and minority interest in
subsidiary of $0.8 million as a result of the Exchange Offer (see "--Exchange
Offer") and (c) increased provision for estimated loan losses of $0.7 million.
NET INTEREST INCOME
Net interest income is the difference between interest earned on loans, MBS
and investment securities ("interest-earning assets") and interest paid on
savings deposits and borrowings ("interest-bearing liabilities"). For the three
months ended June 30, 1997, net interest income totaled $20.3 million,
decreasing by $1.4 million from $21.7 million for the comparable period in 1996.
For the six months ended June 30, 1997, net interest income totaled $40.7
million, decreasing by $2.9 million from $43.6 million for the comparable period
in 1996.
Net interest income is affected by (a) the average volume and repricing
characteristics of the Company's interest-earning assets and interest-bearing
liabilities, (b) the level and volatility of market interest rates, (c) the
level of nonaccruing loans ("NPLs") and (d) the interest rate spread between the
yields earned and the rates paid.
11
<PAGE>
The following table presents the primary determinants of net interest
income for the three months ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------------------------------------------------
1997 1996
------------------------------ ---------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
DAILY YIELD/ DAILY YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
----------- -------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Interest-earning assets:
Loans........................................ $2,716,010 $49,384 7.27% $2,932,512 $54,096 7.38%
MBS.......................................... 254,851 4,673 7.33 42,642 756 7.09
Investment securities........................ 222,986 3,630 6.62 230,317 3,977 6.94
Investment in FHLB stock..................... 53,602 768 5.83 50,638 727 5.77
---------- ------- ---------- -------
Total interest-earning assets........... 3,247,449 58,455 7.21 3,256,109 59,556 7.32
------- -------
Noninterest-earning assets.................... 110,228 70,712
---------- ----------
Total assets............................ $3,357,677 $3,326,821
========== ==========
Interest-bearing liabilities:
Deposits:
Demand deposits............................. $ 294,489 817 1.13 $ 300,560 761 1.02
Savings deposits............................ 115,318 903 3.18 142,438 918 2.59
Time deposits............................... 2,085,341 27,852 5.42 2,109,557 28,108 5.34
---------- ------- ---------- -------
Total deposits.......................... 2,495,148 29,572 4.81 2,552,555 29,787 4.68
---------- ------- ---------- -------
Borrowings.................................. 609,357 8,557 5.70 509,699 8,003 6.30
---------- ------- ---------- -------
Total interest-bearing liabilities...... 3,104,505 38,129 4.98 3,062,254 37,790 4.95
---------- ------- ---------- -------
Noninterest-bearing liabilities............... 36,976 38,334
Preferred stock issued by consolidated
subsidiary................................... 51,750 51,750
Stockholders' equity.......................... 164,446 174,483
---------- ----------
Total liabilities and equity.................. $3,357,677 $3,326,821
========== ==========
Net interest income; interest rate spread..... $20,326 2.23% $21,766 2.37%
======= ==== ======= =====
Net yield on interest-earning assets
("net interest margin")...................... 2.45% 2.66%
==== ====
Average nonaccruing loan balance
included in average loan balance............. $ 45,344 $ 60,591
========== ==========
Net delinquent interest reserve removed
from interest income......................... $ 994 $ 1,627
======= =======
Reduction in net yield on interest-earning
assets due to delinquent interest............ 0.12% 0.20%
==== ====
</TABLE>
12
<PAGE>
The following table presents the primary determinants of net interest
income for the six months ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------------------------------------
1997 1996
------------------------------- ----------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
DAILY YIELD/ DAILY YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
----------- -------- -------- ----------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans..................................... $2,732,790 $ 99,224 7.26% $2,968,577 $110,276 7.43%
MBS....................................... 246,462 8,977 7.28 36,536 1,260 6.90
Investment securities...................... 225,407 7,302 6.53 188,978 6,699 7.13
Investment in FHLB stock.................. 53,266 1,659 6.28 50,252 1,375 5.50
---------- -------- ---------- --------
Total interest-earning assets........ 3,257,925 117,162 7.19 3,244,343 119,610 7.38
-------- --------
Noninterest-earning assets................. 68,490 61,364
---------- ----------
Total assets......................... $3,326,415 $3,305,707
========== ==========
Interest-bearing liabilities:
Deposits:
Demand deposits.......................... $ 293,637 1,605 1.10 $ 302,602 1,516 1.00
Savings deposits......................... 117,238 1,831 3.15 148,581 1,817 2.45
Time deposits............................ 2,086,722 55,276 5.34 2,112,847 57,489 5.46
---------- -------- ---------- --------
Total deposits....................... 2,497,597 58,712 4.74 2,564,030 60,822 4.76
---------- -------- ---------- --------
Borrowings................................ 573,032 17,767 6.25 477,145 15,184 6.38
---------- -------- ---------- --------
Total interest-bearing liabilities... 3,070,629 76,479 5.02 3,041,175 76,006 5.01
---------- -------- ---------- --------
Noninterest-bearing liabilities............ 40,754 37,153
Preferred stock issued by consolidated
subsidiary................................ 51,750 51,750
Stockholders' equity....................... 163,282 175,629
---------- ----------
Total liabilities and equity............... $3,326,415 $3,305,707
========== ==========
Net interest income; interest rate spread.. $ 40,683 2.17% $ 43,604 2.37%
======== ==== ======== ====
Net yield on interest-earning assets
("net interest margin")................... 2.46% 2.68%
==== ====
Average nonaccruing loan balance
included in average loan balance.......... $ 53,526 $ 66,458
========== ==========
Net delinquent interest reserve removed
from interest income...................... $ 2,575 $ 3,318
======== ========
Reduction in net yield on interest-earning
assets due to delinquent interest......... 0.16% 0.20%
==== ====
</TABLE>
13
<PAGE>
The following tables present the dollar amount of changes in interest
income and expense for each major component of interest-earning assets and
interest-bearing liabilities and the amount of change attributable to changes in
average balances and average rates for the periods indicated. Because of
numerous changes in both balances and rates, it is difficult to allocate
precisely the effects thereof. For purposes of these tables, the change due to
volume is initially calculated as the change in average balance multiplied by
the average rate during the prior period and the change due to rate is
calculated as the change in average rate multiplied by the average volume during
the prior period. Any change that remains after such calculations is allocated
proportionately to changes in volume and changes in rates.
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, 1997 SIX MONTHS ENDED JUNE 30, 1997
COMPARED TO JUNE 30, 1996 COMPARED TO JUNE 30, 1996
FAVORABLE (UNFAVORABLE) FAVORABLE (UNFAVORABLE)
-------------------------------- -----------------------------------
VOLUME RATE NET VOLUME RATE NET
----------- ------------ -------------- ----------- -------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans............................ $(3,921) $ (791) $(4,712) $(8,580) $(2,472) $(11,052)
Mortgage-backed securities....... 3,890 27 3,917 7,644 73 7,717
Investment securities............ (144) (203) (347) 1,194 (591) 603
Investment in FHLB stock......... 34 7 41 84 200 284
------- ------- ------- ------- ------- --------
Total interest income......... (141) (960) (1,101) 342 (2,790) (2,448)
------- ------- ------- ------- ------- --------
Interest expense:
Deposits:
Demand deposits................. 17 (73) (56) 48 (137) (89)
Savings deposits................ 198 (183) 15 432 (446) (14)
Time deposits................... 477 (221) 256 797 1,416 2,213
------- ------- ------- ------- ------- --------
Total deposits................ 692 (477) 215 1,277 833 2,110
Borrowings....................... (1,511) 957 (554) (1,753) (830) (2,583)
------- ------- ------- ------- ------- --------
Total interest expense.......... (819) 480 (339) (476) 3 (473)
------- ------- ------- ------- ------- --------
Decrease in net interest income... $ (960) $ (480) $(1,440) $ (134) $(2,787) $ (2,921)
======= ======= ======= ======= ======= ========
</TABLE>
The $1.4 million decrease in net interest income between the second quarter
1997 and the second quarter 1996 was primarily the result of decreased rates and
a decrease in the level of average interest-earning assets combined with an
increase in the average level of interest-bearing liabilities. This was
partially offset by decreased rates on interest-bearing liabilities. The $2.9
million decrease in net interest income between the six months ended June 30,
1997 and the comparable period in 1996 was primarily due to decreased rates on
average interest-earning assets combined with an increase in the average level
of interest-bearing liabilities. This was partially offset by an increase in
the level of interest-earning assets.
ASSET/LIABILITY MANAGEMENT
The objective of interest rate risk management is to maximize the net
interest income of the Company while controlling interest rate risk exposure.
Banks and savings institutions are subject to interest rate risk when assets and
liabilities mature or reprice at different times (duration risk), against
different indices (basis risk) or for different terms (yield curve risk). The
decision to control or accept interest rate risk can only be made with an
understanding of the probability of various scenarios occurring. Having
liabilities that reprice more quickly than assets is beneficial when interest
rates fall, but may be detrimental when interest rates rise.
The Company manages interest rate risk by, among other things, maintaining
a portfolio consisting primarily of adjustable rate mortgage ("ARM") loans.
ARM loans comprised 96% of the total loan portfolio at June 30, 1997 and 97% at
June 30, 1996. The percentage of monthly adjustable ARMs to total loans was
approximately 74% and 76% at June 30, 1997 and 1996, respectively. Interest
sensitive assets provide the Company with a degree of long-term protection from
rising interest rates. At June 30, 1997, approximately 94% of Fidelity's total
loan portfolio consisted of loans which mature or reprice within one year,
compared to approximately 92% at June 30, 1996. Fidelity has in recent periods
been negatively impacted by the fact that increases in the interest rates
accruing on Fidelity's ARM loans lagged the increases in interest rates accruing
on its deposits due to reporting
14
<PAGE>
delays and contractual look-back periods contained in the Bank's loan documents.
At June 30, 1997, 90% of the Bank's loans, which are indexed to the Eleventh
District Cost of Funds Index ("COFI"), as with all COFI portfolios in the
industry, do not reprice until some time after the industry liabilities
composing COFI reprice. The Company's liabilities reprice generally in line with
the cost of funds of institutions which comprise the Federal Home Loan Bank (the
"FHLB") Eleventh District. In the Company's case, the lag between the repricing
of its liabilities and its ARM loans indexed to COFI is approximately four
months. Thus, in a rising rate environment, as in the latter part of 1996 and
early 1997, there will be upward pressure on rates paid on deposit accounts and
wholesale borrowings, and the Company's net interest income will be adversely
affected until the majority of its interest-earning assets fully reprice.
Conversely, in a falling interest rate environment, such as the period in early
1996, interest income will be positively affected.
The Company utilizes various financial instruments in the normal course of
its business. By their nature all such instruments involve risk, and the maximum
potential loss may exceed the value at which such instruments are carried. As is
customary for these types of instruments, the Company usually does not require
collateral or other security from other parties to these instruments. The
Company manages its credit exposure to counterparties through credit approvals,
credit limits and other monitoring procedures. The Company's Credit Policy
Committee makes recommendations regarding counterparties and credit limits which
are subject to approval by the Board of Directors.
The Company may employ interest rate swaps, caps and floors in the
management of interest rate risk. An interest rate swap agreement is a financial
transaction where two counterparties agree to exchange different streams of
payments over time. An interest rate swap involves no exchange of principal
either at inception or upon maturity; rather, it involves the periodic exchange
of interest payments arising from an underlying notional principal amount.
Interest rate caps and floors generally involve the payment of a one-time
premium to a counterparty who, if interest rates rise or fall above or below a
predetermined level, will make payments to the Company at an agreed upon rate on
a notional amount of money for the term of the agreement, until such time as
interest rates fall below or rise above the cap or floor level.
During the third quarter of 1996, the Company entered into a one-year
advisory agreement with an investment advisor, pursuant to which the advisor
will recommend investments, subject to prior approval and direction of the
Company, and execute investment purchases in accordance with the Company's
investment strategy. Under this agreement, outstanding forward commitments to
purchase adjustable rate MBS totaled $47.3 million at June 30, 1997. Also
outstanding in relation to this managed portfolio at June 30, 1997, were $48.0
million notional amount of interest rate caps which will mature in 2007, $5.0
million notional amount interest rate swaps which will mature in 2002 and $9.0
million notional amount of put options on treasury futures with an exercise date
in 1997.
The Company is also considering plans to grow assets (loans and securities)
of approximately $600 million in 1997. See "--Business Strategy."
15
<PAGE>
The following table sets out the maturity and rate sensitivity of the
interest-earning assets and interest-bearing liabilities as of June 30, 1997.
"Gap," as reflected in the table, represents the estimated difference between
the amount of interest-earning assets and interest-bearing liabilities repricing
during future periods as adjusted for interest-rate swaps and other financial
instruments as applicable, and based on certain assumptions, including those
stated in the notes to the table.
MATURITY AND RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
MATURITY OR REPRICING
--------------------------------------------------------------------------------------
WITHIN 3 4-12 1-5 6-10 OVER 10
MONTHS MONTHS YEARS YEARS YEARS TOTAL
----------- ------------ ------------ ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Cash................................... $ 136,472 $ 1,089 $ -- $ -- $ -- $ 137,561
Investment securities (1) (2).......... 55,246 2,239 117,891 -- 42,556 217,932
MBS (1)................................ 53,118 1,783 -- -- 180,773 235,674
Loans receivable:
ARMs and other adjustables (3)........ 2,255,775 447,500 49,842 4,572 895 2,758,584
Fixed rate loans...................... 763 4,425 3,972 17,038 78,666 104,864
---------- ---------- ----------- --------- -------- ----------
Total gross loans receivable......... 2,256,538 451,925 53,814 21,610 79,561 2,863,448
---------- ---------- ----------- --------- -------- ----------
Total............................... 2,501,374 457,036 171,705 21,610 302,890 $3,454,615
---------- ---------- ----------- --------- -------- ==========
INTEREST-BEARING LIABILITIES:
Deposits:
Checking and savings accounts (4)..... 364,471 -- -- -- -- $ 364,471
Money market accounts (4)............. 80,117 -- -- -- -- 80,117
Fixed maturity deposits:
Retail customers..................... 42,624 931,524 1,256,396 13,717 1,578 2.245,839
Wholesale customers.................. 14 1,807 9,429 -- -- 11,250
---------- ---------- ----------- --------- -------- ----------
Total deposits...................... 487,226 933,331 1,265,825 13,717 1,578 2,701,677
---------- ---------- ----------- --------- -------- ----------
Borrowings:
FHLB advances (3)..................... 274,960 124,886 70,000 100,000 -- 569,846
Other................................. -- -- -- -- -- --
---------- ---------- ----------- --------- -------- ----------
Total borrowings..................... 274,960 124,886 70,000 100,000 -- 569,846
---------- ---------- ----------- --------- -------- ----------
Total............................... 762,186 1,058,217 1,335,825 113,717 1,578 $3,271,523
---------- ---------- ----------- --------- -------- ==========
IMPACT OF HEDGING....................... 5,000 -- (5,000) -- --
---------- ---------- ----------- --------- --------
REPRICING GAP........................... $1,744,188 $ (601,181) $(1,169,120) $ (92,107) $301,312
========== ========== =========== ========= ========
GAP TO TOTAL ASSETS..................... 52.63% (18.14)% (35.28)% (2.78)% 9.09%
CUMULATIVE GAP TO TOTAL ASSETS.......... 52.63% 34.49 % (0.79)% (3.57)% 5.52%
</TABLE>
- --------------------
(1) Repricings shown are based on the contractual maturity or repricing
frequency of the instrument.
(2) Investment securities include FHLB stock of $55.2 million.
(3) ARMs and variable rate borrowings from the FHLB system ("FHLB advances") are
primarily in the shorter categories as they are subject to interest rate
adjustments.
(4) These liabilities are subject to daily adjustments and are therefore
included in the "Within 3 Months" category.
Analysis of the Gap provides only a static view of the Company's interest
rate sensitivity at a specific point in time. The actual impact of interest rate
movements on the Company's net interest income may differ from that implied by
any Gap measurement. The actual impact on net interest income may depend on the
direction and magnitude of the interest rate movement, as well as competitive
and market pressures.
16
<PAGE>
ASSET QUALITY
General
The Company's loan portfolio is primarily secured by assets located in
Southern California and is comprised principally of single family and
multifamily (2 units or more) residential loans. At June 30, 1997, 20% of
Fidelity's real estate loan portfolio consisted of California single family
residences, while another 11% and 61% consisted of California multifamily
dwellings of 2 to 4 units and 5 or more units, respectively.
The performance of the Company's loans secured by multifamily and
commercial properties has been adversely affected by Southern California
economic conditions. These portfolios are particularly susceptible to the
potential for further declines in the Southern California economy, such as
increasing vacancy rates, declining rents, increasing interest rates, declining
debt coverage ratios, and declining market values for multifamily and commercial
properties. In addition, the possibility that investors may abandon properties
or seek bankruptcy protection with respect to properties experiencing negative
cash flow, particularly where such properties are not cross-collateralized by
other performing assets, can also adversely affect the multifamily loan
portfolio. There can be no assurances that current improved economic indicators
will have a material impact on the Bank's portfolio in the near future as many
factors key to recovery may be impacted adversely by the Federal Reserve Board's
interest rate policy as well as other factors.
The Bank's internal asset review process reviews the quality and
recoverability of each of those assets which exhibit credit risk to the Bank
based on delinquency and other criteria in order to establish adequate general
valuation allowance ("GVA") and specific valuation allowance ("SVA").
Accelerated Asset Resolution Plan
In the fourth quarter of 1995, the Bank adopted the Accelerated Asset
Resolution Plan (the "Plan"), which was designed to aggressively dispose of,
resolve or otherwise manage a pool (the "AARP Pool") of primarily multifamily
loans and REO that at that time were considered by the Bank to have higher risk
of future nonperformance or impairment relative to the remainder of the Bank's
multifamily loan portfolio. The Plan reflected both acceleration in estimated
timing of asset resolution, as well as a potential change in recovery method
from the normal course of business. In an effort to maximize recovery on loans
and REO included in the AARP Pool, the Plan allowed for a range of possible
methods of resolution including, but not limited to, (i) individual loan
restructuring, potentially including additional extensions of credit or write-
offs of existing principal, (ii) foreclosure and sale of collateral properties,
(iii) securitization of loans, (iv) the bulk sale of loans and (v) bulk sale or
accelerated disposition of REO properties.
The AARP Pool originally consisted of 411 assets with an aggregate gross
book balance of approximately $213.3 million, comprised of $137.0 million in
gross book balance of loans and $76.3 million in gross book balance of REO. As a
consequence of the adoption of the Plan, the Bank recorded a $45.0 million loan
portfolio charge in the fourth quarter of 1995, which was reflected as a credit
to the Bank's allowance for estimated loan and REO losses. This amount
represented the estimated additional losses, net of SVAs, anticipated to be
incurred by the Bank in executing the Plan. Such additional losses represented,
among other things, estimated reduced recoveries from restructuring loans and
the acceptance of lower proceeds from the sale of individual REO and the
estimated incremental losses associated with recovery through possible bulk
sales of performing and nonperforming loans and REO.
In conjunction with the acquisition of Hancock, the Bank identified a pool
of Hancock assets, with similar risk profiles to the assets included in the
Bank's AARP Pool, for inclusion in the Plan. The Bank identified 54 Hancock
assets with an aggregate gross book balance of approximately $29.3 million,
comprised of $25.8 million in gross book balance of loans and $3.5 million in
gross book balance of REO. Simultaneously with the consummation of the
acquisition, the Bank recorded $5.8 million as an addition to the allowance for
estimated loan losses representing the estimated reduced recoveries in executing
the Plan.
17
<PAGE>
Through June 30, 1997, (i) $38.2 million in gross book balances of AARP
Pool loans had been resolved through either a negotiated sale or discounted
payoff, (ii) $7.9 million in gross book balances of AARP Pool loans were
collected through normal principal amortization or paid off through the normal
course without loss, (iii) $22.5 million in gross book balances of AARP Pool
loans had been modified or restructured and retained in the Bank's mortgage
portfolio, (iv) $15.4 million in gross book balances of AARP Pool loans were
removed from the AARP Pool upon management's determination that such assets no
longer met the risk profile for inclusion in the AARP Pool or that accelerated
resolution of such assets was no longer appropriate and (v) $110.6 million in
gross book balances of REO were sold ($43.6 million in gross book balances of
AARP Pool loans were taken through foreclosure and acquired as REO since the
inception of the AARP). As of June 30, 1997, the AARP Pool consisted of 40
assets with an aggregate gross book balance of $18.7 million, comprised
primarily of accruing and nonaccruing multifamily real estate loans totaling
approximately $9.4 million and REO properties totaling approximately $9.3
million, which are reported as real estate owned on the statement of financial
condition. Through June 30, 1997, of the $45.0 million of reserves established
in connection with the Plan, not including the $5.8 million established for the
Hancock assets, $28.2 million had been charged off and $9.5 million had been
allocated to SVAs or REO writedowns in connection with the Bank's estimate of
recovery for AARP Pool assets. Due to the addition of the Hancock assets to the
Plan, it is now anticipated that the remaining AARP Pool will be resolved by
1998.
Notwithstanding the actions taken by the Bank in implementing the Plan,
there can be no assurance that the AARP Pool assets retained by the Bank will
not result in additional losses. The Bank's allowance for loan and REO losses
and the SVAs established in connection with such assets are ultimately
subjective and inherently uncertain. There can be no assurance that further
additions to the Bank's allowance for loan and REO losses will not be required
in the future in connection with such assets, which could have an adverse effect
on the Bank's financial condition, results of operations and levels of
regulatory capital.
Classified Assets
Total classified assets decreased $14.6 million or 8.4% from December 31,
1996, to $159.5 million at June 30, 1997. This decrease was primarily due to a
decrease in performing classified loans and the large volume of REO sales during
the six months ended 1997. The ratio of nonperforming assets (''NPAs'') to
total assets decreased from 1.83% at December 31, 1996, to 1.61% at June 30,
1997. This decrease is primarily due to decreased levels of NPAs at June 30,
1997, compared to December 31, 1996 and to an increase in total assets at June
30, 1997 compared to December 31, 1996.
18
<PAGE>
The following table presents net classified assets by property type at the
dates indicated:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
1997 1997 1996 1996 1996
---------- ---------- ------------- -------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Performing classified loans:
Single family............................ $ 3,331 $ 2,75 $ 4,555 $ 10,054 $ 8,098
Multifamily:
2 to 4 units............................ 4,856 5,527 6,030 9,374 10,227
5 to 36 units........................... 62,509 50,306 60,785 146,050 148,073
37 units and over....................... 20,761 12,196 10,375 42,861 43,564
--------- --------- -------- -------- --------
Total multifamily properties........... 88,126 68,029 77,190 198,285 201,864
Commercial and other..................... 9,788 9,342 29,503(1) 40,628(1) 41,885(1)
--------- --------- -------- -------- --------
Total performing classified loans....... 101,245 80,128 111,248 248,967 251,847
--------- --------- -------- -------- --------
Nonperforming classified loans:
Single family............................ 5,980 7,001 8,019 7,478 6,306
Multifamily:
2 to 4 units............................ 2,677 5,527 5,959 4,897 4,453
5 to 36 units........................... 15,745 21,041 18,071 19,200 24,989
37 units and over....................... 4,929 4,162 2,671 1,665 4,019
--------- -------- -------- -------- --------
Total multifamily properties........... 23,351 30,730 26,701 25,762 33,461
Commercial and other...................... 3,845 1,982 1,405 3,240 3,525
--------- -------- -------- -------- --------
Total nonperforming classified loans..... 33,176 39,713 36,125 36,480 43,292
--------- -------- -------- -------- --------
Total classified loans.................. 134,421 119,841 147,373 285,447 295,139
--------- -------- -------- -------- --------
REO:
Single family............................ 4,095 5,211 3,185 3,548 2,802
Multifamily:
2 to 4 units............................ 2,215 2,766 3,410 4,018 3,297
5 to 36 units........................... 12,992 11,218 13,574 12,331 7,457
37 units and over....................... 3,106 2,812 1,844 1,844 1,265
--------- -------- -------- -------- --------
Total multifamily properties........... 18,313 16,796 18,828 18,193 12,019
Commercial and other..................... 2,432 2,933 3,950 4,475 6,398
--------- -------- -------- -------- --------
Net REO before REO GVA.................. 24,840 24,940 25,963 26,216 21,219
REO GVA.................................. (1,200) (1,300) (1,300) (1,000) (700)
--------- -------- -------- -------- --------
Total REO............................... 23,640 23,640 24,663 25,216 20,519
--------- -------- -------- -------- --------
Other classified assets................... 1,404 1,382 2,060 2,503 3,100
--------- -------- -------- -------- --------
Total classified assets................. $159,465 $144,863 $174,096 $313,166 $318,758
========= ======== ======== ======== ========
</TABLE>
- ---------------------
(1) Includes a hotel property loan with a balance of $18.4 million at December
31, 1996.
19
<PAGE>
Delinquent Loans
During the second quarter of 1997, total delinquent loans decreased $15.4
million, or 24.5%, from March 31, 1997. The following table presents loan
delinquencies by number of days delinquent and by property type as of the dates
indicated. All assets are reported net of specific reserves and writedowns.
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31,
1997 1997 1996
--------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Delinquencies by number of days:
30 to 59 days....................................... 0.41% 0.63% 0.55%
60 to 89 days....................................... 0.26 0.24 0.43
90 days and over.................................... 1.01 1.48 1.31
------- ------- -------
Loan delinquencies to net loan portfolio.............. 1.68% 2.35% 2.29%
======= ======= =======
Delinquencies by property type:
Single family:
30 to 59 days....................................... $ 3,514 $ 4,933 $ 4,986
60 to 89 days....................................... 1,469 1,947 3,479
90 days and over.................................... 5,617 6,770 7,747
------- ------- -------
10,600 13,650 16,212
------- ------- -------
Percent to applicable loan portfolio.............. 1.85% 2.72% 3.15%
Multifamily (2 to 4 units):
30 to 59 days....................................... 1,528 1,856 1,023
60 to 89 days....................................... 741 958 1,790
90 days and over.................................... 2,544 5,527 5,959
------- ------- -------
4,813 8,341 8,772
------- ------- -------
Percent to applicable loan portfolio.............. 1.52% 2.70% 2.79%
Multifamily (5 to 36 units):
30 to 59 days....................................... 2,894 5,100 5,617
60 to 89 days....................................... 5,160 3,545 6,130
90 days and over.................................... 13,406 21,041 18,071
------- ------- -------
21,460 29,686 29,818
------- ------- -------
Percent to applicable loan portfolio.............. 1.54% 2.18% 2.15%
Multifamily (37 units and over):
30 to 59 days...................................... 3,156 1,755 2,460
60 to 89 days....................................... -- -- --
90 days and over.................................... 3,037 4,162 2,671
------- ------- -------
6,193 5,917 5,131
------- ------- -------
Percent to applicable loan portfolio.............. 1.94% 1.94% 1.68%
Commercial and Industrial:
30 to 59 days....................................... 545 3,184 873
60 to 89 days....................................... -- 115 269
90 days and over.................................... 3,846 1,982 1,405
------- ------- -------
4,391 5,281 2,547
------- ------- -------
Percent to applicable loan portfolio.............. 1.96% 2.70% 1.26%
Total loan delinquencies, net......................... $47,457 $62,875 $62,480
======= ======= =======
Loan delinquencies to net loan portfolio.............. 1.68% 2.35% 2.29%
======= ======= =======
</TABLE>
20
<PAGE>
The following table presents net delinquent loans at the dates indicated:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
1997 1997 1996 1996 1996
-------- --------- ------------ ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Number of days delinquent:
30 to 59 days............. $11,638 $16,828 $14,959 $22,748 $23,467
60 to 89 days............. 7,370 6,565 11,668 8,260 8,026
90 days and over.......... 28,449 39,482 35,853 36,249 43,292
------- ------- ------- ------- -------
Total delinquencies..... $47,457 $62,875 $62,480 $67,257 $74,785
======= ======= ======= ======= =======
</TABLE>
Nonperforming Assets
All assets and ratios are reported net of specific reserves and writedowns
unless otherwise stated. The following table presents asset quality details at
the dates indicated:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
1997 1997 1996 1996 1996
---------- ---------- ------------- -------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NPAs by Type:
NPLs............................. $ 33,176 $ 39,713 $ 36,125 $ 36,480 $ 43,292
REO, net of REO GVA.............. 23,640 23,640 24,663 25,216 20,519
-------- -------- -------- -------- --------
Total NPAs..................... $ 56,816 $ 63,353 $ 60,788 $ 61,696 $ 63,811
======== ======== ======== ======== ========
NPAs by Composition:
Single family residences......... $ 10,075 $ 12,212 $ 11,204 $ 10,968 $ 9,108
Multifamily 2 to 4 units......... 4,892 8,293 9,369 8,974 7,750
Multifamily 5 units and over..... 36,772 39,233 36,160 35,040 37,730
Commercial and other............. 6,277 4,915 5,355 7,714 9,923
REO GVA.......................... (1,200) (1,300) (1,300) (1,000) (700)
-------- -------- -------- -------- --------
Total NPAs..................... 56,816 63,353 60,788 61,696 63,811
Total troubled debt restructuring
("TDR")........................ 44,828 42,696 45,196 49,575 57,079
-------- -------- -------- -------- --------
Total TDRs and NPAs............ $101,644 $106,049 $105,984 $111,271 $120,890
======== ======== ======== ======== ========
Classified Assets:
NPAs............................. $ 56,816 $ 63,353 $ 60,788 $ 61,696 $ 63,811
Performing classified loans...... 101,245 80,128 111,248(1) 248,967(1) 251,847(1)
Other classified assets.......... 1,404 1,382 2,060 2,503 3,100
-------- -------- -------- -------- --------
Total classified asset......... $159,465 $144,863 $174,096 $313,166 $318,758
======== ======== ======== ======== ========
Classified Asset Ratios:
NPLs to total assets............. 0.94% 1.21% 1.08% 1.10% 1.31%
NPAs to total assets............. 1.61% 1.92% 1.83% 1.86% 1.94%
TDRs to total assets............. 1.27% 1.30% 1.36% 1.49% 1.73%
NPAs and TDRs to total assets.... 2.88% 3.22% 3.18% 3.35% 3.67%
Classified assets to total assets 4.51% 4.40% 5.23% 9.42% 9.67%
REO to NPAs...................... 41.61% 37.31% 40.57% 40.87% 32.16%
NPLs to NPAs..................... 58.39% 62.69% 59.43% 59.13% 67.84%
</TABLE>
- ---------------
(1) Includes a hotel property loan with a balance of $18.4 million.
21
<PAGE>
Direct costs of foreclosed real estate operations totaled $1.2 million for
both the three months ended June 30, 1997 and 1996, and $2.8 million and $3.0
million for the six months ended June 30, 1997 and 1996, respectively. The
following table provides information about the change in the book value and the
number of properties owned and obtained through foreclosure for the periods
indicated:
<TABLE>
<CAPTION>
AT OR FOR THE QUARTER AT OR FOR THE
ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------- --------------------------
1997 1996 1997 1996
--------- ---------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
REO net book value................................................... $ 23,640 $ 20,519 $ 23,640 $ 20,519
Net (decrease) increase in REO for the period........................ $ -- (3,014) (1,023) (1,302)
Number of real properties owned...................................... 142 120 142 120
Increase (decrease) increase in number of properties
owned for the period............................................ 7 (11) 11 11
Number of properties foreclosed for the period....................... 76 53 149 122
Gross book value of properties foreclosed............................ $ 20,665 $ 15,819 $ 41,795 $ 36,383
Average gross book value of properties foreclosed.................... $ 272 $ 298 $ 281 $ 298
</TABLE>
22
<PAGE>
Allowance for Estimated Loan and REO Losses
The following table summarizes the Bank's reserves, writedowns and certain
coverage ratios at the dates indicated:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
1997 1996 1996
------------ ---------------- ------------
Loans: (DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
GVA............................................................. $33,490 $25,308 $32,053
SVA............................................................. 26,474 32,200 41,669 (1)
------- ------- -------
Total allowance for estimated losses (1) (2)................... $59,964 $57,508 $73,722
======= ======= =======
Writedowns (3).................................................. $ 183 $ 146 $ 316
======= ======= =======
Total allowance and loan writedowns to gross loans (3).......... 2.10% 2.09% 2.54%
Total loan allowance to gross loans (4)......................... 2.09% 2.08% 2.53%
Loan GVA to loans (4)........................................... 1.19% 0.93% 1.13%
Loan GVA to NPLs................................................ 100.95% 70.06% 74.04%
NPLs to total loans............................................. 1.19% 1.34% 1.54%
REO:
REO GVA......................................................... $ 1,200 $ 1,300 $ 700
SVA............................................................. 1,399 781 3,050
------- ------- -------
Total allowance for estimated losses........................... $ 2,599 $ 2,081 $ 3,750
======= ======= =======
Writedowns (3).................................................. $10,736 $14,819 $17,321
======= ======= =======
Total REO allowance and REO writedowns to
gross REO...................................................... 36.06% 40.66% 50.66%
Total REO allowance to gross REO (5)............................ 9.91% 7.78% 15.45%
REO GVA to REO (4).............................................. 4.83% 5.01% 3.30%
Total Loans and REO:
GVA............................................................. $34,690 $26,608 $32,753
SVA............................................................. 27,873 32,981 44,719
------- ------- -------
Total allowance for estimated losses (2)....................... $62,563 $59,589 $77,472
======= ======= =======
Writedowns (3).................................................. $10,919 $14,965 $17,637
======= ======= =======
Total allowance and writedowns to gross loans and
REO............................................................ 2.53% 2.66% 3.22%
Total allowance to gross loans and REO (4)...................... 2.17% 2.14% 2.64%
Total GVA to loans and REO (4).................................. 1.22% 0.97% 1.14%
Total GVA to NPAs............................................... 59.79% 42.86% 50.77%
- ------------------------
</TABLE>
(1) All allowances for loan losses are for the Bank's portfolio of mortgage
loans.
(2) At June 30, 1997, December 31, 1996 and June 30, 1996, the allowance for
estimated loan losses includes $18.1 million, $16.7 million and $24.4
million, respectively, of remaining loan GVA and SVA for the Plan. See "--
Asset Quality--Accelerated Asset Resolution Plan."
(3) Writedowns include cumulative charge-offs on outstanding loans and REO as of
the dates indicated.
(4) Loans and REO, as applicable, in these ratios are calculated prior to their
reduction for loan and REO GVA, respectively, but are net of specific
reserves and writedowns.
(5) Net of writedowns.
23
<PAGE>
The following schedule summarizes the activity in the Bank's allowances for
estimated loan and real estate losses:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------------------------
1997 1996
------------------------------------- -------------------------------------
REAL ESTATE REAL ESTATE
LOANS (1) OWNED TOTAL (2) LOANS (1) OWNED TOTAL
--------- ----------- --------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance on April 1,............. $ 52,882 $ 2,186 $ 55,068 $ 81,430 $ 3,093 $ 84,523
Provision for losses.......... 4,251 620 4,871 3,905 579 4,484
Charge-offs................... (12,441) (478) (12,919) (10,582) (1,904) (12,486)
Allocation from GVA to REO.... -- -- -- (1,982) 1,982 --
Allowances related to
acquisition................. 12,770 120 12,890 -- -- --
Recoveries and other.......... 2,502 151 2,653 951 -- 951
--------- --------- --------- --------- --------- ---------
Balance on June 30,............. $ 59,964 $ 2,599 $ 62,563 $ 73,722 $ 3,750 $ 77,472
========= ========= ========= ========= ========= =========
</TABLE>
- --------------
(1) All allowances for loan losses are for the Bank's portfolio of mortgage
loans.
(2) Included in the estimated loan losses related to the Hancock acquistion is
$5.8 million associated with the Plan. See "--Asset Quality-- Accelerated
Asset Resolution Plan."
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------------------------
1997 1996
------------------------------------- -------------------------------------
REAL ESTATE REAL ESTATE
LOANS (1) OWNED TOTAL (2) LOANS (1) OWNED TOTAL
--------- ----------- --------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance on January 1,........... $ 57,508 $ 2,081 $ 59,589 $ 89,435 $ 3,492 $ 92,927
Provision for losses.......... 8,502 1,362 9,864 7,805 1,247 9,052
Charge-offs................... (22,504) (1,275) (23,779) (22,704) (3,295) (25,999)
Allocation from GVA to REO.... -- -- -- (2,306) 2,306 --
Allowances related to
acquisition................. 12,770 120 12,890 -- -- --
Recoveries and other.......... 3,688 311 3,999 1,492 -- 1,492
--------- -------- --------- --------- -------- ---------
Balance on June 30,............. $ 59,964 $ 2,599 $ 62,563 $ 73,722 $ 3,750 $ 77,472
========= ======== ========= ========= ======== =========
</TABLE>
- --------------
(1) All allowances for loan losses are for the Bank's portfolio of mortgage
loans.
(2) Included in the estimated loan losses related to the Hancock acquistion is
$5.8 million associated with the Plan. See "--Asset Quality-- Accelerated
Asset Resolution Plan."
The following table details the activity affecting specific loss reserves for
the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997
----------------------------------- -----------------------------------
REAL ESTATE REAL ESTATE
LOANS OWNED TOTAL LOANS OWNED TOTAL
--------- ----------- --------- --------- ----------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period........ $ 30,332 $ 886 $ 31,218 $ 32,200 $ 781 $ 32,981
Allocations from GVA to specific
reserves........................... 5,468 871 6,339 13,663 1,773 15,436
Charge-offs.......................... (12,441) (478) (12,919) (22,504) (1,275) (23,779)
Specific loss reserves from
acquisition........................ 3,115 120 3,235 3,115 120 3,235
--------- ----------- --------- --------- ----------- ---------
Balance at end of period indicated.... $ 26,474 $ 1,399 $ 27,873 $ 26,474 $ 1,399 $ 27,873
========= =========== ========= ========= =========== =========
</TABLE>
24
<PAGE>
NONINTEREST INCOME (EXPENSE)
Noninterest income has three major components: (a) noninterest income from
ongoing operations, which includes loan fee income, gains or losses on loans
held for sale, fees earned on the sale of uninsured investment products and
retail banking fees, (b) income/expenses associated with REO, which includes
both the provision for real estate losses as well as income/expenses incurred by
the Bank associated with the operation of its REO properties and (c) gains and
losses on the sales of loan servicing, investment securities and MBS. Items (b)
and (c) can fluctuate widely, and could therefore mask the underlying fee
generating performance of the Company on an ongoing basis.
Net noninterest income increased by $1.1 million from $0.9 million in the
second quarter 1996 to $2.0 million in the second quarter 1997. The major
components of this increase are: (a) net gains from MBS activities in the
second quarter of 1997 increased by $0.8 million primarily as a result of
increased sales and (b) fee income from uninsured investment products increased
by $0.5 million primarily as a result of increased sales.
Net noninterest income increased by $2.5 million from net noninterest income
of $1.2 million in the six months ended June 30, 1996 to net noninterest income
of $3.7 million in the six months ended June 30, 1997. The major components of
this increase are: (a) net gains from securities activities in the first six
months of 1997 increased by $2.1 million primarily as a result of increased
sales and (b) fee income from uninsured investment product increased by $0.8
million primarily as a result of increased sales.
OPERATING EXPENSES
Operating expenses decreased by $1.5 million to $15.0 million for the second
quarter 1997 compared to $16.5 million for the second quarter 1996. The change
was primarily due to (a) a decrease of $1.3 million of FDIC insurance costs
resulting from the recapitalization of the SAIF in 1996 and an upgrade in the
Bank's assessment classification and (b) a decrease of $0.6 million in
professional services which was the result of an insurance reimbursement for
legal costs related to certain litigation. These favorable variances were
partially offset by increases in personnel and benefits expense and other
expenses.
Operating expenses decreased by $3.8 million to $29.4 million for the first
six months of 1997 compared to $33.2 million for the comparable 1996 period.
The change was primarily due to (a) a decrease of $2.9 million of FDIC insurance
costs resulting from the recapitalization of the SAIF in 1996 and an upgrade in
the Bank's assessment classification (b) a decrease of $0.5 million in
professional services which was the result of an insurance reimbursement for
legal costs related to certain litigation and (c) a decrease of $0.4 million in
occupancy and other office related costs which was largely tied to the overall
reduction in personnel and overhead costs.
Decreased operating expenses resulted in a decrease in the annualized
operating expense ratio to 1.77% for the six months ended June 30, 1997 from
2.00% for the same period in 1996, based on the total average asset size of the
Company of approximately $3.3 billion for the six months ended June 30, 1997 and
1996.
Due to the sensitivity of the operating expense ratio to changes in the size
of the balance sheet, management also looks at trends in the efficiency ratio to
assess the changing relationship between operating expenses and income. The
efficiency ratio measures the amount of cost expended by the Company to generate
a given level of revenues in the normal course of business. It is computed by
dividing total operating expense by net interest income and noninterest income,
excluding infrequent items. A decrease in the efficiency ratio is favorable in
that it indicates less expenses were incurred to generate a given level of
revenue.
The efficiency ratio improved to 64.82% for the second quarter 1997 from
68.06% for the second quarter 1996. The efficiency ratio also improved between
the six months ended June 30, 1997 and 1996 from 67.77% to 63.39%, respectively.
This decrease was due to increased noninterest income and decreased operating
expense.
25
<PAGE>
INCOME TAXES
The Company's combined federal and state statutory tax rate is approximately
42.0% of earnings before income taxes. The effective tax benefit rates of 81.1%
and 73.3% on income before income taxes for the quarter and six months ended
June 30, 1997, respectively, reflect the federal and state tax benefit
attributable to the utilization of net operating loss carryforwards, and the
partial recognition of the deferred tax asset. The deferred tax benefit of $2.5
million for the quarter ended June 30, 1997 consisted of a $2.6 million
reduction in the valuation allowance for the Company's deferred tax asset offset
by a $0.1 million current tax expense. This is compared to the deferred tax
benefit of $5.0 million from the $5.2 million reduction of the related valuation
allowance offset by a $0.2 million current tax expense for the six months ended
June 30, 1997. The effective tax rates of 2.3% and 2.4% on earnings before
income taxes for the quarter and six months ended June 30, 1996, respectively,
reflect the utilization of net operating loss carryforwards offset by
alternative minimum tax for financial reporting purposes.
As of December 31, 1996 a valuation allowance was provided for the total net
deferred tax asset. Under Statement of Financial Accounting Standards
("SFAS") No. 109, Accounting for Income Taxes, the reduction in valuation
allowance is dependent upon a "more likely than not" expectation of realization
of the deferred tax asset, based upon the weight of available evidence. The
Company has realized book earnings, before unusual items, for each of the six
consecutive quarters ended June 30, 1997. The loss reflected for the quarter
ended September 30, 1996, was attributable to a one-time $18 million SAIF
assessment which is considered a nonrecurring item. After consideration of the
Company's recent earnings history and other available evidence, management of
the Company determined that under the criteria of SFAS No. 109 it was
appropriate to record a $2.5 million and $4.8 net tax benefit for the quarter
and six months ended June 30, 1997, respectively.
The analysis of available evidence is performed each quarter utilizing the
"more likely than not" criteria required by SFAS 109 to determine the amount, if
any, of the deferred tax asset to be realized. Accordingly, there can be no
assurance that the Company will recognize additional portions of its deferred
tax asset in future periods. Moreover, the criteria of SFAS No. 109 could
require the partial or complete recapture of the $5.0 million deferred tax
benefit into expense in future periods.
REGULATORY CAPITAL COMPLIANCE
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
required the Office of Thrift Supervision (the "OTS") to implement a system
providing for regulatory sanctions against institutions that are not adequately
capitalized. The severity of these sanctions increases to the extent that an
institution's capital continues to decline. Under FDICIA, the OTS issued the
Prompt Corrective Action ("PCA") regulations which established specific
capital ratios for five separate capital categories as set forth below:
<TABLE>
<CAPTION>
CORE CAPITAL TO CORE CAPITAL
ADJUSTED TO TOTAL CAPITAL
TOTAL ASSETS RISK-WEIGHTED TO
(LEVERAGE RATIO) ASSETS RISK-WEIGHTED ASSETS
------------------- -------------- ----------------------
<S> <C> <C> <C>
Well capitalized................. 5% or above 6% or above 10% or above
Adequately capitalized........... 4% or above 4% or above 8% or above
Undercapitalized................. Under 4% Under 4% Under 8%
Significantly undercapitalized... Under 3% Under 3% Under 6%
Critically undercapitalized...... Ratio of tangible equity to adjusted total assets of 2% or
less
</TABLE>
26
<PAGE>
The following table summarizes the capital ratios required by FDICIA for an
institution to be considered well capitalized and Fidelity's regulatory capital
at June 30, 1997 as compared to such ratios.
<TABLE>
<CAPTION>
CORE CAPITAL TO CORE CAPITAL TO TOTAL CAPITAL TO
ADJUSTED RISK-WEIGHTED RISK-WEIGHTED
TOTAL ASSETS ASSETS ASSETS
------------------ ------------------- ------------------
BALANCE % BALANCE % BALANCE %
----------- ---- ----------- ----- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Fidelity's regulatory capital............. $ 216,700 6.15% $ 216,700 10.50% $ 242,500 11.75%
Well capitalized requirement.............. 176,000 5.00 123,800 6.00 206,300 10.00%
---------- ---- ---------- ----- ---------- -----
Excess capital............................ $ 40,700 1.15% $ 92,900 4.50% $ 36,200 1.75%
========== ==== ========== ===== ========== =====
Adjusted assets (1)....................... $3,519,500 $2,063,200 $2,063,200
========== ========== ==========
</TABLE>
- ------------
(1) The term "adjusted assets" refers to the term "adjusted total assets" as
defined in 12 C.F.R. section 567.1(a) for purposes of core capital
requirements, and refers to the term "risk-weighted assets" as defined in 12
C.F.R. section 567.1(bb) for purposes of risk-based capital requirements.
FDICIA also required the OTS and the federal bank regulatory agencies to
revise their risk-based capital standards to ensure that those standards take
adequate account of interest rate risk, concentration of credit risk, and risks
of nontraditional activities. On January 1, 1994, the OTS proposed an interest
rate risk component for its regulatory capital rule. Under the proposed rule,
savings institutions with "above-normal" interest rate risk exposure would be
subject to a deduction from total capital for purposes of calculating their
risk-based capital requirements. No interest rate risk component would have
been required to be added to the Bank's risk-based capital requirement at June
30, 1997 had the rule been in effect.
The Bank is also subject to OTS capital regulations under the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"). These
regulations require Fidelity to maintain: (a) tangible capital of at least 1.5%
of adjusted total assets (as defined in the regulations), (b) core capital of at
least 3% of adjusted total assets (as defined in the regulations) and (c) total
capital of at least 8.0% of risk-weighted assets (as defined in the
regulations).
27
<PAGE>
The following table summarizes the regulatory capital requirements under
FIRREA for Fidelity at June 30, 1997. As indicated in the table, Fidelity's
capital levels at June 30, 1997 exceeded all three of the currently applicable
minimum FIRREA capital requirements.
<TABLE>
<CAPTION>
RISK-BASED
TANGIBLE CAPITAL CORE CAPITAL CAPITAL
---------------- ------------ -----------
BALANCE % BALANCE % BALANCE %
------- --- ------- --- ------- ---
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity (1)................. $ 227,500 $ 227,500 $ 227,500
Unrealized losses on securities.......... 1,100 1,100 1,100
Adjustments
Goodwill.............................. (6,600) (6,600) (6,600)
Intangible assets..................... (9,000) (300) (300)
Nonqualifying mortgage servicing
rights............................ -- -- --
Nonincludable subsidiaries............ -- -- --
Net deferred tax assets............... (5,000) (5,000) (5,000)
Equity investments.................... -- -- (100)
GVA................................... -- -- 25,900
---------- ---------- ----------
Regulatory capital (2)................... 208,000 5.92% 216,700 6.15% 242,500 11.75
Required minimum......................... 52,700 1.50 105,600 3.00 165,100 8.00
---------- ---- ---------- ---- ---------- ----
Excess capital........................... $ 155,300 4.42% $ 111,100 3.15% $ 77,400 3.75%
========== ==== ========== ==== ========== ====
Adjusted assets (3)...................... $3,510,800 $3,519,500 $2,063,200
========== ========== ==========
</TABLE>
- -----------------
(1) Fidelity's total stockholders' equity, in accordance with generally accepted
accounting principles, was 6.44% of its total assets at June 30, 1997.
(2) Both the OTS and the FDIC may examine the Bank as part of their legally
prescribed oversight of the industry. Based on their examinations, the
regulators can direct that the Bank's financial statements be adjusted in
accordance with their findings.
(3) The term "adjusted assets" refers to the term "adjusted total assets" as
defined in 12 C.F.R. section 567.1(a) for purposes of tangible and core
capital requirements, and refers to the term "risk-weighted assets" as
defined in 12 C.F.R. section 567.1(bb) for purposes of risk-based capital
requirements.
CAPITAL RESOURCES AND LIQUIDITY
The Bank derives funds from deposits, FHLB advances, securities sold under
agreements to repurchase, and other short-term and long-term borrowings. In
addition, funds are generated from loan payments and payoffs as well as from the
sale of loans and investments.
FHLB Advances
The Bank had net increases of FHLB advances of $120.0 million for the six
months ended June 30, 1997. This compares to net repayments of $60.0 million for
the six months ended June 30, 1996.
Commercial paper
Commercial paper outstanding decreased by $40.0 million during the six months
ended June 30, 1997 compared to an increase of $49.0 million for the six months
ended June 30, 1996.
Mortgage-backed bond
The Bank retired its $100 million mortgage-backed bonds on April 15, 1997.
The funds were replaced with FHLB advances.
28
<PAGE>
Loan payments and payoffs
Loan principal payments, including prepayments and payoffs, provided $114.2
million for the six months ended June 30, 1997 compared to $125.0 million for
the same period in 1996. The Bank expects that loan payments and prepayments
will remain a significant funding source.
Sales of securities
The sale of investment securities and MBS provided $199.0 million for the six
months ended June 30, 1997 compared to $20.2 million for the six months ended
June 30, 1996. The Bank held $349.5 million and $268.1 million of investment
securities and MBS in its available for sale portfolio as of June 30, 1997 and
1996, respectively.
Undrawn sources
Fidelity maintains other sources of liquidity to draw upon, which at June 30,
1997 included (a) a line of credit with the FHLB with $369.5 million available
(assuming all of the $150.0 million commercial paper capacity is used); (b)
unused commercial paper facility capacity of $150.0 million; (c) $234.6 million
in unpledged securities available to be placed in reverse repurchase agreements
or sold; and (d) $681.9 million of unpledged loans, some of which would be
available to collateralize additional FHLB or private borrowings, or be
securitized.
Deposits
At June 30, 1997, Fidelity had deposits of $2.7 billion. The following table
presents the distribution of the Bank's deposit accounts:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
----------------------- -------------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
----------- --------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Money market savings accounts........... $ 78,074 2.9 % $ 65,605 2.6 %
Checking accounts....................... 311,873 11.5 287,711 11.5
Passbook accounts....................... 54,636 2.0 53,665 2.2
---------- ------ ---------- ------
Total transaction accounts........... 444,583 16.4 406,981 16.3
---------- ------ ---------- ------
Certificates of deposit $100,000 and 575,236 21.3 543,336 21.8
over...................................
Certificates of deposit less than 1,681,858 62.3 1,545,616 61.9
$100,000............................... ---------- ------ ---------- ------
Total certificates of deposit........ 2,257,094 83.6 2,088,952 83.7
---------- ------ ---------- ------
Total deposits....................... $2,701,677 100.0 % $2,495,933 100.0 %
========== ====== ========== ======
</TABLE>
The Company is currently eligible to accept brokered deposits; however, there
were no brokered deposits outstanding at June 30, 1997 and December 31, 1996.
Repurchase Agreements
From time to time the Company enters into reverse repurchase agreements by
which it sells securities with an agreement to repurchase the same securities at
a specific future date (overnight to one year). The Company deals only with
dealers who are recognized as primary dealers in U.S. Treasury securities by the
Federal Reserve Board or perceived by management to be financially strong. There
were no reverse repurchase agreements outstanding at June 30, 1997 and December
31, 1996. In the six months ended June 30, 1997, the Company borrowed and repaid
funds from reverse repurchase agreements of $25.5 million compared to $53.4
million of funds borrowed and repaid during the six months ended June 30, 1996.
29
<PAGE>
Loan Fundings
Fidelity originated and purchased $79.3 million of gross loans (excluding
Fidelity's refinancings) in the six months ended June 30, 1997 compared to $1.4
million in the same period of 1996.
Contingent or potential uses of funds
The Bank had unfunded loans totaling $3.3 million at June 30, 1997 and no
unfunded loans at December 31, 1996. The unfunded loans at June 30, 1997 were
assumed as part of the Hancock acquisition.
Liquidity
The OTS regulations require the maintenance of an average daily balance of
liquid assets of at least 5% of the average daily balance of the net
withdrawable accounts and short term borrowings (the "regulatory liquidity
ratio"). The Bank's average regulatory liquidity ratio was 6.98% and 6.36% for
the six months ended June 30, 1997 and 1996, respectively.
Holding Company Liquidity
At June 30, 1997, Bank Plus had cash and cash equivalents of $0.9 million
and no material potential cash producing operations or assets other than its
investments in Fidelity and Gateway. Accordingly, Bank Plus is substantially
dependent on dividends from Fidelity and Gateway in order to fund its cash
needs, including its payment obligations on the $51.5 principal amount of Senior
Notes issued in exchange for Fidelity's Preferred Stock. In connection
therewith, Fidelity's Board of Directors has approved the payment of a cash
dividend to Bank Plus in the approximate amount of $1.6 million, to assist in
funding Bank Plus' future payment obligations with respect to the Senior Notes.
See "--Recent Developments--Exchange Offer". Both Gateway's and Fidelity's
ability to pay dividends or otherwise provide funds to Bank Plus are subject to
significant regulatory restrictions.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Bank was named as a defendant in a purported class action lawsuit alleging
violations of federal securities laws in connection with the offering of common
stock by the Bank in 1994 as part of the Bank's previously reported 1994
Restructuring and Recapitalization. The suit was filed by Harbor Finance
Partners ("Harbor") in an alleged class action complaint in the United States
District Court-Central District of California on July 28, 1995 and originally
named as defendants the Bank, Citadel Holding Corporation ("Citadel"), Richard
M. Greenwood (the Bank's chief executive officer and Citadel's former chief
executive officer), J. P. Morgan Securities, Inc., and Deloitte & Touche LLP.
The suit alleged that false or misleading information was provided by the
defendants in connection with the Bank's 1994 Restructuring and Recapitalization
and stock offering and that the defendants knew and failed to disclose negative
information concerning the Bank. A motion to dismiss the original complaint was
filed by the Bank, and was granted without opposition. Thereafter, Harbor filed
an amended complaint which did not include J. P. Morgan Securities, Inc. and
Deloitte & Touche LLP as defendants and which contained some factual and legal
contentions which were different from those set forth originally. On May 21,
1996, the court granted the Bank's and Greenwood's motion to dismiss the first
amended complaint, but granted leave to amend. Following the filing of a second
amended complaint, the Bank and Greenwood filed a motion to dismiss. At a
hearing on July 22, 1996, the court ruled that the case should be dismissed with
prejudice and a formal order to that effect was submitted to the court for
execution. Harbor lodged certain objections to the proposed order, including
objections that the state law claims in the second amended complaint should not
be dismissed with prejudice. The court's order of dismissal was entered on
August 5, 1996 and provided that all claims asserted in the second amended
complaint under federal law were dismissed with prejudice and those under state
law were dismissed without prejudice to their renewal in state court pursuant to
28 U.S.C. (S)1367(b)(3). Harbor has filed a notice of appeal to the order of
dismissal. Briefing in the appeal is now concluded and the
30
<PAGE>
appeal awaits hearing and disposition. On August 30, 1996, Harbor filed an
alleged class action complaint in state court containing allegations similar to
those raised in the federal court action as well as claims for unfair business
practices to which the Bank and Greenwood filed demurrers seeking to have the
case dismissed for failure to state a legally sufficient claim. These demurrers
were sustained without leave to amend on March 13, 1997. On May 5, 1997, an
order of dismissal was entered in the trial court in response to which Harbor
has filed a notice of appeal. The Bank has filed a motion to recover its
attorney fees in obtaining the order of dismissal, which was heard
on August 4, 1997. The court continued the motion to August 29, 1997 in order to
receive further evidence as to the attorney fees claim filed by the Bank.
In addition, the Bank is a defendant in several individual and purported class
actions brought by several borrowers which raise claims with respect to the
manner in which the Bank serviced certain adjustable rate mortgages which were
originated during the period 1983 through 1988. The actions have been filed
between July 1, 1992 and February of 1995. In one case the Bank won a summary
judgment in Federal District Court. This judgment was appealed. On July 25,
1996, the Ninth Circuit Court of Appeals filed its opinion which affirmed in
part, reversed in part and remanded back to the Federal District Court for
further proceedings. The Federal District Court recently ruled in favor of
certifying a class in that action. In three Los Angeles Superior Court cases
judgments in favor of the Bank were entered in all three cases. The plaintiff
has appealed the judgments in all three cases. Two appeals, one decided on June
26, 1997, and one decided on July 30, 1997, affirmed the judgment of the
Superior Court in favor of the Bank and one appeal has been dismissed. Two other
cases are pending in the Los Angeles Superior Court. In these actions the
plaintiffs' principal claim is that the Bank selected an inappropriate review
date to consult the index upon which the rate adjustment is based that was one
or two months earlier than what was required under the terms of the notes. In a
declining interest rate environment, the lag effect of an earlier review period
defers the benefit to the borrower of such decline, and the reverse would be
true in a rising interest rate environment. The Bank strongly disputes these
contentions and is vigorously defending these suits. The legal responsibility
and financial exposure of these claims presently cannot be reasonably
ascertained and, accordingly, there is a risk that the final outcome of one or
more of these claims could result in the payment of monetary damages which could
be material in relation to the financial condition or results of operations of
the Bank. The Bank does not believe the likelihood of such a result is probable
and has not established any specific litigation reserves with respect to such
lawsuits.
In the normal course of business, the Company and certain of its subsidiaries
have a number of other lawsuits and claims pending. Although there can be no
assurance, the Company's management and its counsel believe that none of the
foregoing lawsuits or claims will have a material adverse effect on the
financial condition or business of the Company.
31
<PAGE>
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders held on April 30, 1997, the shareholders
elected Waldo H. Burnside, Lilly V. Lee and Mark Sullivan III to the Board of
Directors of Bank Plus to serve for three year terms, approved certain
amendments to and a restatement of the Company's 1996 Stock Option Plan, and
ratified the appointment of Deloitte & Touche LLP as the Company's independent
public accountants for 1997. Of the 18,245,265 shares of Common Stock
outstanding as of the record date, March 26, 1997, the following indicates the
number of votes cast for and against, as well as the number of votes abstaining
and broker non-votes, with respect to each of the three directors, the
amendments and restatement of the Company's 1996 Stock Option Plan and the
ratification of Deloitte & Touche LLP:
<TABLE>
<CAPTION>
NUMBER OF VOTES
--------------------------------------------
BROKER
FOR AGAINST ABSTAIN NON-VOTES
---------- --------- ------- ---------
<S> <C> <C> <C> <C>
Proposal 1 - Election of Directors:
Waldo H. Burnside.................... 15,746,911 2,225 -- N/A
Lilly V. Lee......................... 15,746,911 2,225 -- N/A
Mark Sullivan III.................... 15,746,911 2,225 -- N/A
Proposal 2 - Amendments to, and a
restatement of, the 1996 Stock
Option Plan............................ 12,016,047 3,722,079 11,010 --
Proposal 3 - Ratification of
Independent Public Accountants......... 15,733,646 7,150 8,340 N/A
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable
32
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Reorganization, dated as of March 27, 1996,
among Fidelity, Bank Plus Corporation and Fidelity Interim Bank.
(incorporated by reference to Exhibit 2.1 to the Form 8-B of Bank
Plus filed with the SEC on April 22, 1996 (the "Form 8-B")).*
2.2 Agreement and Plan of Merger, dated June 25, 1997, among Bank Plus
Corporation, Fidelity and Hancock Savings Bank, F.S.B (incorporated
by reference to Exhibit 2.2 to the Form S-4 of Bank Plus filed with
the SEC on June 30, 1997).*
3.1 Certificate of Incorporation of Bank Plus Corporation (incorporated
by reference to Exhibit 3.1 to the Form 8-B).*
3.2 Bylaws of Bank Plus Corporation (incorporated by reference to Exhibit
3.2 to the Form 8-B).*
4.1 Specimen of Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Form 8-B).*
4.2 Form of Indenture relating to senior notes of Fidelity (incorporated
by reference to Exhibit 4.2 of the Form 8-B).*
10.1 Settlement Agreement between Fidelity, Citadel and certain lenders,
dated as of June 3, 1994 (the "Letter Agreement") (incorporated by
reference to Exhibit 10.1 to the Form 8-B).*
10.2 Amendment No. 1 to Letter Agreement, dated as of June 20, 1994
(incorporated by reference to Exhibit 10.2 to the Form 8-B).*
10.3 Amendment No. 2 to Letter Agreement, dated as of July 28, 1994
(incorporated by reference to Exhibit 10.3 to the Form 8-B).*
10.4 Amendment No. 3 to Letter Agreement, dated as of August 3, 1994
(incorporated by reference to Exhibit 10.4 to the Form 8-B).*
10.5 Mutual Release, dated as of August 4, 1994, between Fidelity, Citadel
and certain lenders (incorporated by reference to Exhibit 10.5 to the
Form 8-B).*
10.6 Mutual Release between Fidelity, Citadel and The Chase Manhattan
Bank, NA, dated June 17, 1994 (incorporated by reference to Exhibit
10.6 to the Form 8-B).*
10.7 Loan and REO Purchase Agreement (Primary), dated as of July 13, 1994,
between Fidelity and Colony Capital, Inc. (incorporated by reference
to Exhibit 10.7 to the Form 8-B).*
10.8 Real Estate Purchase Agreement, dated as of August 3, 1994, between
Fidelity and CRI (incorporated by reference to Exhibit 10.8 to the
Form 8-B).*
10.9 Loan and REO Purchase Agreement (Secondary), dated as of July 12,
1994, between Fidelity and EMC Mortgage Corporation (incorporated by
reference to Exhibit 10.9 to the Form 8-B).*
10.10 Loan and REO Purchase Agreement (Secondary), dated as of July 21,
1994, between Fidelity and International Nederlanden (US) Capital
Corporation, Farallon Capital Partners, L.P., Tinicum Partners, L.P.
and Essex Management Corporation (incorporated by reference to
Exhibit 10.10 to the Form 8-B).*
10.11 Purchase of Assets and Liability Assumption Agreement by and between
Home Savings of America, FSB and Fidelity, dated as of July 19, 1994
(incorporated by reference to Exhibit 10.11 to the Form 8-B).*
10.12 Promissory Note, dated July 28, 1994, by CRI in favor of Fidelity and
related loan documents (3943 Veselich Avenue) (incorporated by
reference to Exhibit 10.12 to the Form 8-B).*
10.13 Promissory Note, dated July 28, 1994, by CRI in favor of Fidelity and
related loan documents (23200 Western Avenue) (incorporated by
reference to Exhibit 10.13 to the Form 8-B).*
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------
<S> <C>
10.14 Promissory Note, dated August 3, 1994, by CRI in favor of Fidelity
and related loan documents (1661 Camelback Road) (incorporated by
reference to Exhibit 10.14 to the Form 8-B).*
10.15 Guaranty Agreement, dated August 3, 1994, by Citadel in favor of
Fidelity (incorporated by reference to Exhibit 10.15 to the Form
8-B).*
10.16 Tax Disaffiliation Agreement, dated as of August 4, 1994, by and
between Citadel and Fidelity (incorporated by reference to Exhibit
10.16 to the Form 8-B).*
10.17 Option Agreement, dated as of August 4, 1994, by and between Fidelity
and Citadel (incorporated by reference to Exhibit 10.17 to the Form
8-B).*
10.18 Executive Employment Agreement, dated as of August 1, 1997, between
Richard M. Greenwood and Fidelity.
10.19 Guaranty of Employment Agreement, dated as of August 1, 1997, between
Richard M. Greenwood and Bank Plus.
10.20 Amended Service Agreement between Fidelity and Citadel dated as of
August 1, 1994 (incorporated by reference to Exhibit 10.19 to the
Form 8-B).*
10.21 Side letter, dated August 3, 1994, between Fidelity and CRI
(incorporated by reference to Exhibit 10.20 to the Form 8-B).*
10.22 Placement Agency Agreement, dated July 12, 1994, between Fidelity,
Citadel and J.P. Morgan Securities Inc. (incorporated by reference to
Exhibit 10.21 to the Form 8-B).*
10.23 Stock Purchase Agreement, dated as of August 3, 1994, between
Fidelity and Citadel (incorporated by reference to Exhibit 10.22 to
the Form 8-B).*
10.24 Litigation and Judgment Assignment and Assumption Agreement, dated as
of August 3, 1994, between Fidelity and Citadel (incorporated by
reference to Exhibit 10.23 to the Form 8-B).*
10.25 Amended and Restated 1996 Stock Option Plan (incorporated by
reference to Exhibit 10.24 to the quarterly report on Form 10Q for
the quarterly period ended March 31, 1997).*
10.26 Retirement Plan for Non-Employee Directors (incorporated by reference
to Exhibit 10.25 to the Form 8-B).*
10.27 Form of Severance Agreement between the Bank and Mr. Sanders
(incorporated by reference to Exhibit 10.26 to the Form 8-B).*
10.28 Form of Change in Control Agreement between the Bank and Mr.
Greenwood.
10.29 Form of Severance and Change in Control Agreement between the Bank
and each of Messrs. Austin, Evans & Taylor.
10.30 Form of Severance and Change in Control Agreement between the Bank
and each of Messrs. Condon and Stutz.
10.31 Form of Severance Agreement between the Bank and Mr. Renstrom
(incorporated by reference to Exhibit 10.29 to the Form 8-B).*
10.32 Form of Incentive Stock Option Agreement between the Bank and certain
officers (incorporated by reference to Exhibit 10.30 to the Form
8-B).*
10.33 Form of Amendment to incentive Stock Option Agreement between the
Bank and certain officers (incorporated by reference Exhibit 10.31 to
the Form 8-B).*
10.34 Form of Non-Employee Director Stock Option Agreement between the Bank
and certain directors (incorporated by reference to Exhibit 10.32 to
the Form 8-B).*
10.35 Form of Amendment to Non-Employee Director Stock Option Agreement
between the Bank and certain directors (incorporated by reference to
Exhibit 10.33 to the Form 8-B).*
10.36 Loan and REO Purchase Agreement, dated as of December 15, 1994
between Fidelity and Berkeley Federal Bank & Trust FSB (incorporated
by reference to Exhibit 10.34 to the Form 8-B).*
10.37 Standard Office Lease-Net, dated July 15, 1994, between the Bank and
14455 Ventura Blvd., Inc. (incorporated by reference to Exhibit 10.35
to the Form 8-B).*
10.38 Standard Office Lease--Modified Gross, dated July 15, 1994, between
the Bank and Citadel Realty, Inc. (incorporated by reference to
Exhibit 10.36 to the Form 8-B).*
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------
<S> <C>
10.39 Loan Servicing Purchase and Sale Agreement dated March 31, 1995
between the Bank and Western Financial Savings Bank, FSB
(incorporated by reference to Exhibit 10.37 to the Form 8-B).*
10.40 Supervisory Agreement dated June 28, 1995, between Fidelity and the
OTS (incorporated by reference to Exhibit 10.38 to the Form 8-B).*
10.41 Form of Indemnity Agreement between the Bank and its directors and
senior officers (incorporated by reference to Exhibit 10.39 to the
Form 8-B).*
10.42 Letter from the OTS to the Bank dated December 8, 1995, terminating
the Supervisory Agreement as of the date of the letter (incorporated
by reference to Exhibit 10.40 to the Form 8-B).*
10.43 Loan Servicing Purchase and Sale Agreement dated May 15, 1996 between
Fidelity and Western Financial Savings Bank (incorporated by
reference to Exhibit 10.37 to the quarterly report on Form 10-Q for
the quarterly period ended June 30, 1996).*
10.44 First Amendment to Standard Office Lease--Modified Gross, dated as of
May 15, 1995 between the Bank and Citadel Realty, Inc (incorporated
by reference to Exhibit 10.42 to the quarterly report on Form 10-Q
for the quarterly period ended September 30, 1996).*
10.45 Second Amendment to Standard Office Lease--Modified Gross, dated as
of October 1, 1996, between the Bank and Citadel Realty, Inc
(incorporated by reference to Exhibit 10.43 to the quarterly report
on Form 10-Q for the quarterly period ended September 30, 1996).*
10.46 Form of Indemnity Agreement between Bank Plus and its directors and
senior officers (incorporated by reference to Exhibit 10.44 to the
quarterly report on Form 10-Q for the quarterly period ended
September 30, 1996).*
10.55 Promissory Note, dated July 31, 1996, from Richard M. Greenwood to
Bank Plus (incorporated by reference to Exhibit 10.55 to the 1996
Form 10-K).*
10.56 Bank Plus Corporation Deferred Compensation Plan.
27. Financial Data Schedule.
</TABLE>
- -----------
* Indicates previously filed documents.
(b) Reports on Form 8-K
A current report on Form 8-K was filed with the SEC on July 2, 1997 reporting
on Item 5. "Other Events" including pro forma financial statements for the
acquisition of Hancock.
A current report on Form 8-K was filed with the SEC on August 13, 1997
reporting on Item 2. "Acquisition or Disposition of Assets" and Item 7.
"Financial Statements, Pro Forma Financial Information and Exhibits" related to
the Hancock acquisition.
35
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
BANK PLUS CORPORATION
Registrant
Date: August 14, 1997 /s/ Richard M. Greenwood
--------------------------------------
Richard M. Greenwood
President and Chief Executive Officer;
Vice Chairman of the Board
Date: August 14, 1997 /s/ William L. Sanders
--------------------------------------
William L. Sanders
Executive Vice President and
Chief Financial Officer
36
<PAGE>
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of August 1, 1997, by and between Fidelity
Federal Bank, A Federal Savings Bank (the "Bank"), and Richard M. Greenwood (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Bank and the Executive have previously entered into an
executive severance agreement, dated as of May 1, 1997 (the "Severance
Agreement"), which governs the terms of the Executive's employment in the event
of a termination in connection with a Change in Control (as defined in Section
3 of such Agreement);
WHEREAS, the Bank and the Executive have previously entered into an
employment agreement, dated as of June 2, 1995 (the "Prior Agreement"), which
governs the terms of the Executive's employment with the Bank; and
WHEREAS, the Bank and the Executive desire to amend and restate the
Prior Agreement in its entirety;
NOW THEREFORE, in consideration of the foregoing premises and the
mutual agreements herein contained, the parties hereto agree that the Prior
Agreement is amended and restated to read as follows, effective as of August 1,
1997:
1. Term of Employment.
------------------
(a) The Bank hereby employs the Executive and the Executive accepts
employment with the Bank, in the position and with the duties and
responsibilities set forth in Section 2 below for the Term of Employment (as
defined below), subject to the terms and conditions of the Agreement.
(b) The term of employment (the "Term of Employment") under this
Agreement shall commence on August 1, 1997 and shall continue until July 31,
2000; provided, however, that commencing on August 1, 2000 and on each August 1
-------- -------
thereafter, the Term of Employment shall be extended for an additional year,
unless either the Bank or the Executive notifies the other Party at least 90
days prior to such August 1 date that the Term of Employment shall not be so
extended.
(c) Notwithstanding anything in this Agreement to the contrary:
<PAGE>
(i) The obligations of the Bank hereunder shall terminate for so long
as the Executive is suspended and/or temporarily prohibited from participating
in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or
(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. (S) 1818(e)(3) and
(g)(1)) as of the date of service of such notice unless stayed by appropriate
proceedings; provided that if the charges in the notice are dismissed, the Bank
--------
may in its discretion (A) pay the Executive all or part of any payments within
the terms of this Agreement withheld while its obligations under this Agreement
was suspended and (B) reinstate (in whole or in part) any of its obligations
which were suspended;
(ii) The obligations of the Bank hereunder shall terminate if the
Executive is removed and/or permanently prohibited from participating in the
conduct of the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1)
of the Federal Deposit Insurance Act (12 U.S.C. (S) 1818(e)(4) or (g)(1));
(iii) The obligations of the Bank hereunder shall terminate if the
Bank is in default (as defined in Section 3(x)(1) of the Federal Deposit
Insurance Act); and
(iv) The obligations of the Bank hereunder shall be terminated by
the Director of the Office of Thrift Supervision or his or her designee (the
"Director"), except to the extent that the Director determines that continuation
of this Agreement is necessary for the continued operation of the Bank, (A) at
the time the Federal Deposit Insurance Corporation or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in Section 13(c) of the Federal Deposit
Insurance Act or (B) at the time the Director approves a supervisory merger to
resolve problems related to operation of the Bank or when the Bank is determined
by the Director to be in unsafe or unsound condition.
In the case of paragraphs (ii), (iii) and (iv) of this Section 1(c), vested
rights hereunder held by the Bank or the Executive shall not be affected by such
termination.
2. Position; Duties and Responsibilities
-------------------------------------
Subject to the terms and conditions of this Agreement, during the Term
of Employment the Executive shall be employed as the President and Chief
Executive Officer of the Bank at its principal office, and he will promote the
business affairs and business interests of the Bank
2
<PAGE>
faithfully and diligently. The Executive shall serve in such other executive
positions with the Bank or its affiliates or subsidiaries as the Bank may direct
or to which he may be elected from time to time. The titles, reporting
responsibilities and duties of such other executive positions may be changed or
eliminated at any time. The Executive will perform the usual and customary
duties of President and Chief Executive Officer and any additional positions he
may hold, and he is granted the usual and customary power and authority
associated with each such office, subject to the respective provisions of the
Amended and Restated Charter S and Bylaws of the Bank. The Bank will not assign
to the Executive any duties or responsibilities that are inconsistent with the
position, duties, responsibilities or status of President and Chief Executive
Officer, change his title as President and Chief Executive Officer, require him
to relocate his principal office from the location in Los Angeles County where
the executive offices of the Bank are located, or materially change his
reporting responsibilities or materially diminish his authority or status.
3. Compensation.
------------
During the Term of Employment, the Executive shall be entitled to the
following compensation.
(a) Base Salary. Until August 31, 1997, the Bank shall pay the
-----------
Executive, in accordance with the Bank's normal payroll practices for
executives, an annual base salary of $415,000 ("Base Salary"), which Base Salary
may not be reduced unless the base salaries of all other members of the Bank's
Executive Management Committee ("Senior Executives") of the Bank are
proportionally reduced. The Base Salary shall be increased to $520,000
effective as of September 1, 1997 and may be further increased in the discretion
of the Board of Directors of the Bank (the "Board").
(b) Annual Bonus. The Executive shall be entitled to participate in
------------
the annual incentive plans and arrangements available to Senior Executives of
the Bank from time to time.
(c) Long-Term Incentive Compensation. The Executive shall be entitled
--------------------------------
to participate in the long-term incentive plans available to Senior Executives
of the Bank from time to time, including the Bank Plus Corporation Stock Option
and Equity Incentive Plan.
3
<PAGE>
4. Benefits.
--------
During the Term of Employment, the Executive shall be entitled to the
following benefits.
(a) Benefit Plans. The Executive shall be entitled to participate in
-------------
all benefit programs now made available generally to the executives of the Bank
or which may be made available in the future, subject to, and on a basis
consistent with, the terms, conditions and administration of each such plan.
Such plans include, without limitation, medical, dental, life insurance,
retirement, profit-sharing, savings and disability plans. It shall not
constitute a breach of this Agreement if the Board modifies, reduces or
eliminates the benefits under any benefit plans if such modification, reduction
or elimination applies equally to all similarly situated eligible participants
in such plans. The Executive shall also be entitled to participate in an
additional medical plan that provides up to $25,000 per year for benefits not
covered by the Bank's general medical plan. Executive shall be required to
undergo an annual physical examination by a licensed physician of his choice,
the cost of which shall be included in the annual medical plan referred to in
the preceding sentence.
(b) Tax Preparation. The Executive shall be entitled to receive such
---------------
reimbursement for tax preparation services as have previously been furnished by
the Bank to the Executive.
(c) Vacation and Sick-Leave. The Executive may take annual vacations
-----------------------
aggregating four weeks in accordance with the Bank's vacation policy and will be
eligible for the Bank's standard sick-leave benefits; provided, however, that
-------- -------
the Executive shall not earn any additional vacation days in any year in which
the Executive at any time has 280 or more hours of accrued but unused vacation
time.
5. Expenses and Allowances.
-----------------------
During the term of this Agreement, the Bank shall reimburse the
Executive for the following expenses and provide the following allowances.
(a) Travel and Entertainment. The Bank shall pay or reimburse the
------------------------
Executive for all reasonable travel, business entertainment and other expenses
reasonably and necessarily incurred by the Executive in the performance of his
obligations under this Agreement. The Chairman of the Board shall have the sole
authority to determine whether an
4
<PAGE>
expense incurred by the Executive is reasonable and necessary, which
determination shall in any event be consistent with the Bank's usual and
customary reimbursement policies.
(b) Automobile. The Bank shall pay the Executive the costs for
----------
gasoline, maintenance, repair, license and appropriate casualty and liability
insurance for the use of an automobile for business purposes.
(c) Clubs. The Bank shall reimburse the Executive for all initiation
-----
fees and dues associated with the Executive's membership in those professional
and social clubs which are approved by the Compensation Committee of the Board.
All equity memberships will be the property of and will be in the name of the
Bank if permitted by the club. If not so permitted, upon the termination of the
Executive's employment, the Executive will pay to the Bank the then fair market
value of such equity membership should the Executive decide to retain such
membership, or alternatively, the Executive immediately will seek to sell such
membership at fair market value and pay the proceeds of such sale, if any, to
the Bank.
6. Termination of Employment.
-------------------------
(a) Right to Terminate. The Bank or the Executive may terminate the
------------------
Executive's employment at any time, subject to the Bank's providing the benefits
hereinafter specified in accordance with the terms of this Agreement. For
purposes of this Agreement, the failure by the Bank to renew this Agreement
pursuant to Section 1(b) is deemed to be a termination by the Bank of the
Executive's employment.
(b) Termination by the Bank for Cause or by the Executive Without Good
------------------------------------------------------------------
Reason. If the Bank terminates the Executive's employment for Cause or the
- ------
Executive terminates employment with the Bank other than for Good Reason, the
Executive shall forfeit all rights to non-vested long-term incentive
compensation and the Bank shall be liable to the Executive only for (i) earned
but unpaid salary, (ii) any unpaid annual bonus that was earned in the Bank's
fiscal years prior to the fiscal year in which the Executive's employment
terminates ("Termination Year"), (iii) unreimbursed business expenses or other
allowances that are incurred prior to the date on which the Executive's
employment terminates ("Termination Date") and (iv) the Executive's vested
benefits under any program described in Section 4 in accordance with the terms
of any such program. For purposes of the preceding sentence, expenses or
5
<PAGE>
allowances are incurred as of the date such expenses are payable by the
Executive or Bank. If the Executive challenges such termination, and the
arbitrator appointed pursuant to Section 18 of this Agreement determines that a
purported termination for Cause was without Cause, the termination, at the
Executive's or the Bank's election, nonetheless will be effective, but the
Executive will promptly receive all payments, benefits and property, if any, as
if the termination had originally been denominated as one without Cause.
(c) Termination by the Bank Other than for Cause or by the Executive
----------------------------------------------------------------
for Good Reason. If the Bank terminates the Executive's employment other than
- ---------------
for Cause, death of the Executive, Retirement, or Disability or the Executive
terminates his employment with the Bank for Good Reason, the Bank shall be
liable for the payments and benefits described in Section 6(b) and shall provide
the Executive with the additional payments and benefits described below.
(i) Base Salary. The Bank shall continue to pay the Executive the
-----------
higher of (y) his Base Salary as of the Termination Date or (z) his Base Salary
as of the date of this Agreement, as specified in Section 3(a) hereof, for two
years following the Termination Date.
(ii) Annual Bonus. Within thirty days following the Termination
------------
Date, the Bank shall make a lump-sum cash payment to the Executive in an amount
equal to two times the average of the annual bonus to which the Executive was
entitled during the Bank's two fiscal years ended prior to the Termination Date.
(iii) Long-Term Incentive Compensation. Any awards made to the
--------------------------------
Executive pursuant to any long-term incentive compensation plan maintained by
the Bank shall remain in effect, subject to the terms and conditions applicable
to such awards.
(iv) Benefit Programs and Allowances. The Bank shall continue to
-------------------------------
make available to the Executive benefits and allowances comparable to those
provided pursuant to Sections 4 and 5 as of the Termination Date for two years
following the Termination Date; provided, however, that during the second year
-------- -------
following the Termination Date, the Bank shall only make available to the
Executive benefits and allowances comparable to those provided pursuant to
Sections 4 and 5 as of the Termination Date to the extent the Executive does not
receive such comparable benefits or allowances from other employers.
Notwithstanding the preceding sentence, the Executive shall not be entitled to
6
<PAGE>
accrue further benefits in any tax-qualified pension or retirement plan
maintained by the Bank following the Termination Date to the extent not already
accrued as of such date; provided, however, that upon distribution of benefits
-------- -------
to the Executive from the Bank's retirement or pension plans, the Executive
shall receive a cash payment from the Bank equal to the value of the additional
benefits that the Executive would have received if he had two additional years
of credited service under such retirement or pension plans at his rate of base
salary on the Termination Date. Prior to the second year following the
Termination Date, the Executive shall provide to the Board a list of the
benefits and allowances the Executive expects to receive from other employers
during such year and a copy of each agreement or other document describing the
terms of such benefits and allowances, which list shall be updated by the
Executive promptly following any change in the Executive's benefits or
allowances during such period.
(v) No Mitigation Required. The Executive has no duty to seek
----------------------
employment or mitigate damages under this Section 6(c).
(d) Termination Upon Death. If the Executive's employment terminates
----------------------
as a result of the Executive's death, the Bank shall be liable for the payments
and benefits described in Section 6(b) and a lump sum cash payment equal to the
Executive's base salary at the time of his death, which amounts shall be paid to
the beneficiary or beneficiaries lawfully designated by the Executive in a
written instrument dated and executed by him and delivered to the Bank or, if no
beneficiary is so designated, to the Executive's surviving spouse or, if the
Executive shall have no surviving spouse, to the Executive's estate.
(e) Termination Upon Retirement. If the Executive's employment
---------------------------
terminates on or after the attainment by the Executive of age sixty-five (65)
("Retirement"), the Bank shall have no liability to the Executive other than for
the payments and benefits described in Section 6(b) and those retirement
benefits to which the Executive is entitled under the retirement and pension
plans of the Bank as of the Termination Date.
(f) Termination Upon Disability. If the Executive's employment
---------------------------
terminates as a result of the Executive's partial or total inability to perform
his duties hereunder because of any physical or mental Disability, the Executive
shall receive the benefits described in Section 6(b) and, through the end of the
Termination Year, salary payments which, when aggregated with any income
replacement
7
<PAGE>
benefits (e.g., state disability insurance, workers' compensation or
----
long-term disability payments), equal to the balance of his base salary for the
Termination Year. The Executive will remain a participant in all of the Bank's
benefit and compensation plans through the end of the Termination Year, in
accordance with and to the extent permitted under the terms of any such plans.
During the year following the Termination Year the Executive shall be entitled
to the income replacement benefits only. In the event of a partial Disability,
and if requested by the Bank, through the end of the Termination Year, the
Executive will provide such part-time services as may be consistent with the
nature and extent of such Disability and his position as President and Chief
Executive Officer of the Bank. As used herein, "Disability" means a temporary
or permanent condition which, in the opinion of a competent medical professional
selected by the Bank, and, upon written notice to the Executive, not objected to
by the Executive or his representative, reasonably would prevent or prohibit the
Executive from performing or attempting to perform his duties hereunder
substantially as performed prior to the occurrence of such disability. If the
Executive objects and the parties cannot agree, the question of disability may
be submitted to arbitration as provided in Section 18 below; the prevailing
party in such arbitration on this issue shall be entitled to reasonable
attorneys' fees and costs. Notwithstanding the foregoing, should the Executive
be disabled for a consecutive four-month period or for five months out of six,
or if in the opinion of the medical professional selected by the Bank as
provided above, the Executive will be disabled for at least that period of time,
the Bank may replace the Executive in his position as President and Chief
Executive Officer and in any other position; such replacement, however, will in
no way affect Executive's rights to receive the salary and benefits set forth in
this paragraph. If, and to the extent the Executive recovers from any such
Disability and has not been so replaced, he will resume his duties and
responsibilities hereunder for the remainder of the term of this Agreement.
(g) Termination Upon or Following a Change in Control.
-------------------------------------------------
Notwithstanding Sections 6(b) or 6(c), if the Executive's employment terminates
upon or following a Change in Control (as defined in Section 3 of the Severance
Agreement), the Bank's obligations to the Executive shall be governed by the
terms of the Severance Agreement.
8
<PAGE>
7. Definitions.
-----------
For purposes of this Agreement, the following terms shall be defined
as set forth below:
(a) Cause. Termination for cause shall include (i) the intentional
-----
failure by the Executive to perform stated duties (other than any such failure
resulting from the Executive's incapacity due to physical or mental illness),
which failure continues for more than five days after a written demand for
substantial performance is delivered to the Executive by the Chairman of the
Board, which specifically identifies the manner in which the Board believes that
the Executive has not substantially performed his duties, or (ii) the
Executive's personal dishonesty, willful misconduct, breach of fiduciary duty
involving personal profit, willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) or final cease-and-desist
order, or material breach of any provision of this Agreement. For purposes of
this paragraph (a), no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by the Executive in bad
faith and without reasonable belief that his action or omission was in, or not
opposed to, the best interests of the Bank. Any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the Board or based
upon the advice of counsel for the Bank shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Bank. The Executive's attention to matters not directly
related to the business of the Bank shall not provide a basis for termination
for Cause so long as the Board has approved the Executive's engagement in such
activities. The Executive's employment with the Bank shall be deemed to have
been terminated for Cause immediately upon delivery to the Executive of a copy
of a resolution duly adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to the Executive and an
opportunity for the Executive, together with counsel for the Executive, to be
heard before the Board), finding that in the good faith opinion of the Board the
Executive was guilty of the conduct set forth above in (i) or (ii) of this
paragraph (a) and specifying the particulars thereof in detail. Nothing in this
paragraph (a) shall prevent the Executive from challenging such termination
pursuant to the provisions of Section 18 hereof.
9
<PAGE>
(b) Good Reason. The Executive will be treated as having terminated
-----------
his employment for "Good Reason" if the Executive terminates his employment with
the Bank within 180 days of:
(i) any adverse change in the Executive's status or position(s) as
President and Chief Executive Officer of the Bank as in effect on the date of
this Agreement, including, without limitation, any adverse change in the
Executive's status or position as a result of a diminution in the Executive's
duties or responsibilities (other than, if applicable, any such change directly
attributable to the fact that the Bank is no longer publicly owned) or the
assignment to the Executive of any duties or responsibilities which are
inconsistent with such status or position(s), or any removal of the Executive
from or any failure to reappoint or reelect the Executive to such position(s)
(except in connection with the termination of the Executive's employment for
Cause, Disability or Retirement or as a result of the Executive's death or by
the Executive other than for Good Reason);
(ii) the failure of the Executive to be elected to the Board other
than as a result of any decision by the Executive not to stand for election to
the Board;
(iii) a reduction by the Bank in the Executive's base salary as then
in effect, unless the salaries of all other Senior Executives of the Bank are
proportionally reduced;
(iv) the failure by the Bank to provide and credit the Executive with
the number of paid vacation days to which the Executive is then entitled in
accordance with the provisions of this Agreement and the Bank's vacation policy
as in effect on the date of this Agreement;
(v) the requirement by the Bank that the Executive be based at an
office that is greater than 35 miles from where the Executive's office is
located on the date of this Agreement except for required travel on the business
of the Bank to an extent substantially consistent with the business travel
obligations which the Executive undertook on behalf of the Bank prior to the
date of this Agreement; or
(vi) prompt written notice by the Executive to the Bank of any
material breach by the Bank of this Agreement.
10
<PAGE>
8. Full-Time Employment; Confidentiality.
-------------------------------------
(a) Full-Time Employment. The Executive will devote his full time,
--------------------
energies and attention to perform all of his duties to the Bank under this
Agreement. In addition, except as disclosed to and approved by the Board, the
Executive will not engage in any business, civic or other activities that would
interfere with the performance of his duties hereunder. The Executive will not
perform services, whether or not for compensation, for any person or entity
which competes directly or indirectly with the Bank.
(b) Confidentiality. Except as may be required in the ordinary course
---------------
of performing his duties hereunder, the Executive at no time, whether during his
employment or after the termination of his employment (other than to promote and
advance the business of the Bank), will reveal to any person or entity any trade
secrets or confidential business information concerning the Bank, including but
not limited to its research results and activities, marketing plans and
strategies, pricing and costing policies, customer lists and accounts, business
or financial information of the Bank which have come to the Executive's
knowledge as a result of his employment with the Bank. These restrictions do
not apply to: (i) information that has been or is disclosed generally or is in
the public domain through no fault of the Executive; (ii) information received
by the Executive from a third party outside this confidentiality obligation; or
(iii) information that is required to be disclosed by law or an order of any
court, agency or proceeding.
(c) Return of the Bank's Property and Documents. Upon the termination
-------------------------------------------
of the Executive's employment, the Executive immediately will return to the Bank
all property of the Bank or any of its subsidiaries including, without
limitation, all documents and information, however maintained (including
computer files, tapes and recordings), concerning the Bank or acquired by the
Executive in the course and scope of his employment with the Bank (excluding
only those documents relating to the Executive's own salary and benefits), Bank-
owned automobile(s), keys and credit cards.
(d) The Bank's Right to Equitable Relief. If the Executive commits a
------------------------------------
breach, or threatens to commit a breach, of any of the provisions of this
Section, the Bank will have the right to have such provisions specifically
enforced by any court having competent equity jurisdiction, and nothing in
Section 18 shall be interpreted to the contrary.
11
<PAGE>
9. Witness Fees.
------------
If, at any time after the termination of this Agreement, Executive is
requested by the Company or any affiliate of the Company, or is required, to
testify or to provide evidence or otherwise to perform services in relation to
litigation or similar proceedings (civil, administrative, arbitral or otherwise)
in which the Company or any affiliate of the Company, but not Executive, is a
named party or is otherwise involved,
(a) Executive shall be paid by the Company
(i) with respect to each day that Executive appears as a witness or is
deposed, at the rate of $2,000 per day, and
(ii) with respect to each day that Executive is involved in the
preparation therefor, at the rate of $1,000 per day, and
(b) Executive shall be reimbursed by the Company for reasonable travel
and accommodation expenses if such services are required to be performed outside
of the city of Executive's domicile.
10. Limitations on Payments.
-----------------------
Any payments made to the Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
(S) 1828(k) and any regulations promulgated thereunder.
11. Assignability.
-------------
This Agreement is personal to the Bank and the Executive and may not
be assigned or delegated by any party without the written consent of the other
party.
12. Withholding Taxes.
-----------------
Payroll taxes will be withheld from the amounts payable to the
Executive hereunder in accordance with applicable law as determined by the Bank.
13. Entire Agreement.
----------------
Other than as specified in Section 6(g), this Agreement contains the
entire agreement between the Bank and the Executive concerning the subject
matter hereof and supersedes all prior agreements, understandings,
12
<PAGE>
discussions, negotiations and undertakings, whether written or oral, between
them with respect thereto, including the Prior Agreement.
14. Amendment or Waiver.
-------------------
This Agreement cannot be changed, modified or amended without the
consent in writing of both the Executive and the Bank. No waiver by either the
Bank or the Executive at any time of any breach by the other party of any
condition or provision of this Agreement shall be deemed a waiver of a similar
or dissimilar condition or provision at the same or at any prior or subsequent
time. Any waiver must be in writing and signed by the Executive or an
authorized officer of the Bank, as the case may be.
15. Severability.
------------
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
16. Survivorship.
------------
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
17. Governing Law.
-------------
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the state of California without reference to
principles of conflict of laws.
18. Review of this Agreement.
------------------------
The Bank shall pay the legal expenses (up to a cumulative amount of
$2,000) incurred by the Executive in connection with the negotiation and
documentation of this Agreement.
19. Disputes under this Agreement.
-----------------------------
Any controversy, dispute or claim arising out of, relating to or
concerning this Agreement, the breach of this Agreement, the employment of the
Executive, or the
13
<PAGE>
termination of Executive's employment will be resolved pursuant to this Section.
(a) Agreement to Negotiate. Prior to submitting any controversy,
----------------------
dispute or claim to arbitration, the parties hereto will observe the following
procedures:
(i) The party desiring to submit any such controversy, dispute or
claim to arbitration ("Claimant") first will give written notice thereof to the
other party or parties ("Recipient") setting forth in detail the pertinent facts
and circumstances relating to such controversy, dispute or claim.
(ii) Recipient will have a period of fifteen (15) days in which to
consider the controversy, dispute or claim which is the subject of the notice
and to furnish in writing to Claimant a written statement of the position of
Recipient.
(iii) Within seven (7) days after Claimant's receipt of the written
statement of Recipient or the expiration of the fifteen (15) day period set
forth in subsection (ii), whichever is first, the parties will meet (with
counsel, in the discretion of each party) in an effort to resolve amicably all
differences which may exist and, failing such resolution, either party will have
the right to submit the matter to arbitration.
(iv) All communications between the parties under this Section shall
be deemed communications concerning settlement (including, without limitation,
pursuant to California Evidence Code Section 1152) and shall not be admissible
in any subsequent arbitration or litigation.
(b) Procedure for Arbitration.
-------------------------
(i) Any controversy, dispute or claim arising out of, relating to or
concerning this Agreement, the breach of this Agreement, the employment of the
Executive, or the termination of the Executive's employment will be settled by
arbitration in Los Angeles, California in accordance with the Labor Arbitration
Rules of the American Arbitration Association (the "AAA") then existing.
(Should the AAA publish rules designed to accomplish the arbitration of
employment disputes between employees not represented by a union and their
employers or recommend the use of other rules, then those rules will be utilized
in lieu of the Labor Arbitration Rules.) This agreement to arbitrate will be
specifically enforceable.
14
<PAGE>
(ii) Subject to paragraph (a) of this Section, any demand for
arbitration may be filed with the AAA and served on the other party at any time
within the period covered by the applicable statute of limitations.
(iii) One arbitrator will be appointed by both parties in the
following manner: the AAA will furnish the parties with a list of potential
arbitrators. All such arbitrators must be attorneys who are current members in
good standing of the State Bar of California. If either party objects to all of
the names on the list, the AAA will provide the parties with an alternative list
of potential arbitrators. In no event may a party reject more than one list.
Notice of rejection must be given to the AAA within seven (7) business days of
receipt of the list. Once a particular list has been accepted by both parties,
the parties alternatively will eliminate the names of the arbitrators until only
one name remains. That remaining person will be appointed the arbitrator. The
parties will draw lots to decide which party will eliminate the first name from
the list. Either party may have the proceedings recorded by a reported at that
party's expense. If both parties request a transcript, the cost of the reporter
will be shared equally by the parties. The cost of the arbitrator will be
shared equally by the parties.
(iv) The arbitrator will have no authority to extend, modify or
suspend any of the terms of this Agreement. The arbitrator will make his award
in writing and shall accompany it with an opinion discussing the evidence and
setting forth the reasons for his award.
(v) The arbitrator shall have the power to make all factual
determinations and rule on all issues of law. Any award rendered by the
arbitrator shall be final and binding upon each party to the arbitration and
unreviewable for error of law or legal reasoning of any kind and any such award
may be confirmed, and judgment on such award may be entered, in any court of
competent jurisdiction.
(vi) If the rules of the AAA differ from those of this paragraph, the
provisions of this Agreement will control.
(vii) It is agreed that the Office of Thrift Supervision ("OTS") may,
at its option, appear in any arbitration proceeding and present its position
with respect to the matter(s) before the arbitrator, including, without
limitation, its position with respect to any award of
15
<PAGE>
damages. It is further agreed that the decision of the arbitrator will not bind
the OTS.
20. Notices.
-------
Any notice given to either party shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the party concerned, if to the Bank, at its principal office, and, if to the
executive, at the address of the Executive shown on the Bank's records.
21. Headings; Construction.
----------------------
The headings of the paragraphs contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement. Where appropriate, all
references in this Agreement to the masculine pronoun shall include the
feminine.
22. Counterparts.
------------
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
FIDELITY FEDERAL BANK,
A FEDERAL SAVINGS BANK
By: /s/ James E. Stutz
-------------------
/s/ Richard M. Greenwood
------------------------
Richard M. Greenwood
16
<PAGE>
EXHIBIT 10.19
BANK PLUS CORPORATION
A HOLDING COMPANY FOR [FIDELITY FEDERAL BANK LOGO]
4565 COLORADO BOULEVARD
LOS ANGELES, CA 90039
P. O. BOX 1631
GLENDALE, CA 91209-1631
August 1, 1997
Mr. R. M. Greenwood
24216 Park Granada
Calabasas, California 91302
Re: Guaranty of Employment Agreement
--------------------------------
Dear Mr. Greenwood:
We, Bank Plus Corporation ("Bank Plus"), are advised that you and our
wholly-owned subsidiary, Fidelity Federal Bank, A Federal Savings Bank
("Fidelity"), have negotiated an amended and restated contract of executive
employment dated as of August 1, 1997 (the "Employment Agreement"), pursuant to
which you would be employed as the Chief Executive Officer of Fidelity. We are
advised further that you are willing to enter into that contract and provide
such services only if Bank Plus agrees to: (i) employ you as its Chief Executive
Officer; (ii) guaranty the performance by Fidelity of its obligations under
the above-referenced Employment Agreement; and (iii) make certain payments to
you as set forth below.
The Board of Directors of Bank Plus has determined that it is in the best
interest of Bank Plus and Fidelity that you be employed as the Chief Executive
Officer of Fidelity and that likewise it is in the best interest of Bank Plus
that you be employed as the President and Chief Executive Officer of Bank Plus.
Accordingly, effective as of the effective date set forth in the Employment
Agreement, Bank Plus agrees to (i) employ you as its President and Chief
Executive Officer for three years unless terminated earlier pursuant to this
Letter Agreement; (ii) guaranty the performance by Fidelity of its obligations
under the Employment Agreement; and (iii) make certain payments to you as set
forth below.
1. Guaranty
--------
With respect to the guaranty, the provisions set forth in Annex A
hereto are hereby incorporated by reference into this letter as though set forth
in full herein.
2. Services and Duties
-------------------
Subject to your obligations to Fidelity under Sections 2 and 8 of the
Employment Agreement, you agree to provide your services to Bank Plus on a full-
time and exclusive basis at
<PAGE>
Richard M. Greenwood
August 1, 1997
Page 2
its executive offices and faithfully and diligently to promote the business
affairs and business interests of Bank Plus. You will perform the usual and
customary duties of President and Chief Executive Officer and are hereby granted
the usual and customary power and authority associated with such office, subject
to the respective provisions of the Certificate of
Incorporation and By-laws of Bank Plus. Bank Plus will not assign to you any
duties or responsibilities that are inconsistent with the position, duties,
responsibilities or status of President and Chief Executive Officer, change your
titles as President
and Chief Executive Officer, require you to relocate your principal office from
the location in Los Angeles County where the executive offices of Bank Plus are
located or materially change your reporting responsibilities or materially
diminish you authority or status.
3. Termination
-----------
If you terminate your employment with Bank Plus, your employment with
Fidelity will simultaneously terminate. If you terminate your employment with
Fidelity, your employment with Bank Plus will simultaneously terminate. Either
of these events will constitute a termination of your Fidelity employment by
you. If Fidelity terminates your employment your employment with Bank Plus will
simultaneously terminate; if Bank Plus terminates your employment, your
employment with Fidelity will simultaneously terminate. Either of these events
will constitute a termination of your Fidelity employment by Fidelity. Upon
termination of your employment for any reason, from either Bank Plus or
Fidelity, or both, you agree to resign immediately any and all directorships you
then hold of Bank Plus, Fidelity or subsidiaries or related entities thereof.
Whether any such termination of your Fidelity employment will be for cause or
without cause will be determined under the Employment Agreement.
Bank Plus may terminate your employment at any time, and Bank Plus has
no obligation to make payments to you, upon termination of your employment or
otherwise, except as stated in the guaranty in this Letter Agreement described
in Annex A. Termination of your employment does not terminate Bank Plus'
obligations under the guaranty in this Letter Agreement and under Section 4 of
this Letter Agreement.
4. Independent Payment Obligations
-------------------------------
a. If your employment with Fidelity is terminated by Fidelity
without "cause" as described in Section 7 of the Employment Agreement such that
Fidelity would be obligated to make any payment under Section 6(c) of the
Employment Agreement, Bank Plus also agrees to make any such payment to you. In
the event Fidelity would have no monetary obligation to you under the Employment
Agreement, the Bank Plus likewise will be under no such obligation.
<PAGE>
Richard M. Greenwood
August 1, 1997
Page 3
b. In the event that Fidelity's obligations to pay any amounts to
you under the Employment Agreement are suspended, voided or otherwise found to
be unenforceable by action taken by the Office of Thrift Supervision ("OTS"),
the Federal Deposit Insurance Corporation (the "FDIC") or other regulatory
authority with jurisdiction over Fidelity, for any reason set forth in the
Employment Agreement, then Bank Plus shall pay to Executive, subject to Section
7 below, all such amounts that would otherwise be due to you under the
Employment Agreement as and when such amounts are due.
c. The obligations of Fidelity set forth in Section 3 of the
Employment Agreement are also direct and primary obligations of Bank Plus and
are not only in the nature of a guaranty of Fidelity's obligations. However, in
no event will you be entitled to a double payment, that is, payment by both Bank
Plus and Fidelity upon the occurrence of any event.
5. Compensation and Reimbursements
-------------------------------
You acknowledge and agree that you will not receive any separate or
additional compensation or separate reimbursements from Bank Plus for your
services to Bank Plus and that Bank Plus will pay Fidelity, subject to such
expense sharing agreement that may be in effect between them from time to time,
for such services to reimburse Fidelity, as appropriate, for Fidelity's payment
to you of such sums, if any.
6. Incorporation by Reference
--------------------------
It is further agreed that each of the provisions of Sections 12, 13,
14, 15, 16, 18, 19 and 20 of the Employment Agreement with Fidelity are
incorporated by reference herein as though set forth in full except that the
references to Fidelity shall be deemed references to Bank Plus.
7. Violation of Law
----------------
No payment nor obligation of Bank Plus pursuant to this Letter
Agreement and Annex A attached hereto shall be made or may be enforced by you if
any such obligation would violate any applicable law, statute, rule or
regulation to which Bank Plus and/or Fidelity is subject, including, but not
limited to, Section 18(k) of the Federal Deposit Insurance Act and any
regulations promulgated thereunder; or (b) any order (whether temporary or
final), directive or instruction issued by, or any agreement or commitment
imposed upon Bank Plus or Fidelity by, the OTS, the FDIC or any other
appropriate banking regulatory authority. Any right of Bank Plus to seek
reimbursement from Fidelity pursuant to subsection (a) of Annex A shall also be
effective only if there is of no violation of law as set forth in the preceding
sentence.
<PAGE>
Richard M. Greenwood
August 1, 1997
Page 4
8. Right of Offset
---------------
If Bank Plus is obligated to pay on the guaranty set forth herein,
Bank Plus may offset any amounts owed to Bank Plus or Fidelity or otherwise due
to Bank Plus or Fidelity by you on any loan(s) to you including, but not limited
to the promissory note in the initial principal amount of $265,000, dated July
31, 1997 against any unpaid amounts then owed to you by Bank Plus or Fidelity.
If the terms of this Agreement comport with our understanding of our
respective rights and obligations, please execute at the signature block
indicated below and return a copy of this letter to us for our files.
Very truly yours,
/s/ William L. Sanders
WILLIAM L. SANDERS
Executive Vice President and
Chief Financial Officer
Acknowledged and agreed to, effective
as of August 1, 1997.
/s/ Richard M. Greenwood
- ------------------------
Richard M. Greenwood
<PAGE>
ANNEX A
(a) Nature of Guaranty. As between Richard M. Greenwood (the
------------------
"Executive") and Bank Plus, the liability of Bank Plus hereunder is independent
of the obligation of Fidelity and a separate action or separate actions may be
brought and prosecuted against Bank Plus whether or not any action is brought or
prosecuted against Fidelity or whether Fidelity is joined in any such action or
actions. Executive's release of Fidelity or the modification, settlement,
compromise or alteration of Fidelity's obligations under the Employment
Agreement shall not affect the liability of Bank Plus hereunder; provided,
however, that in no event shall the obligation of Bank Plus be greater than it
would have been under the Employment Agreement as in effect on the date hereof,
without its written approval. As between Fidelity and Bank Plus, and as a
matter with which Executive need not be concerned, the obligation of Bank Plus
is expressly secondary to the primary obligation of Fidelity, and Bank Plus
reserves full right to reimbursement by Fidelity of all payments made to
Executive under or with respect to this guaranty, plus all costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred by Bank
Plus in connection with the determination, performance, enforcement and/or
defense of any one or more of its obligations and/or rights under this guaranty.
Executive agrees that Bank Plus will be subrogated, to the full extent of any
payments made by it under this guaranty, to any claims which Executive may have
against Fidelity and further agrees to cooperate with Bank Plus and to permit
Bank Plus to prosecute and collect on such claims.
(b) Waivers. Bank Plus waives the right to require the Executive to
-------
proceed against Fidelity or to pursue any other remedy in the Executive's power
whatsoever and Bank Plus waives the right to have the property of Fidelity first
applied to the discharge of Fidelity's obligation under the Employment
Agreement. The Executive may, at his election, exercise any right or remedy he
may have against Fidelity without affecting or impairing in any way the
liability of Bank Plus hereunder, except to the extent the obligations of
Fidelity hereunder have been fully performed, and Bank Plus waives any defense
arising out of the absence, impairment or loss of any right of reimbursement,
contribution or subrogation or any other right or remedy of Bank Plus against
Fidelity.
(c) Additional Waivers. Bank Plus waives all presentments, demands
------------------
for performance, notices of nonperformance, protests, notices of protest,
notices of dishonor and notices of acceptance of this guaranty and of the
existence, creation or incurring of new or additional obligations by Fidelity
under the Employment Agreement. Bank Plus assumes the responsibility for being
and keeping itself informed of the financial condition of Fidelity and of all
other circumstances bearing upon the risk of nonperformance of the obligations
which diligent inquiry would reveal, and agrees that Executive shall have no
duty to advise Bank Plus of information known to him regarding such condition or
any such circumstances.
(d) Bankruptcy No Discharge. Notwithstanding anything to the contrary
-----------------------
herein contained, this guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time, payment, or any part thereof, of any or all
of funds paid by Fidelity to the Executive hereunder is rescinded or must
otherwise be restored or returned by the Executive upon the insolvency,
bankruptcy, regulatory seizure or reorganization of Fidelity or otherwise, all
as though such payment had not been made. Notwithstanding any modification,
discharge or extension of the obligation of Fidelity hereunder or any amendment,
modification, stay or cure of the Executive's rights which may occur in any
bankruptcy receivership, conservatorship or reorganization case or proceeding
concerning Fidelity whether permanent or temporary, and whether assented to by
the Executive, Bank Plus hereby agrees that it shall continue to be obligated
hereunder and discharge its other obligations in accordance with the terms of
this guaranty in effect on the date hereof. Bank Plus understands and
acknowledges that by virtue of the guaranty, it has specifically assumed any and
all risks of a bankruptcy, receivership, conservatorship or reorganization case
or proceeding with respect to Fidelity.
<PAGE>
EXHIBIT 10.28
As of August 1, 1997
Richard M. Greenwood
Fidelity Federal Bank,
A Federal Savings Bank
4565 Colorado Boulevard
Los Angeles, California 90039
Dear Mr. Greenwood:
Bank Plus Corporation (the "Company") and its principal subsidiary, Fidelity
Federal Bank, A Federal Savings Bank (the "Bank"), consider the establishment
and maintenance of a sound and vital management to be essential to protecting
and enhancing the best interests of the Company and its shareholders. In this
connection, the Company and the Bank recognize that, as is the case with many
publicly held corporations, the possibility of a change in control may arise and
that such possibility, and the uncertainty and questions which it may raise
among management of the Bank, may hinder the Bank's efforts to recruit qualified
management personnel and result in the departure or distraction of management
personnel, in each case to the detriment of the Company and the Bank and the
Company's shareholders. Accordingly, the Board of Directors of the Company (the
"Board") and the board of directors of the Bank have determined that appropriate
steps should be taken to reinforce and encourage the continued attention and
dedication of members of management of the Bank to their assigned duties without
distraction in circumstances arising from the possibility of a change in control
of the Company or the Bank. In particular, the Board believes it important,
should the Company or its shareholders receive a proposal for transfer of
control of the Company or the Bank, that you be able to assess and advise the
Board whether such proposal would be in the best interests of the Company and
its shareholders and to take such other action regarding such proposal as the
Board might determine to be appropriate, without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Bank, this letter
agreement sets forth the benefits which the Bank agrees will be provided to you
in the event of a "change in control" of the Company or the Bank under the
circumstances described below.
1. RIGHT TO TERMINATE; AGREEMENT TO PROVIDE SERVICES.
-------------------------------------------------
(a) Except as otherwise provided in paragraph (b) below, the Bank or you
may terminate your employment at any time, subject to the Bank's providing the
benefits hereinafter specified in accordance with the terms hereof.
<PAGE>
As of August 1, 1997
Page 2
(b) In the event a tender offer or exchange offer is made by a Person (as
hereinafter defined) for more than 25% of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at
elections of directors ("Voting Securities"), including shares of the common
stock of the Company, you agree that you will not leave the employ of the Bank
(other than as a result of Disability or upon Retirement, as such terms are
hereinafter defined) and will render the services contemplated in the recitals
to this Agreement until such tender offer or exchange offer has been abandoned
or terminated or a change in control of the Company or the Bank, as defined in
Section 3 hereof, has occurred. For purposes of this Agreement, the term
"Person" shall mean and include any individual, corporation, partnership, group,
association or other "person", as such term is used in Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company,
the Bank, any other subsidiary of the Company or any employee benefit plan(s)
sponsored by the Company, the Bank or any other subsidiary of the Bank.
2. TERM OF AGREEMENT.
-----------------
(a) This Agreement shall commence on August 1, 1997 and shall continue in
effect until July 31, 2000; provided, however, that commencing on August 1, 2000
-------- -------
and each August 1 thereafter, the term of this Agreement shall be extended for
one additional year unless at least 90 days prior to such August 1st date, the
Bank or you shall have given notice that this Agreement shall not be extended;
and provided, further, that, notwithstanding the delivery of any such notice,
-------- -------
this Agreement shall continue in effect for a period of twenty-four (24) months
after a change in control of the Company or the Bank, as defined in Section 3
hereof, if such change in control shall have occurred during the term of this
Agreement, as it may be extended by the first proviso set forth above.
(b) Notwithstanding anything in this Section 2 to the contrary:
(i) this Agreement shall terminate if you or the Bank terminate
your employment prior to a change in control;
(ii) the obligations of the Bank hereunder shall terminate for so
long as you are suspended and/or temporarily prohibited from participating in
the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or
(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. (S) 1818(e)(3) and
(g)(1)) as of the date of service of such notice unless stayed by appropriate
proceedings; provided that if the charges in the notice are dismissed, the Bank
--------
may in its discretion (A) pay you all or part of any payments within the terms
of this Agreement withheld while its obligations under this Agreement was
suspended and (B) reinstate (in whole or in part) any of its obligations which
were suspended;
(iii) the obligations of the Bank hereunder shall terminate if you
are removed and/or permanently prohibited from participating in the conduct of
the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the
Federal Deposit Insurance Act (12 U.S.C. (S) 1818(e)(4) or (g)(1));
<PAGE>
August 1, 1997
Page 3
(iv) this Agreement shall terminate if the Bank is in default (as
defined in Section 3(x)(1) of the Federal Deposit Insurance Act); or
(v) this Agreement shall be terminated by the Director of the
Office of Thrift Supervision or his or her designee (the "Director"), except to
the extent that the Director determines that continuation of this Agreement is
necessary for the continued operation of the Bank, (A) at the time the Federal
Deposit Insurance Corporation or the Resolution Trust Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the Federal Deposit Insurance Act or (B) at the
time the Director approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Director to be in
unsafe or unsound condition;
provided, however, that in the case of paragraphs (iii), (iv) and (v) of this
- -------- -------
Section 2(b), vested rights hereunder held by the Bank or you shall not be
affected by such termination.
3. CHANGE IN CONTROL. For purposes of this Agreement, a "change in control"
-----------------
shall be deemed to occur if (a) any "person" (as such term is defined in Section
3(a)(9) and as used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), excluding the Company, the Bank or
any of the Company's other subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of the Company, the Bank or any of the
Company's other subsidiaries, an underwriter temporarily holding securities
pursuant to an offering of such securities or a corporation owned, directly or
indirectly, by shareholders of the Company in substantially the same proportion
as their ownership of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power
of the Company's then outstanding securities ("Voting Securities of the
Company"); or (b) during any period of not more than two years, individuals who
constitute the Board as of the beginning of the period and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (a) or (b) of this
sentence) whose election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at such time or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; (c) the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the Voting Securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting Securities of
the surviving entity) at least 60% of the combined voting power of the Voting
Securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or any agreement for the sale or
disposition by the Company or all or substantially all of the Company's assets;
(d) a sale or sales or other disposition or dispositions by the Company which
results in the Company ceasing to beneficially "own" (within the meaning of Rule
13d-3 under the Exchange Act, directly or indirectly, more
<PAGE>
August 1, 1997
Page 4
than 50% of the Voting Securities of the Bank; or (e) a sale or sales of all or
substantially all of the assets of the Bank, in a single transaction or series
of transactions, other than to a direct or indirect subsidiary of the Company;
or (f) a merger or other combination involving the Bank as a result of which the
Company ceases to beneficially own, directly or indirectly, more than 50% of the
Voting Securities of the Bank or the successor to the Bank.
4. TERMINATION FOLLOWING A CHANGE IN CONTROL. If any of the events described
-----------------------------------------
in Section 3 hereof constituting a change in control shall have occurred, you
shall be entitled to the benefits provided in Section 5 hereof. For purposes of
this Agreement:
(a) Disability. Termination by the Bank of your employment based on
----------
"Disability" shall mean termination because of your absence from your duties
with the Bank on a full time basis for one hundred eighty (180) consecutive days
as a result of your incapacity due to physical or mental illness, unless within
thirty (30) days after Notice of Termination (as hereinafter defined) is given
to you following such absence you shall have returned to the full time
performance of your duties.
(b) Retirement. Termination by you or by the Bank of your employment based
----------
on "Retirement" shall mean termination on or after your attainment of age sixty-
five (65).
(c) Cause. Termination by the Bank of your employment for "Cause" shall
-----
mean termination upon (i) the willful and continued failure by you to perform
substantially your duties with the Bank (other than any such failure resulting
from your incapacity due to physical or mental illness) after a demand for
substantial performance is delivered to you by the Board or the executive
committee thereof, which specifically identifies the manner in which such body
believes that you have not substantially performed your duties, or (ii) your
willful dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) or final cease-and-desist
order, or material breach of any provision of this Agreement. For purposes of
this paragraph (c), no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you in bad faith and without
reasonable belief that your action or omission was in, or not opposed to, the
best interests of the Bank. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or the board of
directors of the Bank or based upon the advice of counsel for the Company or the
Bank shall be conclusively presumed to be done, or omitted to be done, by you in
good faith and in the best interests of the Bank. It is also expressly
understood that your attention to matters not directly related to the business
of the Bank shall not provide a basis for termination for Cause so long as the
Board or the board of directors of the Bank has approved your engagement in such
activities. Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the board of directors of the Bank at
a meeting called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the board of
directors of the Bank), finding that in the good faith opinion of the board of
directors of the Bank you were
<PAGE>
August 1, 1997
Page 5
guilty of the conduct set forth above in (i) or (ii) of this paragraph (c) and
specifying the particulars thereof in detail.
(d) Good Reason. Termination by you of your employment for "Good Reason"
-----------
shall mean termination based on:
(i) an adverse change in your status or position(s) as an executive
officer of the Bank, including, without limitation, any adverse change in your
status or position as a result of a diminution in your duties or
responsibilities (other than, if applicable, any such change directly
attributable to the fact that the Company is no longer publicly owned) or the
assignment to you of any duties or responsibilities which are inconsistent with
such status or position(s), or any removal of you from or any failure to
reappoint or reelect you to such position(s) (except in connection with the
termination of your employment for Cause, Disability or Retirement or as a
result of your death or by you other than for Good Reason);
(ii) a reduction by the Bank in your base salary;
(iii) the failure by the Company or the Bank to continue in effect
any Plan (as hereinafter defined) other than as a result of the normal
expiration of any such Plan, or the taking of any action, or the failure to act,
by the Bank which would adversely affect your continued participation in any of
such Plans on at least as favorable a basis to you or which would materially
reduce your benefits in the future under any of such Plans or deprive you of any
material benefit enjoyed by you unless such plan or material benefits were
applied to all other executives;
(iv) the failure by the Bank to provide and credit you with the
number of paid vacation days to which you are then entitled in accordance with
its normal vacation policy;
(v) the requirement by the Bank that you be based at an office that
is greater than 35 miles from where your office is located, except for required
travel on the business of the Bank to an extent substantially consistent with
the business travel obligations which you undertook;
(vi) the failure by the Company and the Bank to obtain from any
Successor (as hereinafter defined) the assent to this Agreement contemplated by
Section 6 hereof;
(vii) any purported termination by the Bank of your employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of paragraph (e) below (and, if applicable, paragraph (c) above); and for
purposes of this Agreement, no such purported termination shall be effective; or
(viii) any refusal by the Bank to continue to allow you to attend to
matters or engage in business or civic activities not directly related to the
business of the Bank which, as of
<PAGE>
August 1, 1997
Page 6
the date of this agreement, you were permitted by the Board or the Board of
Directors of the Bank to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program or
policy intended to benefit employees of the Bank.
(e) Notice of Termination. Any purported termination by the Bank or by you
---------------------
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon.
(f) Date of Termination. "Date of Termination" shall mean (i) if your
-------------------
employment is to be terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is to be terminated by the Bank for Cause or by
you pursuant to Sections 4(d)(vi) and 6 hereof or for any other Good Reason, the
date specified in the Notice of Termination, or (iii) if your employment is to
be terminated by the Bank for any reason other than Cause, the date specified in
the Notice of Termination, which in no event shall be a date earlier than ninety
(90) days after the date on which a Notice of Termination is given, unless an
earlier date has been expressly agreed to by you in writing either in advance
of, or after, receiving such Notice of Termination. In the case of termination
by the Bank of your employment for Cause, if you have not previously expressly
agreed in writing to the termination, then within thirty (30) days after receipt
by you of the Notice of Termination with respect thereto, you may notify the
Bank that a dispute exists concerning the termination, in which event the Date
of Termination shall be the date set either by mutual written agreement of the
parties or by the arbitrators in a proceeding as provided in Section 14 hereof.
During the pendency of any such dispute, the Bank will continue to pay you your
full compensation in effect just prior to the time the Notice of Termination is
given and until the dispute is resolved in accordance with Section 14.
5. COMPENSATION UPON A CHANGE IN CONTROL; OTHER AGREEMENTS.
-------------------------------------------------------
(a) Subject to Section 8 hereof, if a change in control, as defined in
Section 3 above, shall have occurred, then the Bank shall pay to you, no later
than the fifth business day thereafter, without regard to any contrary
provisions of any Plan (other than any deferral election pursuant to the
Company's Deferred Compensation Plan), an amount in cash equal to 3.0 times the
sum of (I) your annual salary as in effect immediately prior to the change in
control, plus (II) the average of the annual bonus to which you were entitled
for the Bank's three fiscal years ended prior to the change in control, plus
(III) an amount equal to the matching contribution you would have received under
the Bank's 401(k) plan if you had made the maximum contribution under such plan
during the year in which the Date of Termination occurs.
<PAGE>
August 1, 1997
Page 7
(b) If, within twenty-four (24) months after a change in control shall have
occurred, your employment by the Bank shall be terminated (i) by the Bank other
than for Cause, Disability or Retirement or (ii) by you for Good Reason, then
the Bank shall maintain in full force and effect, for the continued benefit of
you and your dependents for a period terminating on the earliest of (x) 36
months after the Date of Termination, (y) the commencement date of equivalent
benefits from a new employer or (z) your attainment of age sixty-five (65), all
insured and self-insured employee health and welfare benefit Plans in which you
were entitled to participate immediately prior to the Date of Termination,
provided that your continued participation is possible under the general terms
and provisions of such Plans (and any applicable funding media) and you continue
to pay an amount equal to your regular contribution under such plans for such
participation. If, at the end of three years after the Termination Date, you
have not reached your sixty-fifth birthday and you have not previously received
or are not then receiving equivalent benefits from a new employer, the Bank
shall arrange, at its sole cost and expense, to enable you to convert your and
your dependents' coverage under such Plans to individual policies or programs
upon the same terms as employees of the Bank may apply for such conversions. In
the event that your participation in any such Plan is barred, the Bank shall, at
its sole cost and expense, arrange to have issued for the benefit of you and
your dependents individual policies of insurance providing benefits
substantially similar (on an after-tax basis) to those which you otherwise would
have been entitled to receive under such Plans pursuant to this paragraph (d)
or, if such insurance is not available at a reasonable cost to the Bank, the
Bank shall provide you and your dependents with equivalent benefits (on an
after-tax basis). You shall not be required to pay any premiums or other
charges in an amount greater than that which you would have paid in order to
participate in such Plans.
(c) Except as specifically provided in paragraph (b) above, the amount of
any payment provided for in this Section 5 shall not be reduced, offset or
subject to recovery by the Bank by reason of any compensation earned by you as
the result of employment by another employer after the Date of Termination, or
otherwise.
(d) In the event that you become entitled to the payments provided by
paragraph (a) above (the "Agreement Payments"), if any of the Agreement Payments
will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the
Internal Revenue Code (the "Code") (or any similar tax that may hereafter be
imposed), the Company shall pay to you at the time specified in paragraph (e)
below an additional amount (the "Gross-up Payment") such that the net amount
retained by you, after deduction of any Excise Tax on the Total Payments (as
hereinafter defined) and any federal, state and local income tax and Excise Tax
upon the Gross-up Payment provided for by this paragraph (d) but before
deduction for any federal, state or local income tax on the Agreement Payments,
shall be equal to the sum of (i) the Total Payments and (ii) an amount equal to
the product of any deductions disallowed because of the inclusion of the Gross-
up Payment in your adjusted gross income and the highest applicable marginal
rate of federal income taxation for the calendar year in which the Gross-up
Payment is to be made.
For purposes of determining whether any of the Agreement Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits
<PAGE>
August 1, 1997
Page 8
received or to be received by you in connection with a change in control of the
Company or the Bank or your termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Company, the Bank, any person whose actions result in a change of control or any
person affiliated with the Company or such person) (which, together with the
Agreement Payments, shall constitute the "Total Payments") shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of Section 280G(b)(1) of the
code shall be treated as subject to the Excise Tax, unless the Company's public
accounting firm as of the date immediately prior to the change of control (the
"Accounting Firm") determines that such other payments or benefits (in whole or
in part) do not constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of the Code or are
otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments
which shall be treated as subject to the Excise Tax shall be equal to the lesser
of (x) the total amount of the Total Payments or (y) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) of the Code (after
applying clause (i), above), and (z) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Accounting Firm in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The
Accounting Firm shall provide detailed supporting calculations to the Bank and
you within fifteen (15) business days of the receipt of notice from the Bank or
you that there has been an Agreement Payment, or such earlier time as is
requested by the Bank. In the event that the Accounting firm is serving as
accountant or auditor for the individual, entity or group effecting the change
in control, you may appoint another nationally recognized public accounting firm
to make the determinations required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Bank and the Bank shall enter into
any agreement requested by the Accounting Firm in connection with the
performance of its services hereunder.
For purposes of determining the amount of the Gross-up Payment, you
shall be deemed to (1) pay federal income taxes at the highest marginal rate of
federal income taxation for the calendar year in which the Gross-up Payment is
to be made, (2) pay the applicable state and local income taxes at the highest
marginal rate of taxation for the calendar year in which the Gross-up Payment is
to be made, net of the maximum reduction in federal income taxes which cold be
obtained from deduction of such state and local taxes (determined without regard
to limitations on deductions based upon the amount of your adjusted gross
income), and (3) have otherwise allowable deductions for federal income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-up Payment in you adjusted gross income. In the event that the Excise Tax
is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, you shall repay to the Bank
at the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-up Payment attributable to such reduction
(plus the portion of the Gross-up Payment attributable to the Excise Tax and
federal and state and local income tax imposed on the portion of the Gross-up
Payment being repaid by you if such repayment results in a reduction in Excise
Tax and/or a
<PAGE>
August 1, 1997
Page 9
federal and state and local income tax deduction), plus interest on the amount
of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time the Gross-up Payment is made (including by reason
of any payment the existence or amount of which cannot be determined at the time
of the Gross-up Payment), the Bank shall make an additional gross-up payment in
respect of such excess (plus any interest payable with respect to such excess at
the rate provided in Section 1274(b)(2)(B) of the Code) at the time that the
amount of such excess is finally determined.
(e) The Gross-up Payment or portion thereof provided for in paragraph (d)
above shall be paid not later than the thirtieth day following payment of any
amounts under paragraph (a) above; provided, however, that if the amount of such
Gross-up Payment or portion thereof cannot be finally determined on or before
such day, the Bank shall pay to you on such day an estimate, as determined in
good faith by the Bank, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined, but in no event later than the forty-fifth day after payment of any
amounts under paragraph (a) above. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Bank to you, payable on the fifth day
after demand by the Bank (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
6. SUCCESSORS; BINDING AGREEMENT.
-----------------------------
(a) The Company and the Bank will seek, by written request at least five
business days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person by agreement in form and substance satisfactory to
you, assent to the fulfillment of the Bank's obligations under this Agreement.
Failure of such Person to furnish such assent by the later of (i) three business
days prior to the time such Person becomes Successor or (ii) two business days
after such Person receives a written request to so assent shall constitute Good
Reason for termination by you of your employment if a change in control occurs
or has occurred. For purposes of this Agreement, "Successor" shall mean any
Person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), the Bank's business directly, by
merger or consolidation, or indirectly, by purchase of the Voting Securities of
the Company or the Bank or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
be no such designee, to your estate.
<PAGE>
August 1, 1997
Page 10
(c) For purposes of this Agreement, the "Bank" and the "Company" shall
include any corporation or other entity which is the surviving or continuing
entity in respect of any merger, consolidation or form of business combination
in which the Bank or the Company, respectively, ceases to exist.
7. FEES, EXPENSES AND INTEREST; MITIGATION.
---------------------------------------
(a) The Bank shall reimburse you, on a current basis, for all reasonable
legal fees and related expenses incurred by you in connection with the Agreement
following a change in control of the Bank, including, without limitation, (i)
all such fees and expenses, if any, incurred in contesting or disputing any
termination of your employment or (ii) your seeking to obtain or enforce any
right or benefit provided by this Agreement, in each case, regardless of whether
or not your claim is upheld by a court of competent jurisdiction; provided,
--------
however, you shall be required to repay any such amounts to the Bank to the
- -------
extent that a court issues a final and non-appealable order setting forth the
determination that the position taken by you was frivolous or advanced by you in
bad faith. In addition to the fees and expenses provided herein, you shall also
be paid interest on any disputed amount ultimately paid to you at the prime rate
announced by the Bank from time to time from the date payment should have been
made until paid in full.
(b) You shall not be required to mitigate the amount of any payment the
Bank becomes obligated to make to you in connection with this Agreement, by
seeking other employment or otherwise.
8. TAXES. All payments to be made to you under this Agreement will be subject
-----
to required withholding of federal, state and local income and employment taxes.
9. OTHER LIMITATIONS ON PAYMENTS. Any payments made to you pursuant to this
-----------------------------
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. (S) 1828(k) and any regulations promulgated thereunder.
10. SURVIVAL. The respective obligations of, and benefits afforded to, the
--------
Bank and you as provided in Sections 5, 6(b), 7, 8, 9, 14 and 15 of this
Agreement shall survive termination of this Agreement.
11. NOTICE. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed, in the
case of the Bank, to the address set forth on the first page of this Agreement
or, in the case of the undersigned employee, to the address set forth below his
signature, provided that all notices to the Bank shall be directed to the
attention of the Company and President of the Bank, with a copy to the Secretary
of the Bank, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
<PAGE>
August 1, 1997
Page 11
12. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
-------------
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the President and General Counsel of the Bank. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California applied without regard to conflict of laws principles.
13. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
14. ARBITRATION. Any dispute or controversy arising under or in connection
-----------
with this Agreement shall be settled exclusively by arbitration in the County of
Los Angeles, State of California by three arbitrators in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrators' award in any court having jurisdiction; provided,
--------
however, that you shall be entitled to seek specific performance of your right
- -------
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement. The Bank shall
bear all costs and expenses arising in connection with any arbitration
proceeding pursuant to this Section 14.
15. EMPLOYEE'S COMMITMENT. You agree that subsequent to your period of
---------------------
employment with the Bank, you will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Bank, any
proprietary processes of the Company and the Bank or any other subsidiary of the
Company or other confidential information concerning their business, affairs,
products, suppliers or customers which, if disclosed, would have a material
adverse effect upon the business or operations of the Company, the Bank and the
other subsidiaries, taken as a whole; it being understood, however, that the
obligations of this Section 15 shall not apply to the extent that the aforesaid
matters (a) are disclosed in circumstances where you are legally required to do
so or (b) become generally known to and available for use by the public
otherwise than by your wrongful act or omission.
16. RELATED AGREEMENTS. To the extent that any provision of any other
------------------
agreement between the Company, the Bank or any of the other subsidiaries of the
Company and you shall limit, qualify or be inconsistent with any provision of
this Agreement, then for purposes of this Agreement, while the same shall remain
in force, the provision of this Agreement shall control and such provision of
such other agreement shall be deemed to have been superseded, and to be of no
force or effect, as if such other agreement had been formally amended to the
extent necessary to accomplish such purpose.
<PAGE>
August 1, 1997
Page 12
17. COUNTERPARTS. This Agreement may be executed in several counterparts, each
------------
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject matter hereof,
kindly sign and return to the Bank the enclosed copy of this letter which will
then constitute our agreement on this subject.
Sincerely,
FIDELITY FEDERAL BANK,
A FEDERAL SAVINGS BANK
By: /s/ James F. Stutz
----------------------------------------
Name: James F. Stutz
Title: President and Chief Operating Officer
Agreed to this 13th day
of August, 1997.
/s/ Richard M. Greenwood
- --------------------------------------------
Richard M. Greenwood
The payment of all obligations and liabilities of Fidelity Federal Bank, A
Federal Savings Bank under this Agreement, is specifically guaranteed by Bank
Plus Corporation.
BANK PLUS CORPORATION
By: /s/ William L. Sanders
-----------------------------------------
Name: William L. Sanders
Title: EVP, Chief Financial Officer
<PAGE>
EXHIBIT 10.29
As of August 1, 1997
[Name of Executive]
Fidelity Federal Bank,
A Federal Savings Bank
4565 Colorado Boulevard
Los Angeles, California 90039
Dear Mr. [Last Name]:
Bank Plus Corporation (the "Company") and its principal subsidiary, Fidelity
Federal Bank, A Federal Savings Bank (the "Bank"), consider the establishment
and maintenance of a sound and vital management to be essential to protecting
and enhancing the best interests of the Company and its shareholders. In this
connection, the Company and the Bank recognize that, as is the case with many
publicly held corporations, the possibility of severance or a change in control
may arise and that such possibility, and the uncertainty and questions which it
may raise among management of the Bank, may hinder the Bank's efforts to recruit
qualified management personnel and result in the departure or distraction of
management personnel, in each case to the detriment of the Company and the Bank
and the Company's shareholders. Accordingly, the Board of Directors of the
Company (the "Board") and the board of directors of the Bank have determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of management of the Bank to their assigned
duties without distraction in circumstances arising from the possibility of
severance or a change in control of the Company or the Bank. In particular, the
Board believes it important, should the Company or its shareholders receive a
proposal for transfer of control of the Company or the Bank, that you be able to
assess and advise the Board whether such proposal would be in the best interests
of the Company and its shareholders and to take such other action regarding such
proposal as the Board might determine to be appropriate, without being
influenced by the uncertainties of your own situation.
In order to induce you to remain in the employ of the Bank, this letter
agreement sets forth the severance benefits which the Bank agrees will be
provided to you in the event your employment with the Bank is terminated under
the circumstances described below or there is a "change in control" of the
Company or the Bank.
<PAGE>
As of August 1, 1997]
Page 2
1. RIGHT TO TERMINATE; AGREEMENT TO PROVIDE SERVICES.
-------------------------------------------------
(a) Except as otherwise provided in paragraph (b) below, the Bank or you
may terminate your employment at any time, subject to the Bank's providing the
benefits hereinafter specified in accordance with the terms hereof.
(b) In the event a tender offer or exchange offer is made by a Person (as
hereinafter defined) for more than 25% of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at
elections of directors ("Voting Securities"), including shares of the common
stock of the Company, you agree that you will not leave the employ of the Bank
(other than as a result of Disability or upon Retirement, as such terms are
hereinafter defined) and will render the services contemplated in the recitals
to this Agreement until such tender offer or exchange offer has been abandoned
or terminated or a change in control of the Company or the Bank, as defined in
Section 3 hereof, has occurred. For purposes of this Agreement, the term
"Person" shall mean and include any individual, corporation, partnership, group,
association or other "person", as such term is used in Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company,
the Bank, any other subsidiary of the Company or any employee benefit plan(s)
sponsored by the Company, the Bank or any other subsidiary of the Bank.
2. TERM OF AGREEMENT.
-----------------
(a) This Agreement shall commence on August 1, 1997 and shall continue in
effect until July 31, 2000; provided, however, that commencing on August 1, 2000
-------- -------
and each August 1 thereafter, the term of this Agreement shall be extended for
one additional year unless at least 90 days prior to such August 1st date, the
Bank or you shall have given notice that this Agreement shall not be extended;
and provided, further, that, notwithstanding the delivery of any such notice,
-------- -------
this Agreement shall continue in effect for a period of twenty-four (24) months
after a change in control of the Company or the Bank, as defined in Section 3
hereof, if such change in control shall have occurred during the term of this
Agreement, as it may be extended by the first proviso set forth above.
(b) Notwithstanding anything in this Section 2 to the contrary:
(i) this Agreement shall terminate if you or the Bank terminate
your employment prior to a change in control, subject to the Bank's obligations
to you under Section 6 hereof;
(ii) the obligations of the Bank hereunder shall terminate for so
long as you are suspended and/or temporarily prohibited from participating in
the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or
(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. (S) 1818(e)(3) and
(g)(1)) as of the date of service of such notice unless stayed by appropriate
proceedings; provided that if the charges in the notice are dismissed, the Bank
--------
may in
<PAGE>
As of August 1, 1997]
Page 3
its discretion (A) pay you all or part of any payments within the terms of this
Agreement withheld while its obligations under this Agreement was suspended and
(B) reinstate (in whole or in part) any of its obligations which were suspended;
(iii) the obligations of the Bank hereunder shall terminate if you
are removed and/or permanently prohibited from participating in the conduct of
the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the
Federal Deposit Insurance Act (12 U.S.C. (S) 1818(e)(4) or (g)(1));
(iv) this Agreement shall terminate if the Bank is in default (as
defined in Section 3(x)(1) of the Federal Deposit Insurance Act); or
(v) this Agreement shall be terminated by the Director of the
Office of Thrift Supervision or his or her designee (the "Director"), except to
the extent that the Director determines that continuation of this Agreement is
necessary for the continued operation of the Bank, (A) at the time the Federal
Deposit Insurance Corporation or the Resolution Trust Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the Federal Deposit Insurance Act or (B) at the
time the Director approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Director to be in
unsafe or unsound condition;
provided, however, that in the case of paragraphs (iii), (iv) and (v) of this
- -------- -------
Section 2(b), vested rights hereunder held by the Bank or you shall not be
affected by such termination.
3. CHANGE IN CONTROL. For purposes of this Agreement, a "change in control"
-----------------
shall be deemed to occur if (a) any "person" (as such term is defined in Section
3(a)(9) and as used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), excluding the Company, the Bank or
any of the Company's other subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of the Company, the Bank or any of the
Company's other subsidiaries, an underwriter temporarily holding securities
pursuant to an offering of such securities or a corporation owned, directly or
indirectly, by shareholders of the Company in substantially the same proportion
as their ownership of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power
of the Company's then outstanding securities ("Voting Securities of the
Company"); or (b) during any period of not more than two years, individuals who
constitute the Board as of the beginning of the period and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (a) or (b) of this
sentence) whose election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at such time or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; (c) the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
<PAGE>
As of August 1, 1997
Page 4
other than a merger or consolidation which would result in the Voting Securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting Securities of
the surviving entity) at least 60% of the combined voting power of the Voting
Securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or any agreement for the sale or
disposition by the Company or all or substantially all of the Company's assets;
(d) a sale or sales or other disposition or dispositions by the Company which
results in the Company ceasing to beneficially "own" (within the meaning of Rule
13d-3 under the Exchange Act, directly or indirectly, more than 50% of the
Voting Securities of the Bank; or (e) a sale or sales of all or substantially
all of the assets of the Bank, in a single transaction or series of
transactions, other than to a direct or indirect subsidiary of the Company; or
(f) a merger or other combination involving the Bank as a result of which the
Company ceases to beneficially own, directly or indirectly, more than 50% of the
Voting Securities of the Bank or the successor to the Bank.
4. TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL. The Bank or you
------------------------------------------------------
may terminate your employment at any time prior to a change in control, subject
to the Bank's providing the benefits hereinafter specified.
(a) Termination for Cause, without Good Reason or upon Death, Disability or
-----------------------------------------------------------------------
Retirement. If the Bank terminates your employment for Cause or Disability, you
- ----------
terminate employment other than for Good Reason, or in the event of your
Retirement or death, the Bank shall be liable to you for (i) earned but unpaid
salary, (ii) any unpaid annual bonus that was earned in the Bank's fiscal years
prior to the fiscal year in which your employment terminates, (iii) unreimbursed
business expenses or other allowances that are incurred prior to the date on
which your employment terminates (the "Termination Date") and (iv) your vested
benefits under the Plans. For purposes of the preceding sentence, expense or
allowances are incurred as of the date such expenses are payable by you or the
Bank.
(b) Termination Other Than for Cause or for Good Reason. If the Bank
---------------------------------------------------
terminates your employment other than for Cause or Disability or you terminate
employment for Good Reason, the Bank shall be liable for the payments and
benefits described in paragraph (a) above and shall provide you with the
additional payments and benefits described below:
(i) Base Salary. The Bank shall continue to pay you the higher of
-----------
(y) your base salary as of the Termination Date or (z) your base salary as of
the date of this Agreement for 2.0 years following the Termination Date.
(ii) Annual Bonus. Within thirty days following the Termination
------------
Date, the Bank shall make a lump-sum cash payment to you in an amount equal to
2.0 times the average of the annual bonus to which you were entitled during the
Bank's two fiscal years ended prior to the Termination Date.
<PAGE>
As of August 1, 1997
Page 5
(iii) Benefit Plans. The Bank shall maintain in full force and
-------------
effect, for the continued benefit of you and your dependents for a period
terminating on the earlier of (x) 2.0 years following the Termination Date, (y)
the commencement date of equivalent benefits from a new employer or (z) your
attainment of age sixty-five (65), all insured and self-insured employee health
and welfare benefit plans in which you were entitled to participate immediately
prior to the Termination Date, provided that your continued participation is
possible under the general terms and provisions of such plans (and any
applicable funding media) and you continue to pay an amount equal to your
regular contribution under such plans for such participation. If, at the end of
three years after the Termination Date, you have not reached your sixty-fifth
birthday and you have not previously received or are not then receiving
equivalent benefits from a new employer, the Bank shall arrange, at its sole
cost and expense, to enable you to convert your and your dependents' coverage
under such plans to individual policies or programs upon the same terms as
employees of the Bank may apply for such conversions. In the event that your
participation in any plan is barred, the Bank shall, at its sole cost and
expense, arrange to have issued for the benefit of you and your dependents
individual policies of insurance providing benefits substantially similar (on an
after-tax basis) to those which you otherwise would have been entitled to
receive under such plans pursuant to this paragraph or, if such insurance is not
available at a reasonable cost to the Bank, the Bank shall provide you and your
dependents with equivalent benefits (on an after-tax basis). You shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order to participate in such plans.
(iv) Equity Awards. The restrictions on any stock options,
-------------
restricted stock or other equity awards under the Bank Plus corporation Stock
Option and Equity Incentive Plan or any other equity incentive plan shall lapse
and all such awards shall become 100% vested.
(c) For purposes of this Agreement,
(i) Disability. Termination by the Bank of your employment based on
----------
"Disability" shall mean termination because of your absence from your duties
with the Bank on a full time basis for one hundred eighty (180) consecutive days
as a result of your incapacity due to physical or mental illness, unless within
thirty (30) days after Notice of Termination (as hereinafter defined) is given
to you following such absence you shall have returned to the full time
performance of your duties.
(ii) Retirement. Termination by you or by the Bank of your
----------
employment based on "Retirement" shall mean termination on or after your
attainment of age sixty-five (65).
(iii) Cause. Termination by the Bank of your employment for "Cause"
-----
shall mean termination upon (i) the willful and continued failure by you to
perform substantially your duties with the Bank (other than any such failure
resulting from your incapacity due to physical or mental illness) after a demand
for substantial performance is delivered to you by the Board or the executive
committee thereof , which specifically identifies the manner in which such body
<PAGE>
As of August 1, 1997]
Page 6
believes that you have not substantially performed your duties, or (ii) your
willful dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) or final cease-and-desist
order, or material breach of any provision of this Agreement. For purposes of
this paragraph (c), no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you in bad faith and without
reasonable belief that your action or omission was in, or not opposed to, the
best interests of the Bank. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or the board of
directors of the Bank or based upon the advice of counsel for the Company or the
Bank shall be conclusively presumed to be done, or omitted to be done, by you in
good faith and in the best interests of the Bank. It is also expressly
understood that your attention to matters not directly related to the business
of the Bank shall not provide a basis for termination for Cause so long as the
Board or the board of directors of the Bank has approved your engagement in such
activities. Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the board of directors of the Bank at
a meeting called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the board of
directors of the Bank), finding that in the good faith opinion of the board of
directors of the Bank you were guilty of the conduct set forth above in (i) or
(ii) of this paragraph (c) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your employment for "Good
-----------
Reason" shall mean termination based on:
(A) an adverse change in your status or position(s) as an
executive officer of the Bank, including, without limitation, any adverse change
in your status or position as a result of a diminution in your duties or
responsibilities (other than, if applicable, any such change directly
attributable to the fact that the Company is no longer publicly owned) or the
assignment to you of any duties or responsibilities which are inconsistent with
such status or position(s), or any removal of you from or any failure to
reappoint or reelect you to such position(s) (except in connection with the
termination of your employment for Cause, Disability or Retirement or as a
result of your death or by you other than for Good Reason);
(B) a reduction by the Bank in your base salary;
(C) the failure by the Company or the Bank to continue in
effect any Plan (as hereinafter defined) other than as a result of the normal
expiration of any such Plan, or the taking of any action, or the failure to act,
by the Bank which would adversely affect your continued participation in any of
such Plans on at least as favorable a basis to you or which would materially
reduce your benefits in the future under any of such Plans or deprive you of any
material benefit enjoyed by you unless such plan or material benefits were
applied to all other executives;
<PAGE>
As of August 1, 1997
Page 7
(D) the failure by the Bank to provide and credit you with the
number of paid vacation days to which you are then entitled in accordance with
its normal vacation policy;
(E) the requirement by the Bank that you be based at an office
that is greater than 35 miles from where your office is located, except for
required travel on the business of the Bank to an extent substantially
consistent with the business travel obligations which you undertook as of the
date of this agreement;
(F) the failure by the Company and the Bank to obtain from any
Successor (as hereinafter defined) the assent to this Agreement contemplated by
Section 6 hereof;
(G) any purported termination by the Bank of your employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of paragraph (e) below (and, if applicable, paragraph (c) above);
and for purposes of this Agreement, no such purported termination shall be
effective; or
(H) any refusal by the Bank to continue to allow you to attend
to matters or engage in business or civic activities not directly related to the
business of the Bank which, as of the date of this agreement, you were permitted
by the Board or the Board of Directors of the Bank to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program or
policy intended to benefit employees of the Bank.
(v) Notice of Termination. Any purported termination by the Bank or
---------------------
by you shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon.
(vi) Date of Termination. "Date of Termination" shall mean (i) if
-------------------
your employment is to be terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is to be terminated by the Bank for Cause or by
you pursuant to Sections 4(d)(vi) and 6 hereof or for any other Good Reason, the
date specified in the Notice of Termination, or (iii) if your employment is to
be terminated by the Bank for any reason other than Cause, the date specified in
the Notice of Termination, which in no event shall be a date earlier than ninety
(90) days after the date on which a Notice of Termination is given, unless an
earlier date has been expressly agreed to by you in writing either in
<PAGE>
As of August 1, 1997
Page 8
advance of, or after, receiving such Notice of Termination. In the case of
termination by the Bank of your employment for Cause, if you have not previously
expressly agreed in writing to the termination, then within thirty (30) days
after receipt by you of the Notice of Termination with respect thereto, you may
notify the Bank that a dispute exists concerning the termination, in which event
the Date of Termination shall be the date set either by mutual written agreement
of the parties or by the arbitrators in a proceeding as provided in Section 14
hereof. During the pendency of any such dispute, the Bank will continue to pay
you your full compensation in effect just prior to the time the Notice of
Termination is given and until the dispute is resolved in accordance with
Section 14.
5. TERMINATION FOLLOWING A CHANGE IN CONTROL. If any of the events described
-----------------------------------------
in Section 3 hereof constituting a change in control shall have occurred, you
shall be entitled to the benefits provided in Section 6 hereof.
6. COMPENSATION UPON A CHANGE IN CONTROL; OTHER AGREEMENTS.
-------------------------------------------------------
(a) Subject to Section 9 hereof, if a change in control, as defined in
Section 3 above, shall have occurred, then the Bank shall pay to you, no later
than the fifth business day thereafter, without regard to any contrary
provisions of any Plan (other than any deferral election pursuant to the
Company's Deferred Compensation Plan) an amount in cash equal to 3.0 times the
sum of (I) your annual salary as in effect immediately prior to the change in
control, plus (II) the average of the annual bonus to which you were entitled
for the Bank's three fiscal years ended prior to the change in control, plus
(III) an amount equal to the matching contribution you would have received under
the Bank's 401(k) plan if you had made the maximum contribution under such plan
during the year in which the Date of Termination occurs.
(b) If, within twenty-four (24) months after a change in control shall have
occurred, your employment by the Bank shall be terminated (i) by the Bank other
than for Cause, Disability or Retirement or (ii) by you for Good Reason, then
the Bank shall maintain in full force and effect, for the continued benefit of
you and your dependents for a period terminating on the earliest of (x) 36
months after the Date of Termination, (y) the commencement date of equivalent
benefits from a new employer or (z) your attainment of age sixty-five (65), all
insured and self-insured employee health and welfare benefit Plans in which you
were entitled to participate immediately prior to the Date of Termination,
provided that your continued participation is possible under the general terms
and provisions of such Plans (and any applicable funding media) and you continue
to pay an amount equal to your regular contribution under such plans for such
participation. If, at the end of three years after the Termination Date, you
have not reached your sixty-fifth birthday and you have not previously received
or are not then receiving equivalent benefits from a new employer, the Bank
shall arrange, at its sole cost and expense, to enable you to convert your and
your dependents' coverage under such Plans to individual policies or programs
upon the same terms as employees of the Bank may apply for such conversions. In
the event that your participation in any such Plan is barred, the Bank shall, at
its sole cost and expense, arrange to have issued for the benefit of you and
your dependents individual policies of
<PAGE>
As of August 1, 1997]
Page 8
insurance providing benefits substantially similar (on an after-tax basis) to
those which you otherwise would have been entitled to receive under such Plans
pursuant to this paragraph (d) or, if such insurance is not available at a
reasonable cost to the Bank, the Bank shall provide you and your dependents with
equivalent benefits (on an after-tax basis). You shall not be required to pay
any premiums or other charges in an amount greater than that which you would
have paid in order to participate in such Plans.
(c) Except as specifically provided in paragraph (b) above, the amount of
any payment provided for in this Section 6 shall not be reduced, offset or
subject to recovery by the Bank by reason of any compensation earned by you as
the result of employment by another employer after the Date of Termination, or
otherwise.
(d) In the event that you become entitled to the payments provided by
paragraph (a) above (the "Agreement Payments"), if any of the Agreement Payments
will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the
Internal Revenue Code (the "Code") (or any similar tax that may hereafter be
imposed), the Company shall pay to you at the time specified in paragraph (e)
below an additional amount (the "Gross-up Payment") such that the net amount
retained by you, after deduction of any Excise Tax on the Total Payments (as
hereinafter defined) and any federal, state and local income tax and Excise Tax
upon the Gross-up Payment provided for by this paragraph (d) but before
deduction for any federal, state or local income tax on the Agreement Payments,
shall be equal to the sum of (i) the Total Payments and (ii) an amount equal to
the product of any deductions disallowed because of the inclusion of the Gross-
up Payment in your adjusted gross income and the highest applicable marginal
rate of federal income taxation for the calendar year in which the Gross-up
Payment is to be made.
For purposes of determining whether any of the Agreement Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits received or to be received by you in connection with a
change in control of the Company or the Bank or your termination of employment
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, the Bank, any person whose actions result in a
change of control or any person affiliated with the Company or such person)
(which, together with the Agreement Payments, shall constitute the "Total
Payments") shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) of the code shall be treated as subject to the
Excise Tax, unless the Company's public accounting firm as of the date
immediately prior to the change of control (the "Accounting Firm") determines
that such other payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code in excess of the base amount within
the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to
the Excise Tax, (ii) the amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (x) the total amount
of the Total Payments or (y) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying
<PAGE>
As of August 1, 1997
Page 10
clause (i), above), and (z) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accounting Firm in accordance with
the principles of Sections 280G(d)(3) and (4) of the Code. The Accounting Firm
shall provide detailed supporting calculations to the Bank and you within
fifteen (15) business days of the receipt of notice from the Bank or you that
there has been an Agreement Payment, or such earlier time as is requested by the
Bank. In the event that the Accounting firm is serving as accountant or auditor
for the individual, entity or group effecting the change in control, you may
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Bank and the Bank shall enter into any
agreement requested by the Accounting Firm in connection with the performance of
its services hereunder.
For purposes of determining the amount of the Gross-up Payment, you
shall be deemed to (1) pay federal income taxes at the highest marginal rate of
federal income taxation for the calendar year in which the Gross-up Payment is
to be made, (2) pay the applicable state and local income taxes at the highest
marginal rate of taxation for the calendar year in which the Gross-up Payment is
to be made, net of the maximum reduction in federal income taxes which cold be
obtained from deduction of such state and local taxes (determined without regard
to limitations on deductions based upon the amount of your adjusted gross
income), and (3) have otherwise allowable deductions for federal income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-up Payment in you adjusted gross income. In the event that the Excise Tax
is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, you shall repay to the Bank
at the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-up Payment attributable to such reduction
(plus the portion of the Gross-up Payment attributable to the Excise Tax and
federal and state and local income tax imposed on the portion of the Gross-up
Payment being repaid by you if such repayment results in a reduction in Excise
Tax and/or a federal and state and local income tax deduction), plus interest on
the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time the Gross-up Payment is made (including
by reason of any payment the existence or amount of which cannot be determined
at the time of the Gross-up Payment), the Bank shall make an additional gross-up
payment in respect of such excess (plus any interest payable with respect to
such excess at the rate provided in Section 1274(b)(2)(B) of the Code) at the
time that the amount of such excess is finally determined.
(e) The Gross-up Payment or portion thereof provided for in paragraph (d)
above shall be paid not later than the thirtieth day following payment of any
amounts under paragraph (a) above; provided, however, that if the amount of such
Gross-up Payment or portion thereof cannot be finally determined on or before
such day, the Bank shall pay to you on such day an estimate, as determined in
good faith by the Bank, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate
<PAGE>
As of August 1, 1997
Page 11
provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can
be determined, but in no event later than the forty-fifth day after payment of
any amounts under paragraph (a) above. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Bank to you, payable on the fifth day
after demand by the Bank (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
7. SUCCESSORS; BINDING AGREEMENT.
-----------------------------
(a) The Company and the Bank will seek, by written request at least five
business days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person by agreement in form and substance satisfactory to
you, assent to the fulfillment of the Bank's obligations under this Agreement.
Failure of such Person to furnish such assent by the later of (i) three business
days prior to the time such Person becomes Successor or (ii) two business days
after such Person receives a written request to so assent shall constitute Good
Reason for termination by you of your employment if a change in control occurs
or has occurred. For purposes of this Agreement, "Successor" shall mean any
Person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), the Bank's business directly, by
merger or consolidation, or indirectly, by purchase of the Voting Securities of
the Company or the Bank or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
be no such designee, to your estate.
(c) For purposes of this Agreement, the "Bank" and the "Company" shall
include any corporation or other entity which is the surviving or continuing
entity in respect of any merger, consolidation or form of business combination
in which the Bank or the Company, respectively, ceases to exist.
8. FEES, EXPENSES AND INTEREST; MITIGATION.
---------------------------------------
(a) The Bank shall reimburse you, on a current basis, for all reasonable
legal fees and related expenses incurred by you in connection with the Agreement
following a change in control of the Bank, including, without limitation, (i)
all such fees and expenses, if any, incurred in contesting or disputing any
termination of your employment or (ii) your seeking to obtain or enforce any
right or benefit provided by this Agreement, in each case, regardless of whether
or not your claim is upheld by a court of competent jurisdiction; provided,
--------
however, you shall be required to repay any such amounts to the Bank to the
- -------
extent that a court issues a final and non-appealable order setting forth the
determination that the position taken by you was frivolous or
<PAGE>
As of August 1, 1997
Page 12
advanced by you in bad faith. In addition to the fees and expenses provided
herein, you shall also be paid interest on any disputed amount ultimately paid
to you at the prime rate announced by the Bank from time to time from the date
payment should have been made until paid in full.
(b) You shall not be required to mitigate the amount of any payment the
Bank becomes obligated to make to you in connection with this Agreement, by
seeking other employment or otherwise.
9. TAXES. All payments to be made to you under this Agreement will be subject
-----
to required withholding of federal, state and local income and employment taxes.
10. OTHER LIMITATIONS ON PAYMENTS. Any payments made to you pursuant to this
-----------------------------
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. (S) 1828(k) and any regulations promulgated thereunder.
11. SURVIVAL. The respective obligations of, and benefits afforded to, the
--------
Bank and you as provided in Sections 5, 6, 7(b), 8, 9, 10, 15 and 16 of this
Agreement shall survive termination of this Agreement.
12. NOTICE. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed, in the
case of the Bank, to the address set forth on the first page of this Agreement
or, in the case of the undersigned employee, to the address set forth below his
signature, provided that all notices to the Bank shall be directed to the
attention of the Company and President of the Bank, with a copy to the Secretary
of the Bank, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
13. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
-------------
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the Chief Executive Officer or President of the Bank.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California applied without regard to conflict of laws principles.
14. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
<PAGE>
As of August 1, 1997
Page 13
15. ARBITRATION. Any dispute or controversy arising under or in connection
-----------
with this Agreement shall be settled exclusively by arbitration in the County of
Los Angeles, State of California by three arbitrators in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrators' award in any court having jurisdiction; provided,
--------
however, that you shall be entitled to seek specific performance of your right
- -------
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement. The Bank shall
bear all costs and expenses arising in connection with any arbitration
proceeding pursuant to this Section 14.
16. EMPLOYEE'S COMMITMENT. You agree that subsequent to your period of
---------------------
employment with the Bank, you will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Bank, any
proprietary processes of the Company and the Bank or any other subsidiary of the
Company or other confidential information concerning their business, affairs,
products, suppliers or customers which, if disclosed, would have a material
adverse effect upon the business or operations of the Company, the Bank and the
other subsidiaries, taken as a whole; it being understood, however, that the
obligations of this Section 16 shall not apply to the extent that the aforesaid
matters (a) are disclosed in circumstances where you are legally required to do
so or (b) become generally known to and available for use by the public
otherwise than by your wrongful act or omission.
17. WITNESS FEES. If, at any time after the termination of this Agreement,
------------
Executive is requested by the Company or any affiliate of the Company, or is
required, to testify or to provide evidence or otherwise to perform services in
relation to litigation or similar proceedings (civil, administrative, arbitral
or otherwise) in which the Company or any affiliate of the Company, but not
Executive, is a named party or is otherwise involved,
(a) Executive shall be paid by the Company (i) with respect to each day
that Executive appears as a witness or is deposed, at the rate of $1,000 per
day, and (ii) with respect to each day that Executive is involved in the
preparation therefor, at the rate of $500 per day, and
(b) Executive shall be reimbursed by the Company for reasonable travel and
accommodation expenses if such services are required to be performed outside of
the city of Executive's domicile.
18. RELATED AGREEMENTS. To the extent that any provision of any other
------------------
agreement between the Company, the Bank or any of the other subsidiaries of the
Company and you shall limit, qualify or be inconsistent with any provision of
this Agreement, then for purposes of this Agreement, while the same shall remain
in force, the provision of this Agreement shall control and such provision of
such other agreement shall be deemed to have been superseded, and to be of no
force or effect, as if such other agreement had been formally amended to the
extent necessary to accomplish such purpose.
<PAGE>
As of August 1, 1997]
Page 14
19. COUNTERPARTS. This Agreement may be executed in several counterparts, each
------------
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject matter hereof,
kindly sign and return to the Bank the enclosed copy of this letter which will
then constitute our agreement on this subject.
Sincerely,
FIDELITY FEDERAL BANK,
A FEDERAL SAVINGS BANK
By: /s/ Richard M. Greenwood
-------------------------------
Name: Richard M. Greenwood
Title: Chief Executive Officer
Agreed to this _____ day
of ____________________, 1997.
__________________________________
[Name of Executive]
The payment of all obligations and liabilities of Fidelity Federal Bank, A
Federal Savings Bank under this Agreement, is specifically guaranteed by Bank
Plus Corporation.
BANK PLUS CORPORATION
By: /s/ Richard M. Greenwood
-------------------------------
Name: Richard M. Greenwood
Title: President and Chief Executive Officer
<PAGE>
EXHIBIT 10.30
As of August 1, 1997
[Name of Executive]
Fidelity Federal Bank,
A Federal Savings Bank
4565 Colorado Boulevard
Los Angeles, California 90039
Dear Mr. [Last Name]:
Bank Plus Corporation (the "Company") and its principal subsidiary, Fidelity
Federal Bank, A Federal Savings Bank (the "Bank"), consider the establishment
and maintenance of a sound and vital management to be essential to protecting
and enhancing the best interests of the Company and its shareholders. In this
connection, the Company and the Bank recognize that, as is the case with many
publicly held corporations, the possibility of severance or a change in control
may arise and that such possibility, and the uncertainty and questions which it
may raise among management of the Bank, may hinder the Bank's efforts to recruit
qualified management personnel and result in the departure or distraction of
management personnel, in each case to the detriment of the Company and the Bank
and the Company's shareholders. Accordingly, the Board of Directors of the
Company (the "Board") and the board of directors of the Bank have determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of management of the Bank to their assigned
duties without distraction in circumstances arising from the possibility of
severance or a change in control of the Company or the Bank. In particular, the
Board believes it important, should the Company or its shareholders receive a
proposal for transfer of control of the Company or the Bank, that you be able to
assess and advise the Board whether such proposal would be in the best interests
of the Company and its shareholders and to take such other action regarding such
proposal as the Board might determine to be appropriate, without being
influenced by the uncertainties of your own situation.
In order to induce you to remain in the employ of the Bank, this letter
agreement sets forth the severance benefits which the Bank agrees will be
provided to you in the event your employment with the Bank is terminated under
the circumstances described below or there is a "change in control" of the
Company or the Bank.
<PAGE>
As of August 1, 1997
Page 2
1. RIGHT TO TERMINATE; AGREEMENT TO PROVIDE SERVICES.
-------------------------------------------------
(a) Except as otherwise provided in paragraph (b) below, the Bank or you
may terminate your employment at any time, subject to the Bank's providing the
benefits hereinafter specified in accordance with the terms hereof.
(b) In the event a tender offer or exchange offer is made by a Person (as
hereinafter defined) for more than 25% of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at
elections of directors ("Voting Securities"), including shares of the common
stock of the Company, you agree that you will not leave the employ of the Bank
(other than as a result of Disability or upon Retirement, as such terms are
hereinafter defined) and will render the services contemplated in the recitals
to this Agreement until such tender offer or exchange offer has been abandoned
or terminated or a change in control of the Company or the Bank, as defined in
Section 3 hereof, has occurred. For purposes of this Agreement, the term
"Person" shall mean and include any individual, corporation, partnership, group,
association or other "person", as such term is used in Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company,
the Bank, any other subsidiary of the Company or any employee benefit plan(s)
sponsored by the Company, the Bank or any other subsidiary of the Bank.
2. TERM OF AGREEMENT.
-----------------
(a) This Agreement shall commence on August 1, 1997 and shall continue in
effect until July 31, 2000; provided, however, that commencing on August 1, 2000
-------- -------
and each August 1 thereafter, the term of this Agreement shall be extended for
one additional year unless at least 90 days prior to such August 1st date, the
Bank or you shall have given notice that this Agreement shall not be extended;
and provided, further, that, notwithstanding the delivery of any such notice,
-------- -------
this Agreement shall continue in effect for a period of twenty-four (24) months
after a change in control of the Company or the Bank, as defined in Section 3
hereof, if such change in control shall have occurred during the term of this
Agreement, as it may be extended by the first proviso set forth above.
(b) Notwithstanding anything in this Section 2 to the contrary:
(i) this Agreement shall terminate if you or the Bank terminate your
employment prior to a change in control, subject to the Bank's obligations to
you under Section 6 hereof;
(ii) the obligations of the Bank hereunder shall terminate for so long
as you are suspended and/or temporarily prohibited from participating in the
conduct of the Bank's affairs by a notice served under Section 8(e)(3) or (g)(1)
of the Federal Deposit Insurance Act (12 U.S.C. (S) 1818(e)(3) and (g)(1)) as of
the date of service of such notice unless stayed by appropriate proceedings;
provided that if the charges in the notice are dismissed, the Bank may in
- --------
<PAGE>
As of August 1, 1997
Page 3
its discretion (A) pay you all or part of any payments within the terms of this
Agreement withheld while its obligations under this Agreement was suspended and
(B) reinstate (in whole or in part) any of its obligations which were suspended;
(iii) the obligations of the Bank hereunder shall terminate if you
are removed and/or permanently prohibited from participating in the conduct of
the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the
Federal Deposit Insurance Act (12 U.S.C. (S) 1818(e)(4) or (g)(1));
(iv) this Agreement shall terminate if the Bank is in default (as
defined in Section 3(x)(1) of the Federal Deposit Insurance Act); or
(v) this Agreement shall be terminated by the Director of the Office
of Thrift Supervision or his or her designee (the "Director"), except to the
extent that the Director determines that continuation of this Agreement is
necessary for the continued operation of the Bank, (A) at the time the Federal
Deposit Insurance Corporation or the Resolution Trust Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the Federal Deposit Insurance Act or (B) at the
time the Director approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Director to be in
unsafe or unsound condition;
provided, however, that in the case of paragraphs (iii), (iv) and (v) of this
- -------- -------
Section 2(b), vested rights hereunder held by the Bank or you shall not be
affected by such termination.
3. CHANGE IN CONTROL. For purposes of this Agreement, a "change in control"
-----------------
shall be deemed to occur if (a) any "person" (as such term is defined in Section
3(a)(9) and as used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), excluding the Company, the Bank or
any of the Company's other subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of the Company, the Bank or any of the
Company's other subsidiaries, an underwriter temporarily holding securities
pursuant to an offering of such securities or a corporation owned, directly or
indirectly, by shareholders of the Company in substantially the same proportion
as their ownership of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power
of the Company's then outstanding securities ("Voting Securities of the
Company"); or (b) during any period of not more than two years, individuals who
constitute the Board as of the beginning of the period and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (a) or (b) of this
sentence) whose election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at such time or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; (c) the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
<PAGE>
As of August 1, 1997
Page 4
other than a merger or consolidation which would result in the Voting Securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting Securities of
the surviving entity) at least 60% of the combined voting power of the Voting
Securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or any agreement for the sale or
disposition by the Company or all or substantially all of the Company's assets;
(d) a sale or sales or other disposition or dispositions by the Company which
results in the Company ceasing to beneficially "own" (within the meaning of Rule
13d-3 under the Exchange Act, directly or indirectly, more than 50% of the
Voting Securities of the Bank; or (e) a sale or sales of all or substantially
all of the assets of the Bank, in a single transaction or series of
transactions, other than to a direct or indirect subsidiary of the Company; or
(f) a merger or other combination involving the Bank as a result of which the
Company ceases to beneficially own, directly or indirectly, more than 50% of the
Voting Securities of the Bank or the successor to the Bank.
4. TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL. The Bank or you
------------------------------------------------------
may terminate your employment at any time prior to a change in control, subject
to the Bank's providing the benefits hereinafter specified.
(a) Termination for Cause, without Good Reason or upon Death, Disability or
-----------------------------------------------------------------------
Retirement. If the Bank terminates your employment for Cause or Disability, you
- ----------
terminate employment other than for Good Reason, or in the event of your
Retirement or death, the Bank shall be liable to you for (i) earned but unpaid
salary, (ii) any unpaid annual bonus that was earned in the Bank's fiscal years
prior to the fiscal year in which your employment terminates, (iii) unreimbursed
business expenses or other allowances that are incurred prior to the date on
which your employment terminates (the "Termination Date") and (iv) your vested
benefits under the Plans. For purposes of the preceding sentence, expense or
allowances are incurred as of the date such expenses are payable by you or the
Bank.
(b) Termination Other Than for Cause or for Good Reason. If the Bank
---------------------------------------------------
terminates your employment other than for Cause or Disability or you terminate
employment for Good Reason, the Bank shall be liable for the payments and
benefits described in paragraph (a) above and shall provide you with the
additional payments and benefits described below:
(i) Base Salary. The Bank shall continue to pay you the higher of (y)
-----------
your base salary as of the Termination Date or (z) your base salary as of the
date of this Agreement for 1.5 years following the Termination Date.
(ii) Annual Bonus. Within thirty days following the Termination Date,
------------
the Bank shall make a lump-sum cash payment to you in an amount equal to 1.5
times the average of the annual bonus to which you were entitled during the
Bank's two fiscal years ended prior to the Termination Date.
<PAGE>
As of August 1, 1997
Page 5
(iii) Benefit Plans. The Bank shall maintain in full force and
-------------
effect, for the continued benefit of you and your dependents for a period
terminating on the earlier of (x) 1.5 years following the Termination Date, (y)
the commencement date of equivalent benefits from a new employer or (z) your
attainment of age sixty-five (65), all insured and self-insured employee health
and welfare benefit plans in which you were entitled to participate immediately
prior to the Termination Date, provided that your continued participation is
possible under the general terms and provisions of such plans (and any
applicable funding media) and you continue to pay an amount equal to your
regular contribution under such plans for such participation. If, at the end of
three years after the Termination Date, you have not reached your sixty-fifth
birthday and you have not previously received or are not then receiving
equivalent benefits from a new employer, the Bank shall arrange, at its sole
cost and expense, to enable you to convert your and your dependents' coverage
under such plans to individual policies or programs upon the same terms as
employees of the Bank may apply for such conversions. In the event that your
participation in any plan is barred, the Bank shall, at its sole cost and
expense, arrange to have issued for the benefit of you and your dependents
individual policies of insurance providing benefits substantially similar (on an
after-tax basis) to those which you otherwise would have been entitled to
receive under such plans pursuant to this paragraph or, if such insurance is not
available at a reasonable cost to the Bank, the Bank shall provide you and your
dependents with equivalent benefits (on an after-tax basis). You shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order to participate in such plans.
(iv) Equity Awards. The restrictions on any stock options, restricted
-------------
stock or other equity awards under the Bank Plus corporation Stock Option and
Equity Incentive Plan or any other equity incentive plan shall lapse and all
such awards shall become 100% vested.
(c) For purposes of this Agreement,
(i) Disability. Termination by the Bank of your employment based on
----------
"Disability" shall mean termination because of your absence from your duties
with the Bank on a full time basis for one hundred eighty (180) consecutive days
as a result of your incapacity due to physical or mental illness, unless within
thirty (30) days after Notice of Termination (as hereinafter defined) is given
to you following such absence you shall have returned to the full time
performance of your duties.
(ii) Retirement. Termination by you or by the Bank of your employment
----------
based on "Retirement" shall mean termination on or after your attainment of age
sixty-five (65).
(iii) Cause. Termination by the Bank of your employment for "Cause"
-----
shall mean termination upon (i) the willful and continued failure by you to
perform substantially your duties with the Bank (other than any such failure
resulting from your incapacity due to physical or mental illness) after a demand
for substantial performance is delivered to you by the Board or the executive
committee thereof , which specifically identifies the manner in which such body
<PAGE>
As of August 1, 1997
Page 6
believes that you have not substantially performed your duties, or (ii) your
willful dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) or final cease-and-desist
order, or material breach of any provision of this Agreement. For purposes of
this paragraph (c), no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you in bad faith and without
reasonable belief that your action or omission was in, or not opposed to, the
best interests of the Bank. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or the board of
directors of the Bank or based upon the advice of counsel for the Company or the
Bank shall be conclusively presumed to be done, or omitted to be done, by you in
good faith and in the best interests of the Bank. It is also expressly
understood that your attention to matters not directly related to the business
of the Bank shall not provide a basis for termination for Cause so long as the
Board or the board of directors of the Bank has approved your engagement in such
activities. Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the board of directors of the Bank at
a meeting called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the board of
directors of the Bank), finding that in the good faith opinion of the board of
directors of the Bank you were guilty of the conduct set forth above in (i) or
(ii) of this paragraph (c) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your employment for "Good
-----------
Reason" shall mean termination based on:
(A) an adverse change in your status or position(s) as an executive
officer of the Bank, including, without limitation, any adverse change in your
status or position as a result of a diminution in your duties or
responsibilities (other than, if applicable, any such change directly
attributable to the fact that the Company is no longer publicly owned) or the
assignment to you of any duties or responsibilities which are inconsistent with
such status or position(s), or any removal of you from or any failure to
reappoint or reelect you to such position(s) (except in connection with the
termination of your employment for Cause, Disability or Retirement or as a
result of your death or by you other than for Good Reason);
(B) a reduction by the Bank in your base salary;
(C) the failure by the Company or the Bank to continue in effect any
Plan (as hereinafter defined) other than as a result of the normal expiration of
any such Plan, or the taking of any action, or the failure to act, by the Bank
which would adversely affect your continued participation in any of such Plans
on at least as favorable a basis to you or which would materially reduce your
benefits in the future under any of such Plans or deprive you of any material
benefit enjoyed by you unless such plan or material benefits were applied to all
other executives;
<PAGE>
As of August 1, 1997
Page 7
(D) the failure by the Bank to provide and credit you with the number
of paid vacation days to which you are then entitled in accordance with its
normal vacation policy;
(E) the requirement by the Bank that you be based at an office that is
greater than 35 miles from where your office is located, except for required
travel on the business of the Bank to an extent substantially consistent with
the business travel obligations which you undertook as of the date of this
agreement;
(F) the failure by the Company and the Bank to obtain from any
Successor (as hereinafter defined) the assent to this Agreement contemplated by
Section 6 hereof;
(G) any purported termination by the Bank of your employment which is
not effected pursuant to a Notice of Termination satisfying the requirements of
paragraph (e) below (and, if applicable, paragraph (c) above); and for purposes
of this Agreement, no such purported termination shall be effective; or
(H) any refusal by the Bank to continue to allow you to attend to
matters or engage in business or civic activities not directly related to the
business of the Bank which, as of the date of this agreement, you were permitted
by the Board or the Board of Directors of the Bank to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such as
an incentive, stock option or restricted stock plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program or
policy intended to benefit employees of the Bank.
(v) Notice of Termination. Any purported termination by the Bank or
---------------------
by you shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon.
(vi) Date of Termination. "Date of Termination" shall mean (i) if
-------------------
your employment is to be terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is to be terminated by the Bank for Cause or by
you pursuant to Sections 4(d)(vi) and 6 hereof or for any other Good Reason, the
date specified in the Notice of Termination, or (iii) if your employment is to
be terminated by the Bank for any reason other than Cause, the date specified in
the Notice of Termination, which in no event shall be a date earlier than ninety
(90) days after the date on which a Notice of Termination is given, unless an
earlier date has been expressly agreed to by you in writing either
<PAGE>
As of August 1, 1997
Page 8
in advance of, or after, receiving such Notice of Termination. In the case of
termination by the Bank of your employment for Cause, if you have not previously
expressly agreed in writing to the termination, then within thirty (30) days
after receipt by you of the Notice of Termination with respect thereto, you may
notify the Bank that a dispute exists concerning the termination, in which event
the Date of Termination shall be the date set either by mutual written agreement
of the parties or by the arbitrators in a proceeding as provided in Section 14
hereof. During the pendency of any such dispute, the Bank will continue to pay
you your full compensation in effect just prior to the time the Notice of
Termination is given and until the dispute is resolved in accordance with
Section 14.
5. TERMINATION FOLLOWING A CHANGE IN CONTROL. If any of the events described
-----------------------------------------
in Section 3 hereof constituting a change in control shall have occurred, you
shall be entitled to the benefits provided in Section 6 hereof.
6. COMPENSATION UPON A CHANGE IN CONTROL; OTHER AGREEMENTS.
-------------------------------------------------------
(a) Subject to Section 9 hereof, if a change in control, as defined in
Section 3 above, shall have occurred, then the Bank shall pay to you, no later
than the fifth business day thereafter, without regard to any contrary
provisions of any Plan (other than any deferral election pursuant to the
Company's Deferred Compensation Plan) an amount in cash equal to 2.0 times the
sum of (I) your annual salary as in effect immediately prior to the change in
control, plus (II) the average of the annual bonus to which you were entitled
for the Bank's three fiscal years ended prior to the change in control, plus
(III) an amount equal to the matching contribution you would have received under
the Bank's 401(k) plan if you had made the maximum contribution under such plan
during the year in which the Date of Termination occurs.
(b) If, within twenty-four (24) months after a change in control shall have
occurred, your employment by the Bank shall be terminated (i) by the Bank other
than for Cause, Disability or Retirement or (ii) by you for Good Reason, then
the Bank shall maintain in full force and effect, for the continued benefit of
you and your dependents for a period terminating on the earliest of (x) 24
months after the Date of Termination, (y) the commencement date of equivalent
benefits from a new employer or (z) your attainment of age sixty-five (65), all
insured and self-insured employee health and welfare benefit Plans in which you
were entitled to participate immediately prior to the Date of Termination,
provided that your continued participation is possible under the general terms
and provisions of such Plans (and any applicable funding media) and you continue
to pay an amount equal to your regular contribution under such plans for such
participation. If, at the end of three years after the Termination Date, you
have not reached your sixty-fifth birthday and you have not previously received
or are not then receiving equivalent benefits from a new employer, the Bank
shall arrange, at its sole cost and expense, to enable you to convert your and
your dependents' coverage under such Plans to individual policies or programs
upon the same terms as employees of the Bank may apply for such conversions. In
the event that your participation in any such Plan is barred, the Bank shall, at
its sole cost and expense, arrange to have issued for the benefit of you and
your dependents individual policies of
<PAGE>
As of August 1, 1997
Page 9
insurance providing benefits substantially similar (on an after-tax basis) to
those which you otherwise would have been entitled to receive under such Plans
pursuant to this paragraph (d) or, if such insurance is not available at a
reasonable cost to the Bank, the Bank shall provide you and your dependents with
equivalent benefits (on an after-tax basis). You shall not be required to pay
any premiums or other charges in an amount greater than that which you would
have paid in order to participate in such Plans.
(c) Except as specifically provided in paragraph (b) above, the amount of
any payment provided for in this Section 6 shall not be reduced, offset or
subject to recovery by the Bank by reason of any compensation earned by you as
the result of employment by another employer after the Date of Termination, or
otherwise.
(d) In the event that you become entitled to the payments provided by
paragraph (a) above (the "Agreement Payments"), if any of the Agreement Payments
will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the
Internal Revenue Code (the "Code") (or any similar tax that may hereafter be
imposed), the Company shall pay to you at the time specified in paragraph (e)
below an additional amount (the "Gross-up Payment") such that the net amount
retained by you, after deduction of any Excise Tax on the Total Payments (as
hereinafter defined) and any federal, state and local income tax and Excise Tax
upon the Gross-up Payment provided for by this paragraph (d) but before
deduction for any federal, state or local income tax on the Agreement Payments,
shall be equal to the sum of (i) the Total Payments and (ii) an amount equal to
the product of any deductions disallowed because of the inclusion of the Gross-
up Payment in your adjusted gross income and the highest applicable marginal
rate of federal income taxation for the calendar year in which the Gross-up
Payment is to be made.
For purposes of determining whether any of the Agreement Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits received or to be received by you in connection with a
change in control of the Company or the Bank or your termination of employment
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, the Bank, any person whose actions result in a
change of control or any person affiliated with the Company or such person)
(which, together with the Agreement Payments, shall constitute the "Total
Payments") shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) of the code shall be treated as subject to the
Excise Tax, unless the Company's public accounting firm as of the date
immediately prior to the change of control (the "Accounting Firm") determines
that such other payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code in excess of the base amount within
the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to
the Excise Tax, (ii) the amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (x) the total amount
of the Total Payments or (y) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying
<PAGE>
As of August 1, 1997
Page 10
clause (i), above), and (z) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accounting Firm in accordance with
the principles of Sections 280G(d)(3) and (4) of the Code. The Accounting Firm
shall provide detailed supporting calculations to the Bank and you within
fifteen (15) business days of the receipt of notice from the Bank or you that
there has been an Agreement Payment, or such earlier time as is requested by the
Bank. In the event that the Accounting firm is serving as accountant or auditor
for the individual, entity or group effecting the change in control, you may
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Bank and the Bank shall enter into any
agreement requested by the Accounting Firm in connection with the performance of
its services hereunder.
For purposes of determining the amount of the Gross-up Payment, you
shall be deemed to (1) pay federal income taxes at the highest marginal rate of
federal income taxation for the calendar year in which the Gross-up Payment is
to be made, (2) pay the applicable state and local income taxes at the highest
marginal rate of taxation for the calendar year in which the Gross-up Payment is
to be made, net of the maximum reduction in federal income taxes which cold be
obtained from deduction of such state and local taxes (determined without regard
to limitations on deductions based upon the amount of your adjusted gross
income), and (3) have otherwise allowable deductions for federal income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-up Payment in you adjusted gross income. In the event that the Excise Tax
is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, you shall repay to the Bank
at the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-up Payment attributable to such reduction
(plus the portion of the Gross-up Payment attributable to the Excise Tax and
federal and state and local income tax imposed on the portion of the Gross-up
Payment being repaid by you if such repayment results in a reduction in Excise
Tax and/or a federal and state and local income tax deduction), plus interest on
the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time the Gross-up Payment is made (including
by reason of any payment the existence or amount of which cannot be determined
at the time of the Gross-up Payment), the Bank shall make an additional gross-up
payment in respect of such excess (plus any interest payable with respect to
such excess at the rate provided in Section 1274(b)(2)(B) of the Code) at the
time that the amount of such excess is finally determined.
(e) The Gross-up Payment or portion thereof provided for in paragraph (d)
above shall be paid not later than the thirtieth day following payment of any
amounts under paragraph (a) above; provided, however, that if the amount of such
Gross-up Payment or portion thereof cannot be finally determined on or before
such day, the Bank shall pay to you on such day an estimate, as determined in
good faith by the Bank, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate
<PAGE>
As of August 1, 1997
Page 11
provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can
be determined, but in no event later than the forty-fifth day after payment of
any amounts under paragraph (a) above. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Bank to you, payable on the fifth day
after demand by the Bank (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
7. SUCCESSORS; BINDING AGREEMENT.
-----------------------------
(a) The Company and the Bank will seek, by written request at least five
business days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person by agreement in form and substance satisfactory to
you, assent to the fulfillment of the Bank's obligations under this Agreement.
Failure of such Person to furnish such assent by the later of (i) three business
days prior to the time such Person becomes Successor or (ii) two business days
after such Person receives a written request to so assent shall constitute Good
Reason for termination by you of your employment if a change in control occurs
or has occurred. For purposes of this Agreement, "Successor" shall mean any
Person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), the Bank's business directly, by
merger or consolidation, or indirectly, by purchase of the Voting Securities of
the Company or the Bank or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
be no such designee, to your estate.
(c) For purposes of this Agreement, the "Bank" and the "Company" shall
include any corporation or other entity which is the surviving or continuing
entity in respect of any merger, consolidation or form of business combination
in which the Bank or the Company, respectively, ceases to exist.
8. FEES, EXPENSES AND INTEREST; MITIGATION.
---------------------------------------
(a) The Bank shall reimburse you, on a current basis, for all reasonable
legal fees and related expenses incurred by you in connection with the Agreement
following a change in control of the Bank, including, without limitation, (i)
all such fees and expenses, if any, incurred in contesting or disputing any
termination of your employment or (ii) your seeking to obtain or enforce any
right or benefit provided by this Agreement, in each case, regardless of whether
or not your claim is upheld by a court of competent jurisdiction; provided,
--------
however, you shall be required to repay any such amounts to the Bank to the
- -------
extent that a court issues a final and non-appealable order setting forth the
determination that the position taken by you was frivolous or
<PAGE>
As of August 1, 1997
Page 12
advanced by you in bad faith. In addition to the fees and expenses provided
herein, you shall also be paid interest on any disputed amount ultimately paid
to you at the prime rate announced by the Bank from time to time from the date
payment should have been made until paid in full.
(b) You shall not be required to mitigate the amount of any payment the
Bank becomes obligated to make to you in connection with this Agreement, by
seeking other employment or otherwise.
9. TAXES. All payments to be made to you under this Agreement will be subject
-----
to required withholding of federal, state and local income and employment taxes.
10. OTHER LIMITATIONS ON PAYMENTS. Any payments made to you pursuant to this
-----------------------------
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. (S) 1828(k) and any regulations promulgated thereunder.
11. SURVIVAL. The respective obligations of, and benefits afforded to, the
--------
Bank and you as provided in Sections 5, 6, 7(b), 8, 9, 10, 15 and 16 of this
Agreement shall survive termination of this Agreement.
12. NOTICE. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid and addressed, in the
case of the Bank, to the address set forth on the first page of this Agreement
or, in the case of the undersigned employee, to the address set forth below his
signature, provided that all notices to the Bank shall be directed to the
attention of the Company and President of the Bank, with a copy to the Secretary
of the Bank, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
13. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
-------------
discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the Chief Executive Officer or President of the Bank.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California applied without regard to conflict of laws principles.
14. VALIDITY. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
<PAGE>
As of August 1, 1997
Page 13
15. ARBITRATION. Any dispute or controversy arising under or in connection
-----------
with this Agreement shall be settled exclusively by arbitration in the County of
Los Angeles, State of California by three arbitrators in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrators' award in any court having jurisdiction; provided,
--------
however, that you shall be entitled to seek specific performance of your right
- -------
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement. The Bank shall
bear all costs and expenses arising in connection with any arbitration
proceeding pursuant to this Section 14.
16. EMPLOYEE'S COMMITMENT. You agree that subsequent to your period of
---------------------
employment with the Bank, you will not at any time communicate or disclose to
any unauthorized person, without the written consent of the Bank, any
proprietary processes of the Company and the Bank or any other subsidiary of the
Company or other confidential information concerning their business, affairs,
products, suppliers or customers which, if disclosed, would have a material
adverse effect upon the business or operations of the Company, the Bank and the
other subsidiaries, taken as a whole; it being understood, however, that the
obligations of this Section 16 shall not apply to the extent that the aforesaid
matters (a) are disclosed in circumstances where you are legally required to do
so or (b) become generally known to and available for use by the public
otherwise than by your wrongful act or omission.
17. WITNESS FEES. If, at any time after the termination of this Agreement,
------------
Executive is requested by the Company or any affiliate of the Company, or is
required, to testify or to provide evidence or otherwise to perform services in
relation to litigation or similar proceedings (civil, administrative, arbitral
or otherwise) in which the Company or any affiliate of the Company, but not
Executive, is a named party or is otherwise involved,
(a) Executive shall be paid by the Company (i) with respect to each day
that Executive appears as a witness or is deposed, at the rate of $1,000 per
day, and (ii) with respect to each day that Executive is involved in the
preparation therefor, at the rate of $500 per day, and
(b) Executive shall be reimbursed by the Company for reasonable travel and
accommodation expenses if such services are required to be performed outside of
the city of Executive's domicile.
18. RELATED AGREEMENTS. To the extent that any provision of any other
------------------
agreement between the Company, the Bank or any of the other subsidiaries of the
Company and you shall limit, qualify or be inconsistent with any provision of
this Agreement, then for purposes of this Agreement, while the same shall remain
in force, the provision of this Agreement shall control and such provision of
such other agreement shall be deemed to have been superseded, and to be of no
force or effect, as if such other agreement had been formally amended to the
extent necessary to accomplish such purpose.
<PAGE>
As of August 1, 1997
Page 14
19. COUNTERPARTS. This Agreement may be executed in several counterparts, each
------------
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject matter hereof,
kindly sign and return to the Bank the enclosed copy of this letter which will
then constitute our agreement on this subject.
Sincerely,
FIDELITY FEDERAL BANK,
A FEDERAL SAVINGS BANK
By: /s/ Richard M. Greenwood
-------------------------------
Name: Richard M. Greenwood
Title: Chief Executive Officer
Agreed to this _____ day
of ____________________, 1997.
__________________________________
[Name of Executive]
The payment of all obligations and liabilities of Fidelity Federal Bank, A
Federal Savings Bank under this Agreement, is specifically guaranteed by Bank
Plus Corporation.
BANK PLUS CORPORATION
By: /s/ Richard M. Greenwood
-------------------------------
Name: Richard M. Greenwood
Title: President and Chief Executive Officer
<PAGE>
EXHIBIT 10.56
BANK PLUS CORPORATION DEFERRED COMPENSATION PLAN
------------------------------------------------
1. Purpose. The purpose of the Bank Plus Corporation Deferred
-------
Compensation Plan (the "Plan") is to permit eligible officers and directors of
Bank Plus Corporation (the "Company") and its subsidiaries to defer the payment
of certain compensation payable to them for their services.
2. Definitions.
-----------
(a) "Accounts" mean the Deferral Account, the Restricted Stock Award
Account and the Company Contribution Account established for a Participant
pursuant to Section 6.
(b) "Bank" means Fidelity Federal Bank, A Federal Savings Bank.
(c) "Base Salary" means the Participant's annual base salary from the
Company and its subsidiaries for any Plan Year, before reduction for deferrals
pursuant to this Plan, the 401(k) Plan, or a cafeteria plan under Section 125 of
the Internal Revenue Code of 1986, as amended.
(d) "Beneficiary" means the person(s) designated by a Participant to
receive payment of his or her Accounts in the event of his death pursuant to
Section 9.
(e) "Board" means the Board of Directors of the Company.
<PAGE>
(f) "Bonus" means the incentive performance bonus which is payable to
Participant for his or her services for the Company or any of its subsidiaries.
(g) "Change in Control" shall be deemed to occur if (i) any "person"
(as such term is defined in Section 3(a) and as used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"), excluding the
Company, the Bank or any of the Company's other subsidiaries, a trustee or any
fiduciary holding securities under an employee benefit plan of the Company, the
Bank or any of the Company's other subsidiaries, an underwriter temporarily
holding securities pursuant to an offering of such securities or a corporation
owned, directly or indirectly, by stockholders of the Company in substantially
the same proportion as their ownership of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 25% or more of the
combined voting power of the then outstanding securities ("Voting Securities of
the Company"); (ii) during any period of not more than two years, individuals
who constitute the Board as of the beginning of the period and any new director
(other than a director designated by a person who has
-2-
<PAGE>
entered into an agreement with the Company to effect a transaction described in
clause (i) or (ii) of this sentence) whose election by the Board or nomination
for election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
such time or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the Voting Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 60% of the
combined voting power of the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or any agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, (v) a sale or sales or other
disposition or dispositions by the Company which results in the Company ceasing
to beneficially "own" (within the
-3-
<PAGE>
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, more than
50% of the Voting Securities of the Bank; (vi) a sale or sales of all or
substantially all of the assets of the Bank, in a single transaction or series
of transactions, other than to a direct or indirect subsidiary of the Company;
or (vii) a merger or other combination involving the Bank as a result of which
the Company ceases to beneficially own, directly or indirectly, more than 50% of
the Voting Securities of the Bank or the successor to the Bank.
(h) "CIC Payment" means a payment of any cash amount to a Participant
due to a Change in Control pursuant to any plan, arrangement or agreement
maintained by, or entered into with the Company or the Bank.
(i) "Committee" means the Committee appointed to administer the Plan
pursuant to Section 11.
(j) "Company Contributions" mean amounts credited to Participants by
the Company pursuant to Sections 5(a) and (b).
(k) "Company Contributions Account" means an account established
pursuant to Section 6.
(l) "Deferral Account" means an account established pursuant to
Section 6.
-4-
<PAGE>
(m) "Director" means a member of the Board or the board of directors
of the Bank or any other subsidiary of the Company who is not an employee of any
Employer.
(n) "Director Fees" means a Director's annual retainer and fees for
service as a Director for a Plan Year.
(o) "Effective Date" means August 1, 1997.
(p) "Election Form" means a written election to defer compensation
under the Plan on a form approved by the Committee.
(q) "Eligible Employee" means an officer of an Employer who is
designated by the Committee to participate in the Plan.
(r) "Employer" means the Company, the Bank and any other subsidiary of
the Company which has been designated by the Board.
(s) "Financial Hardship" means an unanticipated emergency caused by an
event which is beyond the Participant's control and which would result in severe
financial hardship to the Participant.
(t) "401(k) Plan" means the Fidelity Federal Bank 401(k) Savings and
Investment Plan.
(u) "In-Service Distribution" means a distribution that occurs while a
Participant remains in service with the Company.
-5-
<PAGE>
(v) "Investment Fund" means certain investment alternatives
designated by the Committee from time to time, in its sole discretion, for
determining adjustments of amounts credited to the Accounts of Participants.
(w) "Participant" means an Eligible Employee or Director who is
participating in the Plan pursuant to Section 3.
(x) "Plan Year" means the period beginning on August 1, 1997 and
ending on December 31, 1997 and each calendar year thereafter.
(y) "Post-Termination Distribution" means a distribution that occurs
after the Participant has separated from service with the Employer.
(z) "Restricted Stock Award" means the shares of restricted common
stock of the Company which would otherwise be granted to the Participant by the
Company.
(aa) "Restricted Stock Award Account" means an account established
pursuant to Section 6.
(bb) "Retirement" means termination of service on or after attaining
age 55.
(cc) "Stock Units" mean stock units representing Restricted Stock
Awards which may be deferred under this Plan. Each Stock Unit shall be the
equivalent of one share of the Company's common stock.
-6-
<PAGE>
3. Eligibility and Participation.
-----------------------------
(a) In order to participate in the Plan for any Plan Year, an Eligible
Employee or Director must file an Election Form with the Committee prior to the
beginning of the Plan Year. Notwithstanding the foregoing, an Eligible Employee
or Director may become a Participant for the first Plan Year by filing an
election form with the Committee no later than 30 days after the Effective Date.
(b) Participation in the Plan shall continue until the balance
credited to the Participant's Accounts has been paid in full to the Participant
or such Participant's Beneficiary.
4. Amount of Deferral; Time of Payment.
-----------------------------------
-7-
<PAGE>
(a) An Eligible Employee may elect on an Election Form to defer
payment of (i) up to 50% (in increments of 5%) of his Base Salary, (ii) up to
100% (in increments of 5%) of his Bonus, (iii) up to 100% (in whole shares) of
his Restricted Stock Awards and (iv) up to 100% (in increments of 5%) of his CIC
Payments. A Director may elect on an Election Form to defer payment of up to
100% (in increments of 5%) of his Director Fees. In no event may a deferral be
made of less than $2,000 for any Plan Year. Notwithstanding anything contained
herein to the contrary, deferrals for the first Plan Year with respect to Base
Salary and Director Fees shall not be applicable to Base Salary and Director
Fees payable for services rendered prior to the date an Election Form is
received by the Committee.
A Participant may change his or her deferral percentage(s) for any
Plan Year by filing a new Election Form with the Committee prior to the
beginning of such Plan Year. A Participant may discontinue deferrals at any
time during the Plan Year, provided, however, that such Participant shall not be
-------- -------
permitted to resume participation in the Plan until the next following Plan
Year.
(b) The Election Form shall specify whether the Participant's Accounts
shall be paid in a Post-Termination Distribution or an In-Service Distribution.
In no event may
-8-
<PAGE>
an In-Service Distribution be made prior to one year after the end of the Plan
Year in which the amount deferred has been credited to the Participant's
Accounts.
In no event may Stock Units be distributed to a Participant until such
Stock Units are vested. A Participant shall become vested in Stock Units held
in the Plan at a rate of 33-1/3% on each of the first, second and third
anniversary of the date of deferral of the Restricted Stock Award; provided,
--------
that, the Participant has remained in employment with the Employer and its
- ----
affiliates until such respective anniversary date; provided, further, that a
-------- -------
Participant shall become 100% vested in Stock Units credited to his Restricted
Stock Award Account in the event of his termination of employment by reason of
death, disability or Retirement or upon the occurrence of a Change in Control.
If a Participant terminates employment at any time prior to becoming 100%
vested, the unvested Stock Units shall be forfeited.
5. Company Contributions.
---------------------
(a) The Company may from time to time, in its discretion, credit
additional amounts to Participants which shall be allocated to their Company
Contributions Accounts in such manner as the Company shall determine in its sole
discretion.
-9-
<PAGE>
(b) As of the close of each calendar quarter, the Company may credit
the Company Contributions Account of each Participant who is an Eligible
Employee with a matching contribution. The amount of the matching contribution,
if any, shall be equal to such percentage of the Base Salary deferred by the
Participant under Section 4 for the calendar quarter, as determined by the
Company in its sole discretion.
(c) Amounts held in the Company Contributions Accounts shall be
distributed to a Participant only to the extent such amounts are vested. A
Participant shall become vested in Company Contributions made on his or her
behalf, and all earnings allocable thereunder, in accordance with the 401(k)
Plan vesting schedule in effect on the date of the Participant's termination of
employment. The balance, if any, of such Company Contributions Accounts shall
be forfeited upon termination of the Participant's employment to the extent not
vested.
(d) Notwithstanding the foregoing, upon the occurrence of a Change in
Control, Participants shall automatically become 100% vested in their Company
Contributions Accounts.
6. Accounts. The Company shall establish Accounts for each
--------
Participant on its books.
-10-
<PAGE>
(a) The Participant's deferrals of Base Salary, Bonus, Director Fees
and CIC Payments under Section 4 shall be credited to the Participant's Deferral
Account; Company Contributions made under Section 5 shall be credited to the
Participant's Company Contributions Account. The Participant's Deferral Account
and Company Contributions Account shall be allocated in multiples of 10% in
accordance with the Participant's investment election, among the Investment
Funds, as if invested in the applicable Investment Fund as of the last business
day of the month in which such deferrals and/or contributions are allocated to a
Participant's Accounts. Such investment election may be changed by written
notice to the Committee once each calendar quarter. The balance credited to
such Accounts shall be adjusted from time to time to reflect the equivalent
investment performance of the applicable Investment Fund.
(b) The Participant's deferrals of Restricted Stock Awards under
Section 4 shall be represented by Stock Units which shall be credited to the
Participant's Restricted Stock Award Account. If dividends are paid with
respect to the Company's common stock, the Participant's Deferral Account shall
be credited with an amount equal to the product of the per share dividend and
the number of
-11-
<PAGE>
Stock Units credited to the Participant's Restricted Stock Award Account. Such
amounts shall be allocated in accordance with the Participant's investment
election, among the Investment Funds, as provided by Section 6(a).
7. Payment of Accounts.
-------------------
(a) If a Participant separates from service with the Employer for
reasons other than death or Retirement, his or her Accounts shall be paid, in
the sole discretion of the Committee, in a lump sum within 90 days after the end
of the calendar year of such separation or in five annual installments beginning
within 90 days after the end of the calendar year of such separation; provided,
--------
however, that Stock Units held in the Restricted Stock Award Account shall be
- -------
paid solely in whole shares of common stock of the Company. The amount of each
subsequent installment shall be adjusted to reflect investment performance in
accordance with Section 6.
(b) If a Participant separates from service with the Employer by
reason of Retirement, his or her Accounts shall be paid, as specified in his or
her Election Form, in a lump sum within 90 days following the end of the
calendar year of such Participant's Retirement, or in up to 15 annual
installments beginning within 90 days after the end of the calendar year of the
Participant's Retirement; provided,
--------
-12-
<PAGE>
however, that Stock Units held in the Restricted Stock Award Account shall be
- -------
paid solely in whole shares of common stock of the Company. The amount of each
subsequent installment shall be adjusted to reflect investment performance in
accordance with Section 6.
(c) If a Participant dies while in service with the Employer, his or
her Accounts shall be paid to his or her Beneficiary in a lump sum within 90
days following the date of death; provided, however, that Stock Units held in
-------- -------
the Restricted Stock Award Account shall be paid solely in whole shares of
common stock of the Company.
(d) If a Participant has elected to receive an In-Service
Distribution, payment of his or her Accounts shall be made in a lump sum on the
date specified on the Participant's Election Form; provided, however, that Stock
-------- -------
Units held in the Restricted Stock Award Account shall be paid solely in whole
shares of common stock of the Company, provided, further, that in the event of
-------- -------
the Participant's separation from service for any reason, distribution of any
remaining amounts credited to his or her Accounts shall be made in accordance
with the applicable provisions of paragraph (a), (b) or (c) of this Section.
(e) Notwithstanding the foregoing, a Participant may specify a
different method of payment of his or her
-13-
<PAGE>
Accounts pursuant to paragraph (b) of this Section by filing a new Election Form
with the Company prior to the beginning of the year of the Participant's
Retirement or death.
8. Financial Hardship and Other Distributions.
------------------------------------------
(a) In the event of a Participant's Financial Hardship, the Committee
may determine, in its sole discretion, to pay the Participant the amount
necessary to relieve such Financial Hardship.
(b) Upon at least 10 days' prior written notice to the Company, a
Participant may elect to receive from the Participant's Accounts the amount
specified in the notice, reduced by a penalty equal to ten percent of such
amount, which penalty shall be forfeited to the Company. A Participant who has
received a distribution under this paragraph may not make additional deferrals
under the Plan for a period of twelve months following such distribution.
9. Designation of Beneficiary. Each Participant may designate or
--------------------------
change the designation of a Beneficiary or Beneficiaries to receive any payments
due hereunder upon his death by filing a designation form with the Committee, on
a form approved by it, at any time prior to his death. The Committee shall be
bound by the last designation form filed with it by the Participant prior to his
death. In the absence of such designation of a Beneficiary by a
-14-
<PAGE>
Participant, or if no Beneficiary shall survive him, the Participant's
Beneficiary shall be his estate.
10. Contractual Obligation. The obligations of the Company to make
----------------------
payments hereunder shall be contractual only and all such payments shall be made
from the general assets of the Company. Each Participant, Beneficiary and any
other person or persons having or claiming a right to payments hereunder shall
rely solely on the unsecured promise of the Company, and nothing herein shall be
construed to give a Participant, Beneficiary or any other person or persons any
right, title, interest or claim in or to any specific asset, fund, reserve,
account or property of any kind whatsoever owned by the Company or in which it
may have any right, title or interest now or in the future. The Company may, in
its sole discretion, establish a grantor trust for the payment of benefits under
the Plan. The assets of such trust, if any, will be subject to the claims of
the Company's general creditors. To the extent that benefits are paid by the
trust, the Company shall have no further obligation to pay such benefits.
11. Administration. The Plan shall be administered by a committee
--------------
(the "Committee") of at least three persons appointed by the Board. The
Committee shall have the authority to establish, amend and revoke from time
-15-
<PAGE>
to time rules and regulations relating to the Plan and to decide all questions
involving the administration, interpretation or application of the Plan. Any
decision by the Committee concerning the Plan shall be final and binding on all
persons participating in the Plan and their Beneficiaries. No member of the
Committee shall be personally liable for any action or determination under the
Plan.
12. No Assignment. No right or benefit or payment under the Plan
-------------
shall be subject to assignment, sale or other transfer nor shall it be liable or
subject in any manner to attachment, garnishment or execution.
13. No Right to Continued Service. Neither the provisions of the
-----------------------------
Plan nor any action taken thereunder shall be construed to give any Participant
any right to be retained in the service of the Company, an Employer or any other
subsidiary of the Company.
14. Taxes. The Company shall have the right to withhold from any
-----
payment made under the Plan any taxes required by law to be withheld with
respect to the payment.
15. Amendment or Termination. The Board may amend or terminate the
------------------------
Plan at any time in its discretion, provided that any amendment of the Plan may
not adversely affect the rights of any Participant to receive benefits
-16-
<PAGE>
under the Plan in accordance with its terms in effect prior to such amendment.
16. Governing Law. The Plan shall be governed by and construed in
-------------
accordance with the laws of the State of California, without reference to rules
relating to conflicts of law.
-17-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 0 161,560
<INT-BEARING-DEPOSITS> 0 9,581
<FED-FUNDS-SOLD> 0 127,191
<TRADING-ASSETS> 0 10,767
<INVESTMENTS-HELD-FOR-SALE> 0 354,296
<INVESTMENTS-CARRYING> 0 33,297
<INVESTMENTS-MARKET> 0 28,734
<LOANS> 0 2,847,084
<ALLOWANCE> 0 59,964
<TOTAL-ASSETS> 0 3,534,002
<DEPOSITS> 0 2,701,677
<SHORT-TERM> 0 399,846
<LIABILITIES-OTHER> 0 31,661
<LONG-TERM> 0 170,000
0 0
0 0
<COMMON> 0 193
<OTHER-SE> 0 230,625<F1>
<TOTAL-LIABILITIES-AND-EQUITY> 0 3,534,002<F2>
<INTEREST-LOAN> 49,384 99,224
<INTEREST-INVEST> 8,303 16,279
<INTEREST-OTHER> 768 1,659
<INTEREST-TOTAL> 58,455 117,162
<INTEREST-DEPOSIT> 29,572 58,712
<INTEREST-EXPENSE> 38,129 76,479
<INTEREST-INCOME-NET> 20,326 40,683
<LOAN-LOSSES> 4,251 8,502
<SECURITIES-GAINS> 995 2,216
<EXPENSE-OTHER> 19,199 37,389
<INCOME-PRETAX> 3,083<F3> 6,551<F4>
<INCOME-PRE-EXTRAORDINARY> 3,083 6,551
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,250 7,465
<EPS-PRIMARY> .18 .41
<EPS-DILUTED> .18 .41
<YIELD-ACTUAL> 2.45 2.46
<LOANS-NON> 33,176 33,176
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 44,828 44,828
<LOANS-PROBLEM> 101,245 101,245
<ALLOWANCE-OPEN> 52,882 57,508
<CHARGE-OFFS> 12,441 22,504
<RECOVERIES> 15,272<F5> 16,458<F5>
<ALLOWANCE-CLOSE> 59,964 59,964
<ALLOWANCE-DOMESTIC> 59,964 59,964
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 33,490 33,490
<FN>
<F1>INCLUDES $51,750 MINORITY INTEREST: PREFERRED STOCK OF CONSOLIDATED SUBSIDIARY.
<F2>ON JULY 29, 1997, THE COMPANY COMPLETED THE ACQUISITION OF HANCOCK SAVINGS
BANK, F.S.B., A LOS ANGELES-BASED INSTITUTION. THE ACQUISITION WAS ACCOUNTED
FOR AS A PURCHASE AND IS REFLECTED IN THE CONSOLIDATED STATEMENT OF CONDITION
AT JUNE 30, 1997.
<F3>EARNINGS BEFORE INCOME TAXES AND $3,886 MINORITY INTEREST IN SUBSIDIARY WHICH
IS INCLUDED IN [EXPENSE-OTHER].
<F4>EARNINGS BEFORE INCOME TAXES AND $3,886 MINORITY INTEREST IN SUBSIDIARY WHICH
IS INCLUDED IN [EXPENSE-OTHER].
<F5>INCLUDES $12,770 OF LOAN ALLOWANCES ASSOCIATED WITH THE HANCOCK ACQUISITION.
</FN>
</TABLE>
